Opportunity Capture and Growth Strategies for Regional Ports: A Modelling Approach

Regional ports adjacent to capital city ports have often developed as bulk ports (Hilling and Hoyle 1984), but for most there is a recognition that they may be no longer able to rely solely on the benefits of exploiting bulk commodities and trades to sustain competitive advantage and growth. To attain growth and survival there is the perception and often the reality that they need to diversify their trade base or/and enter new markets - most of which are likely to be dominated by their capital city ports. But challenging the market dominance of established capital city ports is likely to be very difficult, especially given the rationalisation of shipping networks and the restructuring of supply chains at few suitable ports - most of which in Australia are likely to be capital city ports. How will regional ports which are in the shadow of capital city ports and constantly face significant economic and competitive penalty manage to compete for growth and survival? How will regional ports manage to grow if the nature and scale of trades in their markets are severely restricted as commercial activities, mainly high-value container trades, are concentrated in the larger established capital city ports - even when there is a recognition that some container trades could be handled economically and cost-effectively in regional ports? Simple observation of the economic health of many regional ports, often ill-devised and/or poorly implemented strategies set in place by regional port managers, and of unclear and less-than-adequate conceptual frameworks for the mechanisms of port growth as set out in the literature all suggest that there is 'strategy decay' (Hamel 2002) and the need for a clear understanding of port growth, and particularly of the dynamics and mechanisms of port growth for regional ports in the shadow of their capital city ports. This study seeks to define the basis of and the mechanisms for regional port growth. The study identifies opportunity capture as the basis for defining effective growth strategies for a regional port; and argues that competition for opportunity share rather than competition for market share is the key for regional port growth. The study offers a theoretical framework which regional port managers can use to effectively capture and increase the share of valuable opportunities in the quest for growth; and empirically investigates the perceptions of regional port managers about effective growth strategies for regional ports. A detailed review of the relevant literature revealed a considerable range of factors and conditions underlying port growth; but to our knowledge, there has been no analytical testing of the proposition that opportunity capture is the appropriate mechanism for regional port growth nor has there been any rigorous attempt to define growth strategies for regional ports that are in the shadow of capital city ports. It was, therefore, necessary to collect data from port specialists in order to gain useful insights into regional port growth strategies and opportunity capture. The qualitative data collected were categorized in relevant dimensions - using content analysis - and then used to develop a more structured and formal Internet-based survey which sought to collect data from a much broader sample of regional port managers with the objective of testing their perceptions about effective regional port growth strategies; and to model opportunity choice - a critical process of opportunity capture. The determinants of opportunity choice were identified with discrete choice modelling which called for a stated choice experiment in order to investigate how regional port managers actually make opportunity selection decisions. Discrete choice modelling as used in this study to model executive judgment at strategic level is novel and constitutes an important departure from more traditional approaches. A major conclusion of the study is that regional ports that have developed in the shadow of their capital city ports have the opportunity for growth if they can capture valuable opportunities over time; and that critical to opportunity capture is entrepreneurship and market-driven strategies that regional port managers can implement and orient to provide shippers and other regional port customers with superior access to markets in which they compete for competitive advantage and market dominance. Superior access to markets is provided through supply chains that are value driven; that is, supply chains that are integrated and focus on the end-to-end, cost-effective movement of freight. Such supply chains seek to deliver competitive advantage or value to shippers and to capture value for the port.