Analysis of Carnival
Carnival Corporation The proposed vision statement “ We will passionately strike for global vacation leader by offer the distinctive vacation experience that cater to the variety of vacationer lifestyle and budget at an outstanding value. We also committed to create strong bond of relationship with our prestigious stakeholder group by prioritize their need. ” The direction of Carnival Corporation to achieve its vision is to serve the cruise ship industry in global platform.
The positioning of the vacation service is perceived as distinctive and exceptional. To become the global vacation leader is the priority for manager to direct their effort and making decision. The proposed vision statement will address the concern on long term interest of stakeholder by placing stakeholder’s need at the top position in order to create strong bond of relationship with them. The statement inspire by focus on brand loyalty and the emotional wording will create the motivational effect.
Last, the vision statement is feasible since Carnival Corporation is the largest and most successful cruise line in the world with adequate resource such as experience management team, operating 81 cruise ships asset with more than hundred thousand passenger capacity, 11. 7% quarterly revenue growth rate, strong brand name and so on. Current mission statement “ Our mission is to deliver exceptional vacation experiences through the world’s best-known cruise brands that cater to a variety of different lifestyles and budgets, all at an outstanding value unrivaled on land or at sea. Based on my review, the target market of Carnival Corporation is North American cruise market which include vacationers in every tier of the cruise market, such as: different budget, itinerary, geography, demographics or psychographics. The services offer by them is cruise line service that provide customer exceptional vacation experience. They use their world’s best-known cruise brands to pleasing customers. The shortcoming of this mission statement is inadequate to reflect the concern for the survival and profitability of company, their public image which related to the company reputation and the concern for their employee.
Beside, the superlative in mission show that it is not clearly defined and is mix up with vision statement . For example, to be the world’s best-known cruise brands is a focus element in vision statement. Another missing element that cause the incomplete of mission statement is lack of well defined target market. The proposed mission statement “We are proud to deliver the memorable vacation experience for vacationer in various tier of the North America market with our world’s best-known cruise brands in order to achieve sustainable growth and continue value creation to satisfy needs of stakeholder group. (Carnival Corporation 2006) Carnival Corporation Strategic Group Map High Number of Brand | | | | Royal Caribbean | | TUI AG Low | Star Cruise | | Number of Capacity Less Many Direct Competitors Comparison Based on the strategic group map with dimension number of employee (X-axis) and number of brand (Y-axis) , the close rivals of Carnival Corporation is Royal Caribbean Cruise Ltd since the position of Royal Caribbean Cruise is adjacent to Carnival Corporation, besides, Royal Caribbean is the second largest cruise line in the global market.
TUI AG is the distant rival to Carnival Corporation, since there are using different strategic group and also the position far apart from each other. Based on Michael Porter 5 Forces Model of Competition, there is high entry barrier in the cruise ship industry, because there is strong brand loyalty associate with the services. Furthermore, industry outlook is risky and uncertain due to seasonality, natural disaster, changes in the government regulation, economic condition of different countries that the company might involve, environmental and health concern and internal issue such as fire on Ecstasy.
Besides, there is high capital requirement for this industry such as fix asset ,more capacity needed to achieve economic of scale, high maintenance cost, high cost to train and remain employee to achieve five star standard. Therefore, the threat of new entrant is low. Another important forces is threat of substitute service. The substitute of cruise ship is alternative form of leisure such as airline or land based vacation package, globalize hotel and resorts which is readily available and at the attractive price compare to the cruise ship service.
Although cruise line is provide more variety and better add-on service as well as entertainment such as beauty product and service, shows, gambling, fine dining, sports activities and so on in the travel time, however buyer have lower cost to forgo the luxury service in switching to the substitutes which price is more attractive. In overall, the threat of substitute’s service is consider high. The bargaining power of supplier in cruise ship service is refer as labor supply, petrol oil supply and so on.
The company bottom line is critical and highly dependent on service of employee and there is a high cost for switching to alternative suppliers due to high training cost in providing the five star service and degree of adaptableness to served in ship. Besides, labor supplier is differentiated due to the skill and human intelligence is unable to imitate. The increasing of the petrol oil will greatly affect the cost of ship operation and price of vacation package. ( Appendix 1) Thus, the bargaining power of supplier is high in this industry.
There are high bargaining power of buyer due to low switching cost to competing services since consumer is able to gain perfect knowledge by comparing the price of different company. Buyer are large because cruise and vacation package mainly sold through travel agents including wholesalers and tour operators. Although cruise ships service is able to differentiated among themselves and buyer demand in AP region is projected to grow by 40% but buyer is more price sensitive based on the consumer discretionary income.
