Carnival Cruise Line, Research Paper Example

Synopsis

The case study presents the current financial situation of Carnival Cruise Lines. The organization is a subsidiary of the American International Travel Service, which was established by Ted Arison in 1972. While the organization began with just one ship, Arison’s dream of offering customers affordable travel vacation packages at an affordable price soon became a reality. Just five years after the company was established, the company had three ships. Seven years after this, the company became public as the industry leader. In the early 1990s, the company began to provide its customers with exciting shore excursions to supplement the services they were offered on board. Currently, the company is ranked as the best competitor in the cruise industry and has about 33.3% of the market.

Carnival has many subsidiaries, including Holland America Line, Windstar Cruises, and Seabourn Cruise Line, which it uses to compete effectively with other cruise lines in the industry. It has two dozen cruise ships that travel to different locations and these ships exhibit different degrees of formality. The company has demonstrated an adequate ability in generating profits through acquisition of new lines and entering new components of the market. Ultimately, it aims to profit by encouraging customers to repeat their travel with the cruise line rather than the competitors.

The cruise line has many options available to its customers, allowing them to select both short term and long term cruise line options. Furthermore, the company is attempting to expand by initiating a collaboration with Hyundai Merchant Marine to reach the market in the Middle East and Asia. The company believes that this expansion will allow it to have access to a greater amount of consumers which would therefore increase its profit. Even though Carnival is currently one of the leaders in its market, it aims to retain this status and increase its profit more significantly. This case study will determine the strengths and weaknesses of the company in order to provide them with recommendations that will help improve their business practices.

Resources

Carnival Cruises has many resources available to it that constitute as strengths. Ultimately, the company markets itself as the “Fun Ship”, which attracts a large numbers of customers in a manner that helps generate profit. The ability for the company to gain profit in this manner is a consequence of its ability to market itself as the perfect solution to the middle class workers’ stress. As a consequence, the cruise line’s marketing team is a valuable resource because they help the company determine ways to generate a greater extent of profit. This is beneficial because using the monetary resources that the company currently has available, the marketing team is able to grow them more significantly.

Additionally, the cruise line has approximately 25 ships available, and the number of this fleet is growing. This is essential to the profit driving capabilities of the company because the greater amount of ships they have available, the greater amount of customers that they are able to accommodate. This is further enhanced by their ability to quickly dispatch the cruises for new trips in addition to the ability to fill the cabins with customers. As a consequence, the Carnival staff is a valuable resource because they are responsible for optimizing the travel experience in terms of efficiency and quality, and therefore are the reasons that many customers choose to utilize the cruise line again.

Capabilities

One of the cruise line’s major capabilities is the ability to effectively expand and compete, therefore serving a greater amount of customers. After acquiring new cruise lines, such as the Holland American Line, Carnival expanded its capabilities to handling a diverse customer base, which came with its ability to offer cruse trips of various expenses and quality. Therefore, the cruise line was able to cater to families with diverse incomes while still offering a high quality experience. More expensive cruises were able to offer a greater extent of luxury and may be considered ideal for couples, while less expensive cruise trips are more relaxed and ideal for the family setting.

A related capability exhibited by the company is its ability to engage in effective partnerships with other cruise lines and travel companies. In particular, Holland America Westours operates in manner that appeals to different markets in order to generate an interest in tourism of various sorts. Furthermore this subsidiary has control over hotels that enhance the tourist experience for its clients; as a consequence it is clear that Carnival is able to expand in a manner that allows it to profit in a variety of ways. Since it began in the cruise industry, it has expanded to other aspects of the tourism industry that may or may not include ocean travel.

Core Competencies

One of the major aspects of the company that allow it to be an effective competitor is that it currently has a 26% market share of the industry. Therefore, it has an enhanced ability to remain in its current position as a competitor in the cruise line industry. Furthermore, it is evident that its marketing strategies continue to work, as its profit has increased by approximately 5% from the year prior. Studies have shown that the company has been using its earnings effectively, investing a reasonable amount of funds back into the company in order to enhance its marketing capabilities. These funds have also been used to make beneficial repairs and upgrades to the cruise line in a manner that promotes the ability of the company to do business. Overall, the sales of the organization have increased by more than 10% compared to the prior year, indicating that the company is able to effectively access new consumers and appeal to individuals who have previously purchased their services.

