The Five Porter Competitive Forces:
1. Competitive Rivalry: (High)
Carnival is the leading company within the cruise line industry, has a large fleet capacity and operates 11 of most recognizable cruise brand names. The cruise line industry is effectively an oligopoly market; in which the market is shared by a small number of producers or sellers. Carnival is constantly engaged in marketing and pricing battles with their competitors, making internal rival central to the industry. They are only few large competitors in the North American cruise industry.
One reason for so few competitors is the high barrier of entry and exit. It is difficult for a cruise liner to sell their assets and exit the industry. The corporation is global but holds only 2% of the market share in the vacation industry. There are few shipbuilders in this industry, thus making it difficult to bargain for the best prices. Overall, Carnival Corporation dominates the industry, with 52.9% of the North American market and 51,6% of the rest-of-world market share. It most formidable competitor, Royal Caribbean, has only 27,6% of the North American market share and 25,6% of the rest –of- world market share. The smaller cruise lines tend to specialize in options for a particular region.
2. Power of Suppliers: (Moderate)
Carnival Corporation stated in its most recent Annual Report that “its largest purchases are for: fuel, travel agency services, food and beverages, air transportation services, port facility utilization, repairs and maintenance, including dry-docking, advertising and marketing, hotel and restaurant products supplies, communication services, and the construction and refurbishment of our ships”. The threat of integration by these suppliers is very low. One exception is Carnival’s new-builds. There are only six major shipyards that have recently built cruise ships, and 2-3 more that either perform conversions or have built ships before 2000. The high supplier power is...
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