I. CASE ABSTRACT
In 2002, the biding war between Carnival and Royal Caribbean Cruise Line for the Princess Cruise Line ended. Carnival’s bid of %5.67 billion was accepted by Princess’s management, the war had lasted for almost a year, Princess had 11.9% market share and Carnival had 31.9% - a potential market share of 53.8%.
After the terrorist attack on New York City and Washington, D.C. on September 11, 2001, customers for cruises dropped out of the market. The 2002 bookings were down 9%. Everyone in the industry was affected and led to several bankruptcies.
Carnival Cruise Lines, Inc. was founded by Ted Arison in 1972. From its inauspicious beginning, Carnival became known for fun-filled Caribbean cruises. Ted retired in 1990 as Chairman. His son, Micky Arison, CEO, then became Chairman. Carnival is considered a “Controlled Foreign Corporation” (CFC), which exempts shipping operations of a corporation from income tax.
Much of Carnival’s success is attributed to its marketing program directed toward the young, fun-seeking, first-time cruiser. One important aspect of the marketing program built upon the ship as the destination rather than some particular port of call. The main advertising theme has been that Carnival Lines is a “Fun Ship.” Carnival has ships for all 4 segments (Luxury, Premium, Contemporary, and Specialty).
Carnival Corporation is considered the leader and innovator in the cruise travel industry. Carnival has grown from two converted ocean liners to an organization with two cruise divisions (and a joint venture to operate a third cruise line) and a chain of Alaskan hotels and tour coaches. Corporate revenues for fiscal 2001 reached $4,535,251,000 and net income of $926,200,000. Carnival has several “firsts” in the cruise industry: first to carry over one million passengers in a single year, and the first to carry five million total passengers. Currently, Carnival’s market share of the cruise travel industry stands at approximately 31.8 percent Princess acquisition. The company owns 35 ships with a capacity of 50,265 berths.
The company’s principal subsidiaries are: (1) Carnival Cruise Lines, which has 16 ships with a total of 31,176 berths and operates principally in the Caribbean; (2) Holland America Lines, which has 11 ships with a total of 13,348 berths and mainly cruises Alaska in summer and Caribbean during the fall and winter. The 1989 acquisition also included Holland America Westours, largest tour operation in Alaska and Canadian Rockies, Westmark Hotels, 16 hotels in Alaska and the Yukon Territories, and Windstar Sail Cruises, three computer-controlled sailing vessels operating primarily in the Mediterranean and the South Pacific; (3) Seaborne Cruise Lines, targeting the luxury market with 3 ships, which can accommodate 208 passengers per ship; (4) Costa Crociere was purchased in 1997 by Carnival and Airtours for $141 million. Considered Europe’s largest cruise line with seven ships and 10,000 berths. (5) Cunard Line, was purchased in 1998 and its two ships were merged with Seaborne.
The industry is characterized by over capacity, intense competition, and larger new ships. The industry’s present problems should intensify in the years to come. foreign corporations. This status makes Carnival Lines almost tax exempt, while most of the passengers embarked in U.S. ports.
Decision Date: 2002 2001 Revenues (6 months):$4,535,751,000 2001 Net Revenues (6 months): $926,200,000
Corporate strategy at present is one of growth through horizontal integration (Holland America acquisition of Princess Lines and Seaborne joint venture), internal development, the pursuit of shipbuilding, and the utilization of aggressive advertising/marketing campaigns. Carnival’s business strategy is essentially one of differentiation in all segments. Such is being accomplished by featuring the short, fun, and...