Strategies Implemented by Carnival Cruise Corporation - Case Study Example

Strategies Implemented By Carnival Cruise Corporation Date Student’s Name Institution   Strategies Implemented By Carnival Cruise Corporation Introduction Carnival Cruise forms one of the major Cruise companies across the world. The company was started in 1972 and has expanded since then through several acquisitions after the initial public offering in 1987. It has more than one hundred ships, which are under ten Cruise brands 1. Over the years, the company has been posting strong financial figures, which have helped the company generate international connections that is instrumental in Cruise industry. Understandably, Carnival cruises have had challenge in operations such as accidents and tax evasion issues. However, Carnival has mostly been focusing on the American and European countries while applying fewer efforts in other parts such as the Middle East 2. The following paper seeks to recommend more effort for the Middle East region where Carnival Cruise can earn more income if proper strategies are put in place. Brief History of Carnival Cruise Lines and PLC. Corporation Carnival Cruise Lines Corp. and PLC Is one of the largest Cruise companies in the industry. According to the company’s website, carnivalcorp.com, Ted Arison established the company in 1972 as a single entity “Carnival Cruise” 3. However, the website indicates that the company expanded through several acquisitions after the initial public offering in 1987, which helped the company to obtain funding. After three decade of operating cruising service, the company has more than one hundred ships that are under ten Cruise brands. The Carnival’s ten Cruise brands include P&O Cruises in the UK, Princess Cruises, Carnival Cruise Lines, Holland America Line, Costa, Iberocruceros, Cunard, AIDA Cruises, Seabourn, and P&O Cruises Australia4 . In addition, the company also has tour-operated ship Holland America Princess Alaska Tours. Further, it is important to note that as a public company, Carnival trades in the NYSE platform with a ticker symbol of “CCL” as well as at the London Stock Exchange with a ticker symbol “CUK". The company started cruising with only one ship, the Mardi gras that was headquartered in Miami, Florida and in London, England. Middle East as the Carnival Cruise target market over the years, Carnival Cruise have been criticized for only focusing and applying its efforts on the Western European countries such as the UK as well as the U.S.A markets thus losing a big portion of some other world destination. One of the new destinations for many holyday making people is the Middle East especially Dubai. Although Carnival Cruise has made significant progress in ensuring its presence in the religion, much still need to be done. is must be understood that part of the middle east has been experiencing political conflicts for many years but a big portion of it is peaceful thus making many tourists and adventurers concentrate on those countries 5. In this connection Carnival Cruise has to consider increasing its voyage to Middle East, in order to compensate the loss of withdrawing from conflict prone regions. On the other hand, it is important to note that the Middle East population has increased tremendously over the last three decades making it attractive for tourism purposes and for business people. Additionally, it is understandable that globalization has played a critical role in changing the cultural set up of the region. This has lead pole from various diversities visit the region making it a multicultural society. Therefore, more introductions of cruises ships in the Middle East for Carnival cruiselines will be instrumental in generating more income for the corporation due to the wealth creation, which has accumulated the years because of tremendous cultural diversity. Finally, by establishing Carnival Cruise Line in the Middle East, the company will be in a better position to reduce the risks of oil price fluctuations since the distance of importing or transporting oil for fueling will have been reduced. Justification of Success in the Middle East market for Carnival Cruise Lines In any industry, there is always room for market penetration, which also applies to the Cruise industry. This is because in the UK, less than half of the population has ever cruised while America it is only seventeen percent who have cruised. The figures shows that Cruise lines have opportunities to venture into other markets across the globe. According to the Cruise Lines International Association for the past two and half decades, the Cruise industry has massively expanded from 6.5 million passengers sailing from UK, American, and Canadian ports in 1990 to approximately 15.8 million in 20146. Therefore, for the Carnival Cruise Lines, there is a huge market potential and the company should be in the optimal position in order to seize revenues in the industry. Based on this reality, Carnival Cruise has taken measures as described below, to venture into various emerging or existing markets for the Cruise industry such as the Middle East. Admittedly, mechanical failures in ships