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Major Case Analysis


We recognize that your vacation is very important to you - an investment in time ... The cruise business is still not considered a vacation alternative ... – PowerPoint PPT presentation

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Title: Major Case Analysis

Major Case Analysis
  • Presented By
  • Shannon Carlson
  • John Wojtowicz
  • Matt Garten
  • Neil Zimmerman

  • In 1972 Ted Arison and American Travel Services
    (AITS) started Carnival Cruises
  • Purchase of first ocean liners
  • Mardi Gras
  • Carnivale
  • In 1974 Arison bought Carnival Cruises from AITS
    for 1, while assuming 5 million in debt
  • All-inclusive packages became available
  • Included airfare, array of port destinations,
    meals, entertainment, and activities

  • Between 1988-1998 Carnival Cruises expanded
    nationally and internationally with purchases or
    joint ventures with companies such as
  • Holland America Cruise Lines
  • Holland America Westours
  • Windstar Sail Cruises
  • Seabourn Cruise Lines (joint venture)
  • Airtours Corporation (joint venture)
  • Costa Cruise Lines
  • Hyundai Merchant Marine Co. Ltd.. (joint venture)
  • Cunard Cruise Lines (joint venture)
  • International Markets
  • Continents of North America, South America, Asia,
    Australia, Africa, Europe and the Middle East
  • Carnival is 1 in the industry, with 6 different
    cruise lines, 458 destinations, in 87 countries

(No Transcript)
Mission Statement
  • To provide quality cruise vacations that exceed
  • the expectations of our guests
  • Presidents Message
  • We (Carnival) strive each day to provide great
    service, whether youre vacationed aboard a Fun
    Ship or interacting with our shoreside team
    prior to or after your voyage. We recognize that
    your vacation is very important to you - an
    investment in time and money that must be truly
    rewarding - so we want to do everything possible
    to ensure that it is enjoyable and, most of all,

  • Ethical Statement
  • Carnival strives to treat the customer with the
    utmost respect, thereby promoting an enjoyable
    vacation. Carnival Corporation also prides
    itself in environmental awareness, understanding
    the importance of a clean and safe environment
    both on and off the cruise ship.
  • Environmental Policy
  • Dumping in Alaska

Corporate Culture
  • Decentralized decision making
  • Relaxed working environment
  • Open door policy of communication
  • Loyal employees
  • promote from within advancement strategy
  • Friendly, family-like working environment
  • Carnival College
  • Facilities Fitness center and professional child
    care located in 225,000 sq. ft. office
    headquarters in Miami, Florida
  • Competitive salary structure
  • Extensive Benefits package

Organizational Objectives
  • Increase awareness of amenities offered on
    cruises to North American consumer population
  • Capture part of the 93-95 percent of the North
    American population that has never cruised
  • By 2002, 3 billion will be invested in new ships
  • Remain the leader and innovator in the cruise
  • Offer competitive pricing
  • Build 14 ships by 2006
  • Expand international presence through joint
    ventures and future acquisitions
  • Build the worlds largest ocean liner the Queen
    Mary 2 by 2006

Corporate Level Strategy
  • Differentiation Strategy
  • Market position - Leader and innovator in the
  • Segmentation of cruise market
  • Contemporary
  • Premium
  • Luxury
  • Joint ventures airplanes and hotels
  • Maintain long-term profitability by operating at
    full capacity
  • Build on fun ship theme
  • Expanding ports and shipbuilding

Internal Strengths and Weaknesses
  • Operations/Manufacturing
  • Strengths
  • Operate at over 100 capacity
  • Expanding fleet
  • Offer entertainment
  • Hold many passengers at one time
  • Many varieties of boats to choose from
  • Worlds largest multiple night cruise company
  • Make the ship into the vacation not just the port
    of destination
  • Own 6 different cruise lines
  • Luggage is delivered by the cruise ship staff to
    the passengers cabin
  • Two engines one for propulsion and one for power

Internal Strengths and Weaknesses
  • Operations/Manufacturing
  • Weaknesses
  • Operational costs need to remain profitable,
    otherwise quality of service to customers will be
  • Depreciation, fuel, insurance, port charges, and
    crew costs cannot be reduced because they are
    fixed costs
  • Boats tend to be slow
  • Limited ports due to size of boats

Internal Strengths and Weaknesses
  • Human Resource Management/Management/Organization
  • Strengths
  • Diverse workforce
  • Employs help from 51 nations
  • Good retention rate employees stay for 8 years
    on average
  • Have overseers to monitor ships for environmental
    pollution and human rights violations
  • Enthusiastic crew
  • Camp Carnival
  • Vacation Guarantee
  • Vacation Protection Plan
  • Many Awards earned

Internal Strengths and Weaknesses
  • Human Resource Management/Management/Organization
  • Weaknesses
  • Lawsuit in 1996 claimed that a woman had been
    sexually assaulted on one of Carnivals ships
  • More than 100 of these claims were reported
    before 1995
  • Employees cannot speak English
  • Carnival has been sited many times by the
    American Maritime Union for exploiting employees

