Strategy Management

Strategy Management

Carnival Cruise Line is the world’s leading travel enterprise. It operates a fleet of 101-ships, serves 8.5 million guests annually, and maintains ten separate cruise lines (CCL, 2017b). Traditionally, cruising is an extremely profitable industry, and Carnival is the best provider in the industry. The headquarters of Carnival Cruise Line is in Miami (Florida), Europe (England) and Asia (Singapore), Germany, Italy and Australia with regional offices. The company has several offices in Asia and 16 offices in China (CCL, 2017b).

The Company states   ‘ their job is to take the world on vacation and to provide memorable adventures through some of the world’s greatest-known cruise brands, spanning a range of different geographical areas and cultures, all of which have an incomparable land and sea appeal. Carnival Cruise concept has a variable pricing strategy that allows consumers in many different geographies to enjoy their holidays at many different price points (CCL, 2017c).  Carnival has a relatively healthy balance sheet, international diversification, superior expertise and manufacturing, and a favourable environment arising from the growth of wealthy people and ageing among its other strengths. Those traits will guarantee that Carnival stays in the industry as the key player, but it does not ensure success.

Carnival has a broad product portfolio (Icahn, 2015). It gets most of its income from its cruise lines. Approximately 80% of its total income results from sales of tickets and the other 20% comes from additional payments (Icahn, 2015). One or more identities at each of their cruise lines. Carnival Cruise Line’s business tactics are to offer different types of cruises to passengers.for example  Carnival Cruise Line can sell them services such as food, speciality restaurants and casinos (Icahn, 2015).

Carnival Cruise claims that its integrity and performance is on sustainable and open operations, referring to the viability policy in the Annual Policy Report of Carnival Cruise Line (CCL, 2016a). Carnival Cruise Line focuses on the development and implementation of advanced technology to ensure the sustainability of the company. Carnival Cruise is currently continually improving pricing strategies to increase profit and introduce new approaches to enhance client satisfaction. It defines China as a Blue Ocean market (Ahola, 2011). In the meantime, Carnival Cruise extends its footprint through China. High capacity growth will lead to higher income, hence exposes the core business strategy of the Carnival. It shows that Carnivals Cruise’s core business strategies are to introduce current products into new markets, for example, in Asian markets, especially China, while striving to provide improved service value to existing markets.

Carnival Cruise Line has been able to offer passengers looking for great-value travel more economical cruise and hence establishing a  minimal-cost strategy that has lead Carnival Cruise Line’s broader to market share (Kenlan et al., 2010). Carnival Cruise Line’s creative and effective marketing strategy (Wheelen & Hunger, 1990) as stated in (Kenlan et al., 2010) is another critical tool for success. It has introduced comprehensive television programs to earn loyalty from current customers and gain new customers (Kenlan et al., 2010). Carnival recognizes the growing influence of mobile device tactics. It has utilized mobile phone abilities such as 360-degree vision to deliver interactive experiences and pre-booking to simplify the reservation experience of smartphones (Abramovich, 2016). The tactics allow Carnival to create high purchasing power in the product buying process and remain profitable on the North American market (Kenlan et al., 2010).

The Carnival’s main strength is its massive scale and range. It is twice as large as the most significant competitor, which operates in almost every sector and region of the world. It gives Carnival power over the whole cruise industry. It allows the company to undertake strategies that will grow the market, provide a platform for active acquisitions and M&A operations, and help Carnival negotiate with significant manufacturers of cruise ships (Levin et al., 2012). Historically, under-average expenses and above-average income are generated by Carnival Cruise Line. It is mainly due to the company’s extensive experience of operating and running cruises, and some right tactical moves. This advantage makes expanding into new markets much simpler for Carnival Cruise Line than for a lesser player or upcoming company. Carnival also has the most significant data pool to use to establish what operates and does not operate and the most skilled cruise market in the world. Such advantages allow Carnival to have more effectively segment its customers than its rivals.

Historically, as a group of mostly independent companies, Carnival was owned by the Arison family. That cruise line operates its passengers, marketing, delivery, storage, ports and logistics to a large extent. This strategy has advantages: internal competition implies that each line works in isolation better than any other track. Carnival’s single most significant move is to reduce the number of new ships ordered throughout the industry to take advantage of its overall market share. Standard Industrial-Organizational Theory suggests that the leader should have a focused propensity to reduce the ability to increase prices.

