We would like to thank our respondents who have taken their time and contributed with valuable information and made this thesis possible. We also want to thank our tutor, Petter Boye, for his time and discerning knowledge and above all his guidelines through this thesis. We will also dedicate gratefulness to our objectors who have given US good advices and insightfulness comments in our thesis. The objective with this thesis is to study and create a good understanding of the current piratical activities off the Somali coast and its influence on the shipping industry.
By illuminating the increasing piracy problem, we have formulated a primary research question: Our theoretical frame of reference includes the stakeholder theory, which is important in order to identify the actors involved with this matter. Moreover, we use the value constellation theory and the institutional theory to be able to identify a structure of the the problem and its impacts.
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The empirical findings are a process of the data we have gathered from our interviewed respondents. It conducts on how they have been affected by the increasing piratical activities and how they believe the international shipping industry and trade has been affected. In our analysis we have linked the theoretical frame of reference with our empirical findings.
We have enlightened how the different studied actors have been affected in accordance to: The thesis conclusions demonstrate that it has affected some of the identified actors, but especially the shipping industry. This through increase costs and re-routing, which have lead to delay in cargo.
Keywords; Piracy, Somalia, international business, the shipping industry, stakeholder theory, value constellation and institutional theory. Illustration of the structure of an interview and its different levels of openness and focus. This chapter conducts background, problem discussion, research questions, objective of the thesis and delimitation are presented and discussed.
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Further on, it will also state the interest and why we have chosen the subject. The last couple of years there has been a severe increase in piracy, especially off the Somali coast, around the Gulf of Aden, the Suez Canal and the Indian Ocean. In this thesis we want to investigate the on- going problem through an international business perspective.
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Moreover, we will present a history of the Suez Canal, piracy, Somalia. In order for the reader to receive greater comprehension of the problem. Thereafter further discuss the problem through a international business perspective. It has improved the international business between the east and the west by avoiding a detour around the Cape of Good Hope. This would have added approximately 6, miles to the transportation route. However, the Suez Canal, is still highly important for the world because around 8 percent of the sea trade transit through the canal guardian.
The establishment of the Suez Canal has not been simple, but after much diplomatic manoeuvring between France and Britain the canal was finally opened in November 17, Despite this, opening and closing of the Suez Canal have lead to some difficulties for the world trade in the history, mainly because of Britain and Egypt.
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Britain wanted to establish military protection in the area because they were the nation with the most transiting trade through the canal. Unfortunately, this was not the end of commotions in the Suez Canal. In , nationalism was heavily influential in Egypt and president Nasser nationalized the Suez Canal in Shortly after, the canal started to be operated by the Suez Canal Authority. Since then there have been less problems regarding the canal. The Suez Canal has been temporarily closed during some periods. Firstly, after the British- French- Israeli invasion when Nasser nationalized the waterway and re- opened it in Secondly, in , a war broke out between Egypt and Israel leading to closing the waterway once again.
However, in the two nations signed a second disengagement agreement and since then the gateway has been primarily in peace suezcanal. The opening and closing of the canal have heavily affected the international business. For instance, the closing between and caused a steady decline of the world trade during that period. Also re- routing around the Cape of Good Hope instead of transiting through the Suez Canal adds two extra weeks in transportation time guardian.
Historical records show that piracy goes back as far as years, early civilizations as the Greeks and Romans dealt with piracy. They could either be pirates who explored and traded with strong nations, or they could plunder the weak and incautious Bradford, In the history the ocean was seen as a dangerous and unexplored area. Throughout the history the ocean was not occupied, owned or governed by anybody. The nations sovereignty ended at the shoreline meaning that the ocean was an open and common- pool of resources for all nations Elleman et al. Piracy is often seen through a romantic and historical aspect, and it has not entirely vanished.
During the last quarter in the twentieth century, piracy has increased to an extent, which researchers never could predict. The prime target has been in West Africa, which has gradually spread to Southeast Asia. Today it is not the piratical activities in Southeast Asia that worries the world instead it is the increased piracy outside the coast off Somali ibid.
Somalia, also called as the Horn of Africa, has a long coastline. Salopek describes after the fall of the Somalia government , the country became a lawless and impunity coastline with unpatrolled waters. This have given MNCs and nations permission to behave as they please. Leeson argues that Somalia is ranked as a LDC, because it does not have a functioned and stable government.
End of , large parts of the country were in civil war, and in January , the Somali state collapsed. Simultaneously, the current leader Mohamed Siad Barre of Somalia was forced to leave the country Abdallah, This left Somalia in a state that created anarchy. Since then Somalia did not have a functioning economy instead there has been clan-based welfare Emmanuel, Somalia and Gulf of Aden are one of the most heavily trafficked areas in the world Sorenson, Approximately 95 percent in volume of the EU member states trade are transferred through the sea-lane and 20 percent of the world trade passes through the Gulf of Aden each year forsvarsmakten.
In , the first severe attack of modern piracy occurred Sorenson, Today, piracy outside the lawless Somali coastline is one of the biggest issues in the world economy. It has posed immense challenges for the international vessels and maritime services. Gulf of Aden is the gateway to the Suez Canal, which allows direct water transportation from Asia to Europe.
Instead of re- routing around the Cape of Good Hope, the canal has provided a fast gateway for transportation and made international business a lot simpler. Salopek also argues that reports have shown that many European industries have had Somalia as a cost- free dumping ground for industrial waste as late as in Further on, Salopek apprizes that for many foreign nationalities such as Thai, European, Yemeni and Korean boats, the Somali coastline has been a rich gold water filled with fish, especially tuna.