Internal Strengths and Weaknesses
  • Financial Accounting
  • Strengths
  • Consumers must pay in full, 60 days in advance
  • Exempt from federal income tax at corporate level
    because of Controlled Foreign Corporation (CFC)
  • Very cost-conscious to achieve various economies
    of scale
  • No cash is used on the boats, only in the gaming
    area (card is used)
  • Financing plans available
  • Offer Carnival MasterCard Allows cruisers to
    earn a seven day cruise with reward program

Internal Strengths and Weaknesses
  • Financial Accounting
  • Weaknesses
  • Spend a lot of money on ships, regardless of
  • Outstanding long-term debt of 1.55 billion
  • 33 of operating expenses cannot be reduced
    because of fixed costs

Internal Strengths and Weaknesses
  • Marketing/Sales
  • Strengths
  • High priority on marketing in an attempt to
    promote cruises as an alternative to land base
  • Leader in the industry
  • First cruise line to break away from print media
    and use television
  • Lead all cruise lines in advertising and
    marketing expenditures
  • Customers can book their own vacation packages
    several ways
  • Customer focus
  • Convenience
  • All inclusive packages
  • Brand recognition
  • First in market
  • Smoke free ships
  • 14 of corporate revenue generated from shipboard

Internal Strengths and Weaknesses
  • Marketing/Sales
  • Weaknesses
  • Carnival must pay travel agents commissions for
  • 90 of American adults have never been on a
  • Being in a concentrated area with a lot of people
    (terrorist threat)

Internal Strengths and Weaknesses
  • Innovation and Technology
  • Strengths
  • Variety of cruise ships to choose from
  • Offer dance clubs, casinos, live music, pools,
    and movie theaters
  • Management can build on the theme of the ships
  • Expansion in innovation with building new ships
    is always growing

Internal Strengths and Weaknesses
  • Innovation and Technology
  • Weaknesses
  • Timely boat construction
  • Takes time to update technology on the boats

Environmental Scan
  • Economic
  • Opportunities
  • Decreasing fuel prices
  • Offer all inclusive packages
  • Threats
  • Rising cost of shipbuilding
  • Fuel prices high
  • Increased airline costs effect industry as a

Environmental Scan
  • Social
  • Opportunities
  • Increase in two income families therefore
    having a disposable income
  • 90 of American adults have never cruised
  • Family cruisers are able to purchase packages
    to allow for family vacations
  • More socially accepted entertainment amenities
  • Growing elderly population
  • Consumers will feel safe and confident to have
    the opportunity to take out insurance
  • Increase in people taking cruises because more
    people will be able to afford packages through

Environmental Scan
  • Social
  • Threats
  • Being confined to a certain space can cause
    sickness to spread quickly
  • Cannot satisfy every customer as far as
    entertainment needs
  • Increasing competition
  • Prices depend on season
  • Consumers are more aware of what sexual
    harassment means and can file a lawsuit

Environmental Scan
  • Government/Political
  • Opportunity
  • Profitability increased due to exemption of
    federal income tax
  • Threats
  • Increased supervision by government, due to
    sexual harassment cases filed against Carnival
  • Security of passengers
  • Dumping laws have become strictly implemented due
    to past violations
  • Regulations with U.S. Coast Guard for compliance
    with the Convention of Safety of Life at Sea
    (SOLAS), U.S Public Health Service for sanitary
  • American Maritime Union citing Carnival for
    employee schedules
  • Political factors - war

Environmental Scan
  • Technological
  • Opportunities
  • Online reservations
  • Expanding cruise lines
  • Building the largest cruise boat in the world
  • Track advertising and web presence
  • Threats
  • Other cruise companies meeting customers on the
    internet with better prices
  • Extensive time needed for updating technology on
  • Mechanical failure on trips

Environmental Scan
  • Natural
  • Opportunities
  • Winter getaways
  • Caribbean climate
  • Threats
  • Weather (Hurricanes, Tsunamis, etc.)
  • Ice glaciers
  • Running aground
  • Shark attacks on excursions
  • Pirates
  • Bermuda Triangle

Structural Analysis
  • Competitors
  • Royal Caribbean Cruise Lines
  • Disney Cruise Lines
  • Alaskan Cruise Lines
  • Independent Yacht Vacations
  • Princess Cruise Lines
  • Carlson Cruise Lines
  • Star Cruises
  • Royal Olympic Cruise Lines

Structural Analysis
  • Threats to Entry
  • Increasing growth rate of cruise market
  • International waters are shared
  • Only 7 of North Americans have cruised

Structural Analysis
  • Barriers to Entry
  • Expense of cruise ship
  • Must operate at high capacity
  • Regulation on Maritime cruises
  • Cost of fuel
  • High advertising costs
  • Consolidated market
  • Consumers use other forms of travel
  • Carnival is the worlds leader in the industry

Structural Analysis
  • Bargaining Power of Suppliers
  • Food and beverage suppliers do not have very much
  • Fuel is a consolidated industry can dictate the
    cost of fuel
  • Ports that are available have very little power

