Written report
Realized by
Sarah Flora Jonas
CARNIVAL CRUISE CORPORATION
INTRODUCTION
Carnival Cruise Lines, was formed in 1972 by cruise industry pioneer, the
late Ted Arison.
After achieving its position as "The World’s Most Popular Cruise Line", in
1987 Carnival made an initial public offering of 20 percent of its common
stock which provided the initial influx of capital that allowed the company
to begin expanding through acquisition.
Over the years, Carnival has acquired representation in virtually every
market segment of the cruise industry, including premium operator
Holland America Line in 1989 (the purchase included niche operator
Windstar Cruises and Alaskan/Canadian tour operator Holland America
Tours); luxury brand Seabourn Cruise Line in 1992; Genoa, Italy-based
contemporary brand Costa Cruises, Europe’s number one cruise operator,
in 1997; and venerable premium/luxury operator Cunard Line in 1998,
which built the world’s largest ocean liner, the 150,000-ton Queen Mary 2.
The launch of Carnival Cruise Lines is a classic tale of the American
Dream. Started by the late Ted Arison, the company began operation in
1972 with a boatload of vision, a single secondhand ship and just enough
fuel to make a one-way trip from Miami to San Juan
The company owns twelve brands and is divided in three geographic
segments: the North-American one, the European one and Other.
The brands are divided into three levels: luxury, medium and
comtemporary.
2
CARNIVAL CRUISE CORPORATION
Step 1
1. 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.”
2. Vision statement
The company does not have a vision statement.
Step 2
1. Improved mission statement
“Our mission is to provide fabulous cruises (2) to a wide range of individuals, regardless of
their budgets and itinerary (1). This is part of our uniqueness and our specificity (7). We
always try to expand deeper in the cruise market (3). We are truly committed to offering to
our customers the ultimate fun experience because we believe that this is what every
vacationer seeks to receive from us (6). We are as well aware of the importance of updating
to technological changes. We therefore provide excellent interactive websites (4). By doing
so, we encourage profitability and financial growth inside our corporation (5).”
2. Improved Vision statement
“Carnival Corporation’s vision is to provide the world’s unique cruises that respects
consumers affordability while being the most financially profitable.”
3
CARNIVAL CRUISE CORPORATION
Step 3
1. Opportunities
-Demand for cruises has increased and is predicted to continue to increase. (127 million
potential passengers for cruising in North America)
-People are more and more interested in all inclusive vacation packages for holidays.
-Demand for Trans-Atlantic cruises has increased since Titanic success.
-The cruise industry appeals to a broad range of demographic groups.
-Flexible strategy, moving their fleets throughout the year to meet the seasonal demand.
-Expansion of fleet has allowed Carnival increasing amount of destinations, itineraries and
markets.
-People are less reluctant to buy cruises on internet.
-Expansion of cruise operations (Carnival’s purchase of new cruise ships would increase its
revenue generating capacity and strengthen its position as a leading cruise operator. )
-Growing travel and tourism in China
-Re-opening of cruise center (The re-opening of Puerta Maya Cruise Center will help the
company to derive revenues from the already existing operation: 1.5 million visitors are
expected to spend $126 million on the island each year)
2. Threats
-Numerous competitors: Royal Caribbean International, Star Cruises, Norwegian Cruise Line
and Disney Cruise Line.
-Cruises can be easily substituted by less expensive on land vacations.
-Any epidemic health concerns in the region where the company does business can prevent
travelers from completing their travel plans.
-Decreased tourism since 9/11: fear of terrorist attacks.
-Environmental lobbyists.
-Viral outbreaks, illnesses aboard cruise ships.
4
CARNIVAL CRUISE CORPORATION
-Economic slowdown in the US.
-Natural disasters: hurricanes, storms…
-Higher fuel costs.
-Various international and national laws and regulations that affect operational costs (ex:
Increased minimum wages in the US)
5
CARNIVAL CRUISE CORPORATION
Step 4
CPM Matrix:
We compared several datas between Carnival Corporation and two of its
competitors – Royal Caribbean and Star Cruises. The results show that Carnival
has a weighted score of 3.66 whereas the other two stay behind in those
critical factors success. This result confirms that Carnival is a leader in the
cruise market.
CPM Matrix.
Carnival Corp.
