Employees are a company’s greatest asset. However, overstaffing can result in high costs that affect the organization’s finances and ability to utilize resources optimally. Multinational Corporation A. P. Moeller-Maersk has announced that it will lay off about 4,000 employees by the end of 2017 to streamline its operations (Woo par. 1). The downsizing has resulted from the downturn in the container shipping industry.
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The company announced that its shipping division (Maersk Line) will simplify the organization by laying off staff to reduce operating costs. Besides, the company will postpone scheduled investments and plans to expand (Woo par. 2). The unit has more than 23,000 staff around the world (Woo par. 3). Maersk Line is the biggest container shipping line in the world and has experienced decreased demand in recent months.
The line’s chief executive officer announced that the program is aimed at making the line leaner and simpler, as well as transforming the shipping industry (Woo par. 4). The cuts are motivated by a gloomy market outlook that will lower the profits of the line. The line has terminated two services in the last two months due to poor performance and low demand in the market (Woo par. 6). The line plans to terminate 35 sailings that are not projected to produce positive financial results.
These changes have been prompted by low global demand for those services and overcapacity in the shipping industry. Its competitor (Neptune Orient Lines) made a loss of US$96.1 million last month due to changes in demand in the market (Woo par. 9). A few months ago, rumors spread that the firm was up for sale owing to its loss-making streak. Its chief executive officer said that there is a possibility of the firm’s sale.
Significance in a global setting
Organizational restructuring is a common strategy applied by firms to reduce costs of operation, streamline business processes, and improve output and productivity. Downsizing capacity will allow Maersk Line to reduce operating costs and retain its dominance in the global shipping industry. The cuts will increase the line’s capability to utilize its resources for optimal profitability in its different shipping lines around the world.
On the other hand, making the firm leaner and simpler will enhance the effectiveness and efficiency of its operations and processes as well as decision-making processes. To maintain its position as the leader in the shipping industry, the company must reduce its operating costs, postpone expansion plans, and suspend certain investments. Restructuring the line will enable the firm to compete effectively and make profits at the same time. The firm needs to focus its resources on its most profitable services to survive the gloomy global shipping market.
Woo, Jacqueline. Maersk Line to Cut 4,000 Staff and Downsize Capacity. 2015. Web.