Carnival Cruise Lines: SWOT Analysis, Pricing Strategy, and Government Intervention

Carnival Cruise Lines is the largest cruise line in the world with a 44% market share. The vulnerability of the firm lies in the high turnover of employees and the decline in revenue due to the strengthening of the dollar. The pricing strategy of the cruise lines is based on price differentiation. The cruise industry is oligopolistic in nature and heavily regulated by international law. The country of Flag state is a place where a cruise ship is registered to meet all international requirements.

Carnival Cruise Lines
Background of the company
Carnival Cruise Lines is known to be an international cruise line with its headquarters in
Florida. Presently, Carnival is known to be the largest cruise line in the world based on
passengers carried annually and the total number of ships present in fleet. Carnival is also
known as the one of the world’s largest cruise ship operator in the world. . Since carnival
earns more than 52 percent of the revenue from the customers of US, when dollar will be
strengthening, it will be recording lower revenue altogether. The business model of carnival
can very easily be imitated by the competitors in the name of industry. In order to overcome
these challenges, the company needs to build a platform model so that it can be integrated by
the suppliers, end users and vendors (De Grosbois 2016).In the year 2018, this particular
Cruise Line was estimated to hold a 9 percent share of cruise industry revenue. The North
American Division of Carnival Corporation is known to have executive control over the
corporation
Vulnerability of the firm
Vulnerability is the degree to which people, resources, social activity as well as
environmental activity is known to be susceptible to harm, destruction and degradation on
being exposed to a hostile agent (De Grosbois 2016). The vulnerability is known to describe
the characteristics as well as circumstances of a community or asset that acts as a hazard. The
four types of vulnerability are physical vulnerability, economic vulnerability, environmental
vulnerability as well as social vulnerability.
Exchange rates
The exit of Britain have affected the Cruise lines industry. Carnival known to have reported
a better than expected rise in the revenue. However, it expects to feel the impact of Brexit in

case of the currency exchange rates. The cruise industry is directly affected by the
fluctuations of the exchange rates when raw materials are purchased. Since carnival is known
to earn most of its revenue from its US customers. When dollar will be strengthening,
carnival will be earning lower revenue altogether. The exchange rate is that value of one
nation’s currency versus another nation currency. The exchange rates are known to be
determined in the foreign exchange market.

The Carnival Corporation is known to capture the highest market share which is 44 percent of
the market share. It is known to hold the largest market share of the cruise lines in the world.
The competitors of carnival corporation, Royal Caribbean is known to capture 23 percent of
the market and the rest of the companies captures less than 10 percent of the market share.
2014 2015 2016 2017 2018
0
500
1000
1500
2000
2500
3000
Net Income (in million$)
The above diagram shows the profit earned Carnival Cruise Lines from 2014 to 2018. The
graph shows that he profit earned by Carnival cruise lines started to increase after 2014 and
then the high profit earned by Carnival Cruise was in the year 2016. Although the amount of

profit decreased a little after that. The total worldwide ocean cruise industry in the year 2018
is estimated to earn around $45.6 billion where more than 26 million passengers were carried
AL throughout 2017.
The SWOT analysis of Carnival Cruise Lines are as follows
Strength: the Carnival Corporation is known to be one of the largest global cruise and
vacation companies in the world. It is known to primarily operate in North America,
Germany, and Spain and in Australia. It is known to have a large fleet size where it is known
to operate under 11 of the most recognizable cruise brand names. Their portfolio of the brand
names is known to appeal to almost every niche markets. There are presence of many large
companies which are known to have significant cost advantage over most of other
competitors. Carnival is known to have 47 percent market share in the United Kingdom, 51
percent in Germany and 68 percent in Italy (De Grosbois 2016). It is known to have a global
presence all over the world. Since their company size is huge, they have a significant cost
advantage over most of the competitors. There are also presence of tons of entertainment on
abroad for all the fun in the ships.
Weakness
The number of turnover of the employees acts as a weakness in case of Carnival Cruise
Lines. Therefore, the high turnover of employees at the lower level is a concern of the
Carnival customer. Another weakness of Carnival cruise lines is that he revenue in the 2017
declined by 3 percent from 3.7 billion to 3.58 billion. Since carnival earns more than 52
percent of the revenue from the customers of US, when dollar will be strengthening, it will be
recording lower revenue altogether. The business model of carnival can very easily be
imitated by the competitors in the name of industry. In order to overcome these challenges,

the company needs to build a platform model so that it can be integrated by the suppliers, end
users and vendors.
Opportunities
The cruise industry have known to grow continuously in the past 10 years although are
known to occupy a small proportion of the global vacation market. since the revenue for
cruises in US have declined, it is constantly on a rise in Europe and Asia, leading to more
opportunities in Carnival in order to expand in these region. Carnival can also introduce high
end luxury cruise for the high class customers (De Grosbois 2016). Therefore, it can be said
that Cruise Lines can expand their Luxury Lines and also they are planning to increase its
berth capacity for the market in Europe by more than 37 percent. Carnival cruise lines are
also planning for introduction of larger cruise lines in Costa Romantic. Carnival has also
known to announce the union of Costa Europe with Thompson Cruise which is known as a
British Travel Company.
Threat
Carnival has been taking advantage of the special tax loopholes in order to avoid pay the
corporation tax of the United States. When these loopholes will be closed, it will be affecting
the financial statements and also the bottom line in the future. With the decrease in the price
of fuel, Carnival might have to deal with the rise in price of fuel.

