HULT INTERNATIONAL BUSINESS SCHOOL STRATEGY: TEAM PAPER

Strategy Project: “Cruise Line Industry”

Mt. Tamalpais Team Three

Ramil Ablaev Emily Bonnell Lingfang Chen Antonio Modestini Tadashi Soga

Sanchit Talwar

D Due : Wednesday, April 13th, 2011

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Table of Contents

1. Industry Overview……………………………………………………………..p.3

1.1 Industry Size………………………………………………………………..p.3

1.2 Industry Growth Prospect………………………………………………...p.4

1.3 Industry Profitability……………………………………………………....p.4

2. Michael Porter’s Five Forces Analysis..............................................................p.5

2.1 Supplier Power……………………………………………………………..p.5

2.2 Buyer Power………………………………………………………………..p.6

2.3 Threat of New Entries..................................................................................p.7

2.4 Threat of Substitutes.....................................................................................p.8

2.5 Rivalry among Established Competitors………………………………....p.8

2.6 Significant Industry Structural Changes..................................................p.10

3. Leading Company.............................................................................................p.10

4. Company Analysis............................................................................................p.12

4.1 Target Market…………………………………………………………….p.12

4.2 SWOT analysis of Carnival Corporations……………………………....p.14

4.3 Recommendations………………..…….....……………………………....p.16

5. Conclusion…………………………………………………………………….p.17

References……………………….……………………………………………….p.18

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Industry Overview

Industry Size

With an average of 9.5% annual growth rate, the world cruise industry is projected to worth $29.34 billion in 2011. Out of the $29.34 billion market, the North American cruise market accounts for $17.46 billion with the remaining $11.88 billion generated from the rest of the world. The following chart provides a detailed breakdown of the market size of the world cruise industry.

$17.46$7.80

$2.70

$0.70 $0.60 $0.08

Cruise Indsutry Market Size (billions)

North AmericanEuropeAsiaSouth AmericaAustraliaMiddle East/Africa

Source: Datamonitor

As an important part of the U.S. economy, according to Cruise Line International Association (CLIA) the cruise industry created nearly 314,000 jobs in 2009, with its total economic benefit to the U.S. economy amounting to $35.1 billion. As can been seen from the following chart, the direct spending by cruise lines and passengers on U.S. goods and services are in billions.

Direct Economic Impacts of the Cruise Industry in the United States – 2009

SectorDirect Spending $ Millions

Core Cruise Travel 8,809

Passenger & Crew Spending 1,527

Port Services & Cruise Lines 2,916

Transportation Services 2,506

Air Transportation 1,859

Source: Business Research and Economic Advisors, Page 29, June 2009

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Industry Growth Prospect

As the fastest growing segment of the travel industry, the cruise market has achieved more than 2,100 percent growth since 1970. With an annual passenger growth rate of 7.67%, cruise industry will reach 21.6 million passengers worldwide in year 2014. The prospect of industry growth is very strong based on the following factors:

Relatively low market penetration: only 19.9% of Americans have cruised and the current target market penetration rate is only 45%. As the industry develops and with proper marketing strategies, the potential customer base could well increase and the penetration rate has the potential to grow towards the range of 70%-80%.

Existence of strong market demand: nearly 51 million Americans have expressed their interest in cruising within the next three years, providing a strong momentum for the continuous development of the industry. The industry capacity growth, combined with sound marketing strategies on the other hand creates the demand itself and will further encourage the industry into flourish.

Exploration of new areas for growth: with over 50% of its revenues coming from the North American market (see Chart 1), the international market represents a huge potential that has yet to be explored. Moreover, the online potential of the cruise industry has remained mainly untapped, representing a new area of profitable growth.

Diversification of products and services: Over the past ten years, the industry has responded to a renewed consumer demand by providing value-added services such as more destinations, new ship designs, and diverse recreational activities, which brings additional revenues to the company and enhances the industry profitability.

Chart 1: Share of North American Cruise Revenue in the Worldwide Cruise Industry

Source: Datamonitor

Industry Profitability

With few leading players in the cruise industry and strong market demand, the cruise industry has been enjoying relatively high levels of profitability in the past few decades. The industry’s profitability is expected to remain strong for the next ten years due to the following reasons:

Economies of scale drives costs down: fueled by the robust industry growth prospect, the industry has been expanding its capacity on a remarkable basis. The number of new and

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larger ships that are built has been increasing on a yearly basis. The economies of scale that are achieved by building mega-ships lowers the cost of sailing per passenger.

