The Port Strategy Matrix

Port Strategy Matrix

Source: adapted from Rugman, A., Verbeke, A. (1990), Global Corporate Strategy and Trade Policy, London, Routledge, 168 p.

The Port Strategy Matrix identifies four basic strategies that ports can adopt. Port behavior is classified according to the nature of the strategy and the different channels used for implementing this strategy:

  • Nature of the strategy. Can be either efficiency-oriented or non-efficiency-oriented. The former situation can typically be expected in a competitive environment. In such a situation, a port seeks protection from competitors by creating government shelter or collusive behavior.
  • Implementation channels. They are situated either in a market or a non-market environment. In the former context, market forces prevail, whereas in the latter situation, ports exert strategic behavior vis-à-vis government and pressure groups.

By combining nature and channel elements, the Port Strategy Matrix is constructed, and four port strategy options are identified. Non-efficiency-based port strategies aim to achieve an artificial advantage in the form of shelter or protection vis-à-vis rival ports. Unfortunately, such shelter-based strategies are not sustainable in the long run as ports are increasingly subjected to competitive market forces. For instance, ports situated in quadrant 3 and looking for market-sharing agree­ments may find themselves in an unstable position and may be forced to pursue an efficiency-based strategy.

The Russian port system during Soviet times was situated in quadrant 4. The Soviet government had a significant impact on the economy through state-owned factories and companies and the development of rigid multi-year plans affecting all economic activities. As all ports were state-owned, inter-port competition in the Soviet Union was low to non-existent (non-market environment). The ports were developed as strategic assets to serve state-owned industries (steel, mining, manufacturing) and the overall economic system. Given the focus on full employment, port efficiency, and overall labor productivity were generally low in ports.

As a result of the changes in the market environment, an increasing number of ports are forced to seek a position in quadrant 1, which has a major impact on traditional strategic port planning. Ports operating in highly competitive and volatile markets often develop formal port planning processes involving a larger amount of data collection and analysis. These planning exercises are concerned with directing change rather than responding to it. This involves a proactive rather than a reactive or defensive attitude towards changes in the external environment.