Assignment

Royal Caribbean Cruise Ltd.

Business Strategy
(Semester II)

PRESENTED TO:
Module Tutor:
Dianne Willis
Jane Young

PRESENTED BY:
Yasir Yasin Kayani
MSc Information Systems
33099193
Date: 08-05-07

TABLE OF CONTENTS Page

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Introduction to Royal Caribbean Cruise Line (RCCL) 1

Overview of RCCL Strategy 1
Formulation of Strategic Plan for RCCL 3
Strategy Analysis 4
Swot Analysis 4
Porter’s Five Forces Analysis 7
Porter Five Forces 7
Summary of Five Forces 8
Analysis Using 5cs Model 8
Market Segmentation 10
Value Creation 10
Customer Identification and Target Market 11
Focus Strategy 10
Age Group and Economies 11
Demographics 11
Alternative Directions for Market Development and Value Creation 12
The Tows Matrix 13
New Strategy for RCCL 16
Competitive Strategy 16
Horizontal Integration 16
Innovation 17
Strategy Using Evaluation Balance Scorecard 17
RCCL Mission Statement 17
Vision 17
Goals 17
The Balance Score Card evaluation 17
Conclusion 18
References 19
Appendix A 21
Appendix B 23

1INTRODUCTION TO
ROYAL CARIBBEAN CRUISE LINE (RCCL)
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This report is written in context to analyze and evaluate the current competitive and
strategic position of RCCL in the cruise industry. Reflecting this we have generated and
proposed strategic options for RCCL in globally competing environment for the future.
Royal Caribbean Cruise Ltd (RCCL) is the world’s second largest cruise company behind
Carnival Cruises, operating 34 cruise ships with 67,550 berths and around 310
destinations was established in 1968 SEC (2006), RCCL (2006). Cruising is fastest
growing industry (Appendix A) in the world. RCCL as a major player of the industry is
now well established and acknowledged operates three cruise brands on a variety of
itineraries. Royal Caribbean International RCI, serves contemporary and premium segments
of the cruise vacation industry, Celebrity Cruises CC, serves the premium segment of the
cruise vacation industry and Pullmantur Cruises PC acquired in 2006 serves modern
Europeans and Latin American vocation cruise industry. In addition to this in 2000
RCCL formed a joint venture with First Choice Holidays PLC, one of the largest tour
operators in the United Kingdom. This alliance operates a cruise brand name Island
Cruises IC, offering range of itineraries intended to catch the fancy of passengers from
the United Kingdom and Brazil. Contemporary section is served by cruises that are seven
nights or shorter and characterized as casual cruising in the industry (Stevenson, 2004).
The premium division is served by cruises that are usually seven to 14 nights and
indulgence to the more affluent and experienced customers. RCCL claims that they serve
on the basis of large number of quality ships, service, price and itineraries

OVERVIEW OF RCCL STRATEGY

As per the given case (Stevenson, 2004), RCCL have practiced diverse strategies in
between 2004 to 2007. RCCL have been engaged in capital expansion program by
building new and large size ships. Aggressive fleet and capital expansion program
resulted in huge capacity is slowing down by 17 % from 2004. SOLSTICE for Celebrity
and Freedom Class III for Royal Caribbean are supposed to be delivered in 2008 (CLIA,
2006). TBA ship is due in 2007 with the cost of US$ 720m in 2007 part of its expansion
program (Mintel, 2004). RCCL have worked on market development and added new
itineraries departing from major US ports to meet the demand in 2003. RCCL has
expanded its market in 2000 to catch European customers operating through European
itineraries with their strategic alliance First Choice Holidays PLC Island Cruises, and
Pullmantur Cruises (PC) acquired in 2006 (SEC, 2006) offering the best cruising
experience to its customers on the basis of quality of ships, quality of service, variety of
itineraries and competitive price. RCCL have developed its new products by introducing
new innovative packages, which includes wireless internet, mobile and computing
technologies, rock climbing, basket ball courts, gamming, onboard dinning, entertainment
and shopping. RCCL have managed to control the operating costs and optimize revenue
per berth through the integration of sophisticated information processing systems to
manage computerized transmission of customer information, administration, marketing,
inventory and decision making. RCCL’s current strategies are to overcome competitive
circumstances and turn potentials into profits by product development, market
development, product differentiation on Celebrity Cruise (CC), and aggressive
advertising and media campaign “Get Out There” started in 2000. Sophisticated
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management systems are deployed to enhance revenue from demand of quality service,
product and low fairs (RCCL, 2000). Further more improvements are made by
introducing new technological capabilities to maintain a strong relationship with travel
agencies, shipyard fabricators and other industry distribution channels, and offering
customers direct access through interactive websites. These web sites include all feature
related to customer reservations and transportation, including arranging hotel reservation,
air and road transportation. RCCL has launched an online passenger loyalty program;
“Crown & Anchor Society” has over 4.1 million registered members. This membership
provides customers a dedicated section in the www.royalcaribbean.com with special
cruise offers, vocation packages and onboard services. RCCL became able to produce
huge revenue to take up on marketing, selling and administrating expenses.