Extended value chains include more diversified value-adding activities: over the years, to better accommodate the increasing customer demand, cruise lines have expanded to include a plethora of onboard amenities and facilities, including internet cafes, rock-climbing walls, surfing pools, multi-room villas, theme restaurants, health and fitness facilities. Those facilities and activities have enhanced the customer satisfaction, while on the other hand enhance the company’s profit-making capability.

The fact that supply falls short of demand reduces the chances of price competition: despite the efforts to increase the industry capacities, the projected demand still exceeds the supply, particularly during peak seasons. This imbalance reduces the chances of price competition, thus increasing the industry profitability.

Michael Porter’s Five Forces of Rivalry

Supplier Power

As the key factors in analyzing the supplier power are the switching costs of the firms and the relative bargaining power of each party, the following analysis will be conducted primarily from these two perspectives.

High switching cost: a cruise liner has to bear a significant cost if it switches its ship manufacturer because the shipbuilder typically owns the right over the ship design. If a cruise liner selects a different shipbuilder, despite the huge cost of the ship itself, the cruise liners still have to incur the cost of time and efforts involved in the design process to accommodate its specific needs. The cost of creating a new ship design is in the millions of dollars.

High supplier power: The concentration ratio of cruise ship suppliers is very high. Major cruise companies rely on a limited number of ship manufacturers for their cruise liners. High concentration of suppliers increases the supplier power though the massive purchase value decreases the supplier’s power to a certain extent.

Low threat of forward integration of suppliers: Chart 2 illustrates that there are, mainly three types of costs (highlighted items) affecting industry players: cost of cruise ships and their maintenance costs, port and transportation services (mostly fuel and embarkation costs), governmental fees and professional assistance (navigation and scientific).The threat of forward integration by those suppliers relative to the threat of backward integration by firms is low, which decreases the supplier power to a certain extent.

High input differentiation: though the majority of supply components have alternative vendors, the high differentiation of inputs increases the dependence of cruise firms on their respective suppliers, thus increasing the supplier power.

Chart 2: Major Cruise Industry Suppliers and Direct Spending

Cruise Industry SuppliersDirect Spending $ Millions

Food & Beverages 893

Apparel & Textiles 121

Chemicals & Plastics 240

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Petroleum Refining 973

Fabricated Metal Products 185

Industrial Machinery 357

Ship Maintenance & Repair 600

Computers & Electronic Equipment 272

Other Manufacturing 421

Information Services 253

Finance, Insurance, Real Estate & Leasing 914

Services & Government (ex. Lodging & Travel Services) 2,470

Professional, Scientific & Technical Services 1,307

Administrative & Waste Management Services 39

Arts, Entertainment& Recreation 176

Other Services &Government 947

Total 2009 17,148

Source: Business Research and Economic Advisors, Page 29, June 2009

In summary, because of the high switching cost, high bargaining power of the cruise ship manufacturers, and high input differentiation, the supplier power in the cruise line industry is STRONG.

Buyer Power

An analysis of the power of the buyers in the cruise industry leads us to the following findings:

Low price sensitivity of buyers: on one hand, though cruise lines cater to a diverse demographic population, a typical cruise line customer is characterized to be a relatively affluent middle-class aged at 46 with $93,000 annual household income. On the other hand, the average cost of a cruise line ticket, which is $1155, is low relative to the customers’ annual income. Therefore, the price sensitivity of the customers is low.

Relatively high competition between buyers: As the demand of cruise services exceeds the capacity building of the industry, the competition between buyers, especially during peak seasons, are relatively high, thus further reducing the buyers power.

Low concentration of buyers: Thousands of people cruise yearly, yet they are spread across different locations and don’t share a common platform where they could exert a collective voice. The concentration of buyers relative to that of the suppliers is quite low, therefore reducing the bargaining power of buyers.

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Low threat of backward integration: consumers do not have the ability to create a cruise line experience without the necessary resources and services provided by a cruise line company, making the backward integration by consumers extremely low.

Close relationship with travel agencies: as can been seen from the chart below, in 2008, 74% of all cruise vacations are booked through travel agents. Though the percentage has been on a declining trend in the recent years, it remains around three quarters of the total sales. The volume purchase made with the involvement of travel agency gives buyers a greater influence over the ticket price.

Source: Datamonitor

Other considerations: factors that increase buyer power in the cruise line industry include low buyers’ switching costs and the instant access to price and specification information from cruise companies.

