As massive changes occur in the overall economic environment, the old rules of the game no longer apply, leading to the emergence of new corporate benchmarks.

In 2012 Wan Hai Lines Ltd. – a family-run enterprise with a 47-year history –  became the top-ranked Taiwanese shipping business in CommonWealth Magazine's Most Admired Company Survey for the first time.

Chung-hsing Huang, executive director of National Taiwan University's EMBA program, observes that in 2011, when domestic shipping stalwarts Yang Ming Marine Transport Corp. and Evergreen Marine Corp. lost NT$9.3 billion and NT$3 billion, respectively, Wan Hai eked out a small profit because of its dense port network, high-frequency shipping schedule, and flexibility.

"It operates short routes, is highly mobile, and has a very flexible schedule within Asia," says Huang, who has closely studied Wan Hai's competitive strengths. At a time when other shipping companies have no choice but to operate empty ships, Wan Hai can keep its losses to a minimum because of its extensive port network and the mutual support of its vessels.

In previous Most Admired Company surveys, the leader in the shipping category has invariably been container lines Yang Ming or Evergreen or bulk shipper U-Ming Marine Transport Corp. But now, with the global shipping industry foundering due to soaring fuel costs and stagnant freight prices, Wan Hai has bucked the tide and stood out among the pack.

'Prince of the Sea' on the Front Lines

Wan Hai's ability to shine in this harsh environment starts with the man known in the industry as the "Prince of the Sea," Wan Hai chairman and president Chen Po-ting.

The company's modest offices are hidden in a building on Songjiang Rd. in Taipei that has its main entrance looking out on an alley. When the elevator door opens onto the 10th floor, one immediately notices that the chairman's office is located next to Wan Hai's bustling northern area service counter, where customers and customs brokers constantly stream in and out to pick up bills of lading and pay document fees.

Noticing the quizzical looks on the faces of the visiting CommonWealth Magazine team, Wan Hai vice president Davis Kao quickly explains, "The chairman likes to be together with customers, and to see customers coming and going the first thing when he comes to work every day."

"Customer service" is the mantra of almost every company, but Chen's direct exposure to the front line remains relatively rare – and essential to his management philosophy.

"Market feel is more important than market study," Chen explains, and because he emphasizes this to his colleagues, he has come to embody the principle, locating his office next to his customers.

Expanding amid a Crisis

Chen, whose flexible management approach helped Wan Hai generate revenues of NT$66.8 billion in 2011, is a third-generation leader of the company. 

The 46-year-old Chen, whose baby face makes him look even younger than that, studied in the United States and got an MBA from the University of San Francisco. After returning to Taiwan, he worked in one of the family businesses – Shihlin Paper Corporation – as a special assistant to the chairman for six years.

In 1999, his father, Wan Hai honorary chairman Chen Chao-chuan arranged for his son to join Wan Hai as its vice chairman and president. Though he was young, Chen Po-ting quickly demonstrated an innovative management style.

The year after he joined the company, the global shipping industry hit rock bottom, with the supply of container space far exceeding demand.

Wan Hai, which had always focused on short and medium-distance routes within Asia, was not hit as hard as Yang Ming and Evergreen because the Asian economy retained some strength. 

But Chen took a gamble, deciding during a time of crisis in the sector to add the long-distance route between Asia and the United States to Wan Hai's schedule. "If all of our resources are devoted to a single region, and that region has a severe downturn, then we're finished," he says.

Chen's move was also a response to another trend he had observed. Evergreen, Yang Ming and other long-distance shippers had begun to invest in Asian routes, which he felt were bound to affect Wan Hai's core business.

Not unexpectedly, Chen's decision to add container service to the United States met with a huge backlash within the company. Faced with a stream of people telling him how unprofitable the route was, he patiently explained the strategy and tried to persuade his colleagues to accept it.

"Your perception that the U.S. route is not that good is based on your experience of the past 10 years, but could it be that the reality now is different than you thought it was?" Chen would tell the skeptics.

"The only thing that truly never changes is that something is always changing," Chen says. His persistence in pushing the initiative was grounded in his love for the Yijing (or Classic of Changes) and other philosophy texts during his youth, which instilled in him the belief that when anything reaches an extreme, it inevitably swings back in the opposite direction.

The next few years proved that Chen had made the right decision. In 2003, competition became so intense on regional routes with all the new market entrants that Wan Hai's core profit margin had fallen by a third from two years earlier. But because of strong growth in the volume of goods being shipped from the United States to China, the profitability of Wan Hai's newest route more than doubled.

Chen's successful strategy made Wan Hai the most profitable company among Taiwan's top three container shippers that year.

Rising Fuel Costs, Falling Freight Prices

As the global shipping environment worsened, however, Chen faced increasingly severe challenges. An industry insider with more than 20 years in the business says that 20 years ago the maritime shipping sector was highly profitable, with revenue and cargo-volume growth charts climbing at nearly 45-degree angles annually.

After 2000, the industry veteran says, the only thing climbing at a 45-degree angle was the hardship of the business environment.

The skyrocketing cost of fuel alone highlights the pressure faced by maritime shippers. Chia Shu-tang, the vice president of shipping agent Seamax International Logistics Co., observes that over the past 10 years, the cost of bunker fuel has risen from US$80 to US$650 per ton.

On top of soaring fuel costs, the shipping industry was also pummeled by the economic meltdown in the United States and Europe caused by the financial crisis. "Empty ships still had to sail. The more they sailed, the more they lost," Chia says.

The industry's profitability problems were compounded by the trend toward larger container vessels. Chen Po-ting says that on long-distance routes, 8,000 TEU (20-foot container equivalent units) container ships used to be considered big. Now, 10,000 TEU vessels have become common, and some shipping companies will soon be using 16,000 TEU ships. In contrast, Wan Hai's largest container vessel has a capacity of 4,500 TEU.

The rapid growth in capacity as global trade stagnated inevitably led to cutthroat price competition, bringing further financial hardship to shipping companies.

"We're (being squeezed) like sandwich crackers," a frustrated Chen jokes, his company, like his competitors, caught between rising fuel prices and lower freight revenues.

"It's like a haymaker heading straight for your face," says the normally measured Chen with rare emotion as he clenches his fist.

To deflect the oncoming blow and set his company apart from its rivals, Chen has played up Wan Hai's competitive strengths during the global economic slowdown. In Asia, which still accounts for 85 percent of the shipper's revenues, Wan Hai has the most extensive network, serving 33 ports in northeast and southeast Asia, and the most intensive shipping schedule of any Taiwanese player. By the end of this year, Wan Hai will own a fleet of 70 container vessels to transport the 3 million TEU it handles per year.

"There's no way right now to stop the blow from coming. But I can attach myself to the punch and try to guide it and redirect its path," Chen says.

He may lack his father's bluster, but Chen's ability to "use softness to conquer hardness" – a saying from the philosopher Lao Tzu that he often quotes – and his preference for innovation and flexibility have enabled Wan Hai to continue successfully riding the shipping waves.

Translated from the Chinese by Luke Sabatier

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Wan Hai Lines Ltd.
Chairman: Chen Po-ting
President: Chen Po-ting
2011 Revenues: NT$66.8 billion
2011 EPS: NT$0.01