FORMULATION OF STRATEGIC PLAN FOR RCCL

Thinking about the most appropriate strategies and implement changes in strategic
direction for RCCL is very essential in the competitive environment. This plan is about a
situation analysis with the help of different tools, determining the strategic position,
generation of options, evaluating, selecting and suggesting the most appropriate option.
A Generic Strategic Model Adopted from: Chaffey D (2004)

Strategic
Analysis

Internal External
Analysis Analysis

Strategic
Position

Strategy
definition

Strategic Option Option

options evaluation Selection

Strategy
Implementati
STRATEGY ANALYSIS on
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The primary objective of strategic analysis of RCCL situation is to gather information

about its very competitive strategic area. Adequate and relevant information can be
collected by different analysis. Two analysis tools are used to extract information form
the given case.

SWOT ANALYSIS

To analyze the internal and external environment of the RCCL and examine the current
state of the business SWOT Humphrey (1970) analysis is used to find out strengths,
weaknesses, opportunities and threats. A SWOT analysis provides a framework to
evaluate internal and external elements of an organization and depicts a picture of the
current position in the market Thompson, Martin (2005).
Here we have used SWOT for internal and external audit of RCCL.

Strengths Weaknesses

Opportunities Threats
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Strengths are those or capabilities of RCCL which can be used for competitive
advantages.
Strengths
1. Second largest cruise company with three brand names, owns voyager class
world’s largest ships, highest percentage of its fleet (80%) serving in the US
(Ebersold, 2004).
2. 310 worldwide destinations in the Caribbean, North America, South America and
Europe and Australia (SEC).
3. Fleet of 34 ships and 65,550 berths capacity driving revenue growth (Mintel,
2004)
4. Strong revenue in 2004, 2005, 2006.
5. RCCL have direct relationship with 30 thousands agencies and provided direct
access to its computers, various online booking applications and facilities has
been provided to the agencies
6. Use of Internet, latest IT software’s to manage daily operations, business
information processing, decision making and marketing.
7. Strategic alliance with one of the dominant tour operator First Choice Holidays
PLC UK and establishment of new brand name of ISLAND Cruises
8. RCCL have youngest average age of ships Celebrity cruise 5.6 and 5.8 for RCC
Mintel (2004).
Unavailable resources or capabilities can be considered as weakness of RCCL.
Weaknesses
1. Lower operation margins due to high fuel prices, operating and marketing cost.
2. Debit equity ratio i.e. 1.31 is higher than average industry ratio 0.69.
3. Commission based agencies have direct influence on customer and can
manipulates their choice.
4. Less capital access due to low market share 33 % in 2004, that is lower than main
competitor.
5. Poor standards of waste management and sewage water etc.
6. Heavily rely on distribution channels.

External audit of the environment can expose new opportunities for RCCL.

Opportunities
1. Only 17 % population in US have tried cruise experience leaving great
opportunities for market growth in US (CLIA, 2006).
2. Air lines ticket prices are high and aviondance of air travel in Europe and
America.
3. Opportunities of addition of new itineraries locally and world wide. New market
being created e.g. Africa and after ASEAN freed trade and cooperation
agreement, Hong Kong, China, Japan, and Taiwan could be the potential target
market. Europe, Australia, New Zealand and Arabian seasonal markets are very
attractive for customer from winter affected countries.
4. Approximately 41% of the UK population are interested in going on a cruise in
the future, 49 % USA population is encouraging for the by 2050. (Mintel, 2004)
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5. Improvements in operating infrastructure, IS/IT infrastructure, new itineraries and

destinations, different cruise packages, online gambling, which is banned in US
can be introduced on ships out of US territories.
6. Attract customers for musical concerts, conferences and entertaining activities.
7. Tight security measures and strong environmental polices (green marketing) can
be used as a tool to attract customers.
8. Small companies can be merged into RCCL e.g. Crystal Cruise, or establish
alliance with Star Norwegian, Holland America operating from Europe.

External threats are always there for any firm in the environment which must be analyzed
to be competitive.

