Ctc's Operations Compare to Historical Rm Applications

MEMORANDUM

TO: Mr. Thomas Young

FROM: Mr. Emmanuel Morin

SUBJECT: CTC's operations compare to historical RM applications

DATE: 10/25/12

INTRODUCTION

Business industries such as airlines, hotels, and rental cars pioneered revenue management (RM) and demonstrated how this application can increase revenue. Container shipping has similar aspects to these RM application areas, in terms of issues and solutions. This memo outlines our understanding of historical RM applications, analyzes CTC's container shipping operations, and describes the similarities between the two.

OUR UNDERSTANDING OF HISTORIC RM APPLICATIONS

Airlines, hotels, and rental cars are considered spearhead businesses utilizing RM successfully. These businesses increased their revenue by targeting discounts in situations where there was a surplus of empty seats, unused rooms and/or rental cars. Utilizing inventory RM systems allowed these companies to gain market share even in the mist of weak demands. RM proved to be so successful at increasing revenue that by 2000, all major rental car firms, hotel firms and airlines implemented the system.

ANALYSIS OF CTC'S CONTAINER SHIPPING OPERATIONS

CTC's container shipping operations from Asia to the Middle East are the most profitable. This route faces limited competition allowing CTC to maintain strong market power. CTC's position in the market suggests they have substantial price control. However, CTC faces shifts in demand due to socio-culture environments. For example, CTC's peak season begins from April and ends the time Ramadan begins, at the end of fall. Ramadan lasts for one month, and is identified as a key reason for significant drops in demand till March. To adhere to satisfactory demand levels, CTC can utilize their price control by reducing prices to increase volume of containers. For example, it is estimated that reducing prices by 3% on a peak season can increase volume by 5%. Likewise, reducing prices by 5% during low seasons can increase container volume by10%.

HOW CTC OPERATIONS ARE SIMLIAR TO HISTORIC RM APPLICATIONS

CTC's and historical RM application businesses like airlines, hotels, and rental cars have similar issues and similar strategies to resolve those issues. These common issues include perishable inventory, as well as shift in demand. For example, CTC deals with empty space on ships for containers due to low container volume. Likewise, airlines deals with empty seats; hotels deals with empty rooms; rental cars deal