Carnival Cruise Lines is one of the leading and largest leisure travel companies in the world. In addition, it is known to be among the companies that have grown to become successful in the cruse and vacation sector. As the largest cruise company, the organization controls about 45 percent of the global cruse industries ( Syriopoulos, Tsatsaronis, & Gorila, 2020 ). In addition, it has been providing services to all major cruse destinations through the world. With operations in Australia, Asia, North America, and Europe, the company boasts of a portfolio that allows it to be a leader in global and regional cruise operations. The products are also tailored to meet the specific needs of the clients and ensure that they get a memorable experience ( Carnival Plc, 2019 ). The company’s mission is to operate a safe cruise company and comply with all the environmental and legal requirements throughout the world. From a financial perspective, the organization has been deriving its profits by rowing its cruise business and increasing the invested capital over time. ( Syriopoulos, Tsatsaronis, & Gorila, 2020 ) Moreover, it attempts to maintain a strong balance sheet and investment grade credit rating. In the last three decades, however, Carnival Cruise Lines has been experiencing dwindling fortunes. The company’s revenue and profits margins have reduced significantly. The situation became worse in 2020 when the cruise ship industry stopped most of its operations because of the Covid 19 pandemic. Consequently, there is a need to reevaluate the strategies that the company uses and come up with interventions that can help in reversing the fortunes of the company and taking it back to the trajectory of profit making.
Carnival Cruise Lines Competitive Strategies
Over the years, Carnival Cruise Lines has been working to achieve its financial and business goals in the global market. The organization has adopted a strategy that entail implementing initiatives that can increase the demand for its products and brad. In addition, attempts are made to create room for capacity growth so that the company can meet the demand for the cruse and leisure travel services. It is also worth stating that Carnival Cruise Lines is one of the cruise liners that has adopted a strategy that revolves around investing in market insight and customers so that they can understand how their guests make vocation decisions and provide the services that will meet their needs ( Carnival Plc, 2019 ). Since Carnival Cruise Lines is a company that operates in a broader vocation industry, it has been implementing strategies to enhance the demand for its products through increased consumer awareness and development of new portfolios for divers markets. The other strategies that have been adopted is significant investment in marketing activities and public relations ( Carnival Plc, 2019 ). The strategies are aimed at strengthening the organization’s cruise ticket revenue while offering attractive and innovative services to the clients. In the last two years, the management has focused largely on enhancing the cruise ship capacity and making them feel more attractive and efficiency. Furthermore, there is an ongoing attempt to accelerate the fleet replacement cycle and investing in onboard product offerings as a way of enhancing consumer’s experiences.
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The market penetration strategy that the organization has used as the basis for its activities has been in existence for a long time. The strategy was informed by the realization that there is an increasing potential for international tourism and the expansion of the middle class population ( Carnival Plc, 2019 ). To attract these customers, the organization is making significant investments in its ships and product offerings. In addition, it is working towards enhancing its capital, debit maturities, and dividend payments to be able to create a positive image in the market and attract customers. However, the dwindling cash flows, revenues, and profits is an indication that the current strategies that are based on the idea of deep market penetration appear not to be working well. In addition, the organization seem to be struggling to use the currents strategies to achieve its financial obligations.
The Growth Share Matrix provides an excellent basis for evaluating the strategies that Carnival Cruise Lines has adopted to determine the current competitive state of the company and identify ways through which it can be enhance. Presently, Carnival Cruise Lines consists of a total of 10 semi-autonomous cruise lines operating in various parts of the market. The cruise lines are all focused on adopting the market penetration strategy to cement Carnival Cruise Lines’ position in the sector in which it operates. However, every semi-autonomous cruise line has its market characteristics and concerns ( Carnival Plc, 2019 ). The Growth Share Matrix portrays the market share on the X axis s and the market growth on the Y axis. The intention is to divide the enterprise into found main categories for easy analysis. The first category is the cash cow which are the stable markets in which the company has dominant share. The second section is the stars which refer to the strong brands found in the fast growing markets. Third, there is the question mark segment which refer to brands that are largely weak but exist in an attractive market. They should either be sold or given significant resources to transform their activities. Then there are the dogs which refer to the weak brands found in the stagnant market. Figure 1 below gives a summary for the Growth Share Matrix for Carnival Cruise Lines.