Threats
1. Failure of the economy to make a full recovery and unemployment in US
continues to hold 6% which can affect the cruise industry, home land cruising in
US is getting popular it can affect international market
2. High fuel cost rose at 60 % in the past years 2002, 2003 and continues to increase
which had a negative effect on operating cost.
3. Euro-Dollars exchange rate has a significant affect on cruising industry, Euro has
raised in recent years
4. National and international GDP trends US, Europe, Canada, Australia and in
South Asian Countries etc.
5. Delays in ships construction and poor quality from supplier and bargaining power.
6. Cancellation due to technical or mechanical problems, unplanned repairing can
impact customer contentment.
7. Strict environmental policies in US and other countries, OCEANA campaign
against poor sewage standards can change customer perception.
8. Other competing forces e.g. Carnival’s larger market shares that is 52 %.
9. Health and safety issues, viral out breaks, terrorist threats are danger for
vacationers and RCCL operations.
10. Customer’s misperception about cruising, life style and changing behaviour.
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PORTER’S FIVE FORCES ANALYSIS

After completing SWOT analysis Porter’s (1985) Five Forces Model is used to
understand the nature of competitive environment, reflecting these situations will help us
to determine the current competitive and strategic position of RCCL. These five forces
are:
Threats of
new
Entrants

Bargainin
g power of Existing Bargainin
Suppliers Rivalry g power of
Buyers

Bargainin
g power of
Suppliers

PORTE FIVE FORCES

Rivalry among Existing Cruise Lines

1. Primary competition with Carnival and Star Cruises is rising on the basis of low
prices, attractive packages and innovation, itineraries, and service quality, so more
competitive actions are required.
2. Huge market shares of the main competitors “Carnival” and brand name can attract
and make more alliances.
3. Internet has widened the boundaries of competition with existing and increasing
number of competitors.

Threats of New Entrants

1. Due to large scale of market there is need of capital requirements for new entrants, so
it is not easy to enter in the industry.
2. It would be very hard for new entrants to market a new brand name in such a
competitive market. However substantial investment, alliances and partnership can
unbalance the industry.
3. Geographical boundaries itself are another barrier to stop entrants.
4. Dispensable economies in countries have a major influence on such a huge
investment.
5. Government regulations licensing and visa policies may stop new businesses to rise.
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Bargaining Power of Buyers

1. There is always Low price pressure from customer side; internet has reduced the
difference in competitors.
2. Trends and economy of customers, customer behaviour, and change life style (can
switch to air lines or other transport system) can have an effect on revenue.
3. Agency influence can manipulate customer perception; that is main distribution
channel of RCCL.
4. Web presence gives more power to customers, low switching cost for customers.
5. Customers are getting more service, package, environmental and security conscious.

Bargaining Power of Suppliers

1. Industry is dominated by few shipyard suppliers; in time delivery of ships, quality and
high cost, service and maintenance are the main issues.
2. Although RCCL have alternative options but low standard of food & leverage
supplier can have a negative effect.
3. Vendor name, quality of IT Services and products can have an effect on the
performance and efficiency.
4. Agencies are the main distribution channel, agency influence may raise or reduce
sales, closely need to monitor, not to be influential on customers perceptions.

Threats of Substitutes
1. Housing colonies on the sea resorts, hotels and there is possibility of floating hotels
with small boats for cursing can be introduced in the industry. Palm Tree in UAE is
example of another sea resort entertainment.

SUMMARY OF FIVE FORCES

The industry is very competitive; three main companies are competing on the similar
basis. RCCL need to create difference among competitors by appropriate actions.
Barriers to entry are very high because of the operating nature of the industry. New
market and product development and use of new technology can stop new entrants.
Internet is the main power of the buyers in sense of gaining information 73 % cruiser use
internet for gaining information (Mintel, 2004) about pricing and packages. Price, loyalty
and differentiation can lock in customers. Suppliers are available on competitive prices;
own brand name of RCCL can have positive effect on company image. Threats of
substitute are minimal cruising vocation is a quite unique experience; more onboard
innovation may reduce the substituting possibilities.

ANALYSIS USING 5CS MODEL

Competition now across cruise industry is very intense, new competitive technology
developments has ability to influence customer behavior and preferences. These new
technologies and electronic transaction could have an impact on the firm’s profitability
Afuah, Tucci (2000). This new technology is the presence of RCCL web and online
interaction of customer with RCCL. Booking agencies and customers have direct access
to RCCL information, availability of different applications to suppliers, RCCL
information processing systems and internet has a vital role need to be analyzed. After
analyzing RCCL traditional position we will focus on the new technologies which may
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have potential to influence the business and strategic position of the RCCL. This analysis
is based on Afuah, Tucci (2000) 5Cs model and E-commerce value grid Appendix B. We
will focus on properties of 5Cs model that depends on information exchange and could
have an impact on the electronic transactions of the RCCL and its performance.
Internet properties

Mediating Technology
Universality Business Models
Network externalities Coordination
Distribution channel Commerce
Time moderator Community
Information asymmetry Performance
Content
shrinker Communication
Infinite virtual capacity
Low cost standard
Creative Destroyer Environment
Transaction-cost reducer

Here we will try to analyze that how internet and e-commerce has been or not playing a
strategic and competitive role in RCCL operations. We will use 5Cs matrix to analyze the
role of e-commerce and values internet has provided to RCCL in competing and strategic
environment. Afuah, Tucci (2000) have defined ten internet properties, have a contact

