P&O Cruise Line Industry: A Critical Analysis of Outsourcing Practices

This report critically evaluates the concept of outsourcing within the P&O Cruise Line Industry, examining its advantages and disadvantages. It begins by introducing the evolving nature of the hospitality industry and the increasing reliance on outsourcing to manage costs and maintain service quality in the face of growing demand. The report details how P&O, like many cruise lines, outsources various non-core activities such as staffing, training, daily management, IT facilities, and security. It highlights the benefits of outsourcing, including cost reduction, increased efficiency, focus on core areas, and faster operations. However, it also addresses the potential drawbacks, such as the risk of exposing confidential data, quality issues, and loss of control over operations. The report concludes by providing a well-argued analysis of whether outsourcing is a suitable proposal for the P&O Cruise Line Industry, considering both its potential benefits and risks.

HOSPITALITY

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Contents
INTRODUCTION.................................................................................................................................1
Outsourcing in Cruise line Industry...................................................................................................1
Conclusion.............................................................................................................................................7
REFERENCES......................................................................................................................................8
INTRODUCTION
Hospitality industry has changed in a great extent in the past decades (Terry, 2011). It is to be
made sure that companies in this industry are also changing according to the demands of the

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market. With the increasing demand of the people in the hospitality industry companies also
adopted various strategies for ensuring their growth. The cruise industry has witnessed a great
deal of development in a past few decades. But this industry is also facing many kinds of
challenges. In order to make sure that these challenges have not reduced the quality of the
services they are providing to their clients. They used the strategies like outsourcing which
helps them in reducing the cost of operations without comprising with the quality. A P&O
cruise is an American/British cruise line based at Carnival House and is owned by Carnival
Corporation & plc. It is the oldest cruise line in the world having world’s first passenger’s
ship in the early 19th century. This report highlights the changing industrial needs of cruise
industry in terms of using outsourcing in its operations. It also showcases the advantages and
disadvantages of outsourcing of operations in cruise industry.
Outsourcing in Cruise line Industry
In various industries outsourcing of operations have become a trend. In many
industries it has become a need (Papathanassis and Beckmann, 2011). In the cruise line
industry many company has adopted the strategy of the outsourcing. This has helped the
firms in making cost cuts as well as relieving them for the maintenance of secondary
operations. It has also facilitated the firm as they can focus on the works that are of strategic
importance and giving internal and external less important task to the third party. This has
become beneficial for companies that are greater in size and has a large number of tasks to be
done in the company. There has been different point of view by several researchers on the
issue that whether the outsourcing is helpful for the companies or not. In the larger context it
has been noticed that outsourcing success is dependent on the organisational ability to
manage the outsourcing as well as tasks that is done by them. It is also crucial for the firms to
understand that which operations are of strategic importance to the company and which can
be given to the third party. The better the judgement the more the beneficial outsourcing
would be. The third party companies are better in doing these works as they provide the
services in the particular domains (Diakomihalis and Stefanidaki, 2011). Many a times it has
been seen that most of the work is being given to the single company so that they maintain all
the additional works at the cruise. There are only a few very large companies who have
distributed the work to many smaller companies. In different parts of the world P & O has
adopted different kinds of strategies for outsourcing of local tasks.
In the cruise line industry, many services and non-core activities have been given to third
parties by larger number of firms (Weaver and Duval, 2014). In the larger domain this has

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increased the operational activity of the companies as well as has resulted in the reduction of
cost of operations. There are many operations that are performed within the cruise line
industry and many of them have been given to the third parties. It reduces the pressure on the
parent company as the full responsibility has been given to the third party. This helps them in
making sure that the highest quality services get provided to clients. This is also due to the
fact that since these tasks are given on contract basis and the third party company has to
perform good in order to extend contract lease. There are many other third party companies
are available in the market, this forces them to work in a better way so that their contract can
be increased (Schemmann, 2012). Some of the task that has been given to the third party in
the cruise line industry is as follows:
 Staffing: One of the most essential tasks that have been outsourced by the cruise line
companies is of managing staffs for various operations. Companies like P& O has
been outsourcing the activities linked with the management of human resource (Oshri,
Kotlarsky and Willcocks, 2015). There are many people working in the company like
P & O from different cultural backgrounds. Managing such diversity is a difficult task
which takes a lot of time and resources. Outsourcing of the tasks such as staffing will
help the company in focusing on the tasks that is of more strategic importance.
 Training and development: In the Hospitality industry, the quality of staffs adds value
to the company’s services. In order to make sure that firms have quality staffs
companies like P&O has given the function of training and development to the third
party (Sheehan and Cooper, 2011). This has helped the company in reducing the time
on the development of the skills that they require within the industry.
 Daily management: There are many tasks in the cruise line operations which need to
be managed on daily basis such as cleanliness, care taking etc. (Görg and Hanley,
2011). These are not of strategic importance but acts as value adder in the services
provide by the companies. Any fault in this management can lead to image failure for
such a reputational company and hence P& O has given all such tasks to third party.
They get things done in a more professional manner as they have a specific role to
perform and they are accountable to the bigger companies.
 IT facilities: Since the cruise line Industry has adopted the IT mediums hence it has
become essential for them to maintain the IT services at the ships. This may include
internal IT management inside the ships like in maintaining navigation technology;
maintain the documenting and online booking system etc. The use of technology has

