Case Study – Carnival Corporation

Group 6: Ana Rodriguez, Courtney Muchugu, Connie Helstowski

Discussion Questions:

1. If Carnival paid higher wages and gave better benefits to it employees how would it affect
the company?

2. Do you think Carnival should concentrate on improving its current fleet or continue to build
newer and bigger ships?

3. How important is it for Carnival to keep up with the latest high tech products and services?

Introduction:
Carnival Cruise Line, aka (The Fun Ships) is a British-American owned company based in Doral,
Florida. Carnival prides itself in delivering fun, memorable vacations by offering a wide variety
of value priced cruises. Carnival is currently the largest and one of the most successful cruise
vacation groups in the world. They have currently 24 vessels currently in operation and they
carry more passengers than any other cruise line they own a total of 21.1% of the worldwide
market share. Carnival Cruise Line is the core of the flagship cruise line and was founded in
1972 by cruise pioneer, the late Ted Arison. His first single ship, a converted ocean line that
successfully started it all was the Mardi Gras. The Carnival Corporation was created in 1993.
Over the years they have acquired many different cruise line brands; Holland America Line,
Princess Cruises, Seabourn, AIDA Cruises, Costa Cruises, Cunard, Ibero Cruises, P&O Cruises
(UK) and P&O Cruised (Australia). All together there are 101 plus ships and more scheduled to
be delivered. For tax purposes they are currently incorporated in Panama and Carnival plc is
incorporated in England and Wales.

Vision/Mission:
The mission statement of Carnival reads: “Our mission is to take the world on vacation and
deliver exceptional experiences through many of the world’s best-known cruise brands that
cater to a variety of different geographic regions and lifestyles, all at an outstanding value
unrivaled on land or at sea”. Carnival’s current vision statement is: “To consistently deliver fun,
memorable vacations at a great value”.

Internal Factors:

Strengths:
Carnival is the largest cruise operator and it is twice as large as its biggest competitor. This can
be attributed to its ability to manage brand autonomy. They have a strong brand portfolio and
a strong geographic presence. Carnival currently developed an excellent interactive website
which offers customers the ability to look at places, packages and discounted promotions with
the option to book the cruise themselves. They also have expanded its promotional campaign
online through social media such as Facebook, Twitter, YouTube and many others. Carnival also
had the most experienced marketers of all the cruises in the world. This gives them the
advantage of having the largest pool of data to determine what works best and what doesn’t
work for them. Most of their cruise ships are always at full capacity by departure. Each year
Carnival’s passenger rate has been increasing by around 7.38% annually.

Weaknesses:
Carnival currently sells mainly through travel agents, wholesalers and tour operators, which
charges them a 10 to 20% fee plus commission. Many of their older ships need renovations, and
analyst are saying that they should stop building new and bigger ships and reinvest into their
current fleet and in their marketing strategies. Another controversy is employee wages,
Carnival has been paying wages that are under a $1.50 per hour with low to no benefits such as
holidays or minimal vacations. Monthly salaries to high paid workers are around $1300.
Employees have reported strenuous working conditions up to 14 hour shift with no days off.
Also at the end of the year they started to revoke the retirement benefits. Due to the above
stated factors employee turnover is high and fewer employees are making this their long term
career.

External Factors:

Opportunities:
The cruise industry’s primary age group is expected to grow by 20 million people in the U.S. and
Canada. The primary age group is expected to grow 12 % in western European countries. Travel
and tourism is expected to grow by 4% per year over the next decade all over the world. North
American cruise guests have a 95% satisfaction rate. Their major competitor Royal Caribbean’s
prices are much higher. There are still approximately 50% of Americans that have never cruised.
Cruises only represent 2% of the overall vacation market. 63% of cruise passengers are sourced
from North America. Young travelers prefer more modern and high-tech cruises. Brand loyalty
and loyalty to cruising are extremely high and should result in a large number of repeat
customers.

Threats:
The biggest threat among cruise lines is the competition; each company tries to promote their
cruise packages differently and uniquely. There are many lines out there in the industry but
currently the biggest competition for Carnival is the Royal Caribbean line. There are also many
other threats and risks that impact this cruise line. The removal of “graywater and blackwater”
waste is a major issue especially now that the ships are getting bigger and bigger and there are
many restrictions on the U.S. flag registry. Natural disasters such as inclement weather and
hurricanes impact the industry. Each country conducts periodic inspections in the area of ports,
customs, labor, immigration, gambling, security, safety, etc. Ships must be in compliance with
all environmental issues such as waste and pollution. Any epidemic health issues could stop
travelers from completing their travel plans. Economic conditions affect people’s travel plans.
Increase in fuel prices could bring up the price of ticket sales. The cruise industry has to have
strict ship security procedures due to the threat of terrorism and security issues.

Conclusion:
The average age of a cruise passenger is 50 but that number has been declining. Cruise
vacations are cheaper than land based vacation. Despite the stock market crash in August
2011, Carnival is still focused on building and/or obtaining a bigger ship. Some analysts predict
that there will be overcapacity in the future.

If Carnival can keep their image as “The Fun Ship” and keep their prices low, I believe they can
maintain their leadership position in the industry and continue to be a financially successful
company.