This analysis includes the opportunities and challenges facing the company, as well as the threatens and weaknesses that the company currently possesses. Below, you will find an overview of Carnival Corporation, including a brief business scope. You will also find the internal and external audits conducted by our firm. After thorough consideration of the internal and external audit of Carnival Corporation, Vision Consulting determined several opportunities available to the company. You will find these opportunities listed below. It was then determined which opportunities available to the company could have the possibility of implementation.
Those opportunities which our team felt were viable objectives were noninsured as possible company objectives. You will find the “pros” and “cons” of each objective listed below in the “Strategic Objectives and Relative Evaluations” section. The “pros” and “cons” of each objective were evaluated. Vision Consulting reviewed the objectives and has recommended several of the objectives for strategic implementation within Carnival Corporation. The strategic implementation of each objective recommended for adoption is discussed in the “Strategy Implementation” section.
Also included is a balanced scorecard for the corporation. Carnival Corporation Mission Statement Our mission is to deliver exceptional vacation experiences through the world’s best- known cruise brands that cater to a variety of different lifestyles and budgets, all at an outstanding value unrivaled on land or at sea. ” Evaluation of Mission Statement A detailed evaluation of the company’s mission statement was conducted to access the effectiveness of the mission statement. The following factors were considered: * Does the mission statement indicate a method of value creation?
Yes. The mission statement indicates that the company will create value by delivering exceptional vacation experiences, catering to a variety of lifestyles and by being the low cost provider. * Does the mission statement indicate the company’s principal product or service? Somewhat. The mission statement indicates that the company “delivers exceptional However, the word “cruise” is mentioned within the statement. The mission statement makes it apparent what the primary business of the company is. * Does the mission statement address the geographical area of service? Somewhat.
The wording of the mission statement makes it appear that the company s already well-established and well known around the world, leading the reader to believe that the company services the whole world. Specific geographical areas are not mentioned. Company Objectives, Strategies & Core Competencies The market strategy of Carnival Cruise is to create more valuable customer relationships and add value by providing quality cruises. Carnival Cruise lines appears to be gaining market share by promoting the ship as a destination vacation and by meeting the diverse financial needs of their customers.
The company’s customer retention continues to grow and improve, and Carnival Cruise Lines has ad positive successes in attracting additional customers. Carnival Cruise Lines continues to benefit from their diversified business mix. A new objective of the company is the commitment to making the cruise experience exciting for their customers. Carnival Corporation is also committed to providing satisfaction and value to its current and past customers with the expectation that new customers will arrive to board the Carnival Cruise ships and experience the “Fun Ship” first hand.
One of the company’s most important strategic goals is to maintain their leadership and market share in the cruise line market. Objectives in order to maintain their leadership in the market are: * To meet the specific needs, and cater to, individual customer segments. (Based on customer demographics. ) Carnival Cruise customers profile showed that approximately 30% were between the ages of 25 and 39, with household incomes of $25,000 to $50,000. This is the target market for Carnival Corporation. * The company is planning to invest over $6 billion in new ships by 2005. To maintain satisfaction rates with current customers. * Uphold the “Fun Ship” theme, which has been present since the emergence of the company. Strategies currently in place to meet objectives: specific desires of their diverse customer base. * Company is maintaining working relationships with ship builders and suppliers, for the purpose of securing contracts for new cruise liners. * Continue with current marketing strategies to promote Carnival as the “Fun Ship” and to aim advertising towards the company’s target market.
The company’s product positioning is comprised of three segments with different passenger demographics, passenger characteristics (including income level), and growth requirements. In order to exceed these segments, Carnival Cruise Lines must o obtain certain key skills or competencies, that will increase their customer relationships and add additional value to their customers. Core Competencies: In order for a skill to be considered a core competency, the skill must meet three tests: Customer value, competitor differentiation and extendibility.
The following skills possessed by Carnival Corporation are considered core competencies: * All inclusive vacation Packages. The company uses three, four, or seven day moderately price cruises to fit the time and budget constraints of their middle class customers. Shorter cruises cost less than $500 per person (depending on accommodations). – Longer cruises cost up to $3,000 per person. * Extensive marketing and public relations with independent travel agents to help promote cruises and further their marketing strategies. * Carnival Corporation is well-known for their exceptional customer service, on and off of the cruise.
For example, it has been noted by customers that the maids on the ship are so attentive, if you leave for room for Just a minute, the bed will be turned when you return. * Contemporary, Premium and Luxury vacations are in operation to cater to the pacific desires of their different customer segments. * Company is maintaining working relationships with ship builders and suppliers. * Continue with marketing strategies to promote Carnival as the “Fun Ship. ” Company * Several projects are underway with the Canard and Costa cruise lines to provide the largest wellness and fitness centers on a cruise ship.