Figure 1 : Carnival Cruise Lines Growth Share Matrix
The SWOT analysis tool also provides a basis for examining the strategy that the company has adopted in the market. In terms of strength, it has enable the company to gain dominant share in the cruise industry for a long time. Second, it has allowed the organization to achieve operational excellence. Finally, it has given the company an avenue through which it can expand its activities into new markets (Carnival Plc, 2019). Next, it is important to consider the weaknesses of the strategy. The weaknesses include the fact that the approach lays minimal emphasis on the enhancing the performance of the company. Second, it is an approach that targets the operational aspect of the organization and less of the management side. However, there are opportunities that the company can still exploit. They include enhancing its image in the public and reducing the number of markets it targets. In terms of threats, the company should be ready for increased competition and adverse effects of global events such as inflation and pandemics.
The primary reason why an organization adopts any kind of strategy is to enhance its financial performance. In the last decade, Carnival has been considered to be a company with reasonable financial health. However, the company’s financial profile has been declining in the last five years. The company has been growing hedges against Brent Crude oil index, a trend that adversely affects its income levels. In addition, the reduced number of passengers carried to the various destinations where the ships operate has resulted in a decline in revenue and profits ( Syriopoulos, Tsatsaronis, & Gorila, 2020) . For the company to regain its former financial value, it must strive to increase its income by about 50 percent. Another critical event is that the company’s stock process has been declining rapidly ( Yahoo, 2021 ). The trend is attributed to a wide range of factors such as slow growth in the cruise industry, the poor public image of the company following the Costa Concordia incident, low dividends to investors, and intense competition. These are financial issues that continue to affect its operating income and profitability in the market.
Recommended Strategic Alternative
The first strategy that the company needs to embrace is to improve its corporate image in the market. The organization is operating in a competitive market in which the image of an enterprise can affect its performance. In the case of Concord, the safety issues and the Costa Concordia litigations have adversely affected the image of the company and increase direct costs ( Syriopoulos, Tsatsaronis, & Gorila, 2020 ). Carnival needs to improve its image in the market by instilling a culture of discipline, settling the Costa Concordia litigations and informing the public about the measures it has taken to improve the safety its passengers. Although the initiatives may require heavy initial investment, they will go a long way in improving the performance of the organization in the market.
The second strategy that should be adopted is differentiating between the mature and growth markets through the market share approach. There has been an increasing demand for cruise services in markets such as Australia and Germany provide new opportunities that the company can exploit ( Gardin, 2013 ). In such areas, Carnival needs to use the market share approach to be able to expand its operations and increase its capacity. It is also imperative to state that the organization should stop new builds in the coming years to be able to restore its profitability in the markets where it has been performing well.
Conclusion
The company also strives to exceed the expectations of the customers by giving them value for their money. Carnival Cruise Lines believes that its portfolio brand is instrumental in the realization of its vision and ensuring that it maintaining its leadership position in the sector. The organization has been using a strategy that is centered in market penetration to achieve its objectives. However, the approach seems to be ineffective judging from the company’s poor performance in the recent years. The above proposed interventions will help the organization to maximize its earnings and increase profits.
References
Carnival Plc. (2019). Strategic report and IFRS financial statements year ended November 30, 2019. https://www.carnivalcorp.com/static-files/e71dadff-f1f5-4d72-8281-0d0a500f84b2
Gardin, D. (2013). Carnival Cruise Lines: What they should have done . https://www.riskmanagementmonitor.com/carnival-cruise-lines-what-they-should-have- done/
Yahoo. (2021). Carnival Corporation & plc (CCL). https://finance.yahoo.com/quote/CCL?p=CCL
Syriopoulos, T., Tsatsaronis, M., & Gorila, M. (2020). The global cruise industry: Financial performance evaluation. Research in Transportation Business & Management , 100558. Advance online publication. https://doi.org/10.1016/j.rtbm.2020.100558
