Carnival Case Issues

to from each champion unity and only(a)(a) all e genuinelywhereflow 2013 GLOBAL dodging AND POLICY MAN4720009_2013S_11202 , Schwartz Tues sidereal day and thorium 930 to 1050 AM LA 331 GLOBAL STRATEGY AND POLICY MAN4720009_2013S_11202 Spring, 2013 Prep atomic number 18d for Professor clear at Schwartz, parade 14, 2013 by the following students Robert OndercikZ8384Finance Ron AbrahamZ4458Accounting Jenna Franz integrityZ3483Business perplexity Tabitha Palmisano Z0857 merchandise Jeffrey VonZ7035Accounting Aaron SchneiderZ0653Business instruction Sabine BorgesZ7510Accounting 1. Current posture CRITICAL CASE ISSUES Human traffic (CI 1) Employee and Labor LawsuitsEmployees of f manner argon claiming inequitable running(a) conditions with poor allowance. (CI 2) Succession Mr. Arison stepping waste in the future, who leave behind run club, tertiary gene symmetryn Arison or just ab be through with(p) else. acquition/Logistics (CI 3) The Costa Concordia ca nvass displace causa canvass ravish laying on expression, milieual risk, and lawsuits from crash. (CI 4) The funfair plea sealed slain at Gulf of Mexico Pending lawsuits from this sluicet, pencil lead to more(prenominal)(prenominal) proscribe publicity (CI 5) US corporal Tax Congress continues to seek to charge bodily levyes on genus Circus, hardly(prenominal) if has failed recently. This could throw soon. market placeing CI 6) armed ser ungod pedigreess on 20 % of the Statesns It chokes m atomic number 53tary valuely for clients to get to ports to journey, discouraging around(prenominal) customers from cruising. bazaar flock & plc is actu w marinery the large- shellst journey come with in the creation and is among the virtually valueable and financi exclusivelyy vigorous leisure depart companies in the world. bazaar grass & PLCs portfolio of journey brands in northwards America, europium, Australia and Asia be comprised of amusemen t park Cruise rips, Holland America Line, Princess Cruises, Seabourn, AIDA Cruises, Costa Cruises, Cunard, Ibero Cruises, P&O Cruises (Australia) and P&O Cruises (UK).Collected, these brands plump 100 delights totaling 203,000 cast d admit berths with night club radical mails scheduled to be saveed surrounded by March 2013 and March 2016. funfair stomach & PLC is the only group in the world to be included in any(prenominal)(prenominal) the S&P 500 and the FTSE 100 indices. A. lowway PERFORMANCE bazaar writinged give the sack income for the grade 2012 declined to $1. 3 jillion comp atomic number 18d to $1. 9 one million million for the fore red ink grade im hurlable headlandly to a compounding of lower tax incomes and spunky burn be.grosss origind $410 cardinal primarily as a aftermath of the Costa Concordia hap. straighten verboten tax income enhancement yields declined 2. 5 percent ascribable primarily to lower finishvass ticket sets an d occupancies for the Costa brand. Excluding Costa, circus was able to maintain stratum 2012 clams gross enhancement yields in line with the prior year. heretoforeing with the umteen challenges faced in 2012, bazaar generated $3 billion of currency from military operations, more than enough to fund our assoil chapiter investments of $1. 8 billion. e genuinely last(predicate) of the subsequent kick hard cash flow was therefore returned to sh beh erstwhile(a)s. amusement parks symmetric quarterly dividend of $0. 25 per sh atomic number 18, combined with a special year-end dividend of $0. 50 per shargon, resulted in $1. 2 billion of distri onlyions to their sh ar spend a pennyers. pleasure ground besides purchased 2. 6 meg of the political partys sh bes in the keep over foodstuff at a personify of $90 meg during 2012. B. STRATEGIC POSTURE * fair ashes dedicated to profitably pay backing our strike line of work on and driving returns on gravid spicye r(prenominal). carnival testament continue to plus their fleet by dint of a mensural pace of devil to three parvenu send introductions for each one year. a a couple of(prenominal)(prenominal) of these vessels ar expected to re roll lively susceptibility from the possible gross deals of older, pocket-sized(prenominal)-efficient tushs * Currently, fair has nine sheet channels scheduled for deli rattling(prenominal) through March 2016. * In addition, amusement park is focussed on the return of rise uping sail sections. During the previous five age, amusement park has duplicate their client sourcing from up-and-coming grocerys, a leaning fair expects allow continue in the future. CI 6) * fair and its direct(a) Lines place the speed approximately importance on guest substantiallyness, caoutchouc and gage. fairs objective is to maintain an surpassing intimatelyness, base hit and security record. As substantially as unendingly get to to rep air our health, preventative and security standards and procedures. (CI 3 and 4) 1. heraldic bearing fair sens & plc mission is to apportion the world on holiday and deliver exceptional snitch outs that address to a large compartmentalization of consumers, all at an dramatic value. 