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carnival cruise |
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... Management Summary Carnival Cruise Lines (CCL) is the leader of an industry experiencing growth in both capacity and customer base. ... Currently Carnival and two other large cruise lines, Princess and Royal Caribbean, dominate the industry. Royal Caribbean and Princess are in a position to challenge Carnival’s industry leadership using many of the tools and strategies developed by Carnival. Because consolidation of the industry is occurring, Carnival must reinforce its position as the industry leader. ... The cruise industry as a whole, and Carnival in particular is victim to an archaic system whereby cruise line customers and Carnival are locked into a system where the travel agent is the middleman. ... The third is Carnival lacks effective control over the sale of its product. A second issue is the expansion in size of the cruise ship, now at about 2500 to 3200 passengers. While in many ways this creates a fantastic economy of scale, there will be a quality sacrifice to be made by both the passenger and Carnival. There will be a backlash that should develop a significant niche segment of the repeat cruise customer base. They will be looking for the smaller more intimate cruise environment. ... A clear expansion strategy must be developed with acquisitions made that can reinforce the economies of scale Carnival has built. It will also create an opportunity to further diversify the company and allow it to take advantage of growth in segments where Carnival is currently weak. In addition, Carnival must reinforce dominance in the Caribbean market and further expand other markets including Alaska and the Mediterranean. ... Carnival’s dominance can grow to new heights in this environment; we will also see many companies fail because of poor planning and the lack of foresight in the rapidly changing business environment of the cruise industry. ... Mission Statement Currently Carnival has no mission statement. ... Based on the overall profile of Carnival, a suggested mission statement might contain the following: Carnival Corporation is the world leader and innovator in quality and value in the cruise travel industry. ... The company owns and operates a modern fleet of cruise ships that sail to exciting destinations around the world. At Carnival Corporation we work to excel at: VALUE – by being fiscally responsible and cost effective managers; we provide our customers with the highest quality and luxury, supplying ultimate customer satisfaction and value. VARIETY- Carnival Corporation offers cruises designed to cover the entire market. GROWTH- Carnival Corporation will pursue growth strategies to maximize investor return. ... ENVIRONMENT-Carnival Corporation will pursue sound environmental policies and be a faithful guardian of the environment. EMPLOYEES-Carnival Corporation is committed to hiring, developing and motivating high caliber employees. ... q Increased willingness to travel by middle class q Cruise largest growth sector in travel industry C. Political, Governmental and Legal Threats § Unified attack on ocean pollution § RCL caught dumping pollution into ocean, increased scrutiny on cruise industry § Governments looking to increase taxes on cruises Opportunities q Trend toward government deregulation q International maritime laws become universally adopted q World stability, no major wars or police actions q Terrorism receding, world travel becoming safer D. ... § Deep discounting of fares to fill overcapacity, last year capacity increased by 11% while sales increase by 9%, as reported by CLIA § Industry consolidation creating cruise lines with economies of scale, industry leaders becoming equals § Discount pricing devaluing the product § Dependence on travel agents § Management of competitors mature, industry leaders are expanding to a few larger carriers of equal ability to compete § Increased competition in Caribbean market § Trend toward larger ships diminishes quality Opportunities q Overall cruise line industry consolidation, weaker lines selling q Industry as a whole involved in sophisticated marketing strategies to raise awareness and inform q 6. ... The cruise industry finds itself in a situation where a third party sells the product. ... There is no direct interaction with the customer during the cruise selection process. ... Cruise ships are becoming larger and larger with the new vessels between 2300-3200 passengers. The expansion in ship capacity will have a negative effect on the overall quality if the cruise experience. ... As a non-essential item, a cruise is one of the first expenses to be eliminated in a consumer budget. ... Since a cruise is all-inclusive it can be marketed as a package price, meaning the consumer knows up front the approximate cost of the vacation. ... The unsteady supply of oil has a direct impact in the cost of ship operations as well as cost of airfare, a major cost factor in selecting a cruise as a vacation. The cost of airfare can be as much as the cruise itself. ... If the weather is too bad the cruise must be cancelled. This presents a problem since the vast majority of Carnival’s revenues are from the Caribbean. ... Low market penetration presents an opportunity for the industry, 90% of North Americans have never taken a cruise. ... Since many areas of North America suffer effects of winter, a cruise to a tropical climate is a desired treat. The Caribbean is a safe and desirable locale for a cruise. ... Currently Norwegian Cruise Lines and Holland America are under investigation for pollution of the oceans. Alaska has a law in the state house requiring cruise lines to register pollution statistics for each ship. This is one of 3 laws in the state legislature designed to regulate pollution created by cruise ships. ... Carnival will see a small number of carriers reaching economies of scale and expand to become equal competitors. ... 