Coordination: Use of internet and partial e-commerce activities has reduced the cost of
information exchange with customers, suppliers and in management operations e.g. with
how a company (RCCL) carries out its activities and what is the influence of the internet
properties is on the RCCL business. RCCL management coordinates with different
departments electronically; customer receives electronic tickets and confirmation without
shipping and posting. It has improves service and quality and reduced cost.
Commerce: RCCL is taking advantage of internet in obtaining and selling services and
goods e.g. in B2C electronic booking system, B2B procurement, industrial relations,
information processing, web transactions, B2G online taxation, C2B customers contact
feedback etc.
Community: RCCL community is much bigger than before using internet they have 4.7
million “Anchor society” members on royalcaribbean.com SEC (2006). User groups with
similar needs and feedback, chat rooms for views exchange, entertainment etc. These
groups are potential customers of RCCL.
Content: Number of information and entertainment contents are available on RCCL
ships, applications, variety of ways of communication, use of different technologies to
entertain customers, internet, music, gamming etc.
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Communication: RCCL has now potential to communicate, disseminate and retrieve

information from all over the world. Real time access of information, electronic
messaging, emails to and from customers, contacts with for suppliers, government
agencies and electronic transaction of customers information for different governments
while cruising in the meddle of the sea.
Here X indicates that which internet properties have added values in RCCL operations.
Afuah, Tucci (2000) 5C Matrix

MARKET SEGMENTATION
“Market Segmentation is about identification of different groups’ with in a target market
in order to develop different offerings (Chaffey, 2004 p 335). According to the given case
in 2000 RCCL have been targeting specific customers who are “explorers” and
adventurous travellers. RCCL have targeted active adults and vocation enthusiastic
families by launching “Get Out There” marketing campaign in Alaska in 2000. Cruising
is the fastest growing sector in North American curies market, with annual rate of more
than 9% since 1980 by 2002 Miller, Grazer (2002). However the problem exists for the
RCCL with bigger ships and enormous fleet capacity. The most challenging thing is that
where these customers come from, how and whom RCCL can attract more. Market
segmentation methodologies suggest us that knowledge of consumer behaviour,
economics psychology, demography’s, travel pattern, decision making service packages
and customer satisfaction are the key threads Hu C (1996).

VALUE CREATION
Value Creation is the process of creating demand of a product or service by focussing on
buyer whether it is individual, society or an organization Lepak D et al (2007). Business
strategy formulation spins around concepts of value creation and value capturing which is
improvement in service, quality, profitability or earning other benefits. In other way we
can create value by changing practices or strategies, by traditional approach of Porter’s
generic strategies

Cost Leadership strategy is low cost in the industry.

RCCL can operate on low cost basis in the US only, where customers are reluctant to
travel due to high prices and interested in home land cruising, while maintaining the
standard of services.
Differentiation is a unique valued product in the industry.
RCCL can compete on the basis of product differentiation, its new innovated large size
ships, especially Celebrity Cruises where customer is willing to pay for good services.

FOCUS STRATEGY
Porter (1985) focus strategy based on the choice of competitive scope within the
industry attempts to target a particular segment of the industry RCCL can capture high
degree of customers focusing on the particular segment presented below and turn into
potential profit.
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CUSTOMER IDENTIFICATION AND TARKET MARKET

“Consumer behavior research provides a foundation of marketing strategy and practice”

Dale, Robinson (1999). The cruising experience time after time exceeds prospect on a
wide range of important customer’s vacationing attributes, age, economies and
demographics. Customers must differ from each other in some respect otherwise
homogeneous customers can not be identified Hooley et al (2004). Market segmentation
is dividing a larger market into submarkets based upon different needs or product and
customer’s preferences. A key factor in competitive success of RCCL is focusing on little
differences that can give a competitive marketing edge and are important for cruising
customers. Market segmentation for RCCL needs match with customer age and
demographics differences with potential or actual cruising behavior. It may prove more
profitable strategy for RCCL to develop smaller market segments into a target segment.

Age Group and Economies

Research on the cruising market by Mintel International (2004) disclosed that baby
boomers are at the heart of the cruise market 34% of cruisers are aged from 35 to 54 and
76% of them are married. Families are the entire time main sector with 16% of cruisers
travel with their children age under 18 can raise huge sales for RCCL. Another potential
target market in North America for RCCL is adults 25 years or older, with household
earnings of $40,000 plus in US. This segment represents 44% of the total US population
FCCA (2007). Bermuda Tourism Research department reveals that a typical cruise
customer is female aged 49 to 52 with white color job is prospective target market Dale
C, Robinson N (1999). People over 49 to 60 are potential target with paid mortgages and
are usually well off with household earning of $84,000.

