Carnival Corporation Case Review

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  • Topic: Carnival Cruise Lines, Holland America Line, Cruise ship
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03/15/2010
Carnival Corporation-2007

Carnival Corporation is the largest cruise and most profitable cruise ship operator in the world. Carnival is headquartered in Miami, Florida and London England and employs 80,000 employees. “Carnival operates a fleet of 95 ships, with another 11 ships scheduled for delivery between 2010 and 2012 (Carnival Corporation, 2010).” Carnival cruises to Alaska, the Caribbean, Panama, South America, Mediterranean, New England, Bermuda, South Pacific, and the Bahamas. “Total revenues in 2009 for Carnival Corporation were $13.2 billion and net income was $1.8 billion (Carnival Corporation, 2010).” In 2009 Carnival Corporation had 8.5 million guests aboard their fleet. Porter’s Five Forces Model

When examining the first of Porter’s five competitive forces Carnival Corporation has a moderate number of competitors and the industry is growing slowly, mostly due to a steep decrease in prices facilitated by the recent economic downturn. Carnival operates over twice as many ships as its closest competitor. As of January 2010 Carnival had a passenger capacity of approximately 185,000 berths in their fleet of 95 vessels, while Royal Caribbean is only able to accommodate 84,050 berths on its 38 cruise ships. Over the last decade, Carnival has made up at least half of the industries total revenue and has posted modest gains on the competition each of the past several years. The form of competition comes from pricing, destination offered, and ship attractions.

Carnival holds the strongest position in the industry with an ever increasing global outreach and offers among the lowest prices in the industry. Carnival also differentiates itself from the competition by accommodating children with activities and amenities. Because of the sheer magnitude of Carnival’s fleet they are able to offer a very diverse experience across their different cruise lines. For instance, the Carnival ship “Dream” which travels to the Caribbean and Mexico has a capacity of nearly 4,000 guests and has such amenities as a rock-climbing wall, Water Park, and a movie theatre. In contrast, the companies smaller “Yacht of Seabourn” travels to Europe and Asia and houses only 240 guests while offering caviar and water sports from the ships fold-down marina (Carnival Corporation, 2010). The over-riding theme of Carnival’s differentiation strategy is that it is the best for families and thrill-seekers of all ages while offering diverse destinations.

The potential for new competitors to enter into the cruise line industry is minimal. The cruise line industry has a number of barriers preventing entry. Building a new cruise ship is a costly and lengthy process. New ships cost hundreds of millions of dollars, with no revenue seen for several years which makes it very difficult to find investors willing to invest large sums of money into an industry dominated by three large multinational companies. The big three cruise ship operators own 95% of the market (David, 2009). The building of new vessels is limited to a few, mostly European ship yards. “By placing orders for series of ships with these yards, the big three are effectively blocking newcomers from building large, sophisticated cruise vessels, thus further strengthening the entry barriers to the business (Unknown, 2009).”

Carnival and its competitors rely heavily on a large network of independent travel agents to book most of their cruises. It would be a task of monumental proportions for a new company to enter into the cruise industry from that marketing and PR perspective. Carnival Corporation also has the access to money and financing to acquire its competition and consolidate them under their name. “Since 1988 Carnival Corporation has acquired 19 different cruise ships (Carnival Corporation, 2010). “

There are many vacation alternatives to taking a cruise. Land based vacations are many times cheaper and more convenient than a cruise, making it more...
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