In summary, the low price sensitivity, low buyer concentration, and high competition among buyers on one hand enhances the buyer power while a high degree of involvement of travel agency and the low switching cost on the other reduces their bargaining power, the power of buyers in the cruise line market is MODERATE.

Threat of New Entries

The threat of new entries is dependent on factors such as capital requirement, economies of scale, and access to channels of distribution. The analysis of the threat of new entries in the cruise industry reveals the following points:

Huge capital requirement: given the average cost of $400M of a cruise ship and the millions required to train employees, the start-up of a cruise line company require a capital layout of at least $1B. The capital requirement in the cruise line industry is so large that it discourages all but the biggest companies, therefore creating an oligopoly market dominated by a few giants.

Constraint of brand equity: most cruisers are inclined to choose a well-established cruise line, rather than a “freshman” in the industry. It would take years for a newly introduced cruise company to develop a well-recognized identity. The adoption of discount ticket proves to be an impotent tactic to compensate the lack of brand recognition. Therefore, it would be quite difficult for new entrants with low brand equity to compete successfully with established companies in the industry.

The threat of M&A: The easiest way to enter the cruise industry appears to be via mergers, acquisitions, and takeovers. The high cost of purchasing a fleet of liners, training and maintaining employees for the casinos and entertainment, employing hotel

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staff, world class chefs, and the maritime staff requires a mother company with vast financial resource, thus limiting the number of potential entrants.

In summary, with the huge capital requirement and the constraint of brand equity, the threat of new entrants in the cruise industry is LOW.

Threat of Substitutes

The threat of substitutes has a significant impact on the attractiveness and profitability of the cruise line industry. The following characteristics of the cruise line industry substitutes are identified:

Diversity of available substitutes: within the leisure industry, the cruise lines face competition from traveling by air or land, global hotels and resorts, “alternative forms of leisure and usually cheaper accommodation”1such as informal accommodation at friends and family, and the use of a second house or apartments. The availability of diverse substitutes adds to the competitiveness of the cruise industry.

Buyer propensity to substitutes: travel agencies play a big part in the purchasing decisions of consumers in the leisure industry. As the intermediate between the company and the customer, travel agencies have at hand endless supplies of vacation packages. Cruise lines must offer competitive price to secure sales during economic downturns when customer’s propensity to switch to lower-cost substitutes are higher.

Distinctiveness of the cruise experience: despite the availability of various traveling options, the experience that a cruise liners offers is so distinctive that quite a lot of people would stick to the cruise line experiences even though the alternatives might be more economically feasible.

In summary, though diverse substitutes exist in the industry and customers exhibit relatively high propensity to substitutes during times of economic downturn, the distinctiveness of the cruise experience renders the threat of substitutes to be MODERATE.

Rivalry among Established Competitors

The competition of established firms in the cruise line industry exhibits the following characteristics:

High concentration ratio: as can been seen from the following chart that the cruise line industry is an oligopoly market where several major cruise liners make up more than 90% of the market shares. The leading player, Carnival, occupies more than 50% of both the North American and international market. A high concentration ratio increases the collaboration among those leading firms and reduces the possibility and intensity of price competition in the industry.

1Hotels, Resorts & Cruise Lines Industry Profile: Global. Hotels, Resorts & Cruise Lines Industry Profile, P. 13 8

2011 North American Cruise Market Share

2011 Rest-of-World Cruise Market Share

Source: Anything Research, 2011

Relatively high product differentiation: The cruise line industry has been diversifying in terms of services and options. The leading companies operate “on a large geographical scale and have diversified operations, meaning that rivalry is reduced somewhat in most countries1”. New on-board and off-board menus have been developed to enhance the level of customization.

Relatively high competitor diversity: There are three cruise market segments, namely contemporary, premium, and luxury. Companies in different market segments cater to

1Hotels, Resorts & Cruise Lines Industry Profile: Global. Hotels, Resorts & Cruise Lines Industry Profile, P. 13 9

different customers by offering varying levels of service and expertise with different strategies, thus reducing the extent of competitiveness among the existing firms.

High exit barriers: The exit barrier for a cruise company is high as it is difficult for a cruise liner to sell their assets. A high exit barrier increases the intensity of competition in the industry as companies are inclined to undercut their prices to boost sales when demand declines due to the inflexibility of capacity adjustment.

In summary, despite the relatively high exit barriers, a high product differentiation and high competitor diversity lead us to the conclusion that the overall rivalry within the cruise line sector is RELATIVELY LOW.