Demographics
As forecasted by FCCA (2007), a record number of 12.6 million passengers are expected
to cruise with 4.1% increase, with 10.6 million passengers originating in North America.
According to Mintel Reports (2004), demographic picture for the USA population is
encouraging especially for the cruise industry and particularly for the RCCL as it shows a
49% increase by 2050. Mintel (2004) consumer research report showed that about 41% of
the UK population are fascinated in going on a cruise in the near future, and one in five
Canadians are interested to have a cruise vocation in next five years. European
destination market is gaining popularity as cruise market. It is assured that European
market will grow from 70 to 80 % which represents 14 % of the total cruise market.

There are currently six customer segments in the North American and Caribbean cruise
market Miller, Grazer (2002).

Restless baby boomers 33 %

Enthusiastic baby boomers 20 %
Luxury seekers 14 %
Consummate shoppers 16 %
Explorers 11 %
Ship buffs 6%
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ALTERNATIVE DIRECTIONS FOR MARKET DEVELOPMENT AND VALUE

CREATION Johnson, Scholes (1999)

Present Product New

Withdrawal
Product
Present Consolidation
development
Market
Penetration
Market
Market Diversification
development (B&C)
New

• New diverse marketing strategy must be developed to attract all type of customers
instead explorers.
• New segmentation and marketing measures must be adopted both offline and
online. 13 % customers’ books online and 88 % cruisers use travel agents when
booking a cruise Mintel (2004).
• New packages, products, gamming, gambling, music concerts can be advertised
with different fares, and seasonal needs. One week packages are most popular
among customers Mintel (2004).
• South East Asia especially Middle East and Australia is a potential market.
(Market Development)
• Alternatives transport systems can be incorporated in cruise packages e.g. Royal
Caribbean Trains in US.
• RCCL have opportunity to operate chain of shopping malls and Royal Caribbean
Hotels on sea resorts. (Diversification)
• RCCL can diversify its services as a large market share holder; can invest to
create partnership with domestic and international air lines rail networks and tours
operators. (Related Diversification)
• Backward integration, forward integration in food, services, and ticketing can be
adopted instead suppliers with Royal Caribbean Brand name. (Product related
development)
• RCCL credit cards and loyalty cards are another way to catch customers with
promotional rates and loyalty discounts for card holders. (Diversification)
• Promotional packages for large size companies to arrange business meetings and
conferences and Celebrity functions.
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THE TOWS MATRIX

After different analysis provided above we have used TOWS to generate strategic options
for RCCL. Based on the option generated we will be able to take a step in strategic
directions. The TOWS matrix helps to develop four different types of strategies, provides
a conceptual framework for the future (Weihrich, n.d) about the combination of internal
formulate an efficient and effective strategy for achievement of its organizational
objectives and competitive edge. “TOWS matrix presents a means for facilitating
linkages and presents a framework for identifying and formulating strategies. It allows
various combinations of strengths, weaknesses, opportunities and threats to be considered
in combination and corresponding strategies to be generated” Proctor T (2000).
Details Appendix B
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INTERNAL FACTORS
EXTERNAL FACTORS
OPPORTUNITIES-O
1. Potential market in US,
UK, Canada, Arabian
Seas, and South Asia
2. Customers are avoiding
air travel in US and EU
3. Discover new Itineraries
in seasonal markets of
warm countries
4. Environmental, health &
security issues are
reducing other modes of
travel
5. Gaming, gambling and
musical concerts
6. Establish alliances with
other companies in
international market
7. Internet, e-commerce
and innovation
8. Backward and forward
integration
9. Target all type of
potential customers
including families and
over 60s customer
THREATS
1. Foreign exchange rate
2. Environmental factors
3. Viral outbreaks
4. Terrorism
5. High fuel prices
6. Distributors influence
STRENGTHS- S WEAKNESSES-W
1. Reputable brand name 1. High debit ratio, above
and development average industry ratio
16
capabilities 2. Distribution channel
2. Fleet of 34 ships and influences passengers
65,550 berths capacity, preferences
largest ships with high 3. Health & safety and
capacity, 3 brands security on board
3. Strategic alliance in 4. Low operation margin
Europe due to fuel prices
4. Strong online and off 5. Unplanned Ships
line marketing, Internet repairing
and e-commerce
5. Strong revenue, market
shares and profitability
SO STRATEGIES WO STRATEGIES
1. Use (S1, S2) to 1. (O1, W1) Market and
penetrate in (O1) product development
International Market & will derive high revenue
product development to eliminate debit
2. Use (S3) to target 2. (O8, W2, W5)
(feared) air passengers 3. Backward and forward
(O2) in US and Europe integration to reduce
3. Use (S1, S3) to attract & distributor & service
meet needs of (O3,O4) supplier affect.
customers from US 4. (O7, O9, W2) Extensive
Canada, and Europe to use of internet can
warm countries reduce intermediaries
4. (O4, S3,S4) Invest on affect
green issues and 5. (O1, W4) Consider
security, use aggressive alternate options, where
marketing to take operating and fuel cost is
advantage low
5. (O5, S1, S3,S4) Attract 6. (O4, W3) Invest on
customers for gamming, environmental, health
gambling, concerts and and security to Improve
conferences. W3
6. (O6, S4) Establish
alliances and
partnerships tactics
ST STRATEGIES WT STRATEGIES
1. (S1, S2, T1) Reduce 1. Use (SO) Strategies to
currency effect by eliminate weaknesses &
expanding in European threats
market 2. Try possible (SO)
2. Use (S3, S4 to remove strategy options and
T2, T3, T4) Invest on experiment them
environmental, Health & 3. Try to catch new
security measures markets or think
3. Use S3, to eliminate withdrawal from those
affect of T6 E- itineraries where profit
commerce can reduce margin is low, cost is
commission base agents high
4. Use (S3) to reduce affect 4. More strategic alliances
of (T6), Backward and
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NEW STRATEGY FOR RCCL

