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Carnival Cruise Lines

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Stephanie Lopez

on 29 October 2013

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Transcript of Carnival Cruise Lines

Carnival Corporation
Carnival Corporation
Presented to:
designed by Péter Puklus for Prezi
Environmental Scan
Financial Analysis
Strategic Alternatives and Recommendations
Carnival Today
Critical case issue 2: Carnival is consistently dealing with the rising prices of oil.
Critical case issue 3: Carnival needs to do a better job of monitoring its employees.
Porter Analysis
Program Objective: To rebuild Carnival’s reputation as the cruise industry leader and promote affordable vacations, all while satisfying consumers, employees, business partners, shareholders, and communities.
Corporate Governance
Currently on the Board of directors for Carnival there are 13 total members, five of the members are internal while the other eight are external hires.

Their website also states that their board of directors “review and approve” any new changes to the corporate governance guidelines to be in accordance with the laws of the U.S. and U.K.
Officers of the company who have to implement those policies and make sure they are held to the up most standards.
Jonathan Band:
Retired chief of naval staff
Former first sea lord (Britain’s equivalent to the U.S. Secretary of Navy)
UK Ministry Of Defense
Represent Carnival PLC (majority owned by Carnival)

Richard Glasier:
Former CFO for rival Royal Caribbean Cruises Ltd.
Former president and CEO of Argosy Gaming Co.
Independent Director
Member of Corporate Governance Committee
Member of Nominating Committee
Member of Compensation Committee
Member of Audit Committee

Debra Kelly-Ennis:
Former president and CEO of Diageo Canada (a global spirits, wine and beer company)
Held marketing, sales and general management positions with leading companies such as RJR/Nabisco, Inc., The Coca-Cola Company, General Motors Corporation and Grand Metropolitan plc.
Named one of the Top 100 Most Powerful Women in Canada for three years
Member of Health, Environmental, Safety and Security Committee.
John Parker:
Chairman of Anglo-American PLC, the world's largest platinum producer
Former president of the Royal Institution of Naval Architects
Another director along with Jonathan Band who represents Carnival PLC
Member of Corporate Governance Committee
Member of Nominating Committee

Internal Scan
Liquidity Ratios
Current Ratio
Quick Ratio
Liquidity, also referred to as solvency, describes how easy it is to convert assets to cash

