Andersen on Maersk's Traditional Approach to New Markets

          
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Nils S. Andersen on Maersk’s Traditional Approach to New Markets

An Interview with the CEO

October 17, 2012
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  • In This Interview
    Nils S. Andersen

    At a Glance

    Born in Denmark



    Year Born: 1958

    Education

    Masters in economics, Aarhus Universitet

    Career Highlights

    2007–present, partner and group chief executive officer, A.P. Moller–Maersk Group



    2001–2007, chief executive officer, Carlsberg



    1999–2001, executive vice president and member of the executive board, Carlsberg



    1997–1999, chief executive of the drinks division, Hero Group



    1983–1997, various positions in marketing, sales, and general management including assignments in Germany and Spain, Carlsberg

    Outside Activities

    Member, ERT European Round Table of Industrialists



    Member, EU-Russia Industrialists’ Round Table



    Board Member, Inditex

     

    For A.P. Moller–Maersk Group, the world has always been its market. Maersk, based in Copenhagen, has been carrying goods to the far reaches of the globe since 1904, so the shipping and oil giant is accustomed to dealing with all different kinds of customers and economies.

    Nils S. Andersen, chief executive officer, says that Maersk’s global shipping heritage helps the company in today’s two-speed economy and across its varied commercial activities. While some Western companies struggle to adapt to fast-growing markets, Mærsk has never had a choice: Because its traditional ships cannot enter many ports in Africa, the company has had to change considerably to gain access to some emerging markets.

    In promising markets, Maersk has cultivated people “on the ground” who know the scene, so that when the company is ready to expand in a new area, it already has a head start. In recent years, Maersk has been making moves in many such markets, building its asset-intensive ports and terminals as well as its oil-rig and oil-exploration businesses.

    One of the keys to success in these markets, according to Andersen, is an intense focus on customers whose needs often differ greatly from those of customers in developed markets. Maersk generates this customer focus through a decentralized organization. Strong adherence to corporate values and culture bind the local businesses and markets together—and also give Maersk a built-in advantage as it expands. The company’s strong reputation, Andersen explains, serves as a powerful calling card when dealing with local officials in developing markets.

    Andersen recently sat down for a discussion with Grant Freeland, a senior partner and managing director at The Boston Consulting Group. Edited excerpts of their conversation follow.

    What are some of the tensions in managing markets or businesses that are running at very different speeds?

    We have been dealing with different markets for a long time because shipping, by definition, is global. Our company has been sailing into Asia since the 1920s, and we started shipping goods to Russia in 1904. If you go to Africa or to the smallest countries in Asia or Latin America, you will find a Maersk office there. We are located in more than 140 countries—and in some of those countries, we may be the only international company present. At our headquarters, our employees represent 75 different nationalities.

    Today in some mature markets, we are affected by slow growth or recessions, and we have responded by focusing increasingly on growth markets. Still, we will maintain a strong presence in mature economies. They remain the largest economies and main destinations for growth-market exports.

    In order to serve fast-growing markets, we have had to make sure that our shipping fleet has the capabilities and capacities that are required to go to ports that may not be up to the Rotterdam standard or that have inland logistics that are more complicated than those in Europe. We have trained our people and sent them around the globe so that they really know the world.

    The whole world is our workplace. If one of our businesses wants to move into a country, we usually already have people on the ground who know the markets, the relevant decision makers, and the opportunities.

    This has helped us tremendously in building up the ports business in growth markets over the past four or five years. We have built a strong position in West Africa, and we are helping these countries join the global economy by cutting their wait time for vessels. In Latin America, we just signed a contract to build a new Pacific port in Mexico, and we are almost finished with a large terminal in Brazil.

    At the moment, we are also using our contacts and global experience to build the oil business. We have recently entered Angola and Brazil. We are also looking at new opportunities for expansion in the Middle East. We use the great brand that we have to build up additional businesses.

    Is most of the talent in these markets local? How much of it is Danish talent? And do you try to manage that balance?

    At our headquarters in Copenhagen, our top layers of management are largely Nordic for tax and other reasons. But around the globe, we mainly have local people. We also circulate talent so that, whatever your home market, you have great chances to move up the ladder or move into different countries.

    What we have seen is that talent from developing markets tends to move to other developing markets. They can easily go and become sales managers in the U.S. or Europe, for example, but when it comes to managing countries, they typically have gone to other developing markets. That is not by design; it is just the way it has happened so far. Also, developing markets are diverse, and what motivates people in one region might not work in another. We are increasing our recruiting activities for top talent in the developing world and trying to diversify the skills and cultural background in the group. But it is a work in progress.

