Carnival Porter 5 Forces

Topics: Holland America Line, Cruise ship, Cruise line Pages: 5 (1838 words) Published: March 25, 2012
Porter’s 5 forces model allows to analyse the factors outside the Cruise industry that influence the nature of Carnival competition within it, the forces inside the Cruise industry that influence the way in which Carnival compete, and so the company’s likely profitability. With an understanding of where power lies, Carnival can take advantages of a situation of strength, improve a situation of weakness and avoid taking wrong strategies. Porter has identified five competitive forces that shape every industry and every market: bargaining power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitutes and rivalry among competitors. A sixth element has also been added to acknowledge others stakeholders such as employees and shareholders. (See graph)

Bargaining power of suppliers. HIGH
Suppliers for Carnival include travel agency, fuel, food and beverages, hotel and restaurant supplies, port facility utilization and dry-docking, repairs and maintenance, communication services and advertising. Travel agencies held a strong position as they are an important source of Carnival’s success and provide a massive amount of customers supplied. Without the travel agencies the company would lose a significant volume of customers and the decrease in profitability will be inevitable. The supply of fuel is another element that increase the power of supplier, the fuel is a consolidated industry and can dictate the cost of oil; even if the company try to hedged the price of fuel oil it can’t limited or have an influence on the price neither avoid to buy it. As the dimension of some of the Carnival’s ships doesn’t allow it to attract in any single port, the power of the limited ports where the company can attract its big ships is high. The port facility utilization is an important factor in the business of the company as it allow the company to increase the ports at call and distinguish the Carnival’s cruise vacations. The suppliers of food and beverages for all the cruise brands haven’t a strong position as the high number of suppliers that allow the company to shop around for the best prices even if the strategy adopted by Carnival is to select a number of supplier to obtain volume discounts. The company owns also a chain of hotels and lodges in Alaska to complement Alaska cruises, also this hotel and restaurant supplies have a weak position against Carnival. The company’s ships require a constant refurbishment and reparations, as Carnival has very few options for choices, the embarkation suppliers can have an high influence in the cost applied. The last elements that determine the bargaining power of suppliers are the communication services and advertising, even if the main communication channel with the costumers is through the travel agency, the company increased online and social media advertising that allow Carnival to establish direct conversation with consumers and also create brand fans. Due to this trend the company doesn’t suffer from the power of this type of suppliers. In summary, because of the high power of travel agencies, supply of fuel, port facility utilization and dry-docking, repairs and maintenance even if Carnival can have a strong position against the suppliers of food and beverages, hotel and restaurant, communication services and advertising; the bargaining power of suppliers is high.

Bargaining power of buyers. MODERATE
Carnival caters cruise vacations to a very diverse population, they offer cruises that meet every budget, to many different geographic locations and offer cruises that last only a few days or up to weeks. This characteristic of the company business create a low concentration of buyers relative to that of the suppliers, therefore reducing the bargaining power of buyers. The customers are spread across different locations and don’t share a common platform where they could exert a collective...
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