The Royal Caribbean International

The Royal Caribbean International is a shipping company founded in 1969 by three Norwegian ship owners eager to enter the rapidly developing US cruise market. Gotaas Larsen, I.M. Skaugen & Company, and Anders Wilhelmsen & Company are not the only three Norwegian shipping businesses. Since its inception, this shipping company has been dedicated to producing innovative and one-of-a-kind cruise ships that provide a variety of amenities to its diverse clientele. The Operations of the Royal Caribbean International belongs to 4724 Standard Industrial Classification code (a four-digit numerical code that has been assigned by the federal government with the aim of categorizing business establishment based on their primary business that they deal with). This means that all organizations that have been assigned SIC code 4724 deals with the arrangement of transportation of freight and cargo. In addition, the cruise industry belongs to the North American Industry Classification System (NAICS) code 483112, and this signifies that the U.S industry is composed of establishments that primarily deal with deep sea transportation of passengers to and from foreign ports. This paper pays high attention to the analysis of the cruise industry in terms of the industry`s dominant economic characteristics, industry Life Cycle, competitive forces facing the industry, trends and driving factors, as well as the expected strategic moves by rivals.

Industry`s Dominant Economic Characteristics

The modern cruise industry is one of the excellent examples of globalization, especially due to the onboard personnel and multinational clientele from every continent as well as the increasing destinations and ports of call all over the world. Moreover, this industry is crisis resistant especially due to its diversified offer of modernized port structures that makes cruising as a vacation alternative available for the wide range of clients. Consecutively, this dynamic industry is continuously expanding the services and products that it offers to its customers, and this has managed it to achieve an average annual growth of 8.5 percent in the last 20 years. In addition, due to its wide range of products and services, this industry has managed to have a total of 90 million passengers since 1980, out of whom 60 percent have been gained in the last one decade, and this is as a result of offering revolutionary fleets and that have been equipped with modern services such as free WIFI. In terms of its customer base, this industry does not show any signs of slowing down, after generating 13 and 13.5 million passengers during 2008 and 2009 respectively (Wind Rose Network, 2017). In 2007, this industry generated 12.6 million passengers, and this shows that the trend of generating new passengers is increasing every New Year, and the same trend is expected to continue throughout the remaining part of the 21st century.

In terms of revenue, the cruise industry generated approximately 37.1 billion U.S. dollars in 2014, all over the world. In 2014, North America was the largest cruise market with a market size of 22.1 billion U.S. dollars, and this was an increased compared to 21.3 billion dollars in 2013 (Florida Caribbean Cruise Association, 2014).

Moreover, there are barriers to entry and exit in the cruise market. For the new entrants, there are high costs of purchasing a single cruise ship, coupled with the high investment needed to manage and maintain a cruise line. To exit, it is challenging for an existing cruise line to sell cruise ship, since very few buyers can manage to afford the selling price. Consecutively, the capability of taking advantage of economies of scale as well as the bargaining power in the cruise industry is influenced by the size of the market in two ways. First, the presence of few technology developers and shipbuilders in the industry and these forces the cruise companies to accept prices and costs that are offered to them v. Secondly, the large number of suppliers of fuel, equipment, and food products enable them to bargain for the best prices.

Industry Lifecycle

The cruise industry underwent a number of phases ranging from the early stages phase, innovation phase, cost/shakeout phase, maturity phase and decline phase. The early stages phase tends to be the most challenge phase, especially due to the fear of being eliminated from the market by the existing and major rivals, limited passengers and the high cost of operating. Apparently, the cruise industry managed to overcome this stage, by embracing continuous improvement of the products and services that it offers to its customers. The continuous improvement of the cruise industry was made possible by the innovation stage, which entailed developing more revolutionary cruise ships that are fitted with modern features such as WIFI and comfort ability. Moreover, the innovation phases tend to continue and even embraced as part of the industry culture, in order to not only meet the needs of the passengers but also to exceed their expectations and to promote uniqueness. The cost/shakeout phase entails the situation where most investors leave the industry especially due to recent bad news or the fear of uncertainty. In this connection, the cruise industry has faced and overcome a number of shakeouts, including economic recession which hinders its operations and its revenue base.

Figure 1: Cruise Industry lifecycle (Popov, 2016)

In addition, the maturity phase is attained when the prices of products stabilized, in such a way that the Cruise industry can manage to enjoy profits or produce goods and services without straining. This is the phase in which most cruise airlines manage to expand by making additional ships or enhancing their level of innovation in order to improve its designs and quality of their services. Lastly, the decline phase entails a situation where the prices and the performance of a cruise industry start to decline. This happens when the competitors adopt new strategies of countering the competition threats from the cruise airline. However, most airlines in the cruise industry have not attained decline phase, especially due to the fact that its performance, passenger base, and revenue base are increasing each year, and the trend it anticipated to continue throughout the entire 21st century.

Competitive forces facing the industry

The Royal Caribbean International has been one of the best performing cruise lines in the world. Apparently, there are a number of competitive forces that are facing this organization. For example, the Carnival Cruise line has been focusing on substantial product differential, and this has been making its products to be unique compared to the services that the other cruise airlines are offering. Product differential has been one of the avenues that enable the rivals to enhance their competitive edge. In 2014, the carnival cruise airline had been the best performer compared to any other cruise line, including the Norwegian and the Royal Caribbean International.

In addition, most competitors have focused on economies of scale as well as gaining a higher bargaining power from the suppliers. Precisely, some cruise companies such as the Royal Caribbean International have a number of cruise ships, and the core aim is to enjoy economies of scale. Precisely, with a higher number of ships, the cruise line manages to carry a huge number of passengers per turn, making the compared to enjoy economies of scale (Popov, 2016). Moreover, due to the high number of suppliers of equipment, technologies, designs, and other basic materials that are necessary for effective operations of the cruise line, the Carnival cruise line have contemplated the importance of having a higher bargaining power to the amount that it charges to its passengers.

Trends and Driving factors

Most driving forces for a cruise line come from its internal environment. Precisely, by offering differentiated services and revolutionary cruise lines at an affordable price sensitizes despite the prevailing economic situations would help in not only retaining passengers but also winning new ones as well. Moreover, the cruise line needs to embrace and maintain the safety of its passengers. For example, in 2013, the Carnival cruise line frustrated its passengers at the Gulf of Mexico, after a fire erupted in the engine room of one of its ship. This incident may have left a negative feeling to most of its loyal passengers (Popov, 2016).

Conclusion

It is, therefore, evident that the cruise industry is developing at a rapid rate, to such an extent that most of the cruise lines have been recording positive revenue and passenger increase each year and has huge anticipations that the same trend will continue throughout the 21st century. Moreover, the room for improvement is never full, and this means that the cruise lines can develop even further through the exploitation of the available opportunities.

References

Florida Caribbean Cruise Association, (2014). Cruise Industry Overview: State of the Cruise Industry. Retrieved from, http://www.f-cca.com/downloads/2014-Cruise-Industry-Overview-and-Statistics.pdf

Popov B., (2016). Cruise Industry Statistics And Facts. Retrieved from, http://cruisejobline.com/

Wind Rose Network, (2017). The Cruise Industry: General Analysis and Overview. Retrieved from, http://www.windrosenetwork.com/The-Cruise-Industry-General-Analysis-and-Overview