Carnival Corporation plc is a planetary sail company, with a portfolio of 12 trade names. It is one of the taking sail operators in both North America and Europe. The company chiefly operates in the US, the UK, Continental Europe and Canada. The company recorded grosss of $ 11,839 million during the financial twelvemonth ended November 2006, an addition of 6.7 % over 2005. The operating net income of the company was $ 2,613 million during financial twelvemonth 2006, a lessening of 1 % as compared to 2005. The net net income was $ 2,279 million in financial twelvemonth 2006, an addition of 1.2 % over 2005.
Carnival ‘s mission statements reads, “ Our mission is to present exceeding holiday experiences through the universe ‘s best-known sail trade names that cater to a assortment of different life styles and budgets, all at an outstanding value unrivaled on land or at sea ” .
To be the taking sail operator in all sections entered and to keep the most up-to-date fleet of sail ships in the universe
To develop new sail sections and advanced sail bundles to make a larger figure of possible and past patrol cars
Employ sophisticated promotional attempts to accomplish a greater consciousness by the public refering the handiness and affordability of sail travel
Attract the first-time and younger patrol cars ( Carnival ) , experient patrol cars ( Holland America ) , upscale patrol cars ( Seaborne ) , and patrol cars desiring a seafaring holiday ( Windstar )
Promote cruises as an alternate to land-based holidaies
Supply a assortment of activities every bit good as ports of call
Be advanced in all respects of operations of the ship
Global growing through homocentric variegation via acquisition of sail lines and constructing new ships, peculiarly in the Asia and European markets.
High quality of the service towards the client ensuing in high client satisfaction, taking to new and repetition clients.
Economies of graduated table by increasing the size of the company ensuing in the lowest break-even point in the sail industry.
Horizontal growing financed through internal financess.
Sophisticated promotional attempts to derive trueness from former clients and new clients
Remodel its ships, changing offered activities, and being advanced through RD in all facets of ship operations.
Board of Directors
Although information is non available about most of the board members, we do cognize that at least two members of top direction are besides insiders on the Board: Micky Arison ( Chairman of the Board ) and Howard Frank ( Vice Chairman ) .
The stock of Carnival Corporation is publically traded and at least 20 % of in private held stock of the Arison household has been sold to fund enlargement. Arison likely controls the board.
Members of top direction are as follows:
Micky Arison, Chairman, CEO, ( Carnival Corporation )
Robert Dickinson, President and COO ( Carnival Cruise Lines )
Kirk Lanterman, President and CEO ( Holland America Lines )
Howard Frank, Vice Chairman and COO ( Carnival Corporation )
Gerald Cahill, Senior VP Finance and CFO ( Carnival Corporation )
Lowell Zemnick, VP Treasurer ( Carnival Corporation )
Peter T. McHugh, President and COO ( Holland America Lines )
Meshulam Zonis, Senior VP of Operations ( Carnival Corporation )
Carnival Corporation is a household tradition passed down from Ted Arison ( laminitis ) to his boy Micky ( current CEO and Chairman ) . Micky Arison and Bob Dickinson seem to be the chief drive force behind strategic determinations in the company.
III. EXTERNAL ENVIRONMENT ( EFAS Table ; see Exhibit 1 )
A. Natural Environment
Rigorous ordinances on ships
Environmental and wellness and safety ordinances
Could addition costs of conformity
Instituted Safety and Environment place
EPA – surveies on waste H2O
Annual award plan
Financially back uping ocean preservation groups
B. Societal Environment
Unstable economic system
Computer and information engineering highly of import
Increased ordinances are issued by the Coast Guard, U.S. Department of Health and Federal Maritime Commission.
Growth is decelerating in the sail travel industry ( 2 % from 1991 – 1995 ) . It is besides estimated that merely 5-7 % of the North American market has of all time taken a sail.
Two-income households have more disposable income to use towards holidaies.
The ripening of America means more possible clients for the Holland America Line, which serves an older, more established patronage. Increased accent on household holidaies and a turning “ household ” sail section.