Significant Industry Structural Changes

Trends that are bringing significant structural changes to the cruise industry and further impact the industry competitiveness are identified as follows:

Prolonged U.S. economic downturn: as the dominant market for the cruise line industry, the U.S. economic downturn affects most cruise firms. Cruise liners will have to face the challenge of continue attracting customers during times of higher unemployment and the decreased availability of disposable income. The increased price sensitivity of customer might well increase the probability of reduced ticket prices to retain the customer base.

Hiking and fluctuating fuel prices: as one of the biggest expenditure item of the cruise industry, the rising fuel costs strained the resources of many cruise liners. The instability of the fuel prices put the industry at danger where an unexpected hike in fuel price might put business profitability and viability into question.

Further consolidation through mergers and acquisitions: during the economic downturn, cruise liners that are able to afford aggressive pricing to retain the customers stands a better chance of survival than firms that have less capital. Major cruise firms, such as Carnival and Royal Caribbean, will likely weather the recession better than smaller cruise liners. To cut costs and survive, small cruise companies are likely to be bought up by bigger firms through mergers and acquisitions, making the industry even more consolidated.

Altered cost structure: though the gross revenues of the cruise line industry have been growing for the most of its history, the costs of the cruise liners have also been on a steady increase with an average annual rate of 9.7%, most of which are variable cost such as fuel, services, and labor. This trend renders a cost structure where the percentage of fixed costs is lowered relative to the variable costs. Reduced weight of fixed cost decreases the company’s business leverage, and thus reduces its operational risks.

To conclude, on one hand, the prolonged U.S. economic downturn and hiking and fluctuating fuel prices alters the industry structure in a way that enhances the attractiveness of the cruise line industry; while on the other hand, the trend of further consolidation among competitors and higher percentage of variable costs against fixed costs impacts the industry structures and reduces the industry’s profitability.

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Leading Company Carnival Corporation has emerged as the leading company within the cruise line industry as a result of their multiple fleets and expansive global reach. Carnival is considered an international cruise line that possesses the largest revenue in terms of overall sales. The Miami based company operates within the U.S., Europe, and Canada. As a consequence of Carnival’s breadth, it is recognized as a foreign-based company due to its dual stock structure.

As of January 2009, Carnival Corporation operated 88 cruise ships with passenger capacity exceeding 160,000 berths. The company consists of 11 cruise brands:

1) Carnival Cruise Lines 4) Ibero Cruises 7) AIDA Cruises 10) Ocean Village2) Princess Cruises 5) Costa Cruises 8) Cunard Line 11) The Yachts of Seabourn3) Holland America Line 6) P&O Cruises 9) P&O Cruises Australia

 

1) Carnival Cruises is the largest of the 11 companies under the Carnival Corporation umbrella, and through its 23 ships, it provides a fun and casual style of cruising. Carnival mainly offers cruises in North American locations, as well as the Mexican Coast, Bahamas, Caribbean, and Panama. The majority of cruises offered ranges from three to seven days at sea.

2) Princess Cruises has a fleet of 17 ships and offers various itineraries in 270 destinations throughout North America, South America, Australia, and the South Pacific.

3) Holland America Line has 15 ships and customers may choose in an array of more than 320 destinations, including Antarctica.

4) Ibero Cruises is the product of a joint venture with Orizonia Corporation. The operations of their three vessels are sourced to Carnival Corporation. Ibero cruises tailor their services including menus, amenities, and crew towards Spanish speaking customers.

5) Costa Cruises is one of the leading cruise line brands in the EU. The company operates 12 ships that offer an international environment with an Italian touch. Although customers hail from 160 countries, passengers typically consist of Italians, French, Spanish, and Germans.

6) P&O Cruises is an operator with seven ships. This UK brand offers more than 235 destinations in 80+ countries. The cruises last from two to sixteen days and offer a modern style of cruising.

7) AIDA Cruises operates four ships with a seasonal pattern. The German customer base travels throughout the Scandinavian and the Mediterranean seas during the summer, while in the winter, the ships move to warmer waters which include: the Caribbean, the Western Mediterranean, the Arabian Gulf, and the Trans-Suez Canal passages. Due to the recent turmoil in Egypt, the company might be rerouting the Trans-Suez routes.

8) Cunard Line operates three ships sail to destinations throughout the world: Queen Elizabeth, Queen Victoria, and Queen Mary 2 (the largest ocean liner). Cunard offers several 90 day around the world trips, as well as transatlantic routes.

