Carnival Corporation Case Study
Those include Carnival Cruises family Caribbean vacations), Holland America (luxury cruises), Canard (ocean liner revive), Costa Crosier (European destinations), Seaboard (luxury), and Windiest :luxury). In addition to the cruise lines, they also operate a tour business that offers sightseeing tours both separately and as a part of its cruise packages.
Carnival also receives revenue form various onboard activities including casino gambling, bar sales, gift shops, arcades, spa services, and photo/art sales.
Carnival Corporation’s mission statement is to provide an alternative to traditional ‘actions by offering quality cruise packages that target customers of every age. Carnival’s major competitors include Norwegian Cruise Lines, P Princess Cruises, Royal Caribbean Cruises, Disney Cruise Line, and Celebrity Cruises. Some other competitors in the cruise line industry are Club Med, American Hawaii, Commodore, Dolphin, Radios, and Royal Olympic.
Even though competition is intensifying within the cruise industry, many analysts believe there is a big undiscovered market in North America where only around 7% of the people have ever taken a cruise. At the present time, the cruise industry appears to be very favorable. There is a significant amount of industry growth and a huge market available in North America. One of the central issues of Carnival Corporation is how to reach ninety three percent 193%) of the population in North America that has yet to take a cruise for their ‘action plans.
It has been estimated that there is a five billion-dollar market in North America that has been untouched. Carnival’s growth potential could seem unlimited if they could capture a significant amount of that market.
Another central Issue, that somewhat ties together with the first one, is the increase of competition in he industry. With new cruise company’s putting out additional fleets of ships, it will become harder and harder for all of the company’s in the industry to operate their cruises at full capacity.
This will prove to be a problem in the future for Carnival unless they can began to further differentiate from the rest of the industry. Carnival Corporation appears to be very strong internally. They have been in business for over thirty years and have learned to operate very efficiently.
By being the industry leader, customers perceive Carnival to represent excellence and dependability. This gives them a huge edge over new entrants in the industry. Also, the size of the company allows them to have cost advantages associated with economies of scale.
Another strength of Carnival is they are able to offer packages for every income bracket. By tottering cruises that tit budgets to people in high, mid and average income brackets, it allows them to reach broader sectors of the market. The last strength of Carnival is that a large percent of their income is exempt from US Income taxes at the corporate level.
This is because the company is registered as a ‘controlled foreign corporation”+. En analyzing a company as strong as Carnival, it can be difficult to find internal Insaneness. One of the major weaknesses for Carnival is their high percentage of fixed costs.
Fuel, insurance, depreciation, port charges and other fixed costs account for over 30% of their operating costs. These costs are hard to control, especially when and if they do not operate at full capacity.
Also, Carnival has increased their current liabilities by approximately 300 million and total liabilities over 1 billion dollars from 1999 to 2000. This expansion could be a potential weakness in the future if Carnival s unable to continue to operate at full capacity. In analyzing Carnival Corporation externally, it appears to be a very favorable situation for Carnival.
The industry works on low profit margins with very high capital requirements. There is also Government regulations that play a major role on new entrants having to comply with US Coast Guard and US Public Health Service regulations. Because of this, the cruise industry has relatively high barriers to entry.
Also, as stated earlier, there is a huge untouched market waiting to be taken by any company that can set themselves apart from the rest of the industry and reach the arrest. There are also external threats that could possibly present problems for Carnival Corporation.
At the present time, the US economy has began to slow and this will have a direct impact on the cruise industry. Also, the industry depends heavily on travel agents to do the majority of their booking. This has caused the cruise operators to be hesitant in implementing on line booking and other marketing plans in fear of the travel agents refusing to sell their packages.
Finally, the increase of competition n the industry will begin to make it more difficult to continue to operate cruises at lull capacity, which is vital in this industry because of the high fixed costs associated Math the startup. Eased on my analysis of Carnival Corporation and the cruise industry, I would recommend that Carnival introduce a new type of cruise vacation. In the industry as of now, there are many cruises that all offer the same basic agendas. Typical cruises travel from destination to destination stopping for only several hours at each port. I Mould propose that Carnival offer a cruise that has one destination with an extended stay at that particular port of call. This would attract many travelers who like to explore and really get to know the area that they are visiting.
This offering would give travelers an unbelievable experience. They would be able to enjoy the luxury of taking a cruise and still have the opportunity to visit particular destinations for an extended period of time. Although they would enter in direct competition with the all-inclusive resorts, I believe this is the way to capture that large percentage of people who nave opt o no take a cruise in the past. Would implement this idea at the beginning of the summer months, which are peak action times in North America.
There will be changes in the cost structure of these particular cruise offerings, but it is not guaranteed that costs will increase. The onboard additional revenues, such as gambling and alcohol, should not be affected because people would be still be spending around the same amount of time on the ships in the evenings.
Passengers normally leave the ships during the day at the ‘arioso ports of call to shop and explore. This cruise would Just allow people to be able to visit a destination extensively and have a so-called “floating resort”+ waiting or them at any time.
Also, the savings on fuel could possibly outweigh the additional costs incurred for the extended stay at the port of call. If this implementation were successful, their competitors in the cruise industry would most definitely imitate the new cruise offering. Since Carnival is the industry leader, they are watched heavily by the competition.
Also, by offering a cruise that has only one destination with travel and lodging included in the price, they will enter into the ‘All Inclusive”+ resort market.
If costs can be controlled and they can offer lower ricers than the resorts, Carnival could tap into a market with unlimited potential. In conclusion, there are a huge percentage of people in North America that have not taken a cruise. It is important for Carnival to find a way to attract these potential customers. The biggest draw back of cruises today is the fact that travelers do not get to spend more than 6-8 hours at any particular destination.
I believe by offering extended, one stop destinations, it will begin to attract more travelers who enjoy the opportunity to be able to really see a particular place of interest.