Issue Analysis on Carnival Cruise Lines
...n political forces that the industry faces are environmental regulation and compliance. Ships are subject to inspection by the U.S. Coast Guard regarding the Safety of Life at Sea (SOLAS) and the U.S. Public Health Service to maintain sanitary standards. Task Environment · The consumer demand in the North American market is immature. Cruises continue to be strong, and long-term sustained growth due to the ongoing addition of ships, destinations and product offerings, as well as the high level of satisfaction among cruisers indicates steady growth for this segment. Only 5% of people in North American target market have taken a leisure cruise. The market potential is in excess of $50 billion. · Global industry - expand the environment of company mergers and buyouts in order to increase the market share by 1) identify the market, 2) measure concentration, 3) identify potentially viable theories of anticompetitive effects, 4) assess the potential for entry barriers, 5) asses potential efficiencies. · The rivalry and competition is extremely high, carnival has some major advantages over its rivals. The company is incorporated in Panama, and many of its ships are registered in Liberia. All cruise lines are striving to dominate the market. · Buyer power is low to medium due to the high entrance barriers of new companies and limited quality options. The company publishes advertiser-supported Currents magazine, which is sent to about 750,000 of the million passengers who sail with it each year. But it's not for any retention objective. · Power of the stakeholders is high - they offer good quality vacations, with an environmentally safe ambience. Customer satisfaction is important in order to increase the diversity of vacation amenities. · Distributors power is medium to high - Cruises have become an indispensable tool for agents to provide a higher level of service to their cruise clients and enjoy the benefits of selling cruises in an automated environment. Cruises continue to be a favorite and cost-effective vacation option for millions of leisure travelers who turn to travel agents for an easy planning and reservations process · Substitutes are very likely - aircraft, train, road trips, as well as, hotels, resorts, or any other vacation people take can be an option. · Entry barriers are high - the high recent and projected growth rate in cruise markets would, in itself, constitute a significant competitive constraint on the incumbent cruise operators as high growth rates provide an incentive for new operators to enter the market. The internal environment of Carnival Corporation is strengthened from its numerous strengths, which overshadows its few weaknesses. Carnival reaps the benefits from its popular name recognition, quality culture, drive to be number one, low breakeven point and favorable tax position. Issue Identification Identifying weaknesses is more difficult than identifying the strengths of the company. One, which is difficult to rectify, is the fact that fixed costs represent more than 33% of the operating expense. This is due to the high cost of insurance, port charges, and depreciation. Corporate structure is of the profit center concept and managers are given independence to the extent that he or she is able to keep profit at a satisfactory or better level. The Carnival corporate staff makes major decisions. Selection and Justification of Strategic Alternatives: 1. Growth through Concentric Diversification 2. Pause strategy 3. Retrenchment W & W recommends the following two Strategies: Pause Strategy: The Pause Strategy consists of the company consolidating various acquisitions to find economies and to encourage innovation among the business units. The major problem that we have identified is that, due to over abundance of berths caused by increasing industry capacity, Carnival is unable to produce sufficient revenue in comparison to the operating cost. The danger lays in the fact that cruise operators may revert to using price reductions as the weapon for filling their cabins. This is why Carnival Corporation must employ this Strategic alternative. Carnival must mimic Southwestern airlines and streamline the fleet, in an effort to increase profits and reduce operating cost. Growth Strategy: At the opportune time, utilize cash on hand to buy out ailing competitors and purchase a shipyard in North America Implementation: How do we do this? Pause Strategy · We first pull historical data from the last five years excluding 2001 and document destination, season, passenger count, and demographic information. This will provide Carnival with data that will indicate peek and minimal attendance. · Provide customer feedback surveys to determine the attributes and detractors from cruise lines. · Invest in fuel efficiency technology in order to reduce fixed cost. · Increase networking with travel agencies and agents to promote cruise travel and also obtain their insight as it pertains to future changes. Continue to give bonuses to agents that mention Carnival first. · Evaluate ea...