Furthermore, Carnival has a strong strategic position. It is able to both meet and exceed guest expectations in all areas of service and support, which convinces many customers to cruise with Carnival again. This is achieved as a consequence of the amount and quality of services provided by the company. In addition, the cruise line ensures that all staff members are friendly, contributing to a positive vacation experience.

The branding of the company is an additional aspect of the organization that allows it to be competitive. Because it markets itself as the “Fun Ship”, this marketing campaign demonstrates that it is family friendly while offering fun activities for people of all ages. Since the company wishes to meet the demands of all individuals who may be interested in its services, it has many cruise options and activities available to meet the budgetary needs of each individual. This ultimately contributes to the organization’s ability to market to a large amount of individuals who are looking to have a vacation in addition to their ability to attract repeat customers. All of these efforts are supported by the fact that the company has specialized training programs available to help travel agents effectively market its products.

Another aspect that makes Carnival effective is that it implements a variety of strategies in order to meet its objectives. As a consequence, the company is highly concerned with a need to build more ships and have access to more cruise lines.

They are particularly interested in Asia and the European markets. Another effective strategy is the high quality of the service. This results in customer satisfaction, which leads to new and repeat customers. Another strategy is the economies of scale. Carnival is trying to increase the size of the company so that they can have the lowest break-even point in the industry.

Strategic Managers

Board – The board is comprised of fifteen members. Six of the members are directly involved in the Carnival Corporation. The other nine members hold various jobs, such as ambassadors and executives of financial groups. The company has a stable mix of inside and outside directors.

Top Management – The management of Carnival Corporation is very strong. The leaders have been responsible for many firsts in the industry. The management team in place has been in place for several years. When the Corporation merges or buys out other companies they often keep on the key players from the new acquisition. The Chief Executive Officer and Chairman of the Board of the Carnival Corporation is Micky Arison, whose father founded the corporation.

Findings of Fact

It is important for Carnival to continue to consider that it needs to remain highly competitive with other cruise lines. Therefore, it needs to determine which types of customers it should appeal to in order to drive profit. Furthermore, it is necessary for the company to consider that many individuals are choosing to vacation destinations on land rather than on the seas. Using this knowledge is also important to refine consumer target demographics and to advertise the company in a manner that allows it to convince the public to purchase its products and services over the other options available. It is possible that Carnival’s investment in the hotel industry will also enhance their ability to achieve this.

Furthermore, many resort companies, such as Disney, are beginning to enter into the cruise line industry. In order to remain competitive with already existing lines, Disney cruises offers discount packages that allow vacationers to visit its theme parks and utilize their cruise services. Despite this, Disney intends to remain a family friendly option and does not offer gambling on board. Therefore, many customers will continue to choose Carnival so that they have access to a greater extent of adult entertainment. One aspect of this practice is that Disney has optimized the ability of consumers to quickly purchase these packages and the entire trip can be booked and organized through one short phone call. In order to ensure that Carnival is able to continue to compete, it would be beneficial for the company to have this option available as well.

Another concern that the company faces is that it has made many investments that have been found to not be profitable. For example, during the 1980s, the company built as resort known as the Crystal Palace Resort and Casino in the Bahamas. However, this was not a widely popular travel destination and the company lost more than $25 million as a result. To resolve this debt, the company needed to sell this business. This demonstrates that it is important for the company to thoroughly examine the market that it is entering with regards to the amount of money that it is likely to make in a particular area. A similar error was potentially made again when the company bought Holland America Lines for $375 million. Since it was not able to finance this purchase out of pocket, it has trouble paying off this purchase for a long period of time.