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become one of the most significant necessities of the industry and lot of operations
depends on the IT infrastructure installed inside the cruise. This also helps in ensuring
that P & O do not face problems in their operations due to lack of skilful staffs that
can manage the IT operations.
 Security: Since the safety of the clients is a major issue in any hospitality industry
hence the companies needs professionals for security. Larger companies such as P &
O cruises have given their security department to the smaller firms specialised in
providing all kinds of security needed at the cruise. Smaller firms do this at lower cost
and hence contracting such jobs can be beneficial for the company (Handley and
Benton Jr, 2012).
There are many kinds of advantages of using contracting out the operations. Some of them
are as follows:
 Cost cutting: In the increasing competition increasing the margins of profits can be a
difficult task (Girth, et al., 2012). For ensuring higher profit margins companies like P
& O cruises have adopted the strategy of outsourcing. This is due to the fact that in
many operations like staffing requires higher salaries to be given to the employees
which is a costly affair. By outsourcing these activities company gets the staffs at
lower cost as third party companies generally of smaller scale have staffs at lower
wages. This is due to the fact that larger companies have to give the employees their
wages according to their average basic salary which is of higher cost (Willcocks and
Lacity, 2016). Apart from these smaller companies avails the resources at lower cost
which can be beneficial in making lower operational cost. They also reduces the
operational cost as they have ties ups with other companies that gives them raw
materials at cheaper. It also works in the ways that since they are dedicated to
managing the particular operations hence they avoid failures which is major concern
for which companies invest money.
 Increased efficiency: Since the contracts are given to the companies that are good in
doing that operation hence there is a significant increase in the efficiency at which
operations are done (Kang, et al., 2012). This can also be attributed in the sense that
workers that are associated with the smaller firms are highly skilled in their particular
job; a proper training is given to them. This helps the firms like P&O to complete
their task on time as well as with greater accuracy. Increased efficiency automatically

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affects the operations of the firm and helps them to gain higher productivity which is
crucial in the modern day business.
 Focusing on core areas: One of the best benefits that it adds to the company like P&O
is that it helps them to focus on their core domain. They can focus on giving best of
services to the people as well as making plans for their future growth. This also helps
them on giving more time towards the work that gives them strategic edge over their
competitors rather than diverting their focus on the daily management activities. P &
O can invest in making the larger changes like their services, increasing brand value,
giving time towards research and development that helps them in understanding the
demands of the market and the industry.
 Faster operations: When outsourcing is done, companies are able to perform at faster
speed (Manning, Lewin and Schuerch, 2011). This is due to the reason that the firm
who have taken the responsibility of a particular job provides facilities as quickly as
possible so that they can provide best services to the companies like P & O. This goes
in the benefit of both P & O cruises as well as the company whom the operational task
has been given.
Along with the benefits that outsourcing has it has certain kinds of disadvantages attached
with it. Some of these disadvantages are as follows:
 Exposing of confidential data: Data is very important in business of modern day firms
(Blanton, et al., 2012). There are many confidential data that gets exposed to
vulnerable breaches because of outsourcing (Schwörer, 2013). Smaller companies
which have been contacted for managing their IT department can take use of the
private data for their personal benefit. This can be unethical in the case when the data
related to the customers of the company gets leaked. If the smaller companies have
contracts with other companies then it can be more dangerous for the companies like
P & O. These security risks are due to the fact that the employees of smaller
companies are not bounded by the ethical rules and regulations of P & O Cruises.
 Quality issues: Since the raw materials that smaller company take use of is of low
quality hence it confronts the business of firms over the issue of quality management
(Freytag, Clarke and Evald, 2012). This gets possible due to the fact that in order to
make reduction in the cost of operations, company generally reduces the quality of
resources they have. In the competition that is present in the cruise industry,

