Carnival Corporation and PLC Business Practices - Case Study Example

 Carnival Corporation and PLC Business Practices Abstract Carnival Corporation & PLC industry has experienced a vast growth in the past years due to transformations in customer tastes and preferences. The paper aims at exploring the company’s practices and management structure, which is the leading cruise ship operator in the world. The paper will include the study of Carnival's goals and objectives whose achievements are the main motivational factors. Marketing strategies will help in the understanding of the company's growth in the international markets and tactics that it has used to curb market competitions. SWOT analysis will reveal the firm's internal factors that have led to its success in the business. Another objective of the study will include the company’s investment in foreign markets. Keywords: Carnival Corporation & PLC, SWOT analysis, business practices, Marketing strategies Carnival Corporation & PLC Business Practices Introduction An American, Ted Arison, founded Carnival Corporation & PLC in 1972, which is a British American cruise company, but its operations headquarters are in Doral, Florida, in the United States while sales management headquarters are located in Southampton, Hampshire, England. He started the business empire as a transportation company and named it Carnival Cruise Lines. It started growing due to the new markets and increased demands. However, its origin can be traced back in the early 19th century from the oldest cruise ship operator, Peninsular and Oriental Steam Navigation Company. Carnival Corporation and PLC are two different holdings with Carnival Corps owning majority of the shares. In 1987, it offered an IPO (Initial Public Offering) for its common stock. After the IPO, it increased its capital base and started expansions through acquisitions of assets and other competitors such as Seabourn Cruise Lines, Holland America Tours and Windstar cruises in the 1980s. Later in the 1990s, it continued its acquisitions that included Costa Cruises and Cunard Line. It underwent a name change in 1993 when it changed its name to Carnival Corporation. After the founder's death, his son Micky Arison who owns 47% through shares and bonds has led the company. The New York Stock Exchange (NYSE) lists the company's stocks, which are incorporated in Panama. Its growth and developments have led to its success in the cruise industry becoming the world's largest operator. The company was founded when the market was still ‘young' and competition was low. Ted claimed that it was an opportunity since most of the vacation services were offered through road and air. The company has become a multinational cruise company due to its dual-ownership. Its transport networks include all oceans and continents. Locally, the company has most of its operations in the Europe and the United States where it has small cruise ships to provide for domestic passengers. To provide for the international demand, the company has more than a 100 cruise ships and has plans to purchase more. The company offers high-class vacation plans to its passengers, and has won several international awards for best services and embracing environmental conservation. Its many acquisitions have also led to its growth in the international market through reducing competition. The cruise ship industry has been a business opportunity to new companies joining the market in the past. Carnival Corporation & PLC has adopted different strategies to help in its competitiveness in the market. It has a large capital and asset base that has led purchases of many cruise ships. Having publicized its share has also led to its success since it has various sources of capital (Doole and Lowe 2007). Mergers with other companies have helped the company increase its customer base. The company also offers unique services and offers which attract more passengers leading to an increase in the profit earned. More profits and a strong customer base have improved its position in the competitive international market (Salwan 2007). Strategic Business Plan Carnival Corporation & PLC has set several strategies to enhance its survival in the competitive markets. It has a business plan that entails all its strategies, which contributes towards the success of the company. The business plan has helped the company make vital decisions especially due to its dual-holding capacities. There are set goals and objectives that accrue to the company's success in the cruise ship industry (Hillestad 2013). Its objectives have been divided into sales, marketing, and management departments. The main goal is to create the best luxury company in the multi-night vacation industry. It has implemented this through introduction of the most luxurious ships in the world attracting the high-class members in the society who are referred to as the spendthrifts. The company has set up management strategies that help in the control and monitoring of its operation globally. It has its headquarters strategically placed to cover more passengers and create awareness of its services. Its main goal is to promote the cruise industry as the best vacation preference to most passengers as compared to land vacations and tourism attractions. It has done this through increased advertisements to cause awareness of its services. It has also tactically partitioned its services to include the entire population irrespective of social, economic, and cultural factors (Gekonge 2014). Through this strategy, it has acquired a larger market share. The business plan also includes growth and development plans for the business (Scheff 2007). It has done this through corporate acquisitions of other cruise companies to ensure growth and eliminate competition. Selling of shares to the public has also helped the company increase its capital and assets through purchase of more ship to curb the increasing demands. Carnival Corporation & PLC has also included management principles in its business plan. They include the bureaucratic procedures that are developed to make vital decisions in the business. The company has a board of governors that meets frequently to develop new ideas to help in the expansion of the company's market. The management