Figure 1 Growth of Carnival Cruise Lines
The above chart shows the growth in terms of revenue, operating income, net income and
EPS.
Pricing strategy of cruise lines

There have been a significant change in the pricing strategy of the cruise lines presently. The
pricing strategy is the new way of adjusting prices with the goal of establishing an optimum
price. Carnival cruise lines is known use price differentiation where the are known to price
differently for different set of customers. Carnival Corporation garnered total revenue of
$15.5 billion in 2013, with a $1.5 billion in total profit. Being recognized as the worldwide
leader in the premium segment of the cruise industry, Holland America Line (HAL) has a
fleet of 15 ship. The factors which are known to affect the pricing decisions of HAL are the
nature of how the trade is doing as a whole, how far the business has reached and what the
experiences are (Gregoriou, Gultek and Demirer 2017). The two subsidiaries of Carnival
Corporation are Holland America Line and the other one is The Yachts of Sea bourn. The
pricing strategy is made by taking into account HAL and without taking HAL into account.
This particular cruise line sis known to offer the guests fleet air schedule from the options
which are tailored to meet the arrival times. Therefore, in this case the air booking tool is
known to add a mark-up to the air cost and also known to known to offer a total price
including air taxes. There are a variety of solutions that exist for pricing technology within
the cruise industry.
Competition and price elasticity
The price elasticity is a measure which is used in economy in order to show responsiveness or
the elasticity of the quantity demanded of a good or services to c change in its price. The
cruise industry is known to have an elastic demand. The cruise industry is known to have an
elastic demand since when there will be rise in price of one particular cruise lines, people will
tend to move to another ne which will be available at cheaper price. Comparatively.

The market structure of the cruise industry is mostly oligopolistic in nature. The capital
intensive nature of the cruise business is known to discourage the new entrants and has also
known to simplify the competitive landscape. For this reason, the industry is known to be
essentially an oligopoly. Carnival is known to be the largest cruise operator in the world with
more than 100 ships in the service (Li and Kwortnik 2017). On the other hand, Royal
Caribbean Cruises Ltd is known to be second largest with 40 ships. These two companies are
therefore known to control around 75 percent of the global cruise ship market. In case of
oligopolistic market structure, it consists of a small number of firms where none of it can
keep him others from having a significant influence. The concentration ratio is known to
measure the market state of the largest firms. One of the ajar difficulties faced by the
oligopolistic firms are the prisoner’s dilemma that each member face is the prisoners
dilemma which each of the member faces and encourages each member to cheat. The three
most important characteristics of oligopolistic market structure is that it is known to be
dominated by a small number of firms the industry is known to have significant number of
barriers and the firms sell either identical or differentiated products.
Government intervention

The cruise industry is one of the most heavily regulated industries with robust, clearly
defined standards. The average ship undergoes dozens of announced and unannounced safety
inspections per year 9Li and Kwortnik 2017). The cruise industry is known to follow the
policies maintained by Cruise Lines International Association often exceeding requirements
of international law. Cruise operations are tightly regulated with rigorous enforcement by
outside authorities. The country of Flag state is a pace where a cruise ship is known to be
registered so that certain registered ships are known to meet all the international
requirements. The Fag States are known to inspect ships on a regular basis for making sure
compliance with both international and national requirements. The international regulators re
known to include IMO, International Labour Organization (ILO), and the World Health
Organization (WHO) (Wang and Xiao 2019). The cruise ships are known to subject to three
robust layers of inspection and enforcement of international law and other requirements
which are port states, countries of registration and classification societies.
Conclusion

The Carnival Corporation is known to capture the highest market share which is 44 percent of
the market share. It is known to hold the largest market share of the cruise lines in the world.
The competitors of carnival corporation, Royal Caribbean is known to capture 23 percent of
the market and the rest of the companies captures less than 10 percent of the market share.
The cruise industry is known to follow the policies maintained by Cruise Lines International
Association often exceeding requirements of international law. Cruise operations are tightly
regulated with rigorous enforcement by outside authorities. The country of Flag state is a
pace where a cruise ship is known to be registered so that certain registered ships are known
to meet all the international requirements. There are presence of many large companies which
are known to have significant cost advantage over most of other competitors. Carnival is
known to have 47 percent market share in the United Kingdom, 51 percent in Germany and
68 percent in Italy. It is known to have a global presence all over the world. Since their
company size is huge, they have a significant cost advantage over most of the competitors.

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