16 describes the external environment in the cruise line industry based on the threats and opportunities. ... While there is consolidation taking place, the trend is towards larger companies such as Carnival, Royal Caribbean and Princess to absorb these weaker lines, but have them remain intact as a subsidiary. Norwegian Cruise Line may become a competitive threat. ... The current industry measure for gross operating profit is in the 40% range, Carnival is at the top with 49. ... Net profit margins for the 3 major lines range from a low of 11% for Princess to a high of 25% at Carnival. ... q Top management has been in the cruise business since inception q Fiscally conscious and conservative management style q Clear focus on marketing q The management has been able to achieve the lowest industry break-even point at 60% of capacity per ship. ... Product and Service Delivery Assessment Weaknesses § Larger cruise ships are losing the specialized service as a result food quality is diminishing, for example the Carnival Destiny holds 3400 passengers § As deep discounting becomes a revenue factor service, quality could decrease. ... § As the company becomes larger, “ classical cruise elegance” may be lost due to over expansion. Strengths q Carnival has a history of excellent service q Company covers all segments of cruise business form contemporary to luxury. ... q Since Carnival maintains lowest low fixed and variable costs, customers get better value. q Can exploit synergies from support industries such as hotels, air fleet, bus lines and tour operators owned by Carnival. ... Marketing Assessment Weaknesses § Carnival needs to develop new strategies, competitors copying Carnival’s strategies and gaining market share. § Participating in discounting, according to Bob Dickinson, president of Carnival Cruise Lines “we’re selling cruises this year at 1980 prices. ... § With the rapid expansion in Carnival’s capacity, large sales increases will be needed to meet expectations and revenue projections. § Caribbean market has extremely large share of company revenues § Since building cruise ships is a 3 – 6 year venture, long term projections must be made with an inability to modify once construction has begun on a cruise ship, estimated to be $6 billion over the next 5 years § 99% of all booking through travel agents, very little direct sales, 10% commission paid per sale Strengths q Due to economy of scale Carnival has lowest cost in all market sectors q All brands strong in market q New strategies beginning to emerge at Carnival, web site to go directly to customer, mall “Carnival Stores”. The Internet should afford carnival a better client to customer relationship and increase profitability, cutting the 10% travel agent commission, 15% in Florida. q Since Carnival controls about 34% of the industry capacity, the new loyalty plan should increase repeat business. The lines are Carnival, Holland America, Cunard, Seabourn, Windstar, and Costa Cruise Lines q Cheap fares have increased passengers, an overall increase of 16. ... Carnival amounted to a large share of the increase. ... Assessment of Recent Strategies Weaknesses § As passenger increases begin to level off Carnival is in the midst of an aggressive expansion program. ... The key attributes that sell the cruise are being diluted in favor of volume. ... Strengths q Under Mickey Arison Carnival has commanded the lead in the industry in sales, capacity and passenger count. ... 9% from 1995 to 1996 q Cruise revenues up 12. ... Internal Factor Analysis Carnival has been the industry leader for since the 70’s. With the growing popularity of cruises other companies are following Carnival and achieving similar results. As the industry consolidates there will be a small group of competitors that will be of the size and scope to compete directly with Carnival. It is up to Carnival to use its superiority in the industry now to promote its future. ... Carnival receives high satisfaction ratings especially from first time cruisers. More experienced passengers do not rate the food quality high on Carnival, but Holland America has excellent ratings. Carnival has shown to provide an excellent value for passengers and a high number become repeat passengers. Carnival has been the most innovative and active marketer in the industry. Other lines have followed the Carnival model with the same success. Carnival needs to branch out and expand direct customer contact. ... Other avenues for direct customer interaction must be pursued by Carnival. ... Carnival Cruise has strong experienced leadership; Mickey Arison has the wisdom and experience to be able to take advantage of the opportunities in the cruise industry. His father established Carnival and Mickey has been a key manager from the very beginning of the company. ... With the lowest break-even point in the industry, 60% Carnival is a fiscally sound competitor. ... Carnival currently has 6 lines. Carnival has positioned itself in all market segments of the industry and is the overall industry leader. |
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