Periodic political tensenesss which occur in sail an country ( such as the Mideast or Mediterranean ) causes cruise competition to escalate in safe Waterss until the tensenesss cease.
B. Task Environment
Menace of new entrants is low, given the recent roseola of sail line failures, amalgamations, and buyouts.
The competitory nature of the industry makes it unattractive to come in, and high start-up costs serve as a barrier to entry.
Competition between rivals is high, with six major rivals ( including Princess and Royal Caribbean Cruise Lines ) and eight minor rivals.
With berth capacity increasing, competition may turn more intense if demand does n’t bounce.
Dickering power of providers ( shipwrights ) is moderate since ship building is a really money- and time-intensive procedure.
If a shipwright ca n’t present on a contract, Carnival ca n’t easy obtain a replacing ship.
Dickering power of clients may turn in the hereafter due to the combination of increased position capacity and reduced demand.
The combination of these factors would take sail operators to offer deep price reductions, and clients would hold more low-cost options in taking the sail they want.
Menace of replacements is intensifying with the debut of across-the-board combination cruise/land bundles such as Disney ‘s Big Red Boat holidaies.
Other stakeholders such as the American Maritime Union pose a menace, with their continued charges against Carnival ( and other operators ) refering development of sail employees.
IV. INTERNAL ENVIRONMENT ( IFAS see Exhibit 2 )
A. Corporate Structure
Carnival Corporation serves major market sections through Carnival, Holland America, and Seaborne ( joint venture ) .
Decision-making is centralized, with top direction and the Board of Directors commanding all strategic determinations.
The corporation attempts to cut down everyday decision-making by standardising shipboard operations when possible.
B. Corporate Culture
Carnival Corporation ‘s civilization seems to internalise the construct of supplying invitees with the highest service criterions while maintaining a house clasp on operating costs.
There is important corporate pride sing Carnival ‘s place as the leader and pioneer in the sail industry.
C. Corporate Resources
Carnival Corporation ‘s chief selling aim is to keep on to its 44 % market portion in the sail industry.
It plans to retain the leading place through aggressive promotional runs by deriving trueness from former patrol cars and by being advanced in shipboard activities and operations. Carnival ‘s sail merchandise is chiseled and positioned to function three major markets: modern-day, premium, and luxury.
Carnival Cruise Lines ( modern-day ) marks immature and first-time patrol cars with reasonably priced bundles which include airfare and a assortment of shipboard comfortss.
Monetary values are competitory with those of other similar sail and land-based bundles. The “ Fun Ship ” sail subject markets the ship itself as the primary holiday finish, with ports-of-call being of secondary importance.
Holland America Lines ( premium ) is positioned to pull higher income travellers with sail monetary values averaging 25-35 % higher than Carnival Cruises.
HAL serves an older, more established patronage. Carnival provides extra holiday chances through Westmark Hotels, Westours, Gray Line Tours, and the McKinley Explorer railway managers in Alaska. These subsidiary Tourss and hotels are marketed chiefly to fulfill turning demand for Alaskan land holidaies in concurrence with Carnival ‘s Alaskan sails.
Seaborne serves the luxury market with South American, Mediterranean, Southeast Asian, and Baltic sail finishs.
Seaborne serves really affluent patronage with worldwide cruises up to 98 yearss ‘ continuance.
Windstar Sail Cruises serves a forte sail niche with ships that have little capacity ( fewer than 150 invitees ) and can near smaller, less traveled ports-of-call.
Carnival Corp. was the first sail operator to publicize on telecasting.
Carnival books 99 % of its sails through travel agents and has implemented an inducement plan to honor travel agents who suggest a Carnival sail before other holidaies.
Presently Carnival Corporation ‘s primary fiscal consideration is the control of costs in order to keep a healthy net income border ( greater than 20 % ) .
Another chief concern is the current enlargement program funded by internal growing.
The fiscal ratios show several countries that need to be addressed in the company.