Critical success
factors
Weights
Market share
0,1
Number of ships
0,09
Financial position
0,1
Product quality
0,07
Consumer loyalty
0,07
Sales distribution
0,05
Global expansion
0,1
Organization
structure
0,05
Diversity of brands
0,05
Advertising
0,03
Customer service
0,09
Price competition
Management
experience
TOTAL
1
Ratings
4
4
4
3
3
3
4
Royal Caribbean.
Weighted
scores
Ratings
3
3
3
4
3
2
3
0,4
0,36
0,4
0,21
0,21
0,15
0,4
0,06
0,1
4
4
2
3
4
0,1
4
Weighted
scores
0,3
0,27
0,3
0,28
0,21
0,1
0,3
0,09
0,4
4
2
3
4
3
0,4
3
0,2
0,2
0,27
3,66
6
Star Cruises.
Ratings Weighted scores
3
3
2
3
3
2
3
0,3
0,27
0,2
0,21
0,21
0,1
0,3
0,15
0,3
3
3
2
3
3
0,3
3
0,3
0,2
0,1
0,36
3,11
0,15
0,06
0,27
0,3
2,82
CARNIVAL CRUISE CORPORATION
Step 5
The EFE Matrix lists the corporation’s opportunities and strengths. We obtain a
total weighted score of 3.04. This number indicates that our company is doing
excellent in terms of its accuracy and efficiency in responding to external
threats and opportunities.
EFE Matrix.
Key external factors
Weights
Opportunities
• Demand for cruises has increased and is predicted to continue to increase.
(127 million potential passengers for cruising in North America)
• People are more and more interested in all inclusive stays for holidays.
• Demand for Trans-Atlantic cruises has increased since Titanic success.
• The cruise industry appeals to a broad range of demographic groups
• Flexible strategy, moving their fleets throughout the year to meet the
seasonal demand.
• People are less reluctant to buy cruises on internet
• Expansion of cruise operations.
• Growing travel and tourism in China
• Re-opening of cruise center
Threats
• Intense competition: Royal Caribbean International, Star Cruises…
• Other vacation limited target audience due to cost
• Decreased tourism since 9/11: fear of terrorist attack.
• Environmental lobbyists.
• Viral outbreaks, illnesses aboard cruise ships.
• Any epidemic health concerns in the region where the company does
business can prevent travelers from completing their travel plans.
• Economic slowdown in the US.
• Natural disaster: tsunami, hurricanes…
• Higher fuel costs.
• Various international and national laws and regulations that affect
operational costs (ex: Increased minimum wages in the US)
TOTAL
Rating
0,08
0,05
0,03
0,08
3
3
2
3
0,24
0,15
0,06
0,24
0,05
0,04
0,08
0,08
0,04
3
4
4
3
3
0,15
0,16
0,32
0,24
0,12
0,08
0,06
0,03
0,03
0,04
3
4
3
2
3
0,24
0,24
0,09
0,06
0,12
0,05
0,08
0,05
0,05
2
3
2
1
0,1
0,24
0,1
0,05
0,06
2
0,12
1
7
Weighted score
3,04
CARNIVAL CRUISE CORPORATION
Step 6
1.
Strengths
Carnival is known for Carnival Destiny, the largest cruise ship in the world. The square
tonnage is 101,353, which is over 30,000 more than any other ship in Carnival’s fleet. It can
hold up to 2,642 passengers with double occupancy
 Fun oriented philosophy. This philosophy is there to keep everyone involved. There are
various activities to keep young and old alike entertained. The ship has been designed to
cater to everyone’s interests.
 Non- formal setting on their cruises. In fact, not everyone wants to have to dress up to
go to dinner on a cruise. The non-formal dress setting keeps the atmosphere light and happy.
People do not feel the need to be embarrassed, and Carnival has gotten great response to it
 Seven teen new ships to be launched by 2014. These includes Paradise, scheduled to be
released by the end of 20011; the Carnival Triumph, which will be larger than the Carnival
Destiny; The Triumph will be released by early 2013; the Carnival Victory is scheduled to be
released by summer 2014.
 Casinos, shopping, entertainment on board. Who wants to be on a cruise and sit in their
room all day? Carnival ships are fully equipped to handle the entertainment of all the
passengers. With casinos, shopping centers, weight and exercise rooms, activities, bars,
lounges, ballrooms, etc.