This is an undertaking not yet done by main competitor Royal Caribbean. Business Scope Carnival Cruise lines is in the business of providing guest with the same experience of a land vacation while at sea. Offering exceptional vacation experiences at outstanding prices has drastically contributed to making Carnival Cruise lines the most profitable company in the leisure travel industry. Operating under the Carnival Cruise Lines are 8 different extensions of cruise companies. Which are the following: Carnival Cruise Lines, Princess Cruise, Holland American Line, Seaboard Cruise Lines, Windiest Sail Cruise, Canard, and Costa Cruise.
Together, these member lines share a commitment to quality and value, offering cruise vacations that appeal to a wide range of lifestyles and budgets and sail to some of the world’s most exciting destinations. Carnival Cruise Lines is the most popular and most profitable cruise line in the world. The Carnival Cruise Lines are known as the “Fun Ships” designed to meet your all around needs in enjoyment and excitement. Carnival ships cruise to destinations in the Bahamas, Canada, the Caribbean, the Mexican Riviera, New England, the Panama Canal, Alaska, and Hawaii with most cruises ranging from 3 to 7 days.
The typical guest aboard these ships are vacationers that love to have fun and like taking family vacations where everyone can find something to do. Carnival Cruise Lines fit more into the contemporary segment of the cruise market. Holland American Line is the undisputed leader in the premium cruise sector. The premium cruising segment is serviced by Holland American lines and it is designed to appeal to the more affluent customers. Holland is positioned to the higher-income travelers with cruise prices averaging 25% – 35% more than similar cruises. Seaboard Cruise Lines has 3 suite ships in operation: Pride, Spirit, and Legend.
Seaboard Cruise lines offers passengers with the highest level of personalized service. Each guest aboard these ships experience having their own personalized staff member at there beckon call. They have award winning service. The typical guest that vacations aboard Seaboard ships are well seasoned travelers who want the “best of the best”. They tend to avoid larger ships and are frequent guest at exclusive hotels and resorts. Seaboard services the ultra-luxury market with destinations in South America, the Mediterranean, Southeast Asia, and the Baltic.
The theme of Windiest Cruise is “180 degrees from Ordinary”. This line of cruise ships is in the business of creating a romantic atmosphere of ship sailing. Windiest Spirit, and Wind Surf. The typical guest aboard these yachts are contemporary cruise containers, 1/3 of whom are 1st time cruisers. They sail to exotic and intriguing destinations. Windiest Cruise services the specialty sailing cruise segment. Canard is a part of the luxury segment of cruising. Canard’s famous fleets of floating palaces have reined the seas, representing the pinnacle of maritime achievement and the quintessence of luxury travel.
Guest that vacation with Canard’s lines of cruises are those that love the sea and relish traditional elegance. They are typically well traveled and have the leisure to indulge in season long sojourns to exotic realms. More than half of Canard’s guests reside outside North America, particularly in Britain and Europe. The company is currently in the process of acquiring Princess Cruise Lines. Below is a brief summary of the Princess Cruise Line: Princess Cruise ships offer a “complete escape” that lets guests leave their daily routine behind for an incredible vacation that’s far from the ordinary.
Guest on these ships are treated like the upper class. Ships under Princess Cruise cater to passengers and their ships offer a wide selection of resort like amenities. Also, Princess is the only cruise line to offer a choice of Traditional Dining or Anytime Dining, so guests can dine when and where it’s convenient. Princess Cruise ships operate on the philosophy of personal choice cruising, where the passenger is in total control of their on board experience. Princess Cruise ships are a part of the luxury cruising segment.
There are 9 ships that operate under Princess Cruise lines: Dawn Princess, Regal Princess, Royal Princess, Pacific Princess, Golden Princess, Grand Princess, Star Princess, Sun Princess, and Titian Princess. Carnival is incorporated in Panama but is traded on the New York Stock Exchange under the symbol “CLC. Throughout 2002, the stock has been trading at a fairly consistent price, which has remained between $25 and $28 USED. Below is a chart which details the stock fluctuations throughout 2002. Financial Ratios – 2002 A number of financial ratios, based on the 2002 Carnival Corporation financial statements, were considered.
Below is a summary of the most significant financial ratios. Liquidity and Leverage Ratios Current ratio = Current Assets/Current Liabilities = 1 = 1. 323 Debt to Equity Ratio = Total Debt/Total Stockholders Equity = . 56*100 = 56% Net profit Margin = Net Incommodious = = . 04 Return on Total Assets = Net Incremental Assets = 926,200/11 = . 080 Return on Equity = Net Income/ Total Stockholder’s Equity = 926,200/6,590,777 = . 141 Carnival Corporation is the most profitable and has the strongest financial position of any cruise company in the world. During the year Carnival stood strong against a global economic slowdown, a U. S. Secession, and a struggling stock market. Also the nation and our leisure travel industry were dealt a blow by the events of September 1 1 the, which caused many people not to fly, postpone vacations, and cancel advance raise bookings and other vacations. Carnival’s strong balance sheet (see figure 4) positioned them well for these unexpected adversities. As of November 30, 2001 , Carnival Corporation, along with its consolidated subsidiaries, had cash and cash equivalents of $1. 42 billion. The cash gives them buying power and leverage. From the above ratios you can see that they have very favorable liquidity and leverage ratios.
