DTD 5 ARTICLE IN PRESS Journal of Strategic Information Systems xx (2005) 1–18 www.elsevier.com/locate/jsis A resource-based view of competitive advantage at the Port of Singapore* John R.M. Gordona, Pui-Mun Leeb, Henry C. Lucas Jr.c,* aQueen’s School of Business, Queen’s University, Kingston, Ont., Canada bNanyang Business School, Nanyang Technological University, Singapore cRobert H. Smith School of Business, University of Maryland, College Park, MD 20742, USA Abstract The purpose of this paper is to discuss the resources, including operations and information technology that have contributed to the competitive position of the Port of Singapore. We present a detailed discussion of the Port and its resources, and analyze the case using the resource-based view of strategy. A firm with a competitive advantage excels in time, quality, or cost, or a combination of such over its competitors. We argue that a combination of resources including supportive government policies, ample investment, and well thought out operations and information technology along with location and a natural deep harbor to help create a sustainable advantage for the Port. We find that Singapore compensated for some of its natural disadvantages like small land area by successfully applying information technology in critical areas to increase the island’s capacity to handle shipping. q 2004 Published by Elsevier B.V. Keywords: Port; Singapore; Resource-based view; Strategy; Operations and Information Technology The purpose of this paper is to describe the key resources, including operations and information technology (IT) that have contributed to the competitive position of the Port of Singapore. The Port of Singapore has achieved a sustainable competitive advantage relative to other locations by carefully building a set of resources that other Ports would find very difficult to match. Some of these resources are natural (a superb sheltered * The authors would like to thank Professor Dorothy Leidner for her extensive and helpful comments on different drafts of this paper, and the anonymous reviewers for their suggestions. * Corresponding author. E-mail address: [email protected] (H.C. Lucas). 0963-8687/$ - see front matter q 2004 Published by Elsevier B.V. doi:10.1016/j.jsis.2004.10.001 DTD 5 ARTICLE IN PRESS 2 J.R.M. Gordon et al. / Journal of Strategic Information Systems xx (2005) 1–18 harbor), some can be replicated at a significant cost (infrastructure, well-educated and hard working labor force), and some are particularly valuable in Singapore, but less useful in other Ports (scheduling systems for multiple cranes to handle the complexity of multi-tier stacking of containers). There have been a number of studies of the Port of Singapore and the information technology that supports it, including a series of Harvard Business School teaching cases. One discusses Singapore TradeNet, an EDI system that dramatically reduced turnaround times for processing information about ship arrivals, loadings and unloadings and departures; see Konsynski and King (1990a) and Applegate et al. (1993). A subsequent case describes the efforts of Singapore to become an ‘intelligent island’ by developing a national network infrastructure (Applegate et al., 1995). A comprehensive description of the Port of Singapore may also be found in Applegate et al., 2001. Konsynski and King (1990b) describe Hong Kong’s TradeLink, which is interesting to compare with the EDI system in Singapore. The case in this paper extends this prior work by analyzing the Port’s strategy using a resource-based view, and by showing the importance of operations and information technology in creating an advantage. We believe that RBV helps explain and interpret the contribution of technology to the Port of Singapore (PSA). This view of competitive advantage is based on the unique resources that a firm possesses. To the extent that a competitor cannot create or substitute for these resources, they provide an advantage to the firm that owns them. Two succinct presentations of the resource-based view (RBV) may be found in papers by Barney (1991) and Peteraf (1993). Jarvenpaa and Leidner (1998) have used this theory to analyze the case of a company in Mexico, a developing country, while Wade and Hulland (2004) review the RBV and information systems research. Section 1 of the paper presents a case study of the Port of Singapore, followed by an analysis of the case using the RBV of strategy. The paper concludes with the implications for management. 