Structural Analysis
  • Bargaining Power of Buyers
  • Option of other cruise lines
  • Comparison shopping on the Internet
  • Travel agents play an important role in customer
    choices and purchases
  • Word of mouth from past customers

Structural Analysis
  • Substitutes
  • Air travel
  • Beach vacations
  • Theme parks
  • Automotive travel
  • Bus travel
  • Train travel
  • Camping
  • Land vacations (beach, landmarks, attractions,

Financial Ratios/Industry Averages
Problem Statement
  • Cruises only represent two percent of the overall
    vacation market
  • The cruise business is still not considered a
    vacation alternative
  • Problems of limited growth and lack of first time
    cruise customers have plagued Carnival
  • Cruises considered a high status vacation
  • Carnival must become proficient at competing in
    the vacation market against typical vacation
    destinations like the beach or theme parks

Problem Statement
  • Competition from other cruise lines
  • First in the cruise market but quickly imitated
  • Must compete by having lower prices than rival
    cruise companies
  • Must provide customers with a cruise experience
    that surpasses their competition

Problem Statement
  • Experienced a two-percent drop in growth rate per
  • Cruise market was new when Carnival entered
  • People were wary of cruises as a vacation medium
    when introduced
  • Carnival was forced to increase advertising

  • Cost Competitiveness
  • Carnival must continue to maintain competitive
    pricing in the cruise industry
  • Purchase used ships rather than build ships
  • Purchase fuel while prices are low
  • Practice Total Quality Management
  • Strategy 1. Practice TQM, closely monitor fuel
    prices, and reduce shipbuilding to decrease
    costs, because the customer count is not
    increased by building new ships.

  • Differentiation Strategy through innovation, and
    new service offerings
  • Full-size shopping mall onboard a ship
  • Wireless computer network allowing internet
    access and communication anywhere on board
  • Radio or television station on board
  • Providing cruises to new locations
  • Strategy 2. Add new product or service offerings
    and provide easier access to information for both
    customers and crew to maintain Carnivals status
    as the leader and innovator in the cruise

  • Differentiation by Innovation in Safety
  • Faster luggage checking
  • Increased onboard security
  • Advanced surveillance
  • Electronic ID cards for passengers
  • Strategy 3. Become the innovator in passenger
    safety and maintain sufficient safety standards
    for customers.

  • Core Competencies differentiate by stressing the
    cleanliness of the facilities and quality of
  • Clean facilities
  • Friendly service
  • Strategy 4. Carnival should differentiate its
    service to customers by stressing the quality of
    the service and the facilities.

  • Focus Strategy currently Carnival focuses on all
    customer groups
  • Broaden the demographic appeal
  • Carnival can appeal to different cultures and age
    groups specifically
  • Strategy 5. Continue to appeal to all customers
    by providing an array of choices through
    Carnivals different cruise line divisions.

  • Horizontal Merger
  • Examine the market for land-based vacations
  • Land tours on busses, trains, airplanes
  • Examine the hotel/motel business more in detail
    to determine whether to enter the market
  • Strategy 6. Examine new vacation markets,
    including land-based vacations, and the
    hotel/motel business.

  • Internet Carnival should use the internet to
  • Continue use of the website for vacation booking
  • Add a discussion forum for customers on the
  • Use pop-up advertisements
  • Use e-mail to keep customers informed and
  • Strategy 7. Continue to maintain services
    provided on the website and use e-mail strategies
    to keep customers informed of special offers,
    sales, and updates.

  • Strategic Alliances
  • Carnival can form strategic alliances with
    governments in areas where the ports are too
    small for Carnivals ships and expand the ports
  • Provide new cruise locations and increase
  • Strategy 8. Pursue strategic alliances with
    governments of countries that do not have the
    port capacity to hold Carnival ships.

  • International
  • Carnival can penetrate new international markets
  • Taylor each ship to meet the desires of different
    markets (For example, China)
  • Strategy 9. Appeal to international markets by
    achieving different themes and providing cultural

  • Cost Competitiveness
  • Building ships is expensive, Carnival should
    purchase ships instead of building them
  • Carnival can maintain cost competitiveness by
    practicing TQM to improve smaller aspects of the
  • Carnival can purchase fuel and store it (if
    storage costs are low) when fuel costs are low

  • Differentiation and Innovation
  • Carnival can differentiate its service by new
    product offerings like a full-size shopping mall
    on one of the boats
  • Existing technology is available to allow
    wireless internet and network access to a laptop
    computer anywhere on the ship
  • Existing technology is also available to create a
    radio or television station on board

  • Differentiate through innovation in passenger
  • Carnival can invest in new luggage screening
  • Carnival can increase onboard surveillance such
    as plain-dressed security guards, cameras, etc.
  • Electronic ID cards can be supplied to each
    passenger for passenger tracking

  • Strategic Alliances
  • Some ports are too small for Carnival ships
  • Carnival can form strategic alliances with
    governments in the areas and try to expand the
  • Expanding ports would create new cruise
    opportunities and increase the marketing
    possibilities for Carnival

The End Any Questions?