Carnival has really low liquid assets, as evidenced by the low current and speedy ratio, and has negative working capital, which may do creditors to doubt whether Carnival can run into its current duties.
Overall, the liquidness of the company is really hapless but may be common to the industry since so much money is tied up in the fixed assets part of the balance sheets.
In other countries, Carnival is making much better with a net income border of 22 % , ROI of 11 % , and ROE of 19 % .
The company is n’t overburdened by debt and has two go arounding recognition understandings for a sum of $ 1 billion, $ 815 million of which is still available for the refurbishing and edifice of ships.
In the past five old ages the corporation has experienced losingss due to the discontinuance of the Fiestamarina Line and two of its hotels.
Carnival late purchased $ 101 million of secured notes issued by Kloster Cruise Lid. ( Norse Cruise Lines ) .
Kloster has experienced fiscal troubles, and if the company fails, Carnival will be in place to claim a part of Kloster ‘s assets.
A fiscal strength of Carnival Corp. is that it is registered as a Controlled Foreign Corporation and therefore is exempt from U.S. Federal income revenue enhancements at the corporate degree.
3. Research and Development
Carnival relies on RD on the portion of its shipwrights to bring forth faster, more fuel efficient, technologically advanced ships.
Carnival besides uses service RD to implement and better shipboard amusement and activities to function the disparate demands of the three market sections they serve.
Main operations consist of the 12 sail lines and the subsidiary Tourss and hotels mentioned in the analysis of selling.
The company expects to take bringing of 10 new ships ( including several “ superliners ” ) in the following four old ages ; seven for the Carnival Line, two for the Holland America Line, and one for Windstar. These ships will ensue in a 20,484 rider addition over Carnival Corp. ‘s current capacity and cost $ 3.3 billion.
This enlargement will enable Carnival to remain competitory with its challengers, who are besides spread outing, but if future demand remains down, the excess capacity could negatively impact future profitableness.
The major strength of Carnival ‘s operations is that they are really efficient ; it has the lowest break-even point of any organisation in the sail industry.
It has besides been able to accomplish important economic systems of graduated table by standardising layout and shipboard operations on its ships.
Carnival ‘s fixed costs make up 33 % of the company ‘s operating disbursals, and they ca n’t be reduced in proportion to lessenings in rider tonss and grosss.
Major variable costs as a per centum of operating disbursal are as follows: airfare ( 25-30 % ) , travel agent fees ( 10 % ) , and labour ( 13-15 % ) .
Shipboard operations are really labour-intensive, which consequences in high labour costs.
Carnival Corporation ‘s sails are besides capable to general menaces in the environment such as political struggles and natural catastrophes in countries where they cruise.
Human Resource Management
Cruises are labour-intensive, necessitating extended showing and hiring of employees.
Employees work on contracts of 3-9 months and are recruited largely from third-world states.
Carnival has employees from 51 states
Carnival has been cited by the American Maritime Union for development of employees, but the mean employment period is about eight old ages, and supply exceeds demand for all sail employee places.
Although it is non mentioned in the instance, Carnival Corporation ‘s information system is assumed to be rather extended, in order to enter rider reserves taken from 100s of travel agents and to orchestrate the day-to-day operations of this big company.
The information system besides appears to give really elaborate dislocations of disbursals between sail divisions and within cost classs.
Analysis of Strategic Factors
Situational Analysis ( SWOT ) ( SFAS Matrix ; see Exhibit 3 )
Largest sail operator
Strong trade name portfolio
Strong geographic presence
High debt load in FY 2006
Expansion of sail operations
turning travel and touristry in China
reopening of sail centres
Economic lag in the United states
Increased minimal rewards in the United states
VI. Strategic Alternatives and Recommended Strategy
A. Strategic Options
1. Growth Schemes: Move more sharply into the household sail market section.
Professionals: Tap a new, turning market with fewer rivals than the traditional sail industry. It allows alternate usage of ships that are n’t being used if future demand remains down. This scheme allows Carnival to maintain in front of its rivals, and the company ‘s low break-even point puts it at an advantage over rivals who are prosecuting a similar enlargement program. Prosecuting moderate enlargement allows Carnival to keep its place as the market leader. This seems to be the scheme that the company wants to prosecute, and direction has been successful in bucking negative industry tendencies in the yesteryear.