Threat of New Entrants:Low
Rivalry among Existing Firms: High
Number of Competitors
Diversity of Rivals
Product or Service Characteristics
Threat of Substitute Products or Services: Medium
Cruise Industry Positioning
Traditional Resort Vacation
Cargo Ship Cruises
Planes, Trains, and Automobiles
Bargaining Power of Buyers:Medium
Low Cost of Changing Suppliers
Customer Price Sensitivity
Bargaining Power of Suppliers: High
Limited Suppliers
Lack of readily available Substitutes
Uniqueness of Cruise Ship
Relative Power of Other Stakeholders: High
Other Stakeholders:
Travel Agents
Coast Guard
Entry Barriers
Capital Requirements
Government Policy
Well Known Brands
Expand to New Markets - Location
More Product Diversification
New Technologies to Reduce Cost
Programs to Protect the Environment
Re-establish Company's Image
Reinforce Existing Markets
Strategic In-Land Partnership
Environmentalist and Government Involvement
Bad Press Coverage
Other Forms of Transportation /Vacation Packages
TOWS Analysis
World's Largest
Product Diversification
Large Global Market Position
Cost advantage
Excellence in Entertainment
Strong Financial Position
Cost of Fuel
Safety and Personnel Training
Dependency to US Market
Financial Statement Reporting
World's Largest
Product Diversification
Expand to New Markets
Large Global Market Position
Dependency to US Market
Financial Statement Reporting
Expand to New Markets
More Product Diversification
Cost advantage
Offered Entertainment
Strong Financial Position
More Product Diversification
Strategic In-Land Partnership
Other Forms of Transportation /Vacation Packages
Cost of Fuel
New Technologies to Reduce Cost
Environmentalist and Government Involvement
Safety and Personnel Training
Re-establish Company's Image
Bad Press Coverage
External Scan
In the U.S., the industry contributed $42 billion to the economy and created more than three thousands jobs in 2012
Carnival Cruise Lines has 60 travel destinations in worldwide.
Carnival Cruise Lines (Miami, Florida) is known as the world's largest cruise operator.
Carnival invested $180,000 million in clean-air technology
The company uses $300 million to add backup generators, to upgrade fire safety, and to improve engine rooms on all of its ships
Carnival complies with International Maritime Organization requirements for using less fuel that contains sulfur
Cruise companies are allowed to avoid a portion of U.S. tax when the ships sail under the flag of a foreign country
Carnival cruise ships fail to meet Centers for Disease Control and Prevention’s requirements.
Financial and property losses after the hurricanes
High fuel prices(CI #2)
Falling currency exchange rates
Consumers have to pay extra travel fees to get to the ship.
Cruise cancellations that resulted from the Splendor and Triumph incidents (CI #3)
High cost and time constraint are associated with up-to-date technologies
The cruise cancels during hurricane season
Sea fare goes up as fuel prices increase. (CI #2)
Carnival Cruise Lines has lawsuit waiver on its tickets. (CI #1)
U.S. and Australian governments are demanding to increase protection for cruise guests.(CI#1)
Carnival plans to expand its market in U.K. and Australia
It has implemented a free-smoking policy
It offers “Great Vacation Guarantee” packages (CI #3)
The Board of Directors
Intensive, deep culture
Friendly, family-like atmosphere
Strong sense of loyalty among its employees
Mission : "To Consistently Provide Quality Cruise Vacations That Exceed the Expectations of our guests"
Improved coordination of work in divisions
Fast response to changes
Strong connection with consumers
A publicly traded company
current assets / current liabilities
current ratio FY 2012 is .25
current ratio has been below .5 for the last 5 years
stable compared to competitors
Excludes Inventory
Quick ratio FY 2012 is .16
Appears to not be able to meet current obligations
Media periodically announces the news of negligence or theft on the board (CI#1)
Increasing revenues, decreasing bottom line
2009 recession
Coast Concordia
Rising prices of Oil
Top-down, hierarchical manner.
2009 recession and attendance drops
strong rebound, all-time high revenues
Costa Concordia Incident, Increase in COGS
Customer deposits are satisfied in two ways:
the customer books a cruise
the customer cancels a reservation and Carnival keeps the deposit
Divisional Structure
Leverage/solvency Ratios
Debt to Equity Ratio
total Liabilities / Total Equity
Total Debt Ratio
Total Liabilities / Total Assets
Main headquarters in Miami encompass a total of 450,000 square feet and include Club Carnival and Camp Carnival
Sales Office in England
Relative proportion of shareholders equity and debt used to finance a company's assets
company uses debt efficiently
financial health
low risk
Same as competitor
Brand and Corporate reputation
Numbers of breakdowns and accidents (CI#1)
Company lowered it's profit forecast.
Company's earnings fell 30%
Crew member inappropriate response led to loss of power(CI#1)
39% of the company's assets are provided via debt
the larger the ratio, the higher the risk of bankruptcy
shows financial health
Leverage ratios are used to get an idea of the company's methods of financing and ability to meet financial obligations
Profitability Ratios
Gross Profit Margin
Return on Equity
One of the most important measurements of profitability
FY 2012 reported the lowest ROE in 5 years
Royal Caribbean's ROE was .22%
Return on Asset
How efficient is management using it's assets to generate profits?
Carrying millions of passengers in all geographical areas
Electronic-access control systems on the ships for security
Offering lower fares and shorter cruises to benefit from economy of scale
Challenge : to remain competitive
Profitability ratios are used to evaluate how a company is able to earn earnings with its resources compared to expenses and other costs used in business.
Environmentalist Involvement
Programs to protect the environment
Gaining Carnival"s perception back
using safety procedures
establishing new image
Research and Development
This ratio shows the portion of capital left after accounting for the cost of goods sold, to pay for other operating expenses that the firm incurs
Find ways to afford rise in fuel price
partner up with recycling companies
Help the environment
Pause/Proceed with caution Strategy
carefully pick qualifying employees
more strict hiring proceses
Intensive trainings
Recommended Strategy
company has .39 cents after accounting for the cost
shows profitability
constants growth over the last 10 years
Renew the overall companies perception as well as being more careful in the selection of employees,lower fuel cost expenses and work on satisfying the mission statement .
Carnival Background:
Most Widely Recognized Cruise Brand.
Carnival was formed in 1972, by pioneer Ted Arison.
By 1987, Carnival went public.
Carnival owns several other cruise lines throughout the world.
Positions itself to cater to guest of all different cultures.
Extra Information:
Carnival's recent trouble with Costa Concordia. (Tuscan)
Carnival vs. Association of Canadian Travel Agencies
Carnival vs. U.S. Coast Guard
Carnival's Mission Statement:
"Our mission is to take the world on vacation and deliver exceptional experiences through many of the world’s best-known cruise brands that cater to a variety of different geographic regions and lifestyles, all at an outstanding value unrivaled on land or at sea."