    How does the strength of your brand in developing markets compare to its strength in Denmark?

    Our brand is incredibly strong. In many developing markets, we are seen as a top employer. We are also known for providing very good education and training programs. Our brand is our strongest asset in recruiting.

    You have a portfolio of different businesses and different markets. How do you make sure that they are receiving the right amount of management attention?

    We adjust to account for the different levels of industry attractiveness through our investment allocations. To compensate for the weakness and volatility in shipping, we have decided to strengthen three additional legs in the group over the next strategic-planning horizon: oil, ports, and drilling.

    In terms of geographic expansion, we have defined 15 promising countries that we call the M15; we have allocated responsibilities for these countries across the executive team, which comprises six people—including the CFO and me. We are responsible for determining whether there are new activities or synergies that we can take advantage of in terms of cross-selling in these countries.

    Of course, at the end of the day, we are an asset-heavy company. So the proof in the pudding is where we have placed our investments. A couple years ago, we ordered 22 vessels specialized for Africa and 16 specialized for Latin America. Our terminal investments are almost exclusively in Asia, Latin America, and Africa.

    Where do you spend your time? How much time do you spend in Denmark? How often are you in Asia and Africa?

    I probably spend half my time traveling, and I try to cover most of our markets. I have spent a significant amount of time in Africa, where I usually go at least once a year for a week or more. I spend quite a bit of time in Latin America as well. Thirty-five percent of our shipping customers and a lot of the oil industry customers are in the U.S., so I am there quite a bit. And, of course, I go to Asia a couple of times a year for a week more.

    How do you connect with your people in all of these countries?

    We all travel a lot. My colleagues and I hold town hall meetings wherever we go. We talk about our values, what we are trying to achieve, and where we invest—and then we listen to the employees’ input. When you meet the frontline, you get the truth. If you just stay at your desk, you lose relevance.

    I also try to minimize hierarchy. When you have a philosophy of decentralization and minimal hierarchy, you are more agile.

    How do you try to create a common culture across the businesses? How much variation do you allow among countries?

    We do not negotiate or deviate from our values. It is a global marketplace, and we cannot have different values depending on the market. So we are very straightforward about our values.

    Of course, businesses in developed markets and less developed ones are very different. The level of service you have to provide to assist someone importing goods into an African country is quite different from what you need to provide in Germany. In developing markets, you need more organizational strengths and a higher level of attention, but the rules of the game are the same.

    You have created shared-service operations in China, the Philippines, and India. Can you describe it?

    Over the past few years, we have taken about $3 billion in costs out of operations. One of the things that we have done is move about 10,000 back-office positions in both mature and less-mature markets to low-cost service centers primarily in India and the Philippines. We also have a large shared-service center in China; this center wasn’t really created for cost reasons but rather because China is such an important place for us, and the customers want our people to speak their language.

    We have also created a decentralized organization. The organization must be focused on the market and not on all the wonderful machines and ships that we happen to own. Also, we have reduced layers in the organization so that there are fewer layers between the top managers of the business units and the customers.

    Are the days of exporting ideas and technology from the developed world to emerging markets over? Or are developing markets now a primary source of inspiration?

    We are still trying to lift the efficiency of terminals in developing markets to the same level of efficiency we attain in mature markets. That is necessary to keep the businesses in the developing markets competitive.

    But we do not see ourselves as exporters of what works in mature markets. We hope to export what works regardless of the origin or destination. Several ideas and solutions that we have rolled out globally originated in growth markets.

    An important thing we can learn from developing markets is their enthusiasm. The willingness to go after growth and seize opportunities is refreshing compared with some of the doom and gloom we see in mature markets.

    You operate in many countries in which the state plays a large role in the economy. How does that affect your way of doing business in those countries?

    We are a known player in all the countries in which stakeholder management is important or state support is high. When I travel to developing markets, I try to meet top ministers to explain what we are trying to do and to listen to them and hear their needs. Are they happy with the infrastructure, whether it is a warehouse or a port? Logistics is a must for any country that has any ambitions, and we are probably the best known and most respected players in that industry.

    We try to be partners with the countries, and I think we have the ethics and the history to be taken seriously by most governments. Our business is complex, but running these countries is also a complex undertaking. We have a lot of respect for those who are trying to do it well.

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