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maintaining quality through outsourcing can be a riskier move (Gunasekaran, et al.,
2015). This can lead to heavy loses to the company.
 Lose control: It can be possible that the companies like P & O can lose control over
tier operation due to outsourcing. This makes them highly dependent on the
performance of smaller companies. There are larger firms that are confronting the
business of the company; in such an environment losing control over some of their
operations can be dangerous for the firm (Lamminmaki, 2011). This also influences
the decision making process as the strategic decisions that must be as per the goals of
P & O cruises can be influenced by the smaller company aims. Partnership in the
decision making can sometimes be loss to the company.
 Labour related issues: Many a time it is seen that the employees get unsatisfied with
the outsourcing as during the outsourcing companies generally make job cuts which
demotivates the core employee of the firms like P & O. It also raises issues related to
their pay scale. There can be conflict between the staffs of two firms (Palugod and
Palugod, 2011). This is not good for the performance and environment of the firm in
the longer run. Many a time it is seen that employees of outsourcing company do not
have the knowledge about the company’s operational methodology. This leads to
reduction in the image of the firm which many a times creates legal compliances. This
compliance gets filed by the customers who was promised with some other kind of
service but receives something else. This happens due to the fact that the outsourced
sourced company’s employee loses focus on people oriented business.
On the greater note of evaluation regarding whether the contracting out can be better for the
cruise industry or not it can be said that it is beneficial for the industry but not to a very large
extent. Many companies in the last few decades have adopted it for the purpose related to the
daily management of the firm. It can be said that there are people who are coming to the
cruises expects a high quality services. Outsourcing the operations can be a serious risk to the
quality which can be highly dangerous for the companies in the present competitive
environment (Leeman and Reynolds, 2012). Some of the non-care activities can be given to
the third party companies which are not of strategic importance but the core activities that are
directly related to the customers must not be contracted out. It enhances the risks related to
the security of the data associated with the clients of the company. This is unethical in term of
the rules and regulations that cruise industry have (Yang, Wacker and Sheu, 2012). On the

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greater note this can lead to loss of image and trust in the minds of the consumers of P&O
cruise. In the competitive business this can be advantageous for the rivals in the industry.
For example if the P & O cruise company has to focus on the core operations like providing
the best quality services, giving focus towards the consumers etc. then company can
outsource its operations. Another case is that if the IT department is given in the hands of
third party then there is larger chance that there can be security breach. This is not good for
the growth of the firm in the longer run.
Apart from this it can be noticed that there are larger number of companies that are providing
the services related to firms. This has forced the companies which is taking the outsourcing
services to work in a more professional manner or say to work more efficiently (Patricia,
2017). This forces them to provide quality as well as ensure the companies like P & O cruises
that they get higher quality services to their clients. It is seen that the companies which
performs bad never gets their contract renewed hence they are forced to perform in the best
way. This also helps in their personal growth in the longer run. It is essential for the P & O
cruises to choose their partners more wisely as well as maintain a good relation with their
contracted company so that most efficient services can be provided to the firm.
P&O cruises needs to think on the ways they have given contracts to the third party. They
need to wisely select the partnership by evaluating the performance of the company in the
past. This company has to make a supervisory team that will supervise on the operations that
is given on contract. Doing this will help the company to make sure that they have their
control on their operations. This will help P & O cruise to ensure that they get perfect quality
services from the third party company. This will also help the company to have edge over
their competitors at the lower prices. This will also help the cited firm at the time of
performance evaluation of the third party company as they will have the details of the faults
they have done at the time of execution. It is important that a company has its own set of
people who judge the performance and work of the third party company which will help them
in gaining edge in the market.
Other side of the story is that they have an excellent feedback mechanism where they collect
data from the clients regarding any problems and suggestion. This should also be taken in a
more serious manner so as to lease out control to any third party company. Quality control
team will also assist the employees from different third party team to improve their
operational methodology so as to ensure. A common minimum program must be made

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between the third party company and P& O cruise so as to make sure that all of them work
together. This is necessary for improving the performance and efficiency of the firm which
will be good for the company on the longer run. It will be better that a P & O has its own set
of rules that governs all the employees irrespective of the company.
A regular inspection to the working of the third party company must be done on regular basis
so as ensure that they work according to the requirements of the industry. A more
collaborative approach will help the firm in maintaining their work performance as well as
they can work in favour of each other interests. It is the responsibility of P&O cruise to have
a more unanimous decision making that includes the interest of Third Party Company so that
their workers can also work towards achieving higher efficiencies (P & O Cruises, 2014).
Conclusion
From the above report it can be concluded that hospitality industry have changed a lot. This
change can also be seen in the industry of cruise where there are numbers of companies who
have given their various operations on the contract basis. Giving operations on contract basis
has several advantages and disadvantages. It helps the firm like P & O cruise to focus on the
core works and leaving the extra works for the contracted companies. It is also crucial for the
company to make sure that they have a mechanism where they supervise the work done by
the third party companies after the works has been allocated to them. This helps in
maintaining the quality of service which is always an issue in the contract based jobs and
affects the performance of the firms.

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