Strengths and Weaknesses of Carnival Cruise Lines - Case Study Example

Carnival cruise lines case study Introduction Carnival Cruise lines is headquartered in Miami, Florida and operates mainly in North America, Germany, United Kingdom, Brazil and Australia. The global cruise industry is estimated to be worth $ 29.34 billion with the North America market accounting for $ 17.46 billion. According to Cruise Market Watch, the cruise industry annual passenger growth rate will remain 7.4 percent until 2015. The growth will be mainly driven by the increase in shorter cruises, construction of more local ports, and new on-shore activities that match customer demands. The industry will attain 21.6 million passengers by 2014. Only 19.8 percent of Americans have enjoyed cruises with the market penetration relatively below 50 percent. Nearly 50 million Americans have expressed their intention of cruising in the next coming years. The cruise industry has experienced high product diversification and additional value-added services such as new cruise ship designs and new leisure activities that enhance the industry profitability (Applegate, Kwortni and Piccoli 5). SWOT analysis Strengths Carnival cruise lines is one of the largest cruise operators and has a well recognized brand image in the operation of cruises in the niche market both in contemporary and luxury cruises. Carnival cruise lines has more than 12 cruise lines and more than 75 ships that cover adequately serve the four North American market segments. Dominant market share One of the greatest strengths of Carnival cruise lines is the dominant market share due to high scope of operations and large economies of scale. The company has operations in nearly all the major cruise markets worldwide. In addition, the company is currently expanding the cruise ship portfolio through purchasing modern and luxury cruise ships. The company has made several mergers and acquisitions that are aimed at strengthening the market leadership position and eliminating competition. In 1996, the company acquired Airtours which is one of the largest air inclusive tour operator and subsequently acquired Costa Cruises in 1997 in order to enter the Italian market (Applegate, Kwortni and Piccoli 7). Low cost operational structure The company has been able to attain below the industry average costs and above industry average revenue growth rate. The company has rich experience in cruise operations which makes it easier for the company to enter new markets. The company has rich market knowledge and data that is useful in making new strategic choices due to its experienced workforce. Weaknesses Poor customer safety record There are numerous customer concerns on their health safety on the cruises. For instance, Costa Concordia tragedy increase the safety concerns after the Costa Allegra engine caught fire in the Indian Ocean. The two incidents have led to negative perceptions on the ability of Carnival cruise lines to guarantee the safety of the customers while in the deep sea waters. Viral outbreaks will necessitate the return of the ship to the departure port and cause high negative publicity and tension among the passengers thus leading to fare refunds. Surprisingly, the Center for Disease Control has pointed out that more that half of the sea viral outbreaks occurred in Carnival cruise lines ships while more than 30 percent of the people lost in the sea over the past one decade were onboard Carnival cruise lines. Opportunities Favorable changing demographics From the past customer demographic profiling, a majority of Carnival Cruise lines are aged 50 years and above. This target market is expanding in both North American and European markets thus Carnival Cruise lines is best positioned to offer value added service with its luxury cruises. The company should ensure that baby boomers entering the 50 years age bracket embrace the cruising luxury experience especially the retiring chief executive officers (Applegate, Kwortni and Piccoli 4). Expanding Asian cruising market and economy Asian economies such as China, Japan and Hong Kong are currently experiencing high economic growth and increase in the consumer disposable incomes. Asian customers currently account for less than 10 percent of the global cruise revenues, but the trend is changing due to growth of affluent and aging population that will demand more leisure services. The company should expand the current cruise line to include Asian ports destination and customize the services to Asian culture. Threats Political instability Fears of global terrorism will lead to decline in the number cruise occupancies. For instance, September 11, 2001 terrorism attacks make many companies to reduce the cruise fares since many customers were not ready for vacation. It took more than five years for the prices to return back to the high-water mark that was prevailing in 1999. There are numerous safety concerns especially cruising in the Indian Ocean which is currently facing numerous pirate attacks and tourist kidnappings. These threats may be unavoidable, but can negatively affect the profitability and revenues of Carnival cruise lines. Increasing fuel costs The global fuel costs have kept