The Global Effects of a Bankruptcy.

By: Emily Gilbert

ARTICLE OVERVIEW: THE BANKRUPTCY

Christmas Shipments will be delayed this holiday because of a bankruptcy of a South Korean shipping giant, Hanjin.

Hanjin filed for bankruptcy at the end of August, causing a global “shock wave” through the commercial world.

Video Link:

http://for.tn/2c4cCmT

ARTICLE OVERVIEW: RECEIVERSHIP This bankruptcy caused the company to enter in

“receivership”.

Receivership is a “type of corporate bankruptcy in which a receiver is appointed by bankruptcy courts or creditors to run the company, in order to prevent liquidation (Investopedia par. 1).”

A company going into receivership causes small business to go on the “back burner”, while allowing big box stores (Walmart, Target, Kohls, etc.) to have the final say on how much space they can have on the remaining vessel.

ARTICLE OVERVIEW: REAL LIFE SMALL BUSINESS PROSPECTIVE

Michael Bray, the owner of Hobby Works (a four location Hobby shop founded and operated in Maryland), gives a further explanation on how this bankruptcy has had a major negative impact on his company.

Brey, whose company has 50 employees and annual revenue of $6 million, believes that the shipment of his products will be in jeopardy at the most crucial time of the year. He ships about 12 containers a year using the company Evergreen Line and MSC Cargo. Although Brey does not use Hanjin directly, the ripple effect of this receivership will cause major supply and demand issues (in this case a large demand with no supplies [supplies=cargo ship]), ultimately giving Brey less of a say on how much room he can have the remaining ships.

“ ‘This is the time when all the big boys–the Walmart's and Amazons and Kohl’s of the world–are pushing their factories to get their products manufactured and shipped to the states and ready to move to stores,’ Brey says. ‘If we have prearranged with [our shippers] to do two containers at the end of November, and then if Walmart says they need an entire ship, guess what happens to me’ (TIME par. 4).”

If you couldn’t guess what will happen:

ORGANIZATION COMMUNICATION CONCEPT:

GLOBALIZATION What exactly is Globalization?

As we learned previously, Globalization Movement “the process of our world becoming even more connected in economic, political, organization, and personal terms as transportation and telecommunication system improve (Miller 3).”

ORGANIZATION COMMUNICATION CONCEPT:

GLOBALIZATION In this particular case:

Hanjin (Major vessel company)Large business (Walmart, target, Amazon, etc.)

Small Business (Hobby Works)

ORGANIZATION COMMUNICATION CONCEPT:

OUTSOURCING Globalization has lead to outsourcing of

jobs

Outsourcing is when a “business moves manufacturing and service centers to countries where labor is cheap

Outsourcing causes businesses to spread among nations throughout the developing world.

ORGANIZATION COMMUNICATION CONCEPT:

OUTSOURCING Cargo companies (like Hanjin, Evergreen, and MSC)

are essentially byproducts of outsourcing Companies are outsourcing their manufacturing plants

overseas because labor cost are very low. In order to get the product from one side of the world

to the other (in a cheap, yet timely manner) companies turn to cargo companies.

It is important to note that cargo companies have been around along time. However, the increase of outsourcing has caused the demand for these companies to increase rapidly

GLOBALIZATION CONCEPT: WHY? APPLICATION

Globalization and outsourcing is used to increase profits for (mostly) large business

Outsourcing is cheaper because the labor cost are so low

The low labor cost increase the amount product that will get shipped to America

Increase of product = More consumer spending

GLOBALIZATION CONCEPT: WHY? APPLICATION

Globalization can also be called macroeconomic maturation

Globalization has served to stabilize business and financial markets in a very dramatic fashion in recent years.

So dramatic the scholars have yet to reach an understanding of the depth and breadth of the impact it has had on lowering political, financial, and economic volatility.

Globalization Concept: Where? Application

“One guy sneezes, and someone else gets the cold (Bremmer 2012).”

The “sneeze” was caused by the shipping company Hanjin and their bankruptcy

The “cold” was caught by American businesses.

The smaller the business, the more serve the cold

GLOBALIZATION CONCEPT: WHERE? APPLICATION

~Globalization increases the need for effective communication~

All business (large and small) are interconnected to each other

If one business fails, it is more than likely that other business involved with the that particular business will fail as well.

All companies must have emergency plans in place that will not only keep their businesses safe, but also the businesses associated with them.

GLOBALIZATION CONCEPT: HOW? APPLICATION

In order to understand how Globalization and Outsourcing effects businesses big and small, we

must understand the basic economic laws of supply and demand:

When Supplies goes up, Demand goes down

When demand goes up, Supplies goes down

GLOBALIZATION CONCEPT: HOW? APPLICATION

How supply and demand works in this case:

~When demand goes up, Supplies goes down~

Because Hanjin went bankrupt, they had to cut down their number of cargo ships in operation.

Cutting cargo ships from Hanjin causes an increase demand in Cargo ships from other companies

Supplies (shipment room on cargo ships) goes down.

Because big box retailers have more leverage (or money) to negotiate with cargo ships, they usually snatch up the remaining space on ships

This leaves small business in the dust, often causing the small business to use other modes of transportation that is more expensive (air, train, automotive, etc.)

Question: How can organizations communicate effectively in a global market?

Small Business can use Henri Fayol’s Theory of Classical Management

Creating a Management system can increase productivity in the company

In return, this increase will help grow the company, causing more room for them to negotiate prices with cargo companies

Question: How can Communication protect the rights of business in the

United State?

Governmental support: Laws and Regulation should be set in place in order to help small business grow

Question: How can Communication protect the

rights of business in the United State

Public Knowledge: Make sure the consumer knows the impact on buying from a small

business

Question: What can small business do to have more of a say in the large global

market place?

~Small business should be required to have an emergency plan in place~

Smaller business should turn to “Freight forwarding” companies such as Unitrans Worldwide, a 12-employee company based in Randolph, Massachusetts.

Freight forwarding is designed to help small business move products at a cheaper price compared to other transportation

However, Freight Forwarding is still not as cheap as large cargo companies because of it’s relatively smaller size

Works Cited

-Quittner, Jeremy. "Even Businesses That Don’t Rely On Hanjin Could Be Caught in Cargo Crisis." Fortune Even Businesses That Dont Rely On Hanjin Could Be Caught in Cargo Crisis Comments. Fortune Magazine, 09 Sept. 2016. Web. 19 Sept. 2016.

-Miller, Katherine. Communication Theories: Perspectives, Processes, and Contexts. Boston: McGraw-Hill, 2005. Print.

-Root. "Receivership." Investopedia. N.p., 2004. Web. 19 Sept. 2016.