Analysis of Corporate Strategy
HOME Since corporate strategy is about the choice of direction of a business as a whole, three key issues must be considered:

1. The company�s overall orientation toward growth, stability, or retrenchment (directional strategy)

2. The industries or markets in which the firm competes through its products and business units
     (portfolio strategy), and

3.  The manner in which management coordinates activities, transfers resources, and cultivates
      capabilities among product lines and business units (parenting strategy)

Of the three generic corporate strategies of growth, stability, and retrenchment, Carnival Corporation (CC) has chosen growth.  Starting with two converted oceans liners in 1972, Carnival Corporation has grown into the most profitable cruise line and holds the strongest financial position of any cruise company in the world. (Standard and Poor, 2002)  They own and operate six cruise lines with 43 ships that travel to many exciting destinations around the world.  Fourteen new cruise ships are scheduled for delivery within the next four years. (CC 2001 Annual Report)  The organization is known as the leader and innovator in the cruise travel industry. (Strategic Management and Business Policy, p. 17-1)  They are presently trying to complete the purchase of Princess Cruise Lines, #3 in the cruise industry.  Carnival Corporation also owns a tour company that operates hotels, motor coaches, rail cars and excursion vessels primarily in Alaska and the Canadian Yukon. (portfolio strategy)

Carnival Corporation has grown internally by expanding its operations both globally and domestically, and externally through acquisitions.  Its internal growth is evidenced by the 14 new cruise ships scheduled for delivery and the fact that it maintained a growth rate of 30% throughout the 1980�s, three times greater than the industry as a whole.  Its external growth is demonstrated by the acquisition of Holland America Line in 1988 (which includes Windstar Sail Cruses as a subsidiary), 50% of Seabourn Cruise Lines in 1992, Costa Cruise Lines 1997, and Cunard Line in 1998.  Seabourn and Cunard then merged, with CC owning 68% of the new Cunard Line Limited.

Both vertical and horizontal growth concentration strategies are used by CC.  Vertical growth was achieved by owning and operating hotels and motor cars in Alaska and the Canadian Yukon, a tour business operating under the brand name of Holland America Tours.  This strategy gains control over a scarce resource (hotels and transportation), guarantees quality of a key input (lodging and transportation), helps reduce costs, and potentially gives access to new customers.  This is a backward integration move on the value chain of CC, that means assuming a function previously provided by a distributor.

Carnival Corporation initially served the contemporary cruise sector through Carnival Cruise Lines and Costa Cruise Lines.  Acquisitions moved Carnival into the premium sector with Holland America Line, the premium/luxury sector with Cunard Line and the luxury sector with Seabourn Cruise Line and Windstar Cruises. (Yahoo! Finance Market Guide).  Horizontal Growth is demonstrated through this broad range of cruise products from this global vacation and leisure travel provider.

Carnival Corporation is always interested in customer satisfaction, offering a wide range of cruise packages in many parts of the world.  They try to maintain a product that is fresh and exciting by providing many types of entertainment on board, attractive and comfortable accommodations, and excellent service.  All strategies aim to enhance the onboard experience of guests, while maintaining the industry leadership by applying a disciplined management approach to the business.  Carnival is known as the "Fun Ship."  They now stress that the cruise itself is the most important part of the trip, not the ports of call.

Ever mindful of the great potential for growth with over 80% of vacationers never having cruised, CC tries to appeal to a greater variety of people. There are cruises targeted for first-time younger cruisers with moderate prices, and cruises targeted for those customers willing to pay the premium or luxury price. Even with the recent downturn in the economy, cruises are the best value in the vacation market place.

In 1995, when Norwegian Cruise Lines was having financial difficulties, CC purchased $101 million secured notes of Kloster Cruise Limited, the parent company of Norwegian Cruise Lines, thus positioning itself to acquire some Kloster assets if it should fail.  CC also engaged in several tactical moves to improve its position in the challenging post-September 11th travel environment.  In 2001, it transferred two vessels from the North American brands to Costa Cruises to accelerate the near-term growth in the European vacation market (France, Spain and Germany) and maximize demand for cruise travel.  These are examples of their parenting strategy and portfolio strategy.  Another portfolio strategy was the managing down of non-essential capital expenditures and the positioning of vessels in homeports close to vacationers, making it more convenient and affordable to take a cruise.

Carnival Corporation has also found it necessary to engage in a few retrenchment strategies.  In 1994, they discontinued the operation of Fiestamarina Lines, which had attempted to serve the Spanish-speaking clientele.  In 1996, Carnival acquired a 29.5% interest in Airtours for $370 million.  Airtours is an air-inclusive operation providing holiday packages to British, Scandinavian, and North American markets. This was considered a growth strategy at the time.  However, in 2001 with the downturn in the economy, Carnival sold their share in Airtours for $500 million. (CC 2001 Annual Report)

Carnival Corporation wants to stay #1 and remain a leader and innovator in the cruise industry. To do this, Carnival plans to use sophisticated promotional efforts to gain new customers and retain loyalty from former cruisers, refurbish ships, vary activities and ports of call, and be innovative in all aspects of ship operations.
Company Overview
Current Situation
Objectives/Goals
Family of Companies
Executives / Board
Environmental Analysis
Industry Trends
Environmental Factors
Internal/Financial Analysis
Corporate Strategy
Competitive Strategy
Analysis of Strategy
Future Strategy Options
Recommended Strategy
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