Carnival is projected to increase its share of the market by ordering the total opposite of reasonable competitive conduct with its current ships slightly. It is possible because each cruise line considers estimated benefits and risks when purchasing new ships and does not know that each new order lowers prices throughout the industry and into the other Carnival brands. Carnival should, therefore, reduce new ship development somewhat and reinvest the money in retrofits and marketing expenditure to enhance the quality of the fleet without flooding the market to better exploit its strategic advantages. The Costa Concordia disaster was just the recent in Carnival’s health misfortunes. Shortly afterwards, there was an engine fire on the Costa Allegra and drifted in the pirate-ridden Indian Ocean for several days. Such severe and evident incidents cause a cruise ship to be scrapped for months and create enormous negative publicity, which affects both Carnival Cruise Line and the cruise industry.

Lower profile problems can also have significant effects. Some of these issues were viral infections and people lost at sea. Norovirus viral epidemics generally require a ship’s return to homeport, an outbreak of negative advertising in newspapers, blogs on television and industry, and reimbursement of many passengers. Carnival’s safety record is far worse than other cruise companies. Although major cruise accidents such as the Costa Concordia disaster do not have a central database, the Center for Disease Control tracks all critical viral epidemics on cruise lines.

Carnival Cruise Line is the global leader in the cruise line industry due to its numerous shops and significant international involvement. There are substantial barriers to entry and exit within the cruise ship industry, resulting in a high concentration ratio.  In sales and pricing, Carnival is continuously battling with these rivals, keeping internal competition key to the industry. Cruise lines have also been subject to intense M&A activity historically, and Carnival also competes to acquire still more share (Levin et al., 2012).

Overall, Carnival Corporation leads the industry with 52.9 per cent of North American market share and 51.6 per cent of the rest of the world market share. His biggest competitor, Royal Caribbean, has only 27.6% of North America’s market share and 25.6% of the rest of the world’s market share. Such high market share means there is room for collaboration among business leaders, which can consequently reduce the chances and intensity of price competition. But in fact, Carnival is sacrificing this conventional industrial-organizational model. Carnival intensifies internal competition by competing with one another in the main European and North American cruise lines.

In the cruise line industry, the manufacturer effect is relatively high. Most of a cruise ship’s goods sold on an open, competitive environment. Carnival Corporation it significant expenses are for fuel, travel agency services, food and beverages, air transport services, use of port facilities, maintenance and repairs such as dry docking, marketing and advertising, restaurant products and equipment, communications facilities and shipbuilding and renovation. The new building is a notable exception. These key builders also have limited power and capacity, and a small number of new builders rely on Carnival Cruise Line. The high supplier power of the shipbuilding tend to reduce due to the balanced relationship: cruising is a similarly oriented market. Indeed, the considerable purchase price of a new ship creates a massive incentive for ship suppliers and provide competitive prices (Levin et al., 2012).

Buyer power in the cruise line industry is relatively low. Unlike many other holidays, travel agents also book more than two-thirds of cruises. Carnival reports that no group of travel agencies make up more than 10 per cent of their market, suggesting that buyer dominance is small, decreasing their strength (CCL, 2017e). Therefore, consumers are spread throughout the world and thus have no mechanisms to convey a coherent message or collective power exercise, leaving them with little influence (Levin et al., 2012).  Moreover, customers do not have the ability or resources to create the cruise experience on their own; it is by nature, a heavily processed deal. It eliminates the breakdown of the cruise by fragmenting other types of vacation packages as mechanisms and companies that allow clients to plan and design individual pieces of their vacation more cheaply

There is little potential for new competitors to join the cruise line industry, which could pose a potential challenge to Carnival Corporation in core markets. Entry into the high-end cruise line industry requires about $1 billion in the capital as it costs an average of $400 million to build a ship. Also, hundreds of sea duty-trained sailors and crew are supposed to employed by large cruise ships (Levin et al., 2012). It indicates that, for a cruise to be successful, its staff must have specific knowledge and experience requiring training and generate high extra costs. Hence making it a pivotal barrier to entry for any new competitor which wants to start a new cruise line from scratch. Finally, the brand value in the cruise line industry is significant, which means that creating a reputation and prestige will take time for a new competitor, slowing down or dissuading their chance to compete with an established company like Carnival Cruise Ship.