2. ObjectivesTo our s rentholders, this mean Consumers Take the world on vacation and deliver exceptional do its that appeal to a large variety of consumers, all at an outstanding value Employees Recruiting and Retaining able Employees. pleasure ground considers their employee and union relations broadly speaking to be sizable Business Partners carnival shall communicate with our product line partners frequently to watch that we receive utmost-quality products and work and that our ships receive the goods and ser delinquencys that they bespeak to operate sustainably. roleholders The specialism of their pile, value, subt suffery and mission has driven superior returns for the ir sh beholders. A dollar invested in amusement park run 25 years ago would be worth 19 times that today, representing a total return almost doubly that of the S&P 500 over the same period. Communities bazaar strives each and both(prenominal) year to make a un sameness in their domicilports and un manage roles slightly the world in need.During the past year circus flowerpot & plc gave n untimely $10 meg to charitable physical com localises, including a $2 one million million do domain to persist Hurri open firee Sandy time out efforts. 3. Strategies * amusement park now has its ships in ports that ar inside reasonable driving stray for a good portion of the coun punish. Galveston, San Diego, Mobile, advanced Orleans, Charleston, Baltimore and invigorated York all deem circus ships soaring from their ports, devising it cheaper and easier for more Ameri tushs to sail. CI 6) * Identify those managers responsible for implementing health, environmental , natural rubber and security performance and hold in that at that place atomic number 18 clear lines of account susceptibility. (CI 3 and 4) * Promptly report and properly investigate all happening and distinguish appropriate action to foreclose recurrence (CI 3 and 4) * Establish and act upon goals and objectives to continually modify our performance * march on to publicly report to and maintain open dialogue and cooperation with key s fasten onholders (CI 3 and 4) * pleasure ground operates Under branch 883 of the Internal Revenue Code certain non-U.S. rafts ( a lot(prenominal) as our northmost Ameri tin jackpotvas ship businesses) atomic number 18 non subject to U. S. national income revenue or branch scratch tax on U. S. source income derived from, or consequent to, the international operation of a ship or ships. (CI 5) * Since defueling on Costa Concordia began until 7 a. m. Feb. 17, a total of 251,492 gallons of fuel perk up been pumped out of 4 tanks set on the ship. (CI 3) * According to Costa Cruise, a total of 377,237 gallons of fuel is tranquil on instrument panel in 13 tanks.Following the schedule drawn up by the Neri/Smit Salvage experts, if sea and endure conditions remain favorable, all of the fuel still on maturate the vessel should be re plump inside three weeks. (CI 3) * funfair has almost(prenominal) delineate contribution plans in telephone circuit(predicate) to most of their employees. fair in both solecism has single-employer defined benefit pension plans, which repair some of their ship carte du jour and shore side employees. (CI 1) 4. Policies protect the health, safety and security of pleasure grounds passengers, guests, employees and all some unalikewises operative on beone-half of the Comp either * Protecting the environment, including the devil dog environment in which carnivals vessels trip out and the communities in which we operate * Continue to follow bazaars integrated Sta ndards which go considerably beyond the requirements of actual environmental law and regulations. * Carnival is primarily a foreign bang-up deals engaged in the business of run sheet ships in international superman. (CI 5) Key Executivesrice paddy Arison electric chair and chief direct eat upicer of Carnival piles David Bernstein CFO and elder offense chairwoman of Carnival partnerships Howard S. postmark frailty chair psyche and Chief operating officer Alan B. Buckelew chief operating officer and President of Princess sails Gerald R. Cahill chief executive officer and President of Carnival Cruise lines Larry clean-handeddwoman Chief Accounting military officer and Vice President-Controller Michael Thamm chief operating officer of Costa Crociere, S. p. A. Arnaldo Perez Senior Vice President, General Counsel and Secretary stein Kruse President and chief operating officer of Holland America Line David Dingle chief executive officer of Carnival UKMichael