Resulting in that the Somali fishermen did not have anything to fish, which lead to sporadic attacks on foreign vessels and taxing them. The Somali fishermen thought this was some sort of compensation after several years of foreign poaching in the Somali waters. Furthermore, this escalated to captures and attacks on vessels, and very outlined activity schemes on the international vessels.
Johan Henningsson apprizes that the pirates today have very organized piratical organizations with economical back up of higher statesmen. Also according to Emmanuel , the piracy has a strong historical influence on the fall of the government due to many factors, such as the state failure and the poor living condition of the population. Furthermore, Strandberg describes the evolved piratical activities in Somalia. Because Somalia is a lawless country, with states within the state; different clans, autonomous regions and in addition ofthat a militant Islamic groups.
It's a mess, some sort of dead point". The increased piracy in the East Coast of Africa has extremely damaged the littoral economies, which has lead to a vast risen of insurance premiums in one of the most trafficked routes for international shipping Emmanuel, The simply reason is: However, today it has increased to an amount that afflicts the whole world, especially the international trade. In order to protect the international trade from this vast increased piracy, many nations have responded with military resolve.
Today there are more than 20 naval escorts assisting many of the vessels. Sadly, the enlarged military resolve has not effectively eliminated piracy Emmanuel, Several problems have arisen and made the military less effective; the area is too large for some few naval ships, which Emmanuel believes have diverse interest in the area and the solutions.
Furthermore, it is hard to distinguish between the pirate boats and the ordinary fishermen. It consists of six warships and a few specialized aircrafts for reconnaissance. The Somali pirates have assertively increased their attacks and expanded the area. In February , the Somali pirates had expanded from the coast of Somali and captured 10 vessels in the Indian Ocean and the Arabian Sea.
In , only three vessels had been captured and two of them were in the Gulf of Aden. Henceforth, at the end of the year vessels from more than 18 different nations were held as hostages Bowden et al. Through an international business perspective, we will identify the aspects that have affected the world business both indirectly and directly on the shipping industry and the identified actors.
Piracy has become a major international problem; therefore, it is vital to identify affected actors and nevertheless the shipping industry Vego, The pirates adapt their techniques and equipment towards the measures that are held to combat them. The success in limitation of attacks has been in the Gulf of Aden by global naval forces such as European, US, Chinese and Indian warships but, that is just a minor of the area in the afflicted route. Furthermore, it is the money that attracts the pirates, instead of earning dollar a year as a fisherman, they can gain 10 dollar for each vessel they capture DI Weekend, Therefore it is important to investigate on how the shipping industry have been affected, because it is the shipping companies that are the main targets in this problem.
According to Henningsson , their activities in the Indian Ocean have tremendously increased and patrolling the whole Indian Ocean is like patrolling the whole u. The piracy off the coast of Somali, the Gulf of Aden and the Indian Ocean has not only affected one country or actor, it has involved and affected several nations and therefore emerged to an international business problem. According to Bowden et al. International trade routes are threatened and goods in the region as well as Somalia are becoming more expensive. Since the piracy affects the whole international trade it further on affects the fishing industries.
Piracy have been a popular topic among international actors who have their transportation routes outside the Somali coast; furthermore, among the neighbouring nations since they are all affected either directly or indirectly. According to Percy and Shortland , the shipping corridor off the coast of Somali is crucial and also economically important for international peace and security. According to Lindahl , the cost of pirates for the worlds shipping companies is estimated to be 12 billion dollar a year, due to the required security and insurance costs.
Therefore, many shipping companies have to re- route to the Cape of Good Hope. All nations that have a trading transport route through the Suez Canal have somehow been affected; especially, Kenya and Tanzania since many shipping companies do not want to port on the eastern African coast. They compiled information concerning costs per day, excess costs for extra 10 days voyage, and costs if 10 percent of the vessels in the shipping industry would re- route.
In nearly twenty years, Somalia has been in civil war due to the agreement on power sharing of the primary six major clan families: The root of Somali piracy underlies in the state failure, the civil war, poverty, and the toxic waste that MNCs dumped outside their coast among several other reasons. It is a complex issue that requires more than one actor to solve.
There are a lot of insistences in the involved actors to handle the issue, but in the present situation the actors are acclimating towards the pirates. The piracy problem have especially troubled the shipping business, as mention before the sea transportation is one of the most vital way of transportation today. The increase piracy in Somalia have lead to a big threat not only for the shipping companies, but all the actors that are somehow affected by the piracy off the Somali coast. We find it is interesting to investigate the increase trend of piracy of the Somali coast, especially because it has a great impact on the international business and affected not only companies, but nations, governments and organizations.
How has the piracy in Somalia affected the behaviour of doing business for the shipping industry and its identified key actors? To answer the main problem we need to identify the encountered challenges and possible business opportunities that may have emerged.
By studying the challenges and opportunities we are able to further identify, examine and question the related cost that have emerged through the maritime piracy in Somali. Based on the identifying question of challenges, opportunities and costs affecting the shipping industry and stakeholders. Corporate Governance in Action. From Oil to Knowledge. Corporate Governance Practices in India. Wall Street Versus America. Leadership for Global Systemic Change. Rapid Changes and Globalization. Recruiting the recent college grad: Best practices for long-term employment success.
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