Case 2 :Carnival Corporation: Acquiring Princess Cruise Line(2002)
Question: Carnival management and board of directors believed that demand would continue to increase well in to the future. Considering that only a small percentage of the North America market had taken a cruise Vacation, reaching more of the North American target market would improve industry profitability. Industry analysis stated that the “assessment of market potential” was only an “educated guess ”.what if the current demand didn’t grow according to industry and cruise line projection?
If there is uncertainty about demand increase, top management should recognize how carnival can improve its activities with current environment, so it seems review and reanalyzing the external and internal environment and current business and corporate strategies are important, then in the next step they can suggest some alternative strategies (according to demand depression)and then making decision about their new strategies (which can be current strategy or another kind of strategies) and start for implementation and finally evaluation and control to make necessary adjustment.
Regarding to the above mentioned matters ,for answer this question first I will discuss about carnival external and internal environment to find out current opportunities, threats, weaknesses and strengths of the carnival, second I will try to explain Carnival current strategy, third, I will bring some strategic alternatives, then in the forth part, according to the environmental analysis which I mentioned in the first part, I will recommend a strategy which they should continue in demand depressed situation ,to improve their activities .
Carnival Corporation External Environment(opportunities & threats)
Two-income families have more disposable income to apply toward vacations. (O)
The aging of America means more potential customers for the Holland America Line, which serves an older, more established clientele. Increased emphasis on family vacations and a growing “family” cruise segment. (O)
New ship program with long run view (O)
More efficient systems used in new construction (O)
Low interest rates (O)
Slow down in U.S. and World economy (T)
Impact of 9/11/01 on consumer spending (T)
Fines for pollution ($18 million) (T)
Terrorist Acts (T)
CFC—corporation for tax purposes (T)
Federal Maretime Laws
Maretime Unions accusations of exploiting foreign crews
Task Environment (Porter 5 forces) in relation with Carnival Corporation
Threat of new entrants is low, given the recent rash of cruise line failures, mergers and buyouts. New entrants the competitive nature of the industry makes it unattractive to enter and high start-up costs serve as a barrier to entry.
Rivalry among competitors is high. With overall increasing berth capacity—new ships.
Bargaining power of suppliers (shipbuilders) is moderate since shipbuilding is a very money- and time-intensive process .If a shipbuilder can’t deliver on a contract, Carnival can’t easily obtain a replacement ship.
Bargaining power of buyers may grow in the future due to the combination of increased berth capacity and decreased demand. The combination of these factors would lead cruise operators to offer deep discounts, and customers would have more affordable options in choosing the cruise they want.
Threat of substitutes is escalating with the introduction of all-inclusive combination cruise/land packages such as Disney’s Big Red Boat vacations.
Bargaining power of other stakeholders such as the American Maritime Union pose a threat with their continued charges against Carnival (and other operators) concerning exploitation of cruise employees.
Carnival Corporation Internal Environment
Carnival Corporation has major market segments: Premium...
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