ABSTRACT
As a part-fabricator, part-assembler of large structural-steel units the shipbuilding industry is an example of a sector heavily influenced by supply factors. Ship costs, as was evident in Chapter 3, are strongly affected by the costs of procuring materials and labour in the shipyards. Moreover, shipyard expenses and production costs in general are very sensitive to technological change, a supply factor considered in Chapter 4. Technological change, however, has implications which extend from supply to demand factors. It may be recollected from the descriptive model that great store was put on the effects of innovation on the competitiveness of industrial organisations and, further, that those effects were made manifest through the intermediary of demand. Shipbuilders falling into the technologicalleader category attract a growing market share as a result of their progressive practices; those categorised as technological laggards, though, are compelled to react to innovation in order to retain a share of the market. Obviously, technological change is having a dramatic impact on demand from both perspectives: the lead firms taking away demand from the laggards and they, in turn, being forced to find compensatory demand largely with government help. It is important to stress, however, that the level of aggregate demand (i.e. international demand for shipping) is set independently from the actions of either shipbuilders as a whole or governments intervening to protect national shipbuilding industries. Aggregate demand is, in fact, the outcome of conditions affecting world trade. The actions of individual shipbuilding enterprises and individual governments may partially regulate the demand for a small component of world shipbuilding, but they will not greatly affect overall demand conditions. In other 206words, aggregate demand for shipping is very largely an exogenous factor; something outside of the control of the industry or government institutions. Why this should be so is explained in the present chapter.