Until now, we have used SWOT, 5 Forces, 5Cs and TOWS to analyze the current
strategic and competitive position of RCCL. Various options are emerging through
analysis. It is very essential for RCCL to evaluate and implement a strategy, which is
appropriate, feasible, acceptable and sustainable in the competitive environment.

During the previous strategic phase from 2000 to 2004 RCCL has been working on
market penetration (Pullmantur acquisition operating in Europe), capital expansion
(introducing new ships e.g. Liberty of the sea and many more), product development
(introducing new packages e.g. more on board entertainment, shopping, ice skating etc)
and innovation (implementation of new technology in ships) internet e-commerce etc.
These activities have generated total revenue up to $5229.584 6.7% increased in 2006 as
compare to 4555.375 in 2004 and net income $3.01 in 2006 from $2.39 in 2004. To
compete and increase large market shares RCCL have to take steps in new direction.
New strategies are based on:

Strategic initiatives concentrate on strengths and opportunities to make RCCL

outstanding in target customer market
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SO Strategies Option 4, 5, and 6.

ST Strategies Option 1, 2

COMPETITIVE STRATEGY (Porter, 1985)

Parameter 1
Due to intense competition in the market RCCL prices must be comparable with Carnival
and other competitors by creating superior position and profitability, to capture large (US
market segment 44% youth and 54 % Female customers with house hold earning of
$40,000) and growing European market segment which is conscious about SO option 4
presented above.
Parameter 2
RCCL can add value by using SO options 3 and 4 in 16 % over 50s segment by creating
attraction in SO option 5 with house hold earning of $84,000. Parameter 2 could be used
by adding value in same area of parameter 1, by premium charge as Differentiation but
any one could be used at same time.

HORIZONTAL INTEGRATION

Acquisition
On the basis of SO option 6 RCCL can work on (acquisition) strategic alliance with Star
Cruises market share 9.3, Holland America 7.0 in 2003 both are large market share
holders after RCCL. Firstly, this action will increase market share under RCCCL brand
with out buying new ships, secondly, this step fulfils generated SO option 6 and
automatically fulfils ST option 1 the main threat to RCCL can be removed.

INNOVATION
Innovation is liked with two above strategies, giving significant change to existing
patterns of offering by new technology. Replacement of existing package with
completely new trends

STRATEGY USING EVALUATION BALANCE SCORECARD

The Balanced Scorecard is a strategic approach developed by Kaplan and Norton (1993),
provides a comprehensive framework that translates a company’s strategic objectives into
a coherent set of performance measures and management system, which enables to
translate a company’s vision and strategy into implementation from four different
perspectives. These perspectives are Financial Perspective, Customers Perspective,
Internal Business Process Perspective, Learning and Growth Perspective.

RCCL MISSION STATEMENT

RCCL vision is to empower and enable its employees to deliver the best vacation
experience to its customers, by this means generating superior returns to stakeholders and
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enhancing the happiness by superior providing cruising vocation to communities across

the globe.

VISION
World class Provider of cruising and vocation pleasure.
Reputation of RCCL and its brand names
Innovative and strong partnership with alliances

GOALS

Fully customer satisfaction, RCCL promise to deliver best cruising services, high quality
results in term of revenue.

The Balance Score Card evaluation

Perspective Objectives Measures

Customer RCCL should focuses on potential 1. Increased in customer

. customer and their maximum turn over in segmented
satisfaction as segments areas
recognized above 2. Maximum customer
satisfaction
Financial RCCL should measure the 3. Less operating cost
traditional fiscal health previously 4. High Share per
earned by RCCL and its new customer/ berth
market position with regard to 5. Increased in market
shares with absolute share
professionalism.
Internal Business Measure internal inputs, 6. Enhanced customer
Processes operations, practices and satisfaction from
experiences with innovations of innovative services
internal system process for 7. Efficiency,
increased efficiency and Effectiveness
effectiveness
Growth and Learning Measures progress towards 8. New markets share
achieving the maximum customer with respect to market
attraction, development and size
withholding of large cruise market 9. Core competence value
share by alliance and acquisition,
innovation and technology.

