In 1972 Ted Arison, backed by the (AITS) American Travel services, Inc., purchased an aging ocean liner from Canadian Pacific Empress Lines for $6.5 million. The new AITS subsidiary, Carnival Cruise Line, refurbished the vessel from bow to stern and renamed it the Mardi Gras to capture the party spirit. Carnival lost money for the next three years, and in late 1974 Ted Arison bought out the Carnival Cruise subsidiary AITS, Inc., for $1 cash and the assumption $5 million in debt. One month later, The Mardi Gras began showing a profit and through the remainder of 1975 operated at more than 100% capacity. Carnival targeted first-time cruiser and young people with a moderately priced vacation package that included airfare to the port of embarkation and home after the cruise. Throughout the 1980s, Carnival was able to maintain a growth rate approximately 30%- about three times that of the industry as a whole. In 1987, Ted Arison sold 20% of his shares in Carnival Cruise Lines and immediately generated over $400 million for further expansion. Holland America was positioned to appeal to higher-income travelers with cruise prices averaging 25%-35% more than similar Carnival cruise. Higher fuel Prices and increased cost began to affect the industry as a whole. The first Persian Gulf War caused many cruise operators to divert ships from European and Indian ports to the Caribbean area of operations, increasing the number of ships competing directly with Carnival. In 1991, Carnival attempted to Acquire Premier Cruise Lines, which was then the official cruise line for Walt Disney World in Orlando, Florida, for approximately $372 million. In 1994, the company discontinued the operations of Fiestamarina Lines, which had attempted to serve Spanish-speaking clientele. Carnival Coorporation continued to expand through internally generated growth by adding new ships and its external expansion through acquisition if the right opportunity arose. In 2006, the company had a portfolio of 12 distinct cruise lines with 79 ships serving 7 continents. Carnival also owned a chain of 16 hotels and lodges in Alaska and the Canadian Yukon with 3,000 guest room. These brands, which, according to management, comprised the most-recognized cruise brands in North and South America, The United Kingdom, Germany, Southern Europe, and Australia, offered a wide range of holiday and vacation products to a customer base that is broadly varied in terms of cultures, languages, and leisure-time preferences.
A. PESTEL ANALYSIS
a) Conflicts in the middle-east, terrorist attack (T)
b) Government Regulations, Carnival’s ships were regulated by various international, national, state, and local port authorities’ laws, regulations, and treaties in force in the jurisdictions in which the ships operate (T) c) Lawsuits, exploitation of its crew, safety issue and unlicensed materials (T) d) Safety Law issue (T)
e) Weaker U.S. dollar compared to the Euro encourages Europeans to take advantage of cruise rate (O) f) Tax policy are different in each country (T)
g) Computer virus (T)
h) Natural distater, such as hurricane Katrina (T)
i) Pollution claim (T)
Households with dual incomes give families more disposable income (O) b)
Changing consumer preferences (T)
Potential customers of Premium/Luxury sectors (O)
B. FIVE FORCES ANALYSIS
* Ships are expensive, Growing Aussie–Threat of new entrants = MEDIUM (T) * Increased ship or berth supply, it was estimated that the total passenger will be increasing in the next three years - Bargaining power of buyers = MEDIUM (O) * All-Inclusive land packages growing - Threat of substitute products or services = MEDIUM (T) * The ticket selling depends on the agent (80%), purchased fuel and port facility services from...
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