Assessment of carnival cruise lines competitive position

Carnival Cruise Lines is certainly the leader of their industry. They are the industry standard for quality, have massive revenues, and the largest growth. In fact, the company continues to set new passenger number records. The first thing I will do in evaluating the company’s competitive position is to do a SWOT analysis. Some of the company’s main strengths include: cruise capacity levels, branding, variety of activities, price compared to other vacation options, and their ability to stay frugal and efficient. The main weaknesses I have identified were they were still considered to be an expensive option for vacations, perceptions of lower-quality (despite major quality improvements), perceptions of being geared to certain demographics, and some IT issues. Certain opportunities available to the company include a chance to narrow the gap between quality and perception of quality, direct marketing through new intermediaries, and more growth in their industry. Major threats to the company are the economy, fuel prices, and hurricane seasons. Overall, looking at the SWOT analysis, it is easy to see why CCL is the industry leader. They have many strengths, only a few weaknesses, opportunities to work on their weaknesses, and threats that affect many industries, not just their own.

Looking at the five competitive forces model, I believe CCL is in a strong competitive position. The only threat I think is a big deal for the company at this point is the threat of fierce competition. Ten brands control 95% of the market, and despite the bad economy those companies are also showing growth. Not only does CCL compete against other cruise ships, they also compete against other forms of vacation entertainment. Some examples mentioned in the case include the vacation opportunities in the Orlando and Las Vegas markets. To make sure they handle this competition, the company must continue to improve in order to dominate the market. The threat of new entrants is weak because of the major start-up costs in their industry and the importance of brand-recognition in their industry. The bargaining power of the buyers is moderate-to-weak because switching costs for customers are high when considering the value they get with CCL despite possible substitutes. Bargaining power of suppliers is getting weaker as travel agencies are going away and costs of dealing with the customer are being minimized. It is possible that CCL will have to deal with the threat of substitute products because there are viable options beyond CCL. However, CCL has positioned themselves very well to deal with this competition through giving the customer great value for the price.

They mentioned in the case that their goal with each customer is to exceed the customer’s expectations to the best of their ability. Doing so will add value to firm because it will likely increase the customer’s willingness to pay. Another way to continue to improve the company will include using a virtual value chain with online intermediaries rather than travel agents in order to lessen the costs of booking customers and to directly market to prospective customers. I believe this can add great value to the firm by decreasing the cost of doing business through intermediaries and increasing customer awareness of vacationing with CCL. If they can take advantages of their opportunities, their competitive position will continue to be strong.

Question 2: Should CCL implement a CRM strategy? (Justify your answer). If so, how would you implement it? If not, what other enterprise systems would you recommend instead? (Justify your answer). Perform a security and privacy risk assessment related to your recommendation. For each major risk, what should the company do?

There are positives and negatives for CCL implementing a CRM strategy. I will use this chance to make an argument for implementing a CRM strategy, highlight the positive aspects of this strategy and explain how this strategy makes up for the negative aspects. They are the industry leaders in almost every aspect of their business except for lagging information systems. If they improve this aspect of their business, they can possibly increase their strategic advantages for the long-term future.

For now, CCL enjoys a strong relationship with travel agents who refer their clients to CCL regularly. This has been a very valuable relationship for CCL over the years. The market is changing in the travel and tourism industry because of the development of intermediaries on the internet who make direct connections from customer to business. This trend is going to be the dominant way of doing business in the short-term and long-term futures of the industry. CCL management argues in the case that they want to balance this relationship with travel agents with this new wave. I argue that travel agents are on their way out of business and it should not be a focus for the company in the long-term. Having a CRM strategy will improve their abilities to reach out to the customer base on the internet and should transform their value chain completely to virtual means. This will cut their costs dramatically and will help the bottom line. This also allows the customer to ask for services directly from CCL. This can result in greater customer service for CCL. It mentioned in the case that the handoff of information from CCL to travel agent to customer was often slow. Eliminating the need for travel agents and dealing directly with customers will also improve customer service by making it a much faster and more efficient process. To me, it makes a lot of sense for CCL. This CRM strategy will not be an overnight process and neither will the demise of the travel agent business, so the strategy they have for now should serve their needs well until they develop this strategy to an acceptable level.