Each perspective presented above contains unique objectives. Objectives are the means
whereby RCCL will achieve its strategic goals. RCCL should use Scorecard to monitor
its performance and actions.

CONCLUSION
 20

In the presence of inflation in economies, security threats, viral out breaks and on the top
intense competing environment and changes in travel pattern can affect any industry and
specially vocation industry. Though, in depth analysis of research literature on the cruise
industry suggest that market is growing very rapidly and there are minimum signs of
market crash. For RCCL it is very essential to obtain the large part of market shares,
instead disposable capital like berths capacity. In this report, current position of company
is closely analyzed, powerful tools and techniques are adapted to recognize and pullout
the real threats, opportunities and competing forces for RCCL. Business process,
operating issues, supplier, customers, income and profits even many thing have been
objectively examined. E-commerce and technology is also brought into account for
sustainable growth and marketing. The fundamental aspect highlighted is the core
competition in the complex market.

On the basis of analysis tools used in report, we have suggested competitive strategy with
combination of horizontal integration and continuous innovation to virtually attract every
segment in different location on different brands, although, suggested for particular
segment. All strategies are the result of environmental scanning of given organization,
and use of strategic management techniques like SWOT, TWOS, and Porter (1985)
generic strategies. On the basis of these tools strategy is generated and evaluated
accordingly. Balance score card is used to measure the worth of proposed strategy.
Apparently, this is worthy strategy in the direction to achieve the strategic position and
competitive edge. However RCCL needs multidimensional measures to check the
performance of applied options through out the course of operation. Apart from the
expected benefits of suggested strategy, the formulated strategy would also bring the
benefits of more market development and market penetration.

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from: <http://www.cruising.org/press/overview%202006/2006OV.pdf> [Accessed on
01-05-07]
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[Internet], Available from: < Website: www.f-cca.com/overview2007>

Dale C, Robinson N (1999), Bermuda Tourism and the Visiting Cruise Sector, Strategies
for Sustain Growth. Journal of Vocation Marketing, Vol. 5, No. 4
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Ebersold W B (2004), Cruise Industry in Figures, BusinessBriefing: GlobalCruise,

Maritime Administration, US Department of Transportation. [Internet], Available
from :< http://www.touchbriefings.com/pdf/858/ACF7B5.pdf> [Accessed on 03-03-07]

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available from :< www.f-cca.com> [Accessed on 28-04-07]

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3rd Ed, UK, Prentice Hall

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Segmentation, Journal of Consumer Marketing, Vol. 20, No. 5

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Approach, International Journal of Contemporary Hospitality Management. Vol. 8, No.7
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[Accessed on 28-04-07]

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Perspective, Academy of Management review, Vol. 32, No. 1
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supply, demand and projections.

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Impact Matrix and TOWS, Journal of Management in Medicine, Vol. 14, No. 1

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 22

Royal Caribbean Cruise Limited (2000), Annual Report, [Internet], Available from :<
http://media.corporate-ir.net/media_files/NYS/RCL/reports/2002AR.pdf> [Accessed on
03-05-07]
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<www.royalcaribbean.com> [Accessed on 01-04-07]
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Opportunities

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[Internet], Available From :< http://www.secinfo.com/DB/SEC/2007-000/0884/887-
0000/43-023.pdf> [Accessed on 30-04-07]

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Francisco [Internet], Available From:
<http://www.usfca.edu/fac_staff/weihrichh/docs/tows.pdf [Accessed on 15 April 2007]

APPENDIX A

INDUSTRY INTRODUCTION
According to Stevenson R (2004), US SEC 2006, Cruising is the one of the fastest
growing industry since its establishment in 1970. North American passengers have grown
to 10.08 million in 2006 from 0.5 million in 1970 with annual rate of 9 percent. A
considerable growth rate has noticed from 2002 to 2006. In 2000 North American market
was served by more than 112 vocation cruise ships with more or less 156,987 berths. This
capacity has grown to significant amount of 229,486 berths with 140 cruising ships in
2006. Numbers of cruise lines are operating in the global market, two major players of
North American Cruise market are Royal Caribbean Cruise Line (RCCL) and their
competitors Carnival Cruise. Both compete on the basis of quality of ships, service, price
and a variety of itineraries and destination.

E-COMMERCE AND TECHNOLOGICAL DEVELOPMENT

 23

RCCL has been continuously investing in technological development to support and

improve company infrastructure and passengers relationship. These IT applications
include CruiseMatch 2000 that provides direct access to RCCL parting agencies to book
tickets online, FormScape to manage financial services; an Internet browser based
booking system CruisePay, a online payment system Insight, a booking summary report
writer system Cruise Writer. RCCL operates two interactive web sites
www.royalcaribbean.com and www.celeberity.com for customers with booking
capabilities. These web sites offer customers a great piece of convenience by providing
access to all relevant information and processing information electronically.

