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Carnival Corporation: Strategic Analysis

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Jess McDowell

on 29 April 2014

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Transcript of Carnival Corporation: Strategic Analysis

Carnival Corporation:
Presented by
Lucas Assenmacher
Nathan Buchheit
Jess McDowell
Cody Gardner
Matt Patchen

Carnival Corporation (1998)
A complete strategic analysis
designed by Péter Puklus for Prezi
MISSION
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.
The Cruise Line Industry
INTERNAL ENVIRONMENT
"
"
Founded by Ted Arison
Bought out the Carnival Cruise subsidiary for

$1 cash and $5 million in debt
VISION
Quality
Tradition
Its employees
Customers
Strong Culture that values
LEADERSHIP STYLE
Friendly
Participative but centralized
GOAL
To become & remain the leader and innovator in the cruise line industry
STRATEGIC DIAMOND
ARENAS
3 Market Segments:
Contemporary, Premium, & Luxury
Geographic Areas:
North America & Europe; Australia & Asia
Product Categories:
Cruises
Distribution Channels:
Travel Agents (>90%)
Value Creation Strategies:
1) Promote the ship as the destination
2) Make cruises available to all market segments
3) Large amounts of marketing & promo campaigns
VEHICLES
How did the company grow?
ECONOMIC LOGIC
Low Cost Through Volume
Differentiators
Vacation packages
Ship as the destination
On board entertainment
Staging
1972 –
Founded by Ted Arison as a subsidiary of American International Travel Service after purchasing two aging ocean liners and refurbishing them
1974
– Carnival bought from AITS by Ted Arison (becomes its own company
1980
– Carnival builds its first ship, the Tropicale, which first sailed in 1982
1987
– Carnival completes IPO, generates $400 million
1988
– Carnival acquires Holland America Line
1992
– Carnival acquires 50% of Seaborne Cruise Lines
1997
– Carnival acquires 50% of Costa Cruises
1998
– Carnival acquires 68% of Cunard Line
1999
– Carnival purchases remaining shares or Seaborne & Cunard
2003
– Carnival merges with P&O Princess Cruises, forms Carnival Corporation & plc
2008
– Carnival joint-venture with Orizonia Corporation to serve Spanish cruise market

Internal development
Acquisitions
Mergers
Contemporary Segment:
Premium & Luxury Segment
Premium Price
Through Unmatchable Service
VRINE
Value Chain #1: Operations
Transformation
Strengths
Dominant world market share (52%)
Global diversification
Diverse staff
Entertainment options
Significant cost advantages
Operational Excellence and Experience
Brand Name
Strong financials
Brand autonomy- each major cruise line maintaining separate sales, marketing, & reservation offices
Aggressive shipbuilding program
Weaknesses
Poor safety record
Uncoordinated business operations
PR nightmares
Costa Concordia in Jan. 2012: sank, 32 deaths
Costa Allegra in Feb. 2012: fire, stranded w/o power
Fallen stock price
If dollar were to strengthen, then company records lower revenue than actually earned (for non USA financials)
Derives majority of its revenue from US customers
Inputs
Transformation
Outputs
Cruise Line Parts
Staff
Entertainment
Preparing & Maintaining
ships
Training employees
Quality control
Departure of the ships
Marketing activities
Customer Service

Value Chain #2: Sales
Inputs
Outputs
Fixed & variable expenses
Fuel
Cost of maintenance
Staffing
Entertainment
Hiring & firing employees
Revenues from each cruise shipped
Inventory
Comparisons to other competitors
Sales
Marketing activities
Customer Service
Value Chain
Activities
Suggestions
Higher capacity cruise lines
Expand
Acquire more businesses within or outside the industry
Strengths &
Weaknesses
Strategic Issues
Slow Growth Industry Demand
Competitors- “price weapon” (price war)
Small Market (5-7% usage of cruises)
External Environment
Cruise Line Industry - Mature
Competitors
Royal Caribbean Cruise Lines
Disney Cruise Line
Norwegian Cruise Lines
North American macro environment
Macro Environment Analysis
Political Forces
Little-to-no effect next 3-5 years
Debt for Capital Trade - 1991 Bahamian govt.
Persian Gulf War
Economic Forces
Airfare price increase
Fuel price increase
Social Forces
Cruises becoming more well-known
More family oriented
Thus, higher trend of consumers
Technological Forces
Creating new ships that are faster and cheaper to produce
Ecological Forces
Little-to-no side effects the next 3-5 years
Legal Forces
Cautious of labor & hours
Cruise lines have been attacked by unions in the past
Degree of Rivary
HIGH
Power of Suppliers
Little Above Average
Power of Buyers
Low Buyer Concentration
Low Importance of Volume
Low switching costs
Threat of Substitutes
High
Threat of New Entrants
Low
Summary
VALUE CURVE
Porter's five forces
High Exit Barriers
High Fixed Costs/Value Added
Low switching costs for buyers
Somewhat Fragmented Industry- Higher price competiton
Shipbuilders, crew, entertainers, travel agents, fuel, food & beverages
Low threat of forward integration
High switching costs
Little below average
Low switching costs
Buyers are highly inclined to switch to substitutes
Land based vacations, all inclusive resorts, day trips, cross country trips
High rate of mergers & acquisitions
High cost advantage
Learning curve advantage
Established brand equity
Moderately Attractive Industry
Believe it to increase in future
More mergers & acquisitions
More concentrated industry = less price competition
Strong Capital
Marketing
Travel Agent Relationships
Good Service
Key
Success Factors
Opportunities
Exploding Asian market
93% of US has never cruised
Enter new markets by acquiring smaller companies already established in that market
New destinations in established markets
Increase berth capacity
Expand luxury liners
Threats
Raising cost of fuel
Raising airfare costs
Cruise market’s declining margins & slower growth
Natural disasters
Competition mergers
Substitutes - land based resorts, day trips, cross country trips, etc.
Conclusion
Mature stage, yet creates profit for companies already in
Limited growth with market share being dominated
Current companies = leaders
More acquisitions to come
New Business Strategy
New Mission:
Same
Generic Strategies
Current: Broad Low Cost Leadership
Change to: Focused Differentiation
Market Position
Leader
Pursue Stabilization
Generating Strategic Alternatives
3 Best alternatives
1) Create an image of improved customer focus by implementing a strong loyalty program as well as a company culture focused on customer’s safety.


Consolidated Product Development
2) Reallocate the advertising budget to have a more concentrated focus on the higher end segments to increase margins while restricting capacity growth.

Market Penetration
3) Realign Carnival Corporation’s capacity increases towards high growth markets in Australia, Asia, and Germany, while restricting the market and raising prices in North America.
Market Development
Comparing
Recommendation
Alternative 3:
Realign Carnival Corporation’s capacity increases towards high growth markets in Australia, Asia, and Germany, while restricting the market and raising prices in North America.

Competitor
Reactions
Attempt to steal Carnival’s North American market share
Also attempt to enter in Carnival’s new markets
New Strategy
Arenas:
Focus in on Europe, Australia, and Asia
Vehicles:
Internal development, not many competitors, focus on new builds
Staging:
Fast growth in new markets
Differentiators:
No change
Economic Logic:
Low cost through volume, focusing on developing markets

Implementable?
Yes!
1) Overwhelming market presence
2) Access to large capital
Questions?
Full transcript