Five forces and value chain-Carnival Cruiseline.docx - Five forces Industry Structure Porters 5 Forces The Cruise Line Industry is moderately attractive

Five forces and value chain-Carnival Cruiseline.docx - Five...

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Five forces:Industry Structure: Porter’s 5 ForcesThe Cruise Line Industry is moderately attractive, with the major players capturing a majority of the revenue. Figure 1 below shows the five forces in the industry.Figure 1: Five Forces ModelBarriers to EntryBarriers to entry in this industry are high and favor incumbents. The industry is essentially a duopoly between Carnival and Royal Caribbean. Incumbents benefit from cost savings achieved through economies of scale since they can leverage fixed costs across bigger fleets and larger ships. A major disadvantage of being an incumbent in this industry is that there are no major proprietary product differences, since most amenities, excursions, and ships can be imitated by competitors. RivalryThe Cruise Line industry is the fastest growing segment of the leisure travel market with 5-Yr CAGR Revenue at 16.9%. It is highly concentrated at the top with three incumbents (Carnival, Royal Caribbean,and Star) splitting 79% of the market. It is also relatively un-balanced between Carnival (47% market share) and Royal Caribbean (22% market share). The remaining market is highly fragmented with hundreds of cruise lines in operation. Competition is fierce between the firms in this industry. The high cost of fixed assets promotes rivalry. Utilization rates must be maintained at 100% for cruise line Entry BarriersEntry Barriers+ High barriers to entry+ High barriers to entry+ Economies of Scale + Economies of Scale +Government policy+Government policy+Brand+Brand-Proprietary Product DifferencesProprietary Product DifferencesRivalry Rivalry +Industry Growth (16.9% CAGR 5 +Industry Growth (16.9% CAGR 5 year)year)+Brand +Brand -Product Differences Product Differences +Unbalanced Competition+Unbalanced Competition+Economies of Scale+Economies of Scale-Fixed Assets/Costs/High DebtFixed Assets/Costs/High DebtSuppliers Suppliers +Ship Builder Concentration (3)+Ship Builder Concentration (3)+Travel Agencies (16,500 +Travel Agencies (16,500 affiliated CLIA agencies)affiliated CLIA agencies)+Food, Tours & Entertainment+Food, Tours & Entertainment-Switching costs of suppliersSwitching costs of suppliersBuyers Buyers -Buyer Information (TVBuyer Information (TV-InternetInternet-Media)Media)+ Brand+ Brand+ Non+ Non-ConcentratedConcentratedSubstitutes Substitutes + Proprietary Product Differences+ Proprietary Product Differences-Many indirect competitors Many indirect competitors -Buyer propensity to substituteBuyer propensity to substituteEntry BarriersEntry Barriers+ High barriers to entry+ High barriers to entry+ Economies of Scale + Economies of Scale +Government policy+Government policy+Brand+Brand-Proprietary Product DifferencesProprietary Product DifferencesRivalry Rivalry +Industry Growth (16.9% CAGR 5 +Industry Growth (16.9% CAGR 5 year)year)+Brand +Brand -Product Differences Product Differences +Unbalanced Competition+Unbalanced Competition+Economies of Scale+Economies of Scale-Fixed Assets/Costs/High DebtFixed Assets/Costs/High DebtSuppliers Suppliers +Ship Builder Concentration (3)+Ship Builder Concentration (3)+Travel Agencies (16,500 +Travel Agencies (16,500 affiliated CLIA agencies)affiliated CLIA agencies)+Food, Tours & Entertainment+Food, Tours & Entertainment-Switching costs of suppliersSwitching costs of suppliersBuyers Buyers -Buyer Information (TVBuyer Information (TV-InternetInternet-Media)Media)+ Brand+ Brand+ Non+ Non-ConcentratedConcentratedSubstitutes Substitutes + Proprietary Product Differences+ Proprietary Product Differences-Many indirect competitors Many indirect competitors -Buyer propensity to substituteBuyer propensity to substitute
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companies to be highly successful. Companies in the cruise line industry must leverage fixed costs acrosstheir fleets in order to increasing operating profitsBuyersBuyers hold some power in the cruise line industry. The increased access to information for customers via trade press, TV and/or the Internet has diluted the power of cruise line operators and travel agents. Customers have large amounts of information to make decisions. In general, most travellers know exactly what they want when they visit a travel agency and/or book a trip online. The percentage of passengers booking cruises online still remains much lower than was originally predicted in the UK (as in the US). However, there is an increasing awareness that a proactive Internet presence will be key to a retailer’s success in this sector.
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  • Spring '16
  • Management, Carnival Cruise Lines, Cruise ship, cruise line, Holland America Line, Cruise Line Industry

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