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Carnival Corporation Case Study

In: Business and Management

Submitted By jyoo008
Words 1315
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Forces Scale Comments Rivalry | High | 1 | Suppliers | Moderate | 2 | Buyers | Low | 3 | Entry & Exit Barriers | Low | 4 | Substitutes | High | 5 |

1. The cruise line industry is effectively an oligopoly market, where several major cruise

liners make up more than 90% of the market shares. Carnival is constantly engaged in

marketing and pricing battles with these competitors, making internal rivalry central to

the industry. Additionally, cruise lines have historically been subject to heavy M&A

activity, and Carnival sometimes competes to acquire even more share. The cruise line

industry has relatively high competitor diversity and a moderate level of product

differentiation. Carnival and Royal Caribbean are each more than 3x the size of the next

largest competitor. Smaller cruise lines tend to specialize in options for a particular

demographic or geographic region. Carnival Corporation’s multiple brands create a

competitive rivalry within the company; however, each brand caters toward a slightly

different demographic or specializes in a particular market or geographic region.

One additional factor increasing internal rivalry in cruising is the industry’s high exit

barriers. It is difficult for a cruise liner to sell their assets and exit the industry. This

increases competition within the industry somewhat, as there is inflexibility in capacity

adjustment, meaning that companies will undercut their prices to boost sales when overall

demand is low. Switching costs between competitors are effectivel nonexistent,

particularly since loyalty programs, which are common for hotel chains and airlines, have

yet to substantively catch on in the cruise line industry, which constitutes a risk for

Carnival Corporation. 2. Supplier Power within the cruise line industry is...

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