Harvard Business School 9-197-3922 November 1, 2008
Background
In early 2007, piracy was a fragmented industry characterized by fierce competition amongst the many pirate “crews” operating along Africa’s East coast. A series of successful projects and the elimination or acquisition of several firms in the spring and summer resulted in substantial consolidation in the industry and by early 2008 70% of the market was dominated by three firms.
Pillage, Inc. is the surviving entity resulting from the hostile takeover of the Black Band of Ali Nefani followed by the murder of Ali Nefani, his right-hand man and their families. Thus founded in 2007, it fell to Abdi Balan Aned, newly appointed CEO of Pillage, Inc., to consolidate his position with the volatile board of directors and articulate his strategic vision for growth.
The Black Band had followed a strategy of minimizing the capital intensiveness of their projects by taking on smaller vessels and concentrating on black market value for seized booty and occasionally, ransom for the crew. This permitted the Black Band to keep capital expenses low, as fewer go-fast boats and lighter armaments were required to catch a foreign prize vessel and subdue her crew without injury. In addition, smaller vessels rarely strayed far from the coast, keeping search and chase costs low as distances to the Black Band’s home base were small.
After the takeover, Abdi steered Pillage, Inc. on a heading which focused on a more capital and labor intensive strategy targeting larger vessels farther off the coast. Larger vessels typically held more crew, the key to large ransom. Cargo was often insured on board larger vessels, and was more difficult to sell on the black market or threaten with destruction, but more well-to-do crew members more than made up the difference in expanded ransom revenue.
By developing relationships with weapons suppliers in Mogadishu, where prices and red tape had both substantially declined since the exile of Mohammed Siad Barre, Abdi was able to quickly deploy 3 crews to prowl the Gulf of Arden. Their cost effective and superior firepower, obtained through their exclusive use of the Mogadishu supply channel, also helped with the many hostile takeovers Pillage, Inc. undertook during Abdi’s growth by acquisition phase.
The strategy paid off. After numerous successful projects aided by the weak-willed shipping owners with loose purse strings and limited enforcement, Pillage, Inc. had reinvested over $30 million in capital expenditures. In late 2008 Pillage, Inc. seized the largest vessel ever captured in the business. The Saudi Arabia-owned Sirius Star, worth over $100 million was seized in a surprise raid.
Pillage, Inc. may be a victim of its own success. The very public success with the Sirius Star is sure to attract more substantial enforcement. Their growing share will make them a target for other well-capitalized groups, and their emphasis on substantial capital expenditures and fleet purchases makes them less nimble than their rivals.
Back in his office, Abdi sat back in the captain’s chair he had stolen from a Greek merchant vessel and looked through the soundproof glass at the languishing hostages from the Sirius Star. How would he approach the challenges to come?
Pirate Victims Finance More Attacks With Ransom Pay [Bloomberg]
First wideclops yarrrrr…
@1 – you’re not even remotely funny.
For those of you who think we are not at the bottom of this market and you think there is more risk you are being too shortsighted. the great depression took a decade to
fully recover, so at least expect it to take a while to really get
moving. econometrics is useful if ppl are basing there buys off the
books, but there aren’t anymore reliable books, so, it makes sense to
base everything off of social logic, rather than econometric and
market quantitative analysis.
please, stop worrying about inflation, stagflation, all that. with the
wealth redistributed, more people will buy, which will account for the
rise in inflation. again, 2.5million jobs and cuts in spending and
taxes only points to a more equal distribution of wealth (hello, ’90s,
without an insecure, horny president). inflation is a worry in
countries where the wealth just isn’t being redistributed, zimbabwe
would be the extreme example, with a few more social complications,
but, it still rings true.
there will be an influx of immigrants, namely, those who are unskilled
and enter at manufacturing levels, but that will only help to right
the economy. NOTICE, foreclosures hit very hard in areas where
manufacturing was lost (partly greedy CEOs looked at five-year profit
from SUVs, forgetting that the more SUVs sold means more gas guzzled,
rising demand for gas equaled those lovely gas prices we used to pay;
partly unions giving benefits to workers who, literally, would sit at
home and get paid, which is a good abuse of weak, unbalanced
regulation, hopefully new congress will realize this, or at least
Obama, considering how mentally limited Pelosi is). this just means
that those immigrants and those natives who are jobless will be
filling those manufacturing jobs. there was a time when “Made in the
U.S.A” sold, simply because of quality. the inflation of the financial
books with subprime loans was a bubble, and it has popped.
we are at the end. here’s your proof. when the market crashes, the
least wealthy traders drop out first, going to the most. if the most
wealthy trader falls out, then the stock market is gone, but, that’s
not happening. i know some damn welathy people that have pulled out,
which shows just how close we are to the bottom of this. BUT we saw a
huge rise with all this good news since last friday, which means the
market has started its way to recovery. of course, it will be
volatile, dangerous, unsure, but, when it comes to investing in
businesses, one must look at how much product is sold.
@3
some of us are still employed hence have an alternative use for their time. pls summarize.
Why is everything in bold? I don’t like it.
L or V?
L OR V?
@EP:
I am currently looking for investors to finance a North Atlantic privateer venture based on the (soon to be) defunct island of Iceland.
The venture will have the ability to monetize North Atlantic trade routes as well as North Sea Oil Rigs.
why is everything in bold? IT guy, fix that jank!
@9
email him @ vikram.pandit@citigroup.com
This was about as brilliant as a Wachovia commodities trader
@11
well baller why don’t you entertain us?
@3…. no one cares/reads your long posts. go fuck yourself
spodeclops
I’ll bring my buddies from Somalia and we’ll get that party started right in the North Atlantic.
14, you can do better.
damn you, SPODE-nik!
just reminding everyone what a pussy that faggot, patrick, at ibanking oasis is
Ticker for Pillage, Inc?
EP, this is just dumb
LOL @ 11
LOL @ 11
ARRR-trocious post, EP. Afterbirth in lieu of composition. File it with the Carney’s magnum opus on the great rice bubble of ’07.
That last paragraph is definitely HBS case style. Nice one.
@11 great!
@20 obviously arrr
@24
And Carney was “under the influence” at the time he wrote that magnum opus about rice.
You left out the mandatory HBS case opening line. Abdi Balan Aned was looking out the window from the deck in his pirate ship when he realized he needed to reevaluate his company’s growth rate.
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Yet another uneducated view of bluegrass music. Folks there is no one more concerned about the state of bluegrass music than Doyle. I first began listening to Doyle in the mid 80s and the quality and artistry is still the same high quality. Drums and the electric bass are actually used in bluegrass as far back again as 40 years. Pay attention to some in the Osborne brothers and J.D. Crowe from again in the day. Doyle, I thank God to the music you might have been making for almost 4 decades with Quicksilver. It has been a crucial aspect of my life for 30 ages. May God bless you along with the ability to ignore stupid posts.