1. The Port of Singapore 1.1. Data The data for this paper came from a number of sources. First, we interviewed Mr Eric Lui, Executive Vice-President (Information Technology)/Executive Vice-President, Container Terminals Division and several members of his staff at PSA. Second, one author visited Kent Ridge Digital Laboratory, the organization that assisted in developing expert systems at the Port. An author interviewed Mr Patrick T.C. Poon, the Director of RTW Shipping (S) Pte. Ltd, which is the shipping agent for the Evergreen and Uniglory Line and a major customer of the Port at the time of the interview. The purpose of the interviews was to learn about operations and specific IT initiatives employed by the Port. The authors toured the Port to study its operations, and collected information from PSA publications, annual reports and various Singapore government Web sites. Finally, we drew on several prior studies of PSA including Teo et al., 1997, and several cases, described above, on the Port. We used the RBV of the firm to identify strategic resources at DTD 5 ARTICLE IN PRESS J.R.M. Gordon et al. / Journal of Strategic Information Systems xx (2005) 1–18 3 the Port, and the results of interviews and information about different Port and Singapore government initiatives to look for linkages among the resources. 1.2. Resources at the Port Singapore’s most important natural resources include its large, protected harbor, its location on major trade routes, and the skills of its well-educated work force. The location advantage is clear in Fig. 1 from the Singapore Web site. Note that Singapore is located where ship traffic between Europe and Southeast Asia and the US West Coast and Southeast Asia must pass; it is a natural entry for products shipped to and from neighboring countries. A Port, particularly as shipping became containerized, requires massive infrastructure development including berths, cranes, trucks, storage and warehousing, anchorages, tugboats, pilot launches, etc. Early in its history, Singapore opened its economy to foreign investment. As its economy grew, it allocated significant amounts of capital to developing its Port. In 1972, Singapore opened its first container berth. In 1997, the Port of Singapore Authority was privatized and its name changed to PSA Corporation, although the government still holds 100% of the shares in the company. The primary difference since privatization is that the company does not retain regulatory and statutory power to draft Fig. 1. Singapore’s strategic location. DTD 5 ARTICLE IN PRESS 4 J.R.M. Gordon et al. / Journal of Strategic Information Systems xx (2005) 1–18 and impose regulations and tariffs for Port operations. These duties are now handled by the Maritime Port Authority. 1.3. Operations at the Port A brief discussion of Port Operations and Information Technology will demonstrate how PSA developed the Port’s attributes and enhanced the attraction of its location. See Fig. 2. Key operations. Being sited in a strategic geographic location has its advantage but it is not the determining factor for PSA to become the number one transhipment Port in the world. The East–West sea lanes have many strategically located Ports, such as Port Klang (Malaysia) or Colombo (Sri Lankan). More recently, Malaysia has added another Port, the Port of Tanjung Pelepas (PTP), located at the southwest tip of the state of Johor, which is a stones-throw from Singapore. However, more than 200 shipping lines with connections to 600 Ports in 123 countries still choose to call at PSA. On an average day, there are two sailings to the United States, five to Japan, nine to China, Hong Kong, Taiwan, four to Europe and 70 to South Asia and South–East Asia Ports. This kind of high volume traffic requires efficient Port operations. Key customer requirements in Port operations include freight rates, frequency of services, shipping options, turnaround time, Port charges (about 20% of freight charges), support services (ship maintenance, ship supplies), and feeder operations. The Port customers are essentially the shipping lines, however, it must be noted that shipping lines often take their cue from manufacturers, exporters, and the large buyers (MNCs) of goods and raw materials. Fig. 2. PSA terminals. “PSA is the Number One transhipment Port in the world, not simply because of its strategic location but because of its efficiency. Exporters and importers in many countries find it more convenient and cost- effective to tranship through Singapore rather than ship direct to their final destination.” Quote from Singapore Prime Minister Goh Chok Tong (The Straits Time, Sep 14, 1998). DTD 5 ARTICLE IN PRESS J.R.M. Gordon et al. / Journal of Strategic Information Systems xx (2005) 1–18 5 Fig. 3. Port operations. As Singapore is a transhipment hub for shippers, Port operations are very demanding. See Fig. 3. Arriving containers destined for other Port destinations have to be transferred to other ships or stacked (for later shipment), while containers destined for Singapore are placed on trailers for local delivery. These operations have to be well coordinated to minimize ship turnaround times. Before ships arrive in Singapore, the shipping companies send a message to PSA through the PortNet system. The company indicates when the ship will be arriving and applies for berthing spaces. Information sent to PortNet includes how many containers are on board, how they are arranged, their destination and their promised arrival date.