Carnival believes that in order to have sustainability in their industry they feel they must “preserve the environment, respect their employees and communities, and return value to our shareholders”
Critical case issue 1: The safety of Carnival’s customers and its environment protection. Carnival is dealing to improve the negative perception of the company due to the Concordia recent accident.
Mickey Arison:
Son of the founder Ted Arison
Family still holds about 28% of the voting stock
Miami Heat franchise owner
Board member since Carnival went public in 1987
Member of Executive Committee

Program Activities
Fix its reputation from all the negative media publications
Find lower costs of oil so they don’t have adversely related costs to consumers
Ensure that all employees are thoroughly screened so that shareholder and company standards are met.
Evaluation and Control
The success of Carnival Cruise Line is evaluated on how much profit the company is making compared to its competitors, and its performance in the stock market.
Currently, the financial performance of Carnival is around the highest it has ever been, and as America comes out of recession, ticket sales are only expected to rise.
However, Carnival must improve problem areas such as its reputation, oil cost issues, and employee screening.
Implementation Process
Through the dates of 11/13-6/14, the P.R. Department will be in charge of reviewing Carnivals current media situation, making strategic press related decisions, and implementing these decisions to help renew Carnival's reputation.
Lead independent director
President/CEO of Metromedia Co.
Member of Executive Committee
Member of Corporate Governance Committee
Member of Nominating Committee
Member of Audit Committee
Stuart Subotnick:
Through the dates of 7/15-1/16, Upper Management will take on the responsibility of reviewing Carnival''s current oil prices, seeking out the most economical suppliers, and deciding where to purchase from.
Through the dates of 6/16-1/17, Carnival's Human Resource department will review current employee screening techniques, research new screening techniques, and implement a process that has a high correlation between screening and job performance.
Control Methods
Laura Weil:
• After implementing Public Relation strategies to restore Carnival’s name, issue random surveys to anyone who has cruised with Carnival. Have these surveys relate to their perception of the company. (Critical Issue 1)
Executive vice president and COO of New York & Co.
Non-Executive Director
Member of Compensation Committee
Member of Audit Committee
• Make a plan to annually scan Carnival’s oil market for alternatives, better pricing, and greener options. (Critical Issue 2)
Randall Weisenburger:
• Establish a group of working tests and interviewing techniques that accurately represent what type of employees are qualified to work for Carnival. Once this combination of personality tests and interviewing techniques has been verified to predict successful employees, stick with this set of screening techniques. (Critical Issue 3)
Executive VP and CFO of Omnicon Group (advertising group)
Member of the Audit Committee
Chief Executive Officer of The Costa Group
Director of Costa Group
Michael Thamm:
Chairman of Holland America Line,
Chief Executive Officer of Holland America Line Inc.
President of Holland America Line Inc.
Stein Kruse:
Howard Frank:
Vice chairman of the board and Chief Operating Officer
A former PricewaterhouseCoopers partner in Miami
On the executive committee with Arison and Subotnick
Former CEO of Costa Cruises
Chairman and CEO of Carnival Asia Unit
Spearheading Carnival's move to source more customers in Asia.
Pier Luigi Foschi:
Arnold Donald:
President and CEO.
Board member for 12 years
Former chairman of Merisant Co.
20-year Monsanto executive
Member of Compensation Committee
Member of Nominating Committee
Member of Corporate Governance Committee
Member of Health, Environmental, Safety & Security Committee



Stephanie Lopez
Carolina Cruz
Cody Henley
Chau Ma
Thiolys Leon
Nick Worrall
Mariana Krylova
Karen Bardale

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