The advertising team for Carnival is doing its job well for it leads it competitors in advertising
and promotion. The Carnival Cruise Line is a common name because of such advertising and
promotion efforts.
 Ships sail at 100% capacity: One thing that is amazing is the fact that Carnival sails at
almost 100% capacity during all of its trips. The ship is almost always full, which means that
they are generating incredible revenues
 The company recorded revenues of $14,646 million during the financial year (FY)
ended November 2008, an increase of 12.4% over 2007.
 Strong brand portfolio.
 Strong geographic presence.
 Its management is excellent.
8
CARNIVAL CRUISE CORPORATION
2.
•
•
•
•
•
Weaknesses
Only 10% of the market has been tapped.
Only discounts during off-seasons. . This discourages people to use Carnival during the
busy season because they cannot get a reduced rate.
Risk of over capacity. The fact that Carnival is usually at a 100% capacity is good news, but
there is always the risk of overbooking. If this should happen, Carnival would need to pocket
out some money because of unhappy customers.
Ports of call limited.
High debt burden in FY2008
9
CARNIVAL CRUISE CORPORATION
Step 7
The IFE Matrix lists the corporation’s main internal strengths and weaknesses.
We obtain a total weighted score of 2.94. This number – above averageindicates that our company’s current strategies correspond to those internal
criterias.
10
CARNIVAL CRUISE CORPORATION
Step 8
After having listed our company’s internal strengths and weaknesses as well as the external
opportunities and strengths, we establish the SWOT Matrix.
The SO strategies combine strengths and opportunities to improve them.
The WO strategies use the opportunities to reduce the problems caused by the weaknesses.
The ST strategies take advantage of the strengths to minimize the external threats.
The WT strategies imply putting threats with weaknesses together so that one offsets the
other.
We came up with the following strategies:
SWOT MATRIX
SO STRATEGIES
1. Create a special cruise line for
teenagers and young adults. (S1,S5,O4)
WO STRATEGIES
1. Channel the rising popularity of the
cruise vacation to tap more on the
segment market with an advertising
campaign (W1,O1)
2. Use the success of the movie
“Titanic” to promote a new TransAtlantic Cruise. (S12,O3)
ST STRATEGIES
WT STRATEGIES
1. Use advertising and promotion to
1.To acquire a company which offers low
eliminate customers' fears (S6,T3,T5,T6) cost on-land vacations.(W1, T2)
2. Discounts during the cruising season
(W2,T7)
11
CARNIVAL CRUISE CORPORATION
SPACE MATRIX
Financial strenghts
Profitability
+6
Ability to raise capital
+6
Average
+6
Environmental stability
Technological change
-2
Demand variability
-4
Competitive pressures
-6
Average
-4
Competitive Advantage
Innovation
-3
Employees capability
-1
Average
-2
Industry strenghts
Profit potential
+5
Growth potential
+5
Resource utilization
Average
+5
+5
12
CARNIVAL CRUISE CORPORATION
X-axis -2+5=+3
Y-axis +6-4=+2
Being in the aggressive section of the graph, the company can be innovative
and take risks. Our advice is to enter the youth cruise market, which is a totally
new area.
13
CARNIVAL CRUISE CORPORATION
IE MATRIX
IE Matrix
STRONG
HIGH
4,0
3,0
AVERAGE
10% II
I
WEAK
1,0
TOTAL IFE
WEIGHTED
SCORE
III
3
2
3,0
MEDIUM
2,0
29%
IV
1
V
VI
61%
LOW
2,0
VII
VIII
IX
1,0
TOTAL EFE
WEIGHTED
SCORE
Segments
Revenues
% Revenues Profits
% Profits
EFE scores
IFE Scores
North
America
$8 090
55%
$1 421
61%
2,7
3
Europe
$5 443
37%
$676
29%
3
2,5
Others
Total
$1 113
8%
$233
10%
3,5
2,9
$14 646
100%
$2 330
100%
-
-
The American segment is the most profitable, it has indeed the
highest prices.
It represents 55% of the total revenues of Carnival. But this segment
must also face hard competition from Royal Caribbean.
European (and other) segments still represent a minor part of the
group profits and revenues.