Having a favorable liquidity ratio means they could pay all their short term obligations if needed. The leverage ratio we computed for them, the debt-to-equity ratio, was quite favorable as well. It was nearly twice as good as their rival competitor, Royal Caribbean. This is what makes their financial position so strong. Carnival’s other assets consist of investments in affiliates, hedged firm commitments, and goodwill. Their inventories consist primarily of provisions, spare parts, supplies and fuel carried at the lower of our weighted average cost or market.
The bulk of their assets are their ships. Their ships represent approximately 70% of their total assets. They made several strong moves throughout the year to help strengthen their financial position. One of the moves made by Carnival was they sold their 25% interest in Riotous for $500 million. This helped them continue to outperform the rest of the leisure travel industry. Strengths *Excellent debt-to-equity ratio (approximately 60%) compared to main competitor(s). *Company is well established in the market. *Company leadership possesses broad knowledge of the industry. Strong Corporate Executive team. *Company operates all over the world and has a very diverse clientele, as well as a *Financially well informed and compliant with tax regulations. (PricewaterhouseCoopers is auditor). Has the newest fleet of ships out of all cruise lines, which equates to better customer satisfaction and less ship maintenance. *Market share is currently 32%, with the ability to expand to almost 44%, with the acquisition of Princess Cruise Lines. *Company has excellent marketing strategies in place and employs many forms of advertising. On-ship entertainment is top notch and they offer many forms of entertainment for their customers, while offering a quality product. *Currently the company has more than a sufficient amount of cash on hand to fund additional growth and products (approximately $1. 2 million dollars). Weaknesses *Company recently settled a lawsuit (April 2002) with environmental groups, as they admitted to illegally dumping ballast water into California ports and faced pollution charges. This lawsuit lowered their rapport with customers and environmental groups. *The company has endured public scrutiny over recent lawsuits regarding their labor practices.
According to the Seattle Post-Intelligencer, several lawsuits were filed by Carnival workers who said the cruise line failed to pay them for working overtime. (Carnival and other cruise lines typically don’t follow U. S. Wage and labor laws cause their ships carry foreign flags. ) *Cleanliness of the company’s Holland Cruise Line and Fascination cruise liner has been under scrutiny over a “Norwalk- like” virus that was contracted by several hundred passengers aboard the ships in late 2002. *Carnival Corporation lacks their own ship building subsidiary and/or company staff to build ships and ship components.
Value, Rareness, Immutability & Organization (BRIO) Figure 1, BRIO Resourcefully? Rare? Costly disappointed byCompetitiveEconomic EmployeesYesNoYesNoSustainable competitiveness adventurousness FleetYesNoYesYesTemporary competitiveness-average f shipsadvantagereturns Services indistinguishableness competitiveness-average activitiesadvantagereturns CorporateYesNoNoNoCompetitive Average to preparative-average Value Chain Below is a value chain for Carnival Corporation, compiled based on the specific functions of the company at the service level.
Figure 2, Value Chain Opportunities *Purchase of Princess Cruise Lines to expand market share and global presence. *Establishment of a corporate travel agency. *Increase market share in North America. (Capture the estimated 85-88% of the North American population that has yet to take a cruise. *Establish a subsidiary which builds ships or staff a ship building crew to build new cruise liners and/or repair existing ships. *Establish a vision statement. Threats *Land based vacation industry taking the vacation market away from cruise lines. Ship asset impairments and/or aging ships. *Political threats in local climates (for a world traveler). *Exchange rate fluctuations between countries threaten to reduce the company’s revenues. *Revisions to the Internal Revenue Code (IIRC) could render unfavorable tax consequences, which would in turn affect investor relations. Lenders refusal to lend additional funds / only offering high interest rates. *Royal Caribbean presence in the market threatens to take the market share away from Carnival.
Strategic Objectives & Relative Evaluations Vision Consulting has determined which opportunities available to Carnival Corporation have a possibility of implementation. Those opportunities which we feel are viable are numbered and listed below as possible overall company objectives. The “pros” and “cons” of each possible objective are listed below. Possible Objective 1 Establish a travel agency within the company to service customers, reducing overall sots. Ross: *Carnival currently spends approximately 10%-15% for third-party travel agent commissions, which constitute 97% of all vacations booked. Creating their own travel agency would reduce costs to the company by reducing the amount of costs for the third party travel agent commission. *Increased customer intimacy by enhancing the ability to better service customer and better tailor to the demands of the customer. *Possible reduction of administrative staff to handle third party contacts, which may lower overall costs. Cons: *Increased upfront costs to establish agency and train personnel.
