East Asiatic Company’s Difficult Experiences with Containerization

Abstract

This chapter uses industry studies and archival material, as well as theories about knowledge transfer and strategic management, to analyse how the position of East Asiatic Company (EAC) changed from a leading liner shipping company—a first-mover—in the 1970s towards a shipping company which lagged behind in the highly competitive environment of the second half of the 1980s and early 1990s. EAC was a pioneer in the development of new container technologies in the 1970s. From 1972 EAC managed ScanDutch, soon the leading operator of container traffic between South East Asia and Europe. In 1977 the Chinese government requested EAC to facilitate the introduction of container technologies to China in close cooperation with the state-owned Chinese shipping company COSCO. China abandoned this project, however, and over the 1980s EAC also lost its position in international shipping and finally sold its liner shipping operations to Danish competitor Maersk Line. This chapter focuses on three factors which contributed to the decline of EAC: (1) The internal disputes of the 1980s within ScanDutch, EAC’s hitherto most profitable and successful shipping business operating liner shipping between South East Asia and Northern Europe (2) the fatal investment in a completely new type of vessel, the Liner Replacement Vessels (LRV), in 1975–1977; and (3) EAC’s view of itself as a political force rather than an ordinary business enterprise as symbolized by the extensive knowledge transfer concerning containerization from EAC to Chinese COSCO in 1978. Taken together, these three factors constitute a pattern which can help understand EAC’s maritime decline. Overall, EAC’s strategy and its company structures which were more in tune with the earlier, compartmentalized international economy of the mid-twentieth century than with the globalized structures evolving towards the century’s end.