escalating over the past one decade. Fuel costs constitute a large portion of Carnival cruise lines cost structure. The frequent derivations in the fuel costs in the global oil market will require the company to use derivatives in managing the short-term risks. Although the company has introduced fuel surcharge fees, many customers will feel uncomfortable with the extra charges thus leading to a decline in repeat customers. High competition Carnival is currently facing high competition in the North American market since other players such as Star Cruise line and Royal Caribbean Cruise line offer similar services. Implementing/ changing CRM strategy Carnival cruise lines should change the current customer relationships management (CRM) strategy. The CRM strategy should be aligned with the overall business strategy and customer demands. The CRM strategy should reduce costs, improve process efficiency and increase customer retention. The strategy should segment customers, introduce effective information technology and ensure adequate customer-based measures. Carnival cruise lines should collect only the useful information and ask customers to update their own records in the electronic database. The changes in the CRM strategy should ensure that the management understands the purchasing patterns of customers’ on-board purchasing behaviour (Applegate, Kwortni and Piccoli 10). Through segmenting, Carnival will be able to plan special cruises such as honey-mooners cruise or singles only cruise depending on the season of the year. The CRM strategy should be capable of monitoring customer purchasing over time in order to adequately meet the changing customer needs. The new CRM strategy should be capable of transforming the data inn to useful marketing information by classifying the customers in to segments. For instance, the CRM should identify the customer demographics, ob-board services purchased and the preferred cruise destination. The company can introduce loyalty programs such as free drinks for repeat customers. In addition, 85 percent of the bookings are done by sales agent thus the CRM should include some incentives to the best performing sales agents. The company can implement a lucky prize scheme online in order to increase the number of online booking. In addition, the company should ensure repeat customers on contemporary cruise are upgraded to premium cruise at a discounted cost (Applegate, Kwortni and Piccoli 9). The company has attained 98 percent customer satisfaction rate, but lacks customer retention. The CRM strategy should create customer user groups that encourage customers to share their cruise experience online thus strengthening the cordial relationships with past customers. The CRM should be integrated in all organisational functions. The CRM systems should contain analytics for analyzing the customer purchasing behaviour and predicting future purchasing activities of each customer. The data warehouse should contain integrated customer records that are uploaded on a regular basis depending on the customer’s changing purchasing pattern. The CRM strategy should be changed to integrate the sales, marketing and customer service functions in order to create a customer-centered organisational culture. Strategic changes and recommendations Carnival cruise lines should entrench a culture of customer safety through carrying out routine safety audits. This will reduce the instances of viral outbreaks and lost passengers thus enhancing the reputation of the company. The company should aggressively expand to the Asian market due to high competition in North America market. The booming Asian economic presents high growth opportunities for the luxury cruise industry in Asia since the market currently accounts for less than 10 percent of global cruise revenues. The company should consider hedging the fuel costs in order to reduce losses associated with frequent changes in the global oil prices. The company should also take enough maritime insurance in order to reduce losses associated with pirate activities and loss of passengers while on board. Global weather changes like Hurricanes may pose a lot of danger to the safety of the customers. The company should take enough insurance coverage in order to avoid costly future lawsuits. Future prospects of Carnival cruise lines in 10 years time In the next 10 years, Carnival cruise will have fully penetrated in the Asian market in order to tap the expanding cruise market. The company will continue making several mergers and acquisitions in order to reduce competition in both European and North American markets. Carnival will implement safety measures to deal with the pirate concerns, and passenger disappearances cases. In addition, the company will concentrate on direct selling in order to fully take advantage of the customer relationships management process and ensure that new service offerings meet the changing customer demands. The company will also introduce larger cruise liners for the contemporary mass-market in order to enjoy the economies of scale. Works cited: Applegate, Lynda., Kwortnik, Robert and Piccoli, Gabriele. “Carnival cruise lines”. Harvard business school. April 24, 2006. Read More