board is also responsible for creating new strategies to help in the success of the organization. Bureaucracy ensures that threats, risks and problems are handled in the right manner through passing of information in the recommended chain of command. Marketing plans for the company include coming up with new potential markets (McLeish 2011). The company targets countries that are economically stable since it is a sign of better living standards. It has also introduced short vocational trips in lakes and seas for those who are not able to have their vacations in the oceans. Expansion plans include opening new offices in towns with potential customers to offer good network coverage for its customers. The newly opened offices will help in advertising the company leading to its growth. Implementation of the company's goals and objectives is a priority for the management. They contribute to the company's success since they are a motivating factor for the employees. They also help in the accomplishment of the set targets. As for Carnival Corporation & PLC, it sets its targets quarterly whereby employees have to achieve them contributing to its success. Advertising and Marketing Strategies Advertising The company has adopted different methods of advertisement to attract more customers. The increasing competition in the market requires that firms continue causing awareness to their customers to ensure a constant customer basis (Pahl and Richter 2007). Carnival Corporation & PLC has embraced the use of television commercials to provide knowledge to its customers and potential clients. Adverts have been aired in various countries providing knowledge on the type of services offered and the packages that accompany them. Most of its markets include Europe and the United States where most of the population owns TV sets. It also advertises through the internet. Carnival Corporation & PLC has a website that can be accessed globally despite the geographical locations. It has expanded its market through posting offers and discounts in its websites for potential customers to read and comment. Use of the internet has been facilitated by the advancement in technology. Any person with a mobile phone or computer can access the website as long as it has internet connectivity. The website also provides details on destination and routes followed by the cruise ships. Additionally, a variety of services that the customer can choose depending on their economic stability. A customer can book a trip online and pay for it using credit cards. The corporation has also used social media as a channel of advertisement. It has used social networks such as Face book, Twitter and Google+ to cause awareness (Fleisher and Bensoussan 2007). It has developed pages that can be liked or be followed by customers in the social networks. The pages provide the company's basic information and the type of services offered. Customers can then share the information with friends who may become potential customers. The use of social networks to advertise has been used by several successful organizations due to their victorious results. In the dynamic world, technology and internet connectivity has facilitated the sharing of information between friends who are located on different geographical areas. Carnival Corporation & PLC has adopted this move due to the high number of people joining the social networks. The company has also issued sail and sign cards to customers who have sailed using its cruise ships. The cards can be given to other people such as family members and friends. The cards have details of the company and discounts being offered. Other cards can be used as stickers on car bumpers to cause awareness to other drivers on behalf of the company. Electronic cards are also available in the company’s website and can be sent via the internet through electronic mail (Montgomery 2004). Videos have also been used as advertisements. The company pays video websites such as YouTube and Vimeo to display its advertisements before the videos can load. Such advertisements distribute information to many people who do not have time to watch TVs or join social networks. Carnival Corporation & PLC has used this advertisement strategy to reveal its cruise ship interiors through pictures and contact information. Use of blogs and interactive websites has also been adopted. Blogs include the company’s corporate blog where customers can interact and share experiences during their tours. Customers can also comment on their experience and rate the company through the comments section in the blogs. Carnival Corporation & PLC can use the information provided by the customers to provide better services. Market strategy-product line and packaging Carnival Corporation & PLC has been a key player in the market becoming the best-rated cruise line globally. It has achieved its success through various strategies such as its product line. Since its foundation, its main idea is provision of vacation services to its customers. Recently, the corporation has acquired the Carnival splendor, Carnival Magic and Carnival Dream to increase the number of destinations offered to its clients. It has also purchased expensive yachts that can be hired the rich and extravagant customers. Most of its ships have been referred to as fun ships because they have all the services that are required for fun. It has offered different packages to its services to meet all customer tastes and preferences. Service costs have been reduced to cater for middle income earners. Carnival Corporation & PLC claims to offer services that fit various budgets and lifestyles. There are no cultural and social limits for clients leading to customers from various diversities. The company has embraced technology as part of market strategies whereby passengers can use their credit cards to pay for tickets and services on board. Carnival Corporation & PLC has also adopted market segmentation as part of its strategy. It has divided its market into various partitions that enable it to monitor them individually. The fall in one market can be compensated by the success in another market. SWOT Analysis Strengths Carnival Corporation & PLC is a large company in terms of assets and capital. It has bought other companies therefore