Microeconomics and the Cruise Shipping Industry - Assignment Example

Microeconomics Introduction The cruise shipping industry is one of the fastest growing industries across the world especially in the countries of Europe. The project will consider the cruise industry of Greece. During the last decade the industry has grown exponentially and has responded quite effectively to the extensive market conditions. Various measures that have been taken for the expansion process to take place include innovation of new design concepts, length of newly designed ships, new travel destinations around the world and activities on both on-board and off-shore. In fact, the new strategies are designed to cater the expectations of all. The cruise industry has witnessed an increased popularization. It has emerged as a part of the tourism sector (Baird and Cartwright, 1999). It has gained enormous significance as a contributing factor in economic development. The cruise industry can be held as one of the examples of globalization. The number of ports on call is ever increasing and the industry currently constitutes of personnel around the globe. Multinational clientele is one of the characteristics of the industry and the industry currently posits economic as well as political and social implications. In today’s world tourists are more inclined to experience the journey on sea. The industry exploits the interests of the consumers and enjoys huge consumer base (United States Environment Protection Agency, 2008). In fact the industry has emerged as the most popular transport facility next to airlines. The industry is stated as the crisis resistant industry and the modernized port structures have opened the gates for cruising vacation. Body The rationale behind the study will be the cruise industry in Greece. The country of Greece is unable to accrue the benefits from the tourism industry mainly because the government of the country follows a policy of protectionism. Recently various measures have been taken from the part of the government under the pressure of the young generation of ship owners. The development of the industry apart from employment opportunities will also contribute to improve the standard of living of the people as a whole. It is believed that whole economy will start to follow the path of recovery along the hands of the cruise industry. The industry is thought of as one of the asset for the economy. The industry plays the key role in the national income of the economy and creates employment opportunities not only for the residents but also for foreign citizens. The cruise industry is currently experiencing huge investments from all around the world. The cruise Industry in the country of Greece is regarded as part of the international sea Tourism. A study was conducted by the European cruise Council which stated that the industry is likely to become more popularize. Therefore, there is lots of space of the managers of the cruise industries to exploit. The company can come up with initiatives that will modernize the facilities available in ports of the country. But the time calls for opening up of new destinations. There are many islands available in the country which has remained unexploited. The managers can come forward to develop new travel routes to the islands but the plan to be implemented properly, initiatives from the part of the government is required as well. The cruise industry giants can offer training facilities for the employees. Such type of initiatives will not only increase the efficiency of the workers but will also attract more market share which in turn will be a source of financing. In order to avoid the lean seasons, it is the duty of the managers to come up with actions that will ensure passengers throughout the year for the company. Moreover, safety measures in sea will also contribute to gain the market share. The merchant marine industry in Greece contributes around 16% in the economy and is one of the largest in the world. The industry is the major contributor in the Greek economic pie. Currently around 3% of the total labor force of the country is engaged with this industry. Some of the ancillary services contributing to the shipping industry of Greece are agencies, ship building as well as repairing. The income of the country from the transport facilities especially from shipping rose around 15% in the first nine months on 2010. The country still ranks number one in the ship owning nations. Currently the country controls more than 15% of the world’s fleet. The country follows the policy of protectionism. As a result of following this policy, the country could only account to 3.3% of the direct receipts. It gathered a little above 10% of passengers boarding throughout the continent of Europe and little lower than 20% of destination passengers. On the contrary, the currently leading most populous destination through sea, Italy could collect little over 30% of the passengers boarding throughout Europe. The market for cruise shipping is governed by the usual demand and supply schedules. If there is increase in the demand for cruise rides, the companies will increase the travel cost and so as the profitability of the cruise companies increases. Again if the supply increases relative to the demand, the cruise companies will have to face losses as they will not be able to gain revenues. D1 is the initial demand curve and D2 is the demand curve after shifting. S is the supply curve. A rise in price leads to increase in supply. Recommendations All are certain about the fact that the cruise industry aims to contribute for the betterment of the economy and therefore the industry can only be encouraged. The policy of protectionism should be withdrawn so that the cruise can be in full bloom. The introduction of new laws can be thought of just as the foundation stone for development of the industry. This means just the start up of partial deregulation with the engagement of various private companies in procedure of bureaucracy and authorization of many private companies with some applicable conditions and incentives to attract investments. The law stated will not indicate full liberalization. Such measure will contribute to strengthen the competitiveness of the industry as well as improve the ports along with constructing passengers’ facility centers in the large as well as the newly discovered small islands (Greek Economic Outlook, 2010). There is also need to improve the relations with the government for the cruise companies. The mutual collaboration will help the cruise liners to distribute their tonnage within the region and will not be forced to depend on the West Mediterranean. Conclusion There are four aspects for a strategy to achieve success in the cruise industry namely strategies regarding commodities, niche strategies, strategies regarding portfolios as well strategies that can affect the people and culture. If the first strategy is taken into account, it is necessary for the operating companies to find the right time to penetrate into the market so that they can accrue maximum gains. The organizations must have both the in and out plans so that if the company fails to taste success then it can move out from the initiatives and follow a different strategy that will shed little impact on the profitability of the firm. The cost must also be taken into account. The cost of operations and crewing are some of the costs that cannot be ignored by the companies (Kavussanos, Visvikis and Goulielmou, 2007). Finally the most important part of the first kind of strategy is to take advantage of the macro environment. The main characteristic of niche strategies is to see the opportunities before anyone else can take the advantage. The pillars for maintaining strong customer relationship are closeness, understanding, continuity as well as trust. The key decisions will be based on the availability of platforms where the company expects to cement their footprints. There are certain risks associated with the industry. First of all the stability of cash flow is an important determinant for all companies. If there is turbulence in the flow of cash the companies are likely to incur challenges in their long term plans. In fact the probability of the company getting eliminated from the business line rises. Therefore, a business model that ensures a steady flow of cash cannot be ignored. Reference Baird, C. and Cartwright, R. (1999). The Development and Growth of the Cruise Industry. Retrieved from: http://books.google.co.in/books?id=wuVF991ZwMsC&dq=cruise+industry&hl=en&sa=X&ei=7g34T82EBYqqrAeP8czbBg&ved=0CDYQ6AEwAA. United States Environment Protection Agency. (2008). Cruise Ship Discharge Assessment Report. Retrieved from: http://water.epa.gov/type/oceb/upload/0812cruiseshipdischargeassess.pdf. Greek Economic Outlook, (2010). The Deregulation of Cruise Industry in Greece. Retrieved from: http://www.kepe.gr/pdf/Outlook%20Old/outlook_13full.pdf. Kavussanos, M., Visvikis, I and Goulielmou, M. (2007). An Investigation of the Use of Risk Management and Shipping Derivatives: The Case of Greece. Retrieved from: http://trid.trb.org/view.aspx?id=804843. Read More