9) P&O Cruises Australia own two ships that operate in Oceania. The cruises offered range from seven to fourteen day vacations and target consumers within the Australian and New Zealand markets.

10) Ocean Village is a company that targets young customers. The one-two week cruises operate from Palma de Majorca in the summer and from Barbados in the winter.

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11) The Yachts of Seabourn provide luxury vacations in vessels (rather than cruise ships). The three 200 guest yachts cruise in several international destinations, such as, Europe, Asia, South Pacific, and the Americas.

Company Analysis

The cruise industry has the opportunity for considerable growth; therefore, we decided to focus on the two major players who have the capacity for expansion: Carnival Corporation and its biggest competitor: Royal Caribbean.

Target Market

Carnival Cruises offers a wide variety of cruises options targeted towards a multitude of demographics. Carnival’s reach extends to a large scope of customers as their goal is to meet the needs of every customer demographic. Due to the breadth of Carnival’s fleet, they are able to meet the needs of several markets by offering a variety of vacation options, service amenities, and language requirements. It is difficult to determine the targeted Carnival customer because they truly offer a different experience for each target market.

Royal Caribbean’ target market is comprised of families and couples or singles between 24 and 55 years in age. Royal Caribbean further narrows their target audience to the business professionals that have an active lifestyle and are in their late twenties to early forties. Young professionals are generating more disposable personal income that increases their purchasing power; therefore they have been flagged as a target customer segment. Royal Caribbean suggests that activities that are targeted toward the young customers also have a strong appeal towards people in their fifties as these activities that make them feel young. Therefore, the strategy of targeting young professionals reaches a wider customer base by meeting the needs of the older audiences.

Carnival Corporation: Revenues & Profitability

2006 2007 2008 2009 20100.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

0.000

5.000

10.000

15.000

20.000

25.000

Sales Net Income Profit Margin

Year

$ M

illio

ns

Profi

t Mar

gin

(%)

Source: Public Financial data

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Royal Caribbean: Revenues & Profitability

2006 2007 2008 2009 20100.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

0

2

4

6

8

10

12

14

Sales Net Income Profit Margin

Year

$ M

illio

ns

Profi

t Mar

gin

(%)

Source: Public Financial data

Upon comparison of the two graphs, the data illustrates that the financial performance of the two companies has been embracing a similar trend. Sales have been increasing slowly but steadily during the past four years while the net income, which took a hit in 2009 financial crisis, has been picking up afterwards. The major concern is the plummeting profit margin. However it is important to denote though, that while Royal Caribbean has had a decrease in profitability, Carnival Corporation managed to react to the market faster (costs are decreased due to the economies of scale). Higher diversification of customers and operations also decreased the risks.

The sales for both Carnival Corporation and Royal Caribbean reveal a recent increase in both revenue and profitability. Another evident factor suggests that the profit margin for Royal Caribbean is lower than Carnival Corporation (at times even more than half). Also, with just above two times the sales of Royal Caribbean, Carnival Corp. have a net income almost three times high as the other competitors.

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SWOT analysis of Carnival CorporationsStrengths Weaknesses

A capacity of ships 1.4 times the closest competitor

Diverse brands that cater to varyinglifestyles and budgets

Robust profitability in a seasonal industry with low profit generation capacity

Strong marketing strategy to effectivelycommunicate value proposition to the target audience

Reliance on North America can affectrevenue growth

Future commitments of ship purchasescould burden financials in a slowingeconomy

Opportunities Threats

Capacity to further penetrate the European cruise market

China: Rising GDP and per capita incomeincrease disposable income

Changing demographics in major cruisemarkets

New tax regulations could erode the specialtax break enjoyed by carnival as anoverseas company

Environmental legislations and regulationscould affect operating costs

Economic slowdown in the US

Source: Data monitor

An analysis of the internal and external factors suggests that Carnival has positioned itself well and their market position is relatively stable.

The IFEM matrix analyzes the internal and external factors that affect a specific industry and through a weighting system of these factors, it provides various suggestions on the direction that a company should take. If the company falls into areas I, II and IV, the suggested action for the company is to grow and build. Areas III, V and VII, suggest maintaining the company’s current position, while areas VI, VIII and IX suggest to harvest and/or retrench. The matrix range for both the internal and external factors is 0-4. The resulting values of the company’s SWOT analysis gave external factors and internal factors a weighted average of 2.47 and 3.17 respectively.