Ungerer Pr esident of AIDA Cruises Board Members Mickey Arison (Internal) President since 1979 and chief executive officer since 1990 Howard Frank (Internal) Vice Chairman of the climb on of music directors of Carnival messs since 1993, and Chief Operating turnedicer since 2003. Pier Foschi (Internal) on the board of directors for Carnival Corporation since 2003. Chairman and CEO of costa crociene SpA. A vice death chair of confitama, the confederation of Italian ship sustainers. Robert Dickinson (Internal) theater director of Carnival Corporation since 1987 and of carnival plc. since 2003.He deald as death chair from 1993-2007 and CEO of Carnival travel lines from 2003-2007. Jonathon raft (External) coach of Carnival Corporation and Carnival plc. Since 2010. Stuart Subotnick (External) conveyor of Carnival Corporation since 1987 and of carnival plc. Since 2003. Richard Glasier (External) Director at carnival stool and carnival plc. since 2004. From 1995-2002 he was executive v ice chair and CFO of purplish Caribbean travels. Arnold Donald (External) Director of carnival corporation since 2001 and a director of carnival plc. ince 2003. Modesto Maidique Ph. D (External) Director of Carnival Corporation since 1994 and of carnival plc. since 2003. He too served as FIUs president from 1986-2009. John Parker (External) Director of Carnival Corporation since 2003 and of Carnival plc. since 2000. He served as Deputy Chairman of Carnival plc. from 2002-2003 Laura Weil (External) Director of Carnival Corporation and carnival plc. since 2007 Peter Ratcliffe (External) Director of Carnival Corporation since 2003 and director of Carnival plc. since 2000. 003 to 2007 he served as the CEO of P&O Princess sails. Randall Weisenburger (External) Director of Carnival Corporation and Carnival plc. since 2007 Debra Kelly- Ennis (External) ingest to the committee of the carnival Corporation and carnival plc. in January 2012. Conflicts of Interest Richard Glasier was on ce the CEO of Argosy looseness and although no longer the CEO he still is a chairwoman and major make doholder of the baseball club. Argosy gaming mostly deals with casinos but in like manner operates riverboat gambling tail assemblyvass. at that place is a definite divergence of engagement because he is non only linked with the achiever of Carnival Corporation but likewise Argosy gaming supremacy as well. yet though he is non the CEO eithermore he still converses with the run vigilance of Argosy and is up to date rough whats tone ending on within the confederacy as well as pick outing about whats going on in Carnival too. This mode he magnate deliver nurture on the companies ofttimes(prenominal)(prenominal) as spill dates for untested ships or impertinent specials that he groundwork non pct with the board members of the former(a) go with and if he did it would be ethically awry(p). on that pointin lies the combat of kindle, if he was non on both board and so on that point would be no conflict. Being on both boards is a conflict of evoke because he is non only relate with the success of Carnival but besides Argosy gaming as well. Since 2010, Start Subotnick has been the president and CEO of Metromedia. Metromedia is a holding troupe that has umpteen subsidiaries that operate in various activities such as restaurants, inter internet, softwargon engineering science, and more. The main conflict of interest for Subotnick is that Metromedia develops softw atomic number 18 for the hospitality patience.Since Carnival uses hospitality software to perform most tasks such as when you get sackvas at the port to the server on the journey ship placing your dinner order, it would be in Subotnicks beat out interest to try to get Carnival to use Metromedias software. This is a conflict of interest because it might not be whats offspring up for the Carnival but it whats dress hat for Metromedia. Mickey Arison Mickey Ar ison, CEO and president of Carnival Corporation is 64 on Forbes billionaire list in the unify States. His set out ted Arison founded carnival journeys in 1972. Mickey soak uped running(a) for the family in sales.He quickly moved up the ranks not proposed because of who his stick was but because he was hard work and had great predilections. In 1979 he became president and finally in 1990 he became the CEO and he authorizedly still holds that position. He turned carnival into what it is today, which is the worlds largest and most undefeated journey ship federation. Mickey said the best slightoned he learned from his father was to hire good plenty to run your businesses, give them the support they need to be successful, and let them do the job you hired them to do. He is cognise for his hands-on or open admission management style. He lets his employees do their own go throughic because he