14
CARNIVAL CRUISE CORPORATION
Our three departments are situated in the Grow and Build area. This
confirms again our position of leader. We can advice: market
penetration through the entering of the Chinese market.
15
CARNIVAL CRUISE CORPORATION
BCG MATRIX
BCG Matrix
Relative market share in the industry
Medium
High
1,00
High
30%
10%
2
Idustry
sales
growth Medium
rate.
Low
Low
0,00
0,50
0%
1
3
29%
61%
-30%
All of our departments are situated in the Stars area. We had an average
growth of 13%. The “Other” segment had the highest growth (nearly 30%), and
the American segment the lowest. Carnival is a leader in the cruise industry all
around the world. And this matrix confirms this fact.
Again, going into Chinese market is a substantial investment to maintain and
strengthen our dominant position.
16
CARNIVAL CRUISE CORPORATION
GRAND STRATEGY MATRIX
Grand Strategy Matrix
Rapid Market Growth
Quadrant II
Quadrant I
Strong
Competitive
Position
Weak
Competitive
Position
Quadrant III
Quadrant IV
Slow Market Growth
" The growth in the cruise industry was constant and solid since 1980. The average growth was 7,4%"
Source : 2009, Cruise Industry Media Update.
The cruise market has an excellent and constant growth rate. The average rate
was 7.4% in the last 20 years. Moreover, Carnival has a good competitive
position in the overall cruise market. As a consequence, it is not surprising to
see our corporation situated in the Quadrant 1. We can take risk aggressively.
And entering the Chinese market is a good challenge.
17
CARNIVAL CRUISE CORPORATION
SUMMARY
Matrix Analysis and SWOT
Summary
Alternative Strategies
IE
BCG
GRAND
COUNT
Forward Integration
X
SPACE
X
X
3
Backward Integration
X
X
X
3
Horizontal Integration
X
X
X
3
Market Penetration
X
X
X
X
4
Market Development
X
X
X
X
4
Product Development
X
X
X
X
4
X
2
Concentric Diversification
X
Conglomerate Diversification
X
1
Horizontal Diversification
Joint Venture
X
1
Retrenchment
Divestiture
Liquidation
In summary, the best strategies are:
Market penetration
Market development
And Product development.
18
CARNIVAL CRUISE CORPORATION
QSPM
QSPM
KEY EXTERNAL FACTORS
Build new
ports in
China.
Weights
Opportunities
1.
Demand for cruises has increased and is predicted to continue to increase.
(127 million potential passengers for cruising in North America)
3 0,24
3 0,24
0,08
2.
People are more and more interested in all inclusive stays for holidays.
0,05
3.
Demand for Trans-Atlantic cruises has increased since Titanic success.
0,03
4.
The cruise industry appeals to a broad range of demographic groups
0,08
5. Flexible strategy, moving their fleets throughout the year to meet the
seasonal demand.
0,05
6.
People are less reluctant to buy cruises on internet
0,04
7.
Expansion of cruise operations.
0,08
8.
Growing travel and tourism in China
0,08
9.
Re-opening of cruise center
0,04
Create very
low-cost
cruises
4
3
3
3
Expansion in
theme park
industry
-
0,32
0,15
0,09
0,24
4
-
-
-
-
3 0,24
4 0,32
-
3 0,12
3 0,24
-
3
3
2 0,16
4 0,24
2 0,06
-
3
-
-
4 0,32
-
3
2
2
-
-
0,2
0,24
0,12
Threats
1. Intense competition: Royal Caribbean International, Star Cruises…
0,08
2. Other vacation limited target audience due to cost
0,06
3. Decreased tourism since 9/11: fear of terrorist attack.
0,03
4. Environmental lobbyists.
0,03
5. Viral outbreaks, illnesses aboard cruise ships.
6. Any epidemic health concerns in the region where the company does
business can prevent travelers from completing their travel plans.
0,04
7. Economic slowdown in the US.
0,08
8. Natural disaster: tsunami, hurricanes…
0,05
9. Higher fuel costs.
0,05
3 0,24
3 0,09
2 0,06
2
0,1
2 0,16
-
10. Various international and national laws and regulations that affect
operational costs (ex: Increased minimum wages in the US)
0,06
3 0,18
0,05
3
3
2
0,24
0,18
0,09
0,08
0,24
0,1
0,1
QSPM cont.