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Source: Privately owned file

The matrix above reveals that Carnival should consider taking actions to expand their power and breadth within the cruise line industry. Possible growth actions include concentric diversification, conglomerate diversification, forward integration, horizontal integration, and market penetration. In the past, Carnival has been able to maintain their leadership position through the expansion of their fleets.

Within the next three to five years, we suggest that Carnival continue concentric diversification and attempt to further penetrate the European market. In addition, we believe Carnival should attempt to target the emerging middle class in China. Our recommendations are aligned with Carnival’s vision, as they are planning to acquire four new ships in 2011, showing that the company’s goal is to maintain operations in the long term. Research has also shown that Carnival is focusing on increasing its presence in Europe market.

However, given our recommendations, it is not evident that Carnival is attempting to target the expanding Chinese customer base. We believe that the company may lose a profitable advantage that they would otherwise gain, if they had integrated the Chinese market as a part of their target market. However, given the political and regulatory situation in China, we understand the company’s concern of direct entry into the Chinese market.

Overall, the size and diversification of Carnival creates a competitive advantage that we believe the company will be able to sustain in the long term. Furthermore, we believe that Carnival could better exploit the resources available, thus, we have developed several recommendations.

RecommendationsIn the 21st century, the companies at the greatest risk are those that fail to carefully monitor their customers and competitors and who fail to continuously improve their value offerings. Companies who are incapable in identifying and adapting to the changing economic environment will ultimately be unable to satisfy their stockholders, their employees, and their suppliers. Planning for future challenges and constantly molding ones product or service to meet evolving customer needs is a never ending pursuit.

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Source: Anything Research, 2011

1) Given its dominant market share, Carnival should consider targeting value conscious consumers. The company has already established themselves as a low-cost cruise line; therefore, incorporating value added services may attract new customers who are also price conscious; i.e. getting more for one’s money.

2) Carnival should consider collaborating with an airline/transportation company to better assist its customers. Carnival could potentially bundle packages, supply discounted tickets, or easily coordinate and create travel itineraries needed for each global customers. This would increase brand transparency and provide a more comprehensive service to customers.

3) Carnival primarily operates in the cruise segment of the tourism industry. However, Carnival should consider penetrating niches within the broader tourism industry, such as resorts or low price destination vacations on land. This would provide the opportunity for Carnival to build brand equity and perhaps inveigle people to consider a Carnival cruise.

4) Carnival should consider developing stronger ties with travel agencies. Again, Carnival should consider collaborating or co-branding with specific agencies to allow for agents to track expressed interest in Carnival, receive feedback from travel experiences, promote the brand, and establish positive word of mouth.

5) Carnival should entertain the idea of expanding further into the international markets and tap into growing global markets such as Southeast Asia, India, and China.

Considering the extensive capacity for expansion in the market, Carnival should consider strengthening its brand by acquiring new customers, nurturing established relationships, expanding its operations. Promoting the value-added experience will further assist Carnival in retaining its leadership position and increasing its market share.

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Conclusion

The cruise industry is exerting a major impact on international tourism, as many operating companies are rapidly expanding their fleets and catering to a myriad of customers. The industry has been recognized as having the opportunity for robust growth and enhanced overall attractiveness. As a result, Carnival faces the challenge to remain the industry leader and retain their customer base in an increasingly saturated market.

Customers are no longer focused simply on how a product looks and functions; they desire a unique international experience offered at a low cost. Thus, Carnival must respond to these changing priorities and preferences by diversifying their brand portfolio and marketing initiatives in order to maintain its industry leadership status.

The sustainability of a company is increasingly associated with innovation, thus if Carnival is slow to respond to industry trends and customer demands, it could be perceived as not only a lack of commitment to understanding the evolving customer base, but also a potential indictment of a brand’s dynamism.

Carnival attempts to mitigate these potential challenges by offering a diversified brand portfolio and targeting a large consumer market by offering a multitude of international ports of call, diversified ship experiences, differentiated days at sea, and unique on board services. Using this strategy as a brand platform, Carnival has the ability to highlight the specific characteristics of each of its exclusive experiences. The need to communicate is even more important in today’s market than in the past due to the wide spread climate of economic uncertainty. Internally the role of communication is to ensure that company strategy is not forgotten or neglected.

Carnival’s primary challenge is to continually renew creativity by generating unique customer experiences and marketing strategies. By reinforcing the company’s unitary goal, brand communication will remain consistent throughout the global marketplace and Carnival will in turn witness, enhanced brand loyalty, positive word of mouth, and overall sales generation.

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