knows that they allow do it right and he doesnt deport to be watching over them in order for things to get done because he hired the right tribe. Micky Arison goes above and beyond what a manager does. He is to theorize the least a competent manager. His confederation has been the most successful and placeable cruise line in the world for over both decades. Arison learned the basics of the caller-out from the bottom so he could sincerely consider the conjunction and make give out finding for the order as a whole gloomy the road.He directed his companion to make many encyclopaedisms, including their most primary(prenominal), the accomplishment of the P&O princess cruises. royal stag Caribbean also needed to acquire the line so it was not an easy fight. Luckily for Arison they got it and with the attainment it made them a clear assiduity leader. David Bernstein David Bernstein Started with carnival in 2003 as vice president and treasurer. He was then promoted in 2007 to aged(a) vice president and CFO. AS CFO and VP of carnival he over looks all pay, treasury, insurance, accounting, tax, and investor relations. Howard FrankHoward frank has been Vice Chairman of the board of directors of Carnival Corporations since 1993, and Chief Operating Officer since 2003. He is responsible for the integrated-wide business strategies. He works closely with all carnival corporation management, especially with Mickey Arison. He leave alones oversight to Mr. Arison of the companies many world(a) ventures. He also serves as a chairman of the executive committee of the cruise line international association. (CLIA) Partnership commission Based on the in arrangeion self-contained the Carnival Corporation manifests a confederation management model. They hold many characteristics of this model. There is a high degree of employment by cover song management and an as high degree of involvement from its board members especially since their CEO is also their chairman and they also convey a hardly a(prenominal) opposite pil eus crown guys on the board. * This enables the top management and board members to work more closely with each other to develop strategies and to converse on a insouciant basis about the many things going on in the phoner. * Howard frank who is the vice chairman of the board is known for working closely with all management of Carnival Corporation& plc, As well as with Micky Arison himself, the CEO and chairman of carnival.When disaster strikes the telephoners senior management team up and board members pose on the certificate of indebtedness for whats going on and work together to come up with the best dodge to fix the occupation. * Also the board defecates committees by matching certain members functions to their expertise. For instance, David Bernstein was promoted to senior vice president and Chief monetary officer in 2007 because of his expertise in finances. He was the CFO of Cunard line and Seabourn cruise line for five years and in front that he held various fiscal positions at royal Caribbean for seven years. Carnivals board consists of 15 members. 3-A. External Environment Opportunities and Threats A. Natural natural Environment Sustainability Issues 1A. Opportunities a. The climate could be a bene positionor since nice weather unremarkably pull outs twistism and cruising. 1B. Threats a. When the weather is not benignant on the sailplanings of the United States, there whitethorn be a negative furbish up on the number of cruise ships sailing since the shipping ports are located in these areas. For example, during the hurri understructuree season, cruises along the Atlantic and Gulf coast do not set sail due to danger the storm whitethorn bring. . The weather in places like Europe, is not as threatening when it comes down to storms examined to the United States. This lessens the degree of one threat in the European mart for Carnival cruise lines. B. SOCIAL ENVIRONMENT 1. Opportunities Economic * potencyly elaborate their luxury line rs which can cause an ontogenesis in revenue. (CI2) * Increase their mental ability of their cruises by 30-40%. (CI2) * Offer more travel destinations that they currently do not land, such as China, India, and various countries in southwest America (CI2) technical Improvement of the technology on the cruise. * Working on their home web page since millions of deal punish this site daily. They can improve their format so that it would be better still and easier to navigate by people in foreign countries. * Using more scientific machines for the cleaning round for example, to check off each room that was cleaned or is in need for something, such as towels, toiletries, blankets, and so on (C1) Political-legal * Avoiding turn outing some of the taxes that other companies in the same exertion relent for. CI5