increasing its capital base (Brown and Bentley 2004). It operates 11 of the most known brand names and has a large fleet capacity as compared to competitors. Its brand name is appealing to any market niche and has been awarded several awards. The awards are based on service provision and the fleets operated by the company. Its large size proves it difficult for other firms to gain entry into the market due to the amount of capital required. Carnival Corporation & PLC also uses this gap to purchase and merge with some of its competitors. The company enjoys economies of scale due to its large size. The economies of scale range from finance to operational costs. It can run and manage its fleets from one control center, unlike emerging competitors. It has two headquarters that means that one can make decisions if the other is not in a position. It can also purchase its inputs such as ship fuel at discounted costs since it is buying in large-scale. Its employees can also work at any department as long as they are specialized. Long-term loans from banks can be acquired within a short time due to the assets being offered as collateral. It is one of the most profitable cruise ship companies. Its increased profits come from the expanded markets leading to more customers. Competing firms have first to acquire a larger market share to increase their profits, which is an advantage to Carnival Corporation & PLC that has a larger market share to increase their profits. Its financial statements dated March 2014 shows that the company makes an average of $1 billion yearly. Such large profits help in its expansion in terms of customers and assets. Carnival Corporation & PLC has highly invested in advertisements. It has adopted the both digital and print media as an awareness tool. It has also embraced the technology to help take its advertisements a notch higher. Advertisements have led to is publicity hence attracting more customers leading to higher profits. Weaknesses The company has highly relied on travel agents to get customers. Influx of other budget cruise lines and airlines has seen these travel agents shift their attention to other cheap companies which are preferred by the customers. Bookings that are internet based have also led to declining in customers since not all customers have internet access. Its overreliance on the American market for its revenues has led to market fluctuations. More than 50% of the business' revenues come from the American passengers. Any economic meltdown experienced by the country will lead to a reduction in more than half of its revenues. It is evident during the economic crisis in 2010 where most of the customers had to use their savings to cater for basic needs. The company should seek other markets to balance its revenue sources. Economic uncertainty such as that in 2009 has led to the company using its capital holding to purchase already ordered ships. Increasing demand has led to the company's need for more ships. However, there was the lack of enough revenue to purchase all the eight cruise ships at once. Opportunities The cruise industry has grown in the past few areas leading to new available markets. Carnival Corporation & PLC should come up with strategies to occupy the created market niches. Currently, the company covers only 50% of the market. It has most of its markets in Europe and America whereas there are new upcoming markets in Asia, Australia and Africa. For example, research in China has shown that the disposable incomes have increased by 10%. It has created the need for luxurious cruise vacations. With an entry in these markets, the company will increase its profits and growth respectively (Miller 2005). Economic stability in most countries is also an opportunity to the company since it shows that most of the people have increased disposable incomes. The company’s brand is an opportunity for larger market shares (Oguejiofor 2012). It has led to loyal customers who can only go for vacations using the cruise line. It has been providing services in the market since the 1970s that has provided a long period for the company to create a brand name. Threats The change of laws governing the environment based on the level of pollution has become a threat to the firm (Hiriyappa 2013). The company has followed these laws to date, but they are changing day by day reducing the amount of toxic gases affecting the atmosphere. It has led to Carnival Corporation & PLC using expensive fuels that may decrease the company's revenue in the near future. The increasing numbers of accidents that have happened to passengers onboard its ships has also been a threat to the success of Carnival. In 2009, three passengers fell from the ships while taking pictures an incident that the press used to tarnish the company's good record. Future accidents need to be prevented to protect the company’s brand name. Carnival Breakthrough the Negative Publicity of Its High Profile after Events Such As the Costa Concordia Incident The Costa Concordia incident was a major setback to the cruise company. The media criticized the accident claiming that the cruise ship’s captain did not handle the situation as required leading to the loss of 30 lives. The incident affected the company’s operation in Europe leading to fewer customers. Most of the company’s crisis management officers were found guilty and charged with murder. However, Carnival Corporation & PLC has employed several strategies to prevent such an incident in future and gain trust from its customers. It has installed state of the art gadgets in its ships to monitor any problems. The Costa Concordia’s captain could not tell whether the ship was capsizing until it was too late. The gadgets will tell the ship’s status at all times leading to security awareness the passengers. It has also changed its training tactics to help during an evacuation to prevent loss of life. There has been the provision of life jackets for all passengers to prevent drowning in case the ship capsizes. The company also installed survival crafts that are sufficient for all passengers onboard. Basic safety training sessions were offered to all ships' employees and agreed that the drill should be repeated after every two weeks. Carnival Corporation & PLC compensated