Given that a cruise is a vacation for most consumers, the cruise line industry presents a significant threat from other forms of holiday replacement. Generally, air-land travel has been cheaper than cruises. Any holiday can is replaceable, and there is no high cost to switch, which makes the risk of replacement look very tall. Alternatively, if the price and service appear to be more desirable, customers who can qualify for a cruise might choose an all-inclusive vacation in the resort. Others may decide to go onto an adventure vacation that enables them on the same journey to visit different destinations.  Carnival Cruise Line has been actively advertising the high standard of service they provide, the all-inclusive value of their cruises. Particularly since the economic recession, have sought to make their journeys more appealing and comparable to possible alternative holidays.

In the future, Carnival Cruise Line should consider the following recommendations: as a whole, it needs to demonstrate to consumers that the company handles security concerns for the order to regain customer trust after significant incidents occur. Their market share should continue to be used to distinguish between current and new markets and to maximize ticket prices by providing a new and improved cruising experience. Carnival Cruise Line should also add a concentrate on making cruising safer throughout the world. To improve the value of its services, Carnival Cruise Line must bring attention to providing customers with more convenient cruising experiences. Carnival travel agents are the corporation’s backbone. They are the key marketing tactics, the primary income source, and tracking relationships of visitors from Carnival. By the nature of such a partnership, it may be challenging to make full use of the tools available to other companies. Carnival, for example, hasn’t had any access to comprehensive client lists and has a hard time connecting customer history.

Nevertheless, the alternative is not merely to walk away from the relationship between the cruise operator. Carnival should instead try to collaborate with its numerous travel agencies and obtain on ongoing basis information from them. That would have some advantages. Carnival cruise lines can be more selective, offering discounts and improvements to customers.

REFERENCES

Abramovich, G. (2016). Carnival Cruise Lines CMO On Marketing The Seven Seas. Cmo.com. Retrieved 28 March 2017, from http://www.cmo.com/interviews/articles/2016/10/25/carnival-cruise-lines-cmo-on-marketing-the-seven-seas.html#gs.k=1WESg

Ahola, A. (2011). Creating a consumer-driven business model for the cruise line industry: Case Royal Caribbean Cruise Lines Ltd. (Master). Aalto University.

Carnival Corporation & plc (CCL). (2016b). Carnival Corporation & plc 2015 Annual Report.

Carnival Corporation & plc (CCL). (2017a). Investor Relations. Retrieved 6 February 2017, from http://www.carnivalcorp.com/phoenix.zhtml?c=140690&p=irol-irhome

Carnival Corporation & plc (CCL). (2017b). Corporate Information. Retrieved 6 February 2017, from http://www.carnivalcorp.com/phoenix.zhtml?c=200767&p=irol-prlanding

Carnival Corporation & plc (CCL). (2017c). Mission & History. Carnival Corporation & plc. Retrieved 6 February 2017, from http://www.carnivalcorp.com/phoenix.zhtml?c=200767&p=irol-history

Carnival Corporation & plc (CCL). (2017e). Carnival Corporation & plc 2016 Annual Report on Form 10-K

Icahn, C. (2015). Carnival Corporation – Technology and Operations Management. Harvard Business School. Retrieved 6 February 2017, from https://rctom.hbs.org/submission/carnival-corpora

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Kenlan, M., Maxwell, K., McKearney, B., Murphy, T., & Smith, Z. (2010). Carnival Cruise Lines Strategic Audit. North Carolina State University. Retrieved from https://mie480project.wikispaces.com/file/view/Carnival%2BPaper2.docx.

Levin, B., Jones, J., & Slade, T. (2012). Carnival Corporation strategy report. Retrieved from http://economics-files.pomona.edu/jlikens/seniorseminars/likens2012/reports/carnival.pdf

Wheelen, T. L. & Hunger, J. D. (1999). Case Study – Carnival Cruise Lines, Inc – a Successful Company Rapid Growth. Retrieved from http://www.scribd.com/doc/26363095/Case-Study-Carnival-Cruise-Lines-Inc-A-Successful-Company-Rapid-Growth.