Porters Forces Cruise Industry
The Leisure- Cruise Industry
Major: Marketing
Porter’s Six Forces
I. Threat of New Entrants: Low * Barriers to entry: High * High Capital Requirements: The capital required to start up a cruise line is one of the key factors contributing to this industry’s high barriers to entry. With the average cost of building a cruise ship rising, the amount of capital needed to start up a cruise line is estimated at one billion dollars. Therefore discouraging any new entrants into the industry. * High Brand Equity: A cruise line’s brand awareness and reputation are significant factors to the industry’s high barriers to entry. Cruising is a risk-averse activity, which influences consumers to trust and purchase from established cruise lines. That being said it would be difficult for any new entrants with low brand equity to successfully compete with this oligopolistic industry. (Dowling, 2010) * High Economies of Scale: The cruise line industry has a major cost advantage over any new rival based on two types of economies of scale. These cost savings contribute positively to the liners profitability. * Economies of Destiny: These “mega-ships” are built with a large number of cabins and lower berths aiding in the spread of substantial fixed costs over many passengers. Therefore, resulting in lower unit costs and making the product much more appealing and affordable to more parts of the population by achieving a break-even point at lower prices. Cruise liners also have a strong incentive to reach high utilization ratios in order to achieve such economics, which result to such discounting. (Dowling, 2010) * Economies of Fleet Size: This is where fixed costs that require a substantial financial capital such as research, design, construction, training, sales, administration, marketing and advertising are spread over a large number of ships. (Dowling, 2010)
II. Rivalry Among Existing Firms: High * High Concentration Ratio: The cruise line
Major: Marketing
Porter’s Six Forces
I. Threat of New Entrants: Low * Barriers to entry: High * High Capital Requirements: The capital required to start up a cruise line is one of the key factors contributing to this industry’s high barriers to entry. With the average cost of building a cruise ship rising, the amount of capital needed to start up a cruise line is estimated at one billion dollars. Therefore discouraging any new entrants into the industry. * High Brand Equity: A cruise line’s brand awareness and reputation are significant factors to the industry’s high barriers to entry. Cruising is a risk-averse activity, which influences consumers to trust and purchase from established cruise lines. That being said it would be difficult for any new entrants with low brand equity to successfully compete with this oligopolistic industry. (Dowling, 2010) * High Economies of Scale: The cruise line industry has a major cost advantage over any new rival based on two types of economies of scale. These cost savings contribute positively to the liners profitability. * Economies of Destiny: These “mega-ships” are built with a large number of cabins and lower berths aiding in the spread of substantial fixed costs over many passengers. Therefore, resulting in lower unit costs and making the product much more appealing and affordable to more parts of the population by achieving a break-even point at lower prices. Cruise liners also have a strong incentive to reach high utilization ratios in order to achieve such economics, which result to such discounting. (Dowling, 2010) * Economies of Fleet Size: This is where fixed costs that require a substantial financial capital such as research, design, construction, training, sales, administration, marketing and advertising are spread over a large number of ships. (Dowling, 2010)
II. Rivalry Among Existing Firms: High * High Concentration Ratio: The cruise line
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