Recommendations

One aspect that will allow the company to grow relates to their need to apply to consumer interest. Therefore, it should begin initiatives in order to attract the customer base. One such case is related to the company’s tendency to support environmental issues, which make the industry look good in the eye of the public. Furthermore, it can do this a manner that has a negligible expense, causing more good than harm. For example, if the company is able to donate one thousandth of one percent of its total net income, it would be able to donate more than $650,000 to an environmental cause. Of particular relevance would be a commitment to saving the ocean because this would allow the company to market itself as an environmentally friendly cruise line. This would allow the cruise line to appeal to individuals that were previously opposed to ocean travel due to the environmental damage it could cause. In addition, this initiative would help decrease company expenses related to lawsuits or attacks from environmental groups and other organizations.

Another concern for the company is the need to continue to find ways to increase the amount of passengers that travel on the cruise line in addition to determining how to convince them to spend more money once on board. This can be done by providing these individuals with more services on board in addition to shore excursions. Furthermore, the marketing team should attempt to modify its practices so that it could reach a wider percentage of the public. Therefore, it would be beneficial for the company to increase the amount of online advertisements that it currently uses to attract a wider customer base. In addition, these advertisements could be supplemented by physical advertisements on billboards and public transportation so that the middle class individuals that comprise a majority of their customer base are able to access more adequately.

Furthermore, it would be beneficial for the company to emphasize what services are covered by their purchase. While many individuals are aware that Carnival cruises offer a cruise ticket for an affordable price, many consumers are concerned that the cruise experience will be too expensive for them due to expenses on board. However, there are many optional expenditures available, but none are mandatory to optimize the cruise experience. Therefore, it is important to emphasize the fact that there is free food, entertainment, and other benefits available online for free. In addition, entertainment services are available for travelers of all ages, including children and adults.

Another aspect of Carnival’s effective competition in the cruise line industry lends to the fact that the company is able to offer affordable vacation packages to its customers. This is enhanced by the fact that the company is able to acquire airline tickets in mass quantities that allow its consumers to access ports if they are located in faraway destinations. By purchasing these tickets in bulk, they are able to pass their discounts along to their customers. This allows the company to make its package deals look even more appealing to its consumers, which is ideal for large families who often have a difficult time affording large vacation packages.

The company would also benefit from establishing a referral program in which recommending friends and family members to the cruise line will earn the customer a discount. This is a valuable advertising tool because it will allow the company to have access to free marketing, while they will provide customers with incentive to repeat their business. In order for this to be profitable, several limitations could be put in place. For example, a certain amount of discount should be earned for each ticket purchased up to four tickets and it should be necessary for the discount to be used in the year following the receipt of the coupon to ensure that the company is able to retrieve an immediate return for this promotion.

Furthermore, the company would be able to increase its business more significantly by providing a greater extent of employee inceptives. Many cruise lines, such as Royal Caribbean provide their employees with incentives to treat their customers well, which contributes to a culture of excellent customer service. Carnival would benefit by providing similar incentives to these individuals because while the program would cost the company some money in the short term, it will ultimately make them more money back in terms of improving the customer return rate. Not only will this program motivate employees, it is expected to increase the likelihood that best practices will be created and implemented. Furthermore, offering the same level of employee customer service as other major cruise lines will allow the organization to be more competitive.

Conclusion

Even though Carnival cruise lines is the most successful company within its industry, it must take action in order to ensure that it will be able to remain on top of the competitive ladder. Currently, it holds about one-third of its market, but it is conducting efforts in order to make this number grow. As a consequence, it is attempting to appeal to a broad consumer market in terms of the ages of customers it is able to benefit in addition to the level of luxury that individuals are expecting on board. While a majority of the company’s practices are effective, it would be beneficial for it to make several improvements in order to retain its standing. Most importantly, it is important to improve customer service to generate a larger number of return customers. Furthermore, customers should be provided with incentive to invite their family members and friends to try Carnival in exchange for a discount. It is expected that this will increase the profitability of the organization. While many improvements can be made to the company, this paper provides a summary of starting points that would be beneficial for the organization to implement.

Works Cited

Carnival Press Room. Carnival Cruise Lines Fact Fact. 2009. Web. 15 May 2015.

Cruise Market Watch. Market Share. N.D. Web. 15 May 2015.

Fincantieri. Press Releases. 23 September 2014. Web. 15 May 2015.