Group Company Project Part IV: Final Written.Paper Topic :Carnival corporation is our company

Group Number-H

Group Members

Venkatesh Munnuru

Naitik Bhatt

Lokesh Kumar Kurra

Mujahed Mohammed

Chendrashekar Panjala

Subject Name: BA62070H519 Managerial Finance

Professor: Dr.Sunny Oniri

Introduction

This paper provides information on Carnival Corporation's financial management perspectives. This will include background information, current position, operational mechanisms, and revenue management.

Background history of Carnival corporation

Carnival corporation is the global leader in the provision of cruise services. It was founded in 1972 by Ted Arison as one company namely Carnival Cruise. In 1987, the company expanded itself through the acquisition of other small but the related company which enables the company to operate approximately 100 ships under 10 brands. The acquisition was done through public offering which saw the company successfully incorporating small companies.

The company started operating with only one ship but with time acquired other ships. Some of the brands include; Princess Cruises, Holland America Lines, P&O Cruises, Cunard, Seabourn, Carnival Cruise Lines, AIDA Cruises among others. Carnival corporation is one of the biggest shareholders in the New York Stock Exchange (NYSE) market as well as the London Stock Exchange.

Competitors

Some of the major competitors for Carnival Corporation are Norwegian Cruise Line Holdings Limited Royal Caribbean Cruises Ltd. Due to the economy of scale Carnival Corporation occupies a bigger market share which stands at forty-seven percent being followed by Royal Caribbean with twenty-three percent and Norwegian occupying ten percent.

The company also faces competition from other smaller key players in the industry include MSC Cruises, Disney Cruise Line, and Thomson Cruises which all combine to reduce the bigger share of the Carnival Corporation.

The current position of the company in the Cruising industry

Carnival Corporation has positioned itself in the competitive edge as it has world destinations which include: United States, United Kingdom, Australia, Bahamas, Panama and Caribbean and thus having expanded market share (Severson, 2013; Ward 2008). According to Ward, (2008) in Barron’s magazine acknowledged that “Carnival corporation has exposure nearly in all continents of the world and it is being recognized globally through its top-notch brands.”

Based on the views by Verbeek (2018), the cruising industry, competition is at a moderate level and in most cases, companies are not many. In this case, they compete based on factors such as pricing, differentiation and placements. Furthermore, he argued that “the industry contains intimidating barriers of entry with no real potential threats or substitutes from other industries” (Verbeek, 2018).

It is also noted that due to the nature and level of investment made by Carnival corporation, it is difficult for new competitors to enter the market. This has been made possible by the company acquiring the smaller companies and becoming the giant in the industry, Currently, the company has got only two competitors and to make sure it is always at the front, the company offers the top-notch services using the latest technology (Wheelen and Hunger, 2006).

The company has recognized the need to carry out market segmentation to cater to the customers’ needs accordingly. On this note. The company carries out training of employees required to provide specialized services in the vacation arena. To employ highly qualified employees requires a good financial base that other companies may not have access to and thus places the Carnival corporation in the best position in the industry.

New developments in Carnival Corporation

The company has recently initiated various strategic plan issues which are aimed at increasing its market share and attain a competitive edge as it scales up the profit margins. To enhance its fleet management portfolio, the company has set its base to launch an additional four ships that will traverse the global arena before the end of the year 2020. Some of the brands that will launch the four ships include: includes Carnival Cruise Line, Costa Cruises, P&O.

Company future direction

The provision of a wide range of products targeting different market segments places the company in a competitive edge. The company pays special attention to customers and has succeeded in addressing the pressing needs of many by offering both short and long vacation opportunities through specialized activities.

The company is currently considered successful in its expansion and its profitability index. The company endeavors to grow in the future and therefore required to minimize the weakness while maximizing its strength. The management is geared towards making arrangements that are directed at putting the company always ahead of others.

By the year 2025, the company has placed itself strategically to launch an addition of sixteen new ships to give its clients improved experience and cater to all the clients’ needs and categories. The company has plans to introduce the first new ship for the P&O Cruises brand in the United Kingdom before June 2020.

In the same period, the plan to company plans to introduce another ship for Enchanted Princess which will operate in the Mediterranean region. The Costa brand in Italy will launch the second ship by October 2020 which is slotted to open up the Chinese market by providing the most affordable and awesome experience and finally the introduction of Mardi Gras ship in November 2020.

The main objective of introducing the four ships by the company is to provide high-quality services that will capture the customer’s anticipation and give them experience like never before. This will go ahead in putting the company in the best position globally in the provision of sea-related tourism as compared to the normal land tourism sites.

As part of the strategic plan to escalate its capacity and capture the attention of the world’s tourism industry, the company installed its ship operation in the majority of the continents while employing the latest technology that will make the vacation enjoyable and of high quality and enhances its profit base.

To be in line with government and territorial policies, the company has complied with all and has open up its communication channels and other disclosures such as the issuance of annual criminal reports. Norwegian Cruise Lines and Royal Caribbean Cruise Lines together with Carnival have publicized various criminal cases that have occurred in their operations in ships (Mohn, 2013). Such information is critical to consumers and government bodies and thus will help the company reduces legal battles and provide necessary security to its customers.

As a result of high taxation, the corporation may not be certain on the best approach to address the matters relating to taxation and especially corporate-related taxes. Even though this is the case, the company has got a financial muscle that can give them a platform to undertake the necessary lobby to achieve a favorable outcome.

Company’s Revenue Base

Based on the turnover, the cruising industry generates a lot of revenue and because of its market share, it is expected that Carnival Corporation is likely to expand its profit base. According to the American Association of Port Authorities, the industry generates approximately 38 US dollars and expected to grow by 7.2 percent yearly.

Concerning pricing, the company strategically places prices that are affordable to those who like vacations and thus allows them to enjoy within their budgets. The pricing of the cruising industry is much cheaper compared to that of land vacations with approximately 20% to 30% less expensive. In this case, Carnival corporation sets prices to capture potential customers not only from its direct cruise line competitors but also from the over-all vacationing industry.

Based on the taxation, the company operates under a corporate tax-free environment because the majority of its ships are registered in the Panama and Bahamas as well as other foreign countries, Carnival enjoys the revenue of United State users without the corporate pay (Ward, 2008).

Severson (2013) argued that Cruising companies have fewer ships than have foreign flags installed on them with their mother companies incorporated overseas and thus they subjected to the international regulatory framework and not the state laws. This has helped the company be law-abiding and support the laid down procedures in the industry.

Shareholders benefits

To ensure that all the shareholders get value for their investments, the company through its website has extended the benefits accrued onboarding on all the four cruise brands. This will go a long way in building trust and ensure continuity of the business in the coming years. Majority of these benefits are designed to boost the stakeholders involved in the success of the company as they will be motivated (Carnival, 2020)

Conclusion

Based on the mode of operation and general management of the company, it is evident that Carnival corporation has succeeded in laying a firm foundation in the operation of the cruising industry. The implementation of the strategic plans in the company has seen it grows over the years and has become a global leader in the industry. The competitive strategies employed by the company have resulted in global dominance in the industry.

References

Wheelen, L. T. and Hunger, J. D. (2006). Strategic Management and Business Policy. New Jersey: Pearson Prentice Hall