E-COMMERCE VALUE GRID ANALYSIS Riggins (1998)

Value Grid helps to identify new opportunities through different applications, companies
compete along five dimensions of commerce using various modes of interaction;
organizations compete over both time and distance to provide some product or service to
their customers through a chain of relationships. These values can be utilize to measure
use of E-commerce in RCCL

Value grid analysis of technologies and use of internet in RCCL

Efficiency Effectiveness Strategic

Time Time saving Quick Information Internet has no time

accessible limit fast billing,
invoicing
Distance Reduced the Single gateway Websites
distance strategically
competing
Relationship Direct access, Online marketing User dependent
Removes
intermediaries
Interaction Better CRM, User could be Customer chat
monitored rooms etc.
Product On line product Quick Decisions Flow of information,
promotion, single channel
evaluation,
comparison

TOWS
 24

THE EXTERNAL AND INTERNAL ENVIRONMENT

In a situational analysis of RCCL as presented above, we have first listed and analyzed
the threats and opportunities in the external environment and than internal weaknesses
and strengths of RCCL. We can generate strategic options with combination of these SO,
WO, ST and WT.

STRENGTH AND OPPORTUNITIES STRATEGIES (SO)

This situation analysis strategy formulation matrix represented greatest strengths to take
advantage from opportunities. RCCL contains potential to take advantage of
opportunities by deploying its feet in to international seasonal market. For instance
Australia, Newzeland, Arabian and South Asian resorts are potential market for
customers from Europe Canada, and US where there is heavy clod winter. RCCL large
market shares brand name reputation attracts more small operators to create partnership.
Aggressive online and offline marketing strategies can be used to take advantage of
environmental issues and airlines bad security measures.

WEAKNESSES AND OPPORTUNITIES (WO)

The growing material comfort of western customers has resulted in substantial growth in
the cruise industry. RCCL must use alternative options in line to introduce a wider
spectrum of customers to take over weaknesses. In order to minimize the stress of
weaknesses market and product development will derive high revenue to eliminate debit.
Backward and forward integration tactics can be adopted to reduce distributor and service
supplier influences. Extensive use of internet can reduce intermediaries affect. Consider
alternate options, where operating and fuel cost is low, improvement by investing on
environmental issues and tight measures of health and security can provide a competitive
edge.

STRENGTH AND THREATS STRATEGIES (ST)

One of the greatest threats to RCCL is fuel price continuing to rise. Alternative options
can be used for example RCCL can deploy its fleet in Europe to reduce unfavorable
exchange rate where higher prices for the customer can put positive effective. Where the
market is growing and competition is less as compare to Caribbean.

WEAKNESS AND THREAT STRATEGIES (WT)

The primary objective of the WT strategy is to minimize both weaknesses and threats.
RCCL is facing with external threats and internal weaknesses but indeed not in a
precarious position. In such case RCCL may need dropping off its operations or merger
with other companies however intent of either overcoming the weaknesses or hoping that
the threats will diminish over time is often not a wise thinking.

APPENDIX B

FINANCIAL REPORT
Financial comparison based on reports of 2003 and 2006 are compared to check company
financial strength.
 25

To Check Income ratio on Total Sale 2003& 2006

Net income / 2003 280.70/3784.20*100= 2006 $633.92/5229.58*100=
sale * 100 $7.41 $12.12
To check what is worth of RCCL to pay back debit from total equity
Total Liabilities (long term)
Total 2003 5475.80/4262.90= 2006 373.422/6091.57=
Liabilities/ $1.28 $0.06
share holders
equity
To check position of RCCL in terms of how much their current assets are
Current asset/ 2003 574.6/1549.30= 2006 104.520/1872.386=
current $0.37 $0.05
liability
To check ratio of G.P on sale (cost of sale)
Gross 2003 1403.20/2381.20*100= 2006 3399.76/1829.83*100=
profit/cost of $58.92 $1.85
sale*100
To determine the amount of sale generated from each dollar of asset

Revenue/sale/ 2003 3784.20/11322.70= 2006 5229.58/1339.09=

total asset $0.33 $3.90

Industry Growth (SEC, 2006)

The following table details the growth in the North American cruise market of both
passengers and estimated weighted-average berths over the past five years:

Year North Weighted-Average

American Supply of Berths
Cruise Marketed in
Passengers(1) North America(2)
2002 7,640,000 163,100
2003 8,195,000 182,600
2004 9,108,000 206,700
2005 9,909,000 216,300
2006 10,836,000 227,300

Projected supply and demand growth worldwide, 2000-09 Mintel (2002)

Year Berths Increase Passengers Growth

2007 367,000 3.4% 14,387,000 4.0%

2008 380,000 3.6% 15,106,000 5.0%

 26

2009 400,000 5.3% 16012, 000 6.0%