There were quite a few other key points I read in the case that stand out to me in supporting a CRM strategy. Management stressed the importance of fitting their services to customers’ changing tastes. This is a reasonable goal. If this goal is truly important, developing a successful CRM strategy can help them track these changing tastes in the most effective way. This includes a possible improvement in the check-in process for customers boarding the cruise ship. The current process requires hours for each customer in order to pass through security. If they can update their information systems to hold security information and some biometrics, security can be quicker and possibly of better quality. The case also pointed out that CCL has a wide variety of customers unlike their competitors. This can be a great advantage to the company if CCL can utilize their information systems in a way that provides the company with information about the mix of customers they have for a certain cruise. Planning for a customer base that is homogenized is much easier than making strategic plans for a customer base that is diverse. It would certainly be an advantage to CCL to have a CRM strategy that helped them with this diverse customer base. They mention in the case that customer loyalty is a great strength of the company and they hope to continue to increase customer loyalty. Having a CRM strategy that can help improve customer service and improve the services offered to customers and can certainly create loyalty.

One aspect of their CRM strategy I would not be as concerned with is developing a highly detailed rewards program to go along with it. The company has experimented with this idea and has a simple system they use. I think it would be fine to continue with something simple like this but do not see any reason to create a detailed plan. I believe the degree of customability is low for this industry and the repurchase rate for customers is typically once a year. Therefore, investing in a rewards program would result in a low payoff. Also, competitors in their industry have tried using rewards programs and the results have not been positive for these companies. At this point, I do not see a major need for CCL to develop their rewards program further.

So I have argued for a new CRM strategy. How does CCL implement such a strategy? First, it has to be realized that CRM strategies are only strategies, not technology. In order to effectively implement this kind of strategy, it is imperative that there is an information technology infrastructure in place. This means that the databases have to be strong and the information has to be reliable. This is the first step of the process for implementation. According to the case, CCL already has the databases there for use, including Oracle databases called Property Management Systems (PMS) and Point of Sale (POS). The problem right now with their infrastructure is issues they have with data integrity and availability, as pointed out on page 412. Regardless of whether or not CCL implements a CRM strategy, issues with data integrity and availability are major issues that should be dealt with to have good information and security. The second step of implementing the new CRM strategy is to change the database design in a way that can improve customer and transactional data so the company can use the information. Having this data funnel into one data store can help the company get the most out of the relationships they build with the various intermediaries they will have online as well as through their website.

Certainly, at this point implementing a CRM strategy will require major considerations for funding and how this information system will be created or bought. For funding initiatives within this new CRM strategy, the steering committee will have to figure out what would add the greatest value to the firm and what they will do to create the information systems that fit this strategy. At this point, I do not think I have enough information in order to have an opinion on how to do this.

As I mentioned earlier in the paper, security and privacy risk seems to be a major issue for this company. It was mentioned in the case that information integrity and availability are not at acceptable levels. This has to be addressed immediately in order to have good information, which is imperative for effective information systems. Security and privacy are not just IT issues; they are issues that go the very top of management. Therefore, measures have to be put in place to protect the information that CCL obtains from using this CRM strategy. The information systems created because of this strategy will likely contain very sensitive information such as credit card numbers. In accordance with the importance placed on privacy, the company should look to obtain a trust seal from TRUSTe, WebTrust, or the Better Business Bureau. Also, a privacy statement should be drafted for the site in order to help gain the customer’s trust. Beyond that, I think the major issue will be preventing hackers from getting sensitive information from the company’s information systems and I think one step that will help is hiring a third party to conduct an information systems audit. This will help the company identify weaknesses that they can improve. Policies and training for employees will also need to be evaluated in order to prevent phishing or social engineering. If they can continually assess their security and privacy needs with the suggestions I have made, their security and privacy should be fine. It will then be up to the company to straighten out the mess they made with their information quality.