STRENGHTS
Build new ports in
China.
WEIGHT
1.
Largest cruises chip in the world.
0,08
3
2.
Fun oriented philosophy.
0,07
3.
Non- formal setting.
0,03
4.
Seven teen new ships to be launched by 2012.
0,09
5.
Casinos, shopping, entertainment on the board.
0,08
6.
Leads competition in advertising and promotion.
0,08
7.
Ships sail at 100% capacity.
0,08
3
3
-
8. The company recorded revenues of $14,646 million
during the financial year (FY) ended November 2008, an
increase of 12.4% over 07.
0,07
9.
0,09
Strong brand portfolio
10. Excellent mangement
0,07
Create very lowcost cruises
Expansion in theme
park industry
0,24
2
0,16
3
0,24
0,14
0,09
0,09
0,24
0,16
4
-
0,28
0,27
2
3
1
3
2
0,27
0,21
1
3
3
0,07
0,27
0,21
0,24
4
0,28
3
3
3
0,24
-
0,24
4
3
-
WEAKNESSES
0,08
1.
High debt burden in year 2008
2.
Only 10% of the market has been tapped.
0,06
3.
Only discounts during off-seasons.
0,06
4.
Risk of over capacity.
0,06
5.
Ports of call limited.
0,08
TOTAL
1
3
3,38
19
-
0,24
0,18
3,72
4
4
-
0,24
0,24
3,14
CARNIVAL CRUISE CORPORATION
QSPM cont’
Expand into China : the most important factor is “growing tourism in China”
Low- cost cruise: the most important factor is “demand for cruises has
increased and is predicted to continue to increase”
Theme park industry: the most important factor is “People are more and more
interested in all inclusive stays for holidays.” And the“Fun oriented
philosophy. “ of Carnival.
The project which has the highest score is: Create a low cost cruise.
20
CARNIVAL CRUISE CORPORATION
Step 9
Strategy n°1: Expand further into China
“ Our objective is to exploit the Chinese market which constitutes 132 million tourists
arrivals. ”
The best way to put into practice out strategy is to build new cruise centers in seaside cities.
Three cruise centers will feature a variety of shops and restaurants. Collectively, the ships
which will serve those cruise centers will bring an estimated 6 million visitors annually, who
are expected to spend $500 million in the centers each year. The centers inauguration is
planned at the end of 2014.
The provided services include on-site shopping and dining experiences; this would help the
company in deriving revenues from the already existing operations.
Estimated cost: $ 3,5 billion
Projected costs
2010
2011
2012
2014
Advertisement
0
0
$ 40 million
$100 million
R &D
$15 million
$ 13 million
$7 million
$ 7 million
Operation & Logistic
$700 million
$700 million
$700 million
$600 million
Human Resources
$50 million
$30 million
$30 million
$30 million
Accumulated total:
$765 million
$1508 million
$2285 million
$ 3,02 billion
21
CARNIVAL CRUISE CORPORATION
Strategy n°2: To attract younger generations.
“We want to attract younger cruisers. We will focus on low cost and trendy cruises to exploit
this niche. Our objective is an average age of 42 years old by 2014. ”
The best way to put into practice out strategy is to dedicate a ship for teenagers and young
adults .
This special ship will offer cruises for young adults and teenagers only. It will gather all kinds
of trendy entertainments . Moreover, famous teenagers stars such as Miley Cyrus or Amy
Winehouse will be associated with this project.
This cruise will include low-cost offers. Indeed, teenagers do not have the same income as
the workers. However, today’s young cruisers will become the old cruisers of tomorow. This
would help the company in acquiring a younger image, as well as deriving revenues from this
new kind of cruises. A revenue of $150 million is expected annually.
Estimated cost: $1,5 billion
Projected costs
2010
2011
2012
2014
Advertisement
$ 20 million
$20 million
$ 30 million
$50 million
R &D
$50 million
$ 20million
$20 million
$ 25 million
Operation & Logistic
$ 400million
$300 million
$300 million
$200 million
Human Resources
$10 million
$10 million
$10 million
$10 million
Accrued total:
$480 million
$830 million
$1190 million
$ 1,48 billion
22
CARNIVAL CRUISE CORPORATION
Comparisons of strategies with actual ones
Carnival Corporation has set the following strategies, that totally correspond to
our strategies:
One strategy is acquiring new cruise lines and building new ships. They are
particularly interested in Asia and the European markets.