for all the passengers to overcome the negative publicity. The investigations showed that human error caused the deaths because the captain should have listened to the coast guards who claimed that the ship was to capsize due to its banking angle. Carnival Corporation & PLC Expansion into Foreign Markets Carnival Corporation & PLC being the world's largest cruise line has decided to expand to other foreign markets such as Africa, Asia, and Australia. These markets are still young and have not been invaded by other competitors. The corporation has had most of its customers from the mother countries. The large capital base of the company has facilitated entry into new markets. Carnival Corporation & PLC has bought more than 100 cruise ships which can handle more than 50,000 passengers at a time. Economic trends in some countries have led to the search for new markets in economically stable countries. Continents such as Africa have been investment spots for most of the global companies leading to transportation of their employees. Creation of jobs locally and paying adequate salaries has increased the level of GDP that reflects the increase in disposable incomes. Workers have the ability to take their family and friends to cruise vacations where they can enjoy unique services of the rich. Carnival Corporation & PLC has used this opportunities to open offices in Africa and Asia where employees can offer the company's services. Competition in Europe and America has also led to the company seeking markets in other continents such as Asia that have accumulated wealth in the past few years. According to research, most of the world's millionaires are found in Asia. The wealthy have a tendency to spend in luxurious vacations and Carnival Corporation & PLC has decided to bring these services to their doorsteps. Cruise shipping is preferred as a means of transportation. Passengers can move from one continent to another while have fun in their vacations. The increased number of tourist destinations in the Middle East such as Dubai has attracted most of its customers from the America and Europe. Carnival Corporation & PLC has occupied this market gap by providing transport services for the rich to such tourist destinations. Additionally, there is an increase in demand for cruise ship services in these areas since most five star hotels are located in islands and coastal beaches. In Australia, Carnival Corporation & PLC has opened offices and launched advertisement campaigns. There are smaller cruise ship companies in the country but Carnival has most of the advantages, which include more destinations, a larger ship fleet, and luxurious services among others. Entry in this market has become a major achievement to the company since it has had maximum returns. The company’s market expansion has led the firm to enjoy new tax tariffs and regulations (Hitt 2013). While offering services in America, Carnival Corporation & PLC has undergone various operational taxes. In markets such as Africa, there are no high taxes hence contributing to high profits. Travel agencies have been set up in Asia, Africa, and Australia which have facilitated easy access of tickets. Online booking has also assisted in market expansions where customers can buy tickets from anywhere and later meet for pick up at agreed points. Conclusion Carnival Corporation & PLC's success can be based on the type of strategies it has used based on internal and external environments. The company's success can be rated by the level of achievements of the set goals and objectives. Internal environments have consisted of the management of the company that has led to the making of important decisions for the firm. The management officials have met during catastrophic events such as the Costa Concordia accidents and come up with rational decisions to keep the company running despite the setback. It has survived in the market despite external factors such as political, environmental, social, technological, and legal. Political factors include the political stability of most of its market countries. Technologically, the firm has embraced new technology in its operations leading to saving of time and resources. Technology has also been used to increase levels of passenger safety and security. In its operations, Carnival Corporation & PLC has considered environmental conservation using low carbon fuels. In the case of an accident, it has deployed rescue workers to help in evacuation and cleaning of the toxic materials in the capsizing ships. Legally, the company has followed the rules and regulations based on the different countries that it serves. Economically, the company's growth has provided employment to more people hence leading to poverty eradication and better lifestyles. It has also contributed to the economic stability of various countries through the taxes collected. The sale of public shares has also been a source of revenue to some of the shareholders through dividends (Chan 2005). The acquired profits are later returned into the economy through purchase of new ships and licenses of operation. However, competition in the cruise industry has caused Carnival Corporation & PLC to adopt unique strategies to ensure customer satisfaction. From 2012, it started offering free internet services to its passengers. It also offered discounts and offers to loyal customers to ensure a constant supply of passengers. It has come up with season based vacations such as Christmas and Valentine’s Day. Collection of customer data has helped it in such programs since it has details on the age, gender and location of the customer. It has also targeted different markets which include online bloggers, past customers, new customers and travel agents. Data collected from the customers can be used to coming up with different types of advertisements (BoÌhm 2009). The company has come up with different strategies to work on the issues of threats and weakness. To balance the majority revenue from the United States, the company has widened its market with entries in Africa Asia and the Middle East. Increasing the markets will also lead to a situation where losses from one market can be covered with profits from a well doing market. 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