Carnival Corporation Case Study


cruise travel industry is considered to be very perspective, especially in the North American region. At this respect, it is necessary to analyze the work of the companies that operate in this market such as Carnival Corporation, which is now considered to be one of the largest and the most significant ‘players’ in this segment of the market.

Obviously, analyzing Carnival Corporation, it is necessary to briefly dwell upon the current situation both in the company and in the market at large, as well as discuss the development of the company and the problems it faces and how successfully these problems are solved. Certainly, it is also important to analyze the company’s product and its perspectives in the nearest future.

The current situation

Generally speaking, Carnival Corporation may be considered as one of the most successful companies operating in the cruise travel industry, especially in the Caribbean region, including North America. It should be said that the company includes different cruise brands, which are traditionally associated with the most successful and reliable companies that were gradually combined with Carnival Corporation. Among the famous brands that are now incorporated in the company may be named Holland America Lines, Costa Cruise Lines, and one of the recent acquisition of the company, Princess Cruise Line.

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To prove that the company is one of the largest operators in the market, it should be said that Carnival Corporation has 32% of the market share in the cruise travel industry.

However, it should be pointed out that the company possesses not only ships, but it also possesses corresponding restoration and infrastructure providing the company with the possibility to ferry its clients to Carnival Corporation’s modern ocean liners, which, in fact, propose to the client as much entertainment and activities as any other land-based theme park, such as Walt Disney World. Moreover, the company attracts its customers by prices compared to land-based theme parks vacation packages, while its all-inclusive package is even lower than that of the theme parks. Probably one of the critical factors of the company’s success is its reputation of a leader in the industry as well as its striving for implementation of different innovation in its business.

The company’s development

Apparently, Carnival Corporation hasn’t been such a successful and influential as it is nowadays. In fact, the company has gone through a complicated process of evolution during which the company has enlarged, acquired new technologies, built new ships, etc.

On analyzing the development of Carnival Corporation, it is possible to single out several strategic points. Primarily there may be defined two main strategies: acquisition and internally generated growth.

First of all the company always used the most perspective technologies and ways of development providing of services of a possibly higher level. At this respect, it should be pointed out that 1960s were marked by a great shift in the industry since at this period aircraft companies have become the major transporters of passengers, especially for long distances. It means that they transported passengers for the land-based vacation. Naturally companies operating in cruise travel industry couldn’t compete with them, and they have little choice but to dramatically change cruise industry transforming ocean liners from means of transportation into the destination where customers could spend their vacation and Carnival Corporation, which foundation dates the back the to early 1970s, was one of the companies that used such a change the most effectively. In fact, 1970s were the starting years when the company only struggled for a share in the market while 1980s were marked by some significant acquisitions, such as the Holland America Line, including its subsidiaries Windstar Sail Cruises and Holland America Westours (1988).

Furthermore, along with the strategy of the market expansion, Carnival Corporation was always focused on building new ships, which could be modern and comfortable. By the way, the combination of two strategies, expansion and building new ships, led to the situation when, after the acquisition of the Holland America Line, Carnival Corporation could start building of ‘superliners’ and occupy the first place in the industry with 750,000 passengers in 1989. the 1990s were marked by the development of the company’s superliners, such as Fantasy (1990) or Sensation (1993) and some others that was the logical continuation of strategic enlargement of the company’s fleet, which eventually achieved 16 ships in company’s possession.

Also, it should be said that the company successfully entered the most perspective segments, notably contemporary segment, where Carnival ships operate, premium, the Holland America Line and Costa Cruises, and luxury segment, where Carnival Corporation is presented by Seabourn and Cunard.

The company’s problems and their solution

However, the development and the current situation in Carnival Corporation is not perfect, and the company had and still has some problems.

First of all, it is possible to remind the problems with the company’s negative publicity and the accusations in the pollution of waters or the problem with a virus that struck passengers of the Holland America ship. Naturally, such problems discredited the public image and reliability of the company but soon these problems had been successfully solved, and the company had to pay $18 million fine for the pollution and cancel some sailings because of the virus.

However, the most significant problem the company faced after the terror attacks September 11. As a result of the attacks, the number of passengers decreased dramatically, and the company’s overall profitability in 2001 was $40 million down compared to 2000. Probably, high expenditures of the company also significantly contributed to the deterioration of the financial position of the company because of all company’s operating expenses 33% constitute fixed costs. It means that these costs cannot be reduced, otherwise, it will result in the reduction of the number of clients.

Naturally, after the tragedy of September 11, such a step, i.e., reduction of fixed costs, could have tragic consequences for the company. This is why it is quite natural that by 2001 Carnival Corporation long-term debts have practically reached $3 billion.

In such a situation, the only way out for the company was to attract more clients, and it has been done with the help of the development of the shipboard activities and entertainment for the clients. Moreover, and it is probably more important than improvement of services, the company has increased its presence in shorter-term segments of the cruise market. As a result, the company’s services have become more attractive for middle-class clients that naturally provided the growth of the general number of clients and popularity of Carnival Corporation in the market.

Conclusion: the company’s perspectives

Thus, Carnival Corporation has relatively successfully managed with the problems it faced. In conclusion, it is possible to forecast the company’s outlooks. Taking into consideration the fact that nowadays the company is among the industry’s leaders it would be logical to presuppose that the company would grow as well as the cruise travel industry at large. For the industry is not fully uses the potential of the market, only in North America it constitutes about $50 billion, then the company operating in the market have quite good perspectives for the growth that means that the competition between them will increase dramatically, but, taking into consideration Carnival Corporation experience and its expansion through acquisition of other companies, it is possible to forecast that in the future the company has excellent opportunities to enlarge its market share and increase its profitability.

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