Cons: This scheme requires a new manner of thought to be successful in fulfilling household demands. In add-on, a lower monetary value may be necessary to pull households who are looking for low-cost holidaies. Competitor Disney is a major force in the holiday industry. If demand does n’t bounce, the industry may confront monetary value wars and deep price reductions. This consequence will be compounded by Carnival ‘s inability to cut fixed costs in the face of diminishing demand, and profitableness may be aggressively reduced.
2. Pause Scheme: Sing the possibility of reduced demand and the uncertainness of future demand, it may be prudent to detain undertaking for any extra ships until it is evident whether sail demand will bounce.
Professionals: The company would n’t be binding up capital in extra ships when demand may non deserve it. This would let the company to concentrate on polishing its current operations and selling scheme. It may besides take to an betterment in the liquidness ratios.
Cons: If demand does bounce and Carnival has n’t ordered extra ships, there will be a clip slowdown until it receives new ships. In add-on, if Carnival ‘s rivals continue enlargement, so the company runs the hazard of losing its leading place in the industry.
3. Retrenchment Scheme: Carnival presently is n’t in a place where retrenchment is recommended. However, if demand does n’t bounce, retrenchment could go a necessity in the hereafter.
B. Recommended Scheme
Recommend that the company continue to prosecute its current growing program.
This scheme allows Carnival to remain current with its rivals.
If demand remains down in future old ages, there will still be ample clip for Carnival to reevaluate its corporate scheme every bit long as they do n’t detain indefinitely.
The recommended scheme does n’t necessitate any extended alterations in current plans.
Top direction should closely supervise the industry and general economic tendencies to find whether demand will bounce as expected.
If non, direction should explicate surrogate schemes that adjust to these conditions.
Carnival ‘s direction needs to turn to the hapless province of the company ‘s on the job capital and current ratio.
These are of concern since a low current ratio may do the company to default on certain debt compacts.
However, the province of the on the job capital and current ratio may be normal when compared with industry criterions, since a big part of the balance sheet assets is concentrated in fixed assets.
The company ‘s information systems are sufficient to measure the public presentation of the recommended scheme and to divide costs associated with the enlargement.
Carefully proctors future demand and makes necessary accommodations, I think it is in a good place to keep its leading place in the industry and go on to be financially successful.
IX. EFAS, IFAS, and SFAS EXHIBITS
EFAS ( External Factor Analysis Summary )
Key External Factors
Merely 5-7 % of N. American market has cruised
Great figure of possible clients
More accent on household holidaies
Developing market section
Two-income household – more disposable income
Cruises are an option
Decelerating growing in the sail industry
2 % in 1991-1995
Very competitory industry
Six major rivals
Strong economic conditions
Menace of replacements
IX. IFAS, EFAS, and SFAS EXHIBITS
IFAS ( Internal Factor Analysis Summary )
Key Internal Factors
New larger ships
Future over capacity
104 % capacity
“ Fun Ship ” sail subject
Clients – merely tap 5 %
Hard to acquire remainder
Strong direction squad
Best in industry
Acquisitions – concentric variegation
HRM – working employees
Stay 8 old ages
Low B/E and hard currency for new ships
Market portion – 26 %
Healthy net income borders
IX. SFAS, EFAS, and IFAS EXHIBITS
SFAS ( Strategic Factor Analysis Summary )
Key Strategic Factors
S I L
Merely 5-7 % of Americans have taken a sail
Turning household holiday market section
Very competitory industry
Escalating menace of replacements
26 % market portion
Lowest break-even point
High fixed costs
Poor liquidness ratios