An Analysis of the Carnival Corporation

Carnival Corporation is the largest and most profitable cruise company in the world.

Carnival Corporation owns Carnival Cruise Lines, Holland America Line, Costa Cruises, Cunard Line, Seabourn Cruise Line, and Windstar Cruises. The company’s cruise lines operate 45 ships that travel to a wide variety of exciting destinations around the world. They also own or maintain an interest in tour companies that offer air transportation and operate hotels, motor coaches, rail cars, cruise ships, and excursion vessels in select markets.

The company is in the enviable position of being the largest, most profitable, and most popular cruise line in the world. With a commitment to leadership, innovation, value, and quality, Carnival offers cruise vacations that appeal to a wide variety of lifestyles and budgets and sail to some of the world’s most exciting destinations. Through acquisitions and alliances, Carnival has built up an impressive fleet of ships that sail the world, as well as interests in lodging and other similar activities.

Carnival’s main goal is to remain #1 in the cruise travel and vacation industries by promoting cruises as an alternative to land-based vacations.

External Environment (Societal)

Sociocultural factors include safety concerns regarding terrorism stemming from the 9/11 event and rumors of war. Two other key factors in this area are the increasing affluence of Americans and the increased participation of women in the workplace, which give families a more disposable income for discretionary items like vacations. These factors affect the cruise industry by making cruises more acceptable as family-type vacations.

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Another key trend that will positively impact the cruise industry is the aging population since “prime cruising ages” are between 40 and 60.

Key economic trends that exist and have great potential to impact the future of the cruise industry include the global economic slowdown in the last three years. The rising unemployment rate and higher fuel prices may adversely impact the cruise industry. However, there is an opportunity for Carnival to leverage this weakness in the economy by continuing to offer the segments of the market impacted by the economy affordable vacations and also leveraging those target markets that have not been impacted by the economic slowdown.

The technological impact on commerce has increased the efficiency of cruise travel, and bookings, and has the opportunity to assist in joint venture activities and improve the ease of travel as compared to the competitors.

The political instability in some destination points poses a moderate threat; however, this can be controlled by strategic economic alliances with destination governments. In addition, this provides an opportunity to explore destinations that have not been utilized in the past.

Internal Environment (Task/Industry)

The threat of Entry. There are significant large players in the cruise industry. However, large entertainment and recreational parks have started to see the value of associating with the cruise experience. Industry consolidation through mergers and buyouts, and the expansion of the industry may negatively impact the profitability of this industry. The opportunity in the North American market is substantial where only 5%-7% of the population has taken a cruise. Another opportunity is the Asia/Pacific market where income levels are increasing and there are new destinations to explore. The cost of entry is high given the initial investment; therefore, those entering the cruise industry must have the financial power.

Power of Suppliers. Carnival owns all of its destination points and controls its supply needs. Another key strength is that Carnival has a variety of cruise lines to meet most budgets. This allows them to capture a good cross-section of the population. They have established a good relationship with travel agencies because they can merchandise its affordability. 99% of all Carnival cruises are sold through travel agents. There are some opportunities that Carnival may explore to achieve greater profit margins. For example, strategic alliances, joint ventures, etc. with oil/gas suppliers, commodity suppliers, amusement or entertainment parks, or creative cruise experience enhancers.

Power of Customers. Carnival earns its revenues primarily from the sales of passenger cruise tickets. The ticket price includes accommodations, meals, and most onboard activities. Additional revenue is generated from the sale of air transportation to and from the cruise ships and the sale of goods and services sold on-board. These goods and services include casino gaming, bar sales, gift shop sales, photograph sales, shore excursions, and spa services.

The rivalry is high among the big players which include: Celebrity Cruises, Disney Cruise Lines, Norwegian Cruise Lines, Princess Cruises (purchase pending by Carnival), Radisson Seven Seas, Renaissance, and Royal Caribbean, American Hawaii Cruises, and Club Med.