Besides, luxury service make buyer easily to postpone the purchase compare with the necessities. Therefore, the bargaining power of buyers is high. Intensity of rivalry is one of the factor that greatly affect a company position. The case show that cruise traveler increased by 7. 8% in North America and 10% in Western Europe within five years, this indicate that buyer demand is growing gradually.
Besides, buyer cost to switch brands are low and there is high fix cost associate with this business can be significant expense of operating cruise line Despite there is other alternative brand, however the experience that a cruise liners offers is so distinctive that people is willing to spend more on the specific brand. Also the intense competitor are not equal size and competitive strength, since Carnival Corporation have more brand and employee compare to other competitors. Thus, there is a moderate intense of rivalry.
According to the analysis above, the threat of cruise ship industry is consider high. Recent years, the growth rate of cruise line industry is significant increase in term of size and opportunity. Cruise industry have to serve broader range of demographics group, for example increase customer demand within age of 20 and 41-74 years old. It is in favor of the cruise line industry with high barrier of entry by limiting the number of new entrants. There is an increasing globalization due to increase of consumer demand in more and more countries, such as increase cruise traveler by 7. % in North America , increase 10% in Western Europe, Asia-Pacific is projected to grow by more than 40% and significant growth in Europe , Asia, Australia, New Zealand, and South America. So globalization will increase intensity of competition, furthermore lowering trade barrier due to European Union (EU), ASEAN Free Trade Area (AFTA) and North America Free Trade Agreement (NAFTA) will lower the entry barrier which lead to increase new entrant and reduce profit of industry. On the other hand, globalization may reduce supplier argaining power by helping company to get lower cost labor from the developing country and increase number of suppliers. It bring benefit to the company when come to negotiation for more favorable deal. Due to the environmental concern, cruise ship operator have to comply with the international standards set by MARPOL regarding discharge of gray water and treated black water only while ships are underway and not while in port. The antitrust law and consumer protection law regarding governing competition ensure there is competition among the industry players.
It will increase the intensity of competition within the industry. The net effect in entry barrier is difficult to estimate precisely without sufficient information, but it show that the intensity competition forces that are moderate presently are beginning to be strong which might reduce the profit of existing player . However, bargaining power of supplier is getting weaker which might help company to gain cost saving. Although there is low penetration level in this industry , but increasing growth rate and demand give opportunity for company to stay profitable.
Based on the analysis, Carnival Corporation is occupied the attractive position in this industry which is many capacity and more variety of brand, since more capacity can served the increasing market demand and enable Carnival Corporation enjoy economic of scale by achieving cost -saving. Carnival Corporation capture the opportunity in globalization trend by meet the need of different demographic group using its variety of brand. Beside from that, the more variety of brand better served customer in different lifestyle , budget and segment as well as increase customer satisfaction by providing more chooses.
Thus, Carnival Corporation’s strategic group enable them to capture larger market and improve the bottom line by positioning themselves differentiated among their competitors. The effective of Carnival Corporation strategic is reflect in their increased profit from 1790000 in year 2010 to 1978000 in year 2009 (Appendix 2) as well as they are the market leader in the cruise line industry. Carnival Corporation face more demand elastic and Royal Caribbean become second best substitute brand due to strong competitive pressure from Royal Caribbean.
Therefore, Carnival Corporation will continue stay at the current attractive position and reduce competitive barrier by focus on building bigger ship to enjoy more economic of scale and satisfy consumer preference. They also increase the number of ship to meet the growth rate of industry and adding the new product design in order to compete with their close rival. Another company that is in the attractive position is TUI AG. Although they have less variety of brand and less capacity, however their position is not in cluster and their competitive characteristic is different than the competitor.
They serve the niche market by solely target on German market and customize the service in order to suit the taste of German in term of food, accommodation, design and entertainment. Moreover, they joint venture with Royal Caribbean allow them to share resources and experience which generate synergies. (Appendix 3) Royal Caribbean have less brand but more capacity compare to Carnival Corporation. Based on the financial performance, Royal Caribbean quarterly revenue growth by 10. 4% in year 2011 which is quite near to quarterly revenue growth of Carnival Corporation 11. 7% .
This shows that Royal Caribbean is competitive in producing good result, therefore they are more likely to make only minor strategic adjustment by construct more ship which is build 47 additional European cruise in 2011 and 2012 to increase capacity in order to further enjoy economic of scale and serve the growing market demand. In conclusion, Carnival Corporation have to be more competitive and beware of their fierce rival- Royal Caribbean by having strategic capabilities and dynamic capabilities in order to sustain the position in industry and capture more market share.