This first one is our strategy n°1 about China.
Another effective strategy is the high quality of the service. This results in
customer satisfaction, which leads to new and repeat customers.
Another strategy is the economies of scale. Carnival is trying to increase the
size of the company so that they can have the lowest break-even point in the
industry.
Those other two are combined and we get to our strategy n°2
about the low cost cruise for the teenagers.
23
CARNIVAL CRUISE CORPORATION
Step 10
Strategies implementation
1. Top management should continue to merge with other companies and build
new and larger ships. They should increase their efforts to expand into other
ports, particularly the Asian market.
2. The company should increase their marketing campaign. They should focus
on the different price ranges available, the many ports-of-call, and the high
quality superior service that is found on every Carnival cruises.
3. They need to develop a budget more concentrated on marketing and
improvement of services. This will make their product seem more unique.
EPS/EBIT Analysis





Amount needed: $ 5 000 000 000
Share price: $35
Tax rate: 20%
Interest rate: 4,5%
# Shares Outstanding: 816 million
24
CARNIVAL CRUISE CORPORATION
Common debt financing.
Recession
Normal
Boom
EBIT
$2 300 000 000
$2 600 000 000
$3 000 000 000
Interest
0
0
0
EBT
$2 300 000 000
$2 600 000 000
$3 000 000 000
Taxes
$460 000 000
$520 000 000
$600 000 000
EAT
$1 840 000 000
$2 080 000 000
$2 400 000 000
# Shares
958 857 143
958 857 143
958 857 143
EPS
$1,92
$2,17
$2,50
Debt financing.
Recession
Normal
Boom
$2 300 000 000
$2 600 000 000
$3 000 000 000
$103 500 000,00
$117 000 000,00 $135 000 000,00
$2 196 500 000
$2 483 000 000
$2 865 000 000
$439 300 000
$496 600 000
$573 000 000
$1 757 200 000
$1 986 400 000
$2 292 000 000
816000000
816000000
816000000
$2,15
$2,43
$2,81
According to those results it is clear that debt financing is the most appropriate
source of financing our projects, since in the three scenarios (recession, normal
and boom), it provides the highest EPS (Earning per share).
25
CARNIVAL CRUISE CORPORATION
Step 11
Recommendation of specific annual objectives and policies
• Our objective is to actualize our project. We will maximize revenues of
other divisions to help financing them.
• From 2015, our objective is to strenghten our position of leader in the
cruise market. We want to become the first cruise line in Asia as well as
the most popular and cheapest cruiser amongst the youth.
26
CARNIVAL CRUISE CORPORATION
Step 12
Strategy review
Strategy evaluation: Rumelts’s criteria.
Consistency: our strategies are going in the same
direction with actual goals and policy.
Consonance: Nowadays, youth wants cheap fun. Carnival
offers it a low cost cruise.
Moreover, R&D needs to do always be aware of the new
fashion trends , and to examine Asian habits and tastes.
Are our projects able to stay trendy and attractive for the
consumer?
Strategy evaluation: Rumelts’s criteria.
• Feasibility: Our first project is very costly. But, we
hope to make profits on it from 2014. Moreover,
Carnival’s leader position will help us find funding
quickly.
Will profits be sufficient to justify the initial
investment?
• Advantage: These two projects will be a gain in
competitive advantage for Carnival.
• Will we be leader in the 1) Asian Market 2) Youth?
27
CARNIVAL CRUISE CORPORATION
Strategy evaluation
1. A system should be developed to measure how quickly and satisfactorily
customer needs are being met. The system should also look at how the services
can be expanded and improved.
2. Carnival must be sure that all the companies they merge with or purchase,
share the same vision of customer satisfaction and service.
3. They should evaluate their financial performance and be sure that they are
still operating at their high performance level
Bibliography and sources
References.
• Data Monitor
• www.meretmarine.com
• Wikipedia
• www. carnivalcorp.com
• Strategic Management, Fred R. David
•www.wsj.com: Wall Street Journal
28