lead to massive losses for the players in the Cruise sector7. Cruising companies must therefore ensure that such incidences are minimized to provide quality services to their customers. This is the opportune time of venturing into Middle East for the Carnival Cruise Lines since the company has already invested a lot in the improvement of ship technology that is intended to reduce mechanical failures. It is prudent to invest on the back up technology in order to get passengers reach their destinations when power or mechanical failures arise 8. In most of the currish ships of many companies, there is no back systems that can be used by the ships in order to return back to a port when power fails. According to The New York Times, “nearly all ships lack backup systems to help them return to port should power fail”. Further, John Hicks, who is the vice president for passenger ships for the North American division of Lloyd’s Register, which is a consulting firm, clarifies that ”Today, only about 10 Cruise ships have such equipment,” (Meier & Schwartz, 2013). Additionally, Carnival Cruise has taken measures to ensure that the company responds to accidents in a professional manner whining the shortest time possible9. The main aim of the measures is to reestablish customer trust and confidence on the company. Over the past years, Carnival Cruise has witnessed embarrassing incidents of ship failures, which have forced the new CEO, Arnold Donald, to invest $700 million for shipboard fire prevention and for new marketing campaigns. According Writers Palmeri since the new CEO was appointed in that position, on July 3 of 2013, Carnival has taken a dramatic change. In an interview with the Bloomberg’s BusinessWeek magazine, Arnold Donald noted that the investment would be useful in pursuing a cost effective strategy as well as persuading other Cruise lines in collaborating with and conduct negotiations on how to share spaces in international ports 10. This is instrumental since many multinational Cruise lines have already entered the Middle East market making it necessary to have efficient port control. According to Donald, the main objective for the Carnival is to have better locations at ports as well favorable prices at positions since each Cruise line has been negotiating its own port space, which is much more expensive. Therefore, by fully venturing into the Middle East, Carnival Cruise Lines will be in a better position of bargaining its part in the market under the leadership of Donald 11. Currently, each Cruise line negotiates their own port spaces but Donald believes the company can get better locations and prices if all lines work together. Finally, as noted above, the company through its CEO started marketing campaign in order to rebuild the confidence from customers. In this respect, Carnival Cruise established the “vacation promise” as one of the initiatives that would guarantee quality services to customers after the “Triumph incident” where it lost a considerable number of its existing clients. The vacation promise entails promising customers that they would be flew back home if the services provided to them were not satisfactory. As a marketing strategy, this is instrumental in creating trust for new customers or existing ones in to or from the Middle East region. Therefore, with the quality services provided by Carnival crew and all measures pit in place, Carnival is going to make considerable income in the near future. External Factors Affecting Carnivals Cruise Business Although Carnival Cruise is one of the largest companies in the Cruise industry, it faces external complications from legislation actions as well as social environment, which may affect its business performance in the Middle East region. According to Dev., in the Cornell Hotel & Restaurant Administration Quarterly publication, “the Cruise industry is booming too quickly and calling for a strong consistent oversight” 12. However, the increases in the number of operators around the globe have led to the avoidance of taxes. The problem has not only affected Cruise companies in the UK but also in the U.S.A as well as across the world13. Therefore, it is important that as Carnival enters looks for the remaining opportunities sin the Middle East region, the management of the company should be able to ensure that the operators do not avoid taxes that may lead to cancellation of operating licenses in the region. However, one of the steps that Carnival as taken is to increase disclosure to respond to the legislative pressure. Consequently, Carnival has been releasing on-board criminal reports in attempts to show openness in its operation. The information is expected to be consumed by consumers as well as in order to increase confidence and build trust. This will be instrumental in facilitating smooth sailing in the Middle East region. Further, an obvious threat of terrorism cannot be ignored as the problem has increased tremendously in recent years. The terrorism incidents in world have created fear among holyday makers or business people. Terrorist groups have increased in numbers and their presence is felt in almost everywhere across the globe. Cruising business has therefore been affected in varying degree. For example, many companies halted their services in conflict zones many years ago. Some of the areas affected include Syria, Yemen, Afghanistan, and others. Therefore, customers who wish to visit such areas may not be able to due to the ongoing conflicts. Consequently, illegal transportation of people from one continent to another has thus increased leading to confusion in the cruising industry in such regions. For example in December 2008, passengers on the Carnival owned Oceania Cruise ship was attacked by Somali pirates. Fortunately, the ship was able to speed away and no passenger was injured. Although the issue of pirates taking over ships has reduced in the last seven years, the threat of terrorism is alive more than ever, which negatively affect perceptions of consumers on cruising. Therefore, as Carnival continues to offer cruising services, safety issues due to terrorism may harm the performance of the business. Despite the fact that the fuel cost has currently reduced, Carnival must prepared for the ever-fluctuating prices of oil. In 2010, the U.S. Environmental Protection Agency changed laws to reduce the sulfur content (emission) in fuel oil used aboard ships14. This increased the demand for lower sulfur fuel, thus raising the prices of the fuel. The fluctuation of oil prices has however contained this increase but in case the same scenario happens in the near future, Carnival will have to device strategic ways of dealing with significant increase in fuel prices. Additionally, cruising in the Middle East my not heavily affected due to the nearness to the oil production region. Finally, bad press or media affects heavily on the reputation of not only Carnival but also the entire industry. This happens more often when an accident happens or poor services are provided by a major Cruise company. For example in 2009, Carnival was subjected to bad press in a period of three weeks consecutively after three passengers fell off ships. Statistics shows that in 2009, 22 incidents of passengers falling overboard were reported15. The incidents raised concerns over safety measures taken by cruising companies in protecting their clients. However the media as blamed for negatively reporting the incidents. Consequently, Carnival was later not required to report the incidents to avoid harming the cruising industry. On this note, Carnival should be aware of such media manipulation and protect its integrity since some media are sponsored by competing forces in the cruising industry. Recommendations In order to ensure that Carnival succeeds in the Middle East, some factors will have to be adopted by the management. The first step is to ensure that Carnival contuse to exploit economies of scale by utilizing the advantages that exist on each ship. This is because by moving to larger ships the company will continue to exploit these advantages based on their capacities and abilities. In this way, Carnival will reduce the cost realized from the total maintenance programs, optimization of inventory, quantity rebates, procurement, or any other scale of economies. Further, the company will be required to differentiate the Cruise product that it will be offering in the Middle East region, which is achievable though application of innovative concepts and designing products of unique ships. By cruising in different routes of Middle East, Carnival should anticipate the demand and position its product appropriately in order to suit the interests of this customer base. It is critical to note that the success of Carnival in future depends on its ability to offer different Cruise themes, new destinations, types of vessels as well as other operational activities. However, the company should continue using the customers’ voice data in order to improve the products as well as differentiating them from the company’s competitors. Finally, Carnival will have to ensure sustainability of new investment by managing them strategically. The timing of contracts of new vessels or investment in new destinations is important for the future success of carnival. At the same time, Carnival will be required to continue being competitive especially in the purchasing decisions. It leads the industry with the price of buying a ship per bed unit and value is a key contributor to every investment decision. They will continue to need to add assets strategically to meet demand. Conclusion As noted above, Carnival Cruise Lines Corp. and PLC is one of the largest Cruise companies in the industry. The company has progressed tremendously in the last there decades by acquiring other cruising companies and extending the scoped and scaled of doing the business. However, much has not been done in the Middle East region, which calls for more action and efforts by the carnival. References Brown, Severson. Cruise Line's Woes Are Far From Over As Ship Makes Port. New York City, New York: New York Times, 2013. Chin, Christine B. N. Cruising in the Global Economy: Profits, Pleasure and Work at Sea. Aldershot, England: Ashgate, 2008. Dev, Crey. 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