Introduction
Cruise industry is facing a downturn worldwide after Sep 30, 2010’s terrorist attack in Caribbean, experienced an immediate decline in bookings. A requested report to identify a strategy for Coast4Life (C4L hereafter) to remain profitable during the downturn is followed.
Issue Identification
The terrorist attack caused the decline in booking of cruise next year implies that the cruise revenue may shrink worldwide.
C4L itself, although in the past three years has been growing fast with continuing improvement in liquidity and profitability, activity and long term debt (Appendix 1), but facing the industry downturn, If no any action on C4L in 2011, it may suffer a net loss if dry dock division is not able to obtain the external revenue from maintenance ships (Appendix 2). The following four alternative strategies are being considered in order for C4L to keep profitable in the downturn
Analysis
First option is to cut cost by selling dry dock that C4L used to do maintenance for the two cruises.
Pros:
• A relevant cost analysis has been conducted and it shows: by selling dry dock, C4L could save an average cost at $1.6million in 2011 and $1.3million in 2012(Appendix 3) based on how much dry dock can obtain from external revenue in three scenarios.
• C4L can use its resources and investment concentrating on its core business after divesting its dock maintenance service
• BC government may assist in building more docks for cruise ships is an opportunity that C4L has more choices to look for an external high quality dock-maintenance services.
Cons:
• will lose the strength of owning dry dock by which the two ships are well maintained
• Could hurt C4L’s reputation for safety
• Could lose external revenue from outside maintenance contracts
• The layoffs may damage the relationship with local community and government
Second option is to target a