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Piracy and International Supply Chain

The most important aspect of any business is the supply chain. The ability of the company to bring in the needed raw materials and supply the finished products to the market is an integral part of any business. Recently the number of ships that are being captured by pirates has been on the increase; this is especially near the coast of Somalia. The instability of the country and the lack of a government have promoted the increase in the insurgency along the coastal shores of the country.

The effect has created a huge disruption in terms of the international supply chain with various businesses looking to methods by which they can cope with the problem (KERSTEN, 2012). It is a problem that has made companies that rely on these trading routes seek alternative water ways by which they can transport their cargo. There are also a number of other steps that companies have taken to try and reduce the risk that they face in relation to cases of piracy (Trent & Roberts, 2010).

This has increased the cost that is associated with the transportation of goods across via the sea. This disruption to the time of goods delivery leads to a lot of inconveniences in the supply chain that affects the two important aspects of the business. The first one is the ability of the firm to acquire the raw materials that it needs on time. This disruption in the time at which the companies are able to get their raw materials delays production of the company. On the other end the company’s ability to get goods to market on time is impeded. This disruption reduced the revenues that the company would have to get. This reduces the profitability of the company in most cases. In other cases it increases the cost of goods (Alexander & Richardson, (2009).

Research objectives and hypothesis

At this point the research aims to find out what the effect of maritime pirating has been on the international supply chain. There are a couple of objectives that that the study seeks to establish. To begin with is the analysis of the supply chain. The aim of the study is to determine if there has been an increase in the levels of piracy in the world in general. The second objective would be to make a determination of if in the same time period there has been a decrease in the amount of goods traded. This will enable us to develop a relationship between piracy and the international supply chain especially as regards to their correlation. The other objective of the experiment is to determine the reactionary action of the business community to the increase or otherwise of the pirates. This will provide a basis by which recommendations can be made and the right conclusions drawn on the subject. The hypothesis of the experiment is that an increase in maritime piracy has lead to a disruption of the international supply chain. This hypothesis is postulated from the theory that the increase in piracy will reduce the traffic flow of goods (Misra, 1989).

Ethical rules, controls and policy

The ethical rules that underpin the collection of data in this type of research to begin with are that of privacy and confidentiality (Penslar, 1995). There is need for those companies to maintain the information that they believe is proprietary. However much this information may be useful in the analysis of the data collected. There may be need to understand what specific areas have been worst hit. There may also be need to establish the various types of cargo reductions in each route. The information that may provide insight into this may be information that the companies taking part in the research may wish to withhold. This is so as to protect the identity of their clients or so as to avoid giving up part of what their business is. There is also the ethical concern as regards the company’s protection against participating in the research. For any research conducted all the data that is collected should be taken from willing respondents (Resnik, 2011). In the case of this study there is need to ensure that the material sources that are used are from public sources. This is to make sure that the researchers are willing to share the information that they do have. There are four basic controls that govern any research including this one. The first one is those that are externally imposed through various regulations. Here the consideration will have to be on the international laws that protect on privacy and data (Pimple, 2008). This will vary depending on the country in which the research is done. The other in this category would be rules imposed by the article depository where the research papers being used are stored. There is the internal control that is imposed by the professional codes that we abide by when conducting the research. There is the educational control that is imposed by the scope of the study. Finally we have the professional codes of best practice that we need to prescribe to in the study (CESSDA, 2012).

Data sources and research objectives

Tomoney provides a fair grounding on the subject of piracy providing different views onto the subject (2012). This gives one a good place to begin on examining what piracy is, what informs those who partake in the attacks as well as a number of measures that firms take to control the negative effects of piracy. This introduction also provide for fair understanding on the subject of piracy which would provide enough grounding in the study of its other related aspects. Looking at the study by Sullivan one is able to deduce that piracy has an effect on the international supply chain (2010).  This study will provide the needed correlation between the two subjects. Establishing this correlation is important as it enables us to understand the objective of whether there is an effect of piracy on trading routes.

The first of which is that piracy is an important consideration when looking at international supply chain. After which the concerns then becomes how far reaching is the extent of this piracy and this may be provided by the some other materials on the subject. To begin with there is the BBC’s report by Buchanan (2008) that mentioned an increase in the number of piracy events in the high sea. Most of this report was centered along the coast of Somali where these incidences are of an increased nature. There are also other reports that have indicated the problem to be present even in Southeast Asia. In his paper Barrios infers that the piracy in this region is costing international trade lots of funds as this trade route accounts for about 45% of the international trading through ships (2005). Carlos Liss also points to evidence of piracy off these coasts (2003).

The establishment of how far reaching the practice of piracy is will lead us to look into how much this problem is costing the international shipping companies and what other effect it may have on the international shipping lines. Even though evidence has already been provided as to the cost of the Southeast Asia cases there is more works on this costs as relates to the piracy off the coast of the Horn of Africa. Tsvetkova writes in his report that there have been over 120 attacks that occurred in the year 2008 where over $30 million was paid to the pirates as ransom (2009). The cost of piracy has as recently as 2010 been estimated to cost the international economy anywhere in the ranges of $7 billion to $ 12 billion in any given year (Bowden et. al. 2010). This discrepancy between the two values gives us a way in which we can understand the trend in global piracy, which is reportedly on the increase.

There are other works that have shown the effects that the piracy industry has had on the world of trade. Here there are two ways in which this effect may be studied. In one the study is based on the direct implication which is the monetary evaluation provided already by the studies that are from being quoted. The next implication lies in the effect that has been taken by the world of trade in trying to mitigate the risks that are involved in using international shipping waters. Farell has postulated based on his study as to the different security measures that are being taken to combat this practice and curtail the extent to which piracy would affect international trading routes (2008).  This may also be evidenced by the concerns raised by Nautilus international as to the effects of piracy on supply chain (Gilbert, 2012). This article also includes the measures that they would take in case of government inaction. Some of these steps are also presented by Chalk in their study (2009).

Data contribution to the study

To begin with the data has shown that piracy is a growing concern in international trade. This has raised issues for the firms that are in the business of transportation of goods using these routes. This may be exhibited with the increasing concerns that are being raised in different quarters. There is concern among businesses that heavily rely on these trading routes for their daily activities. Concern also raised by government due to piracy impact on economies. The evidences also show the increase in the levels of piracy both in terms of the cash amount that it is costing the different firms and in the number of incidences being reported.

The data is able to indicate that there is no correlation between the incidences of piracy and the levels of goods being transported by this method. The decrease may be attributed to other factors such as trade slowdown. Companies in the related industries have simply devised ways in which to counter the threat of terrorism as indicated in the research studies used. The studies have also been able to indicate the efficacy of these different measures to countering terrorism. This though has had various effects on this trade including increased cost of using these routes for the purposes of transporting goods.

The different materials also provide an understanding as to the importance of these routes for the purposes of international trade. The studies have also presented evidence as to the resilience of the industry to threats such as piracy. This may be attributed to the fact that the 80 - 90% of all trade in the world is through sea (Gilbert, 2012). This shows the importance of this transport route. The hypothesis postulated that the increase in piracy would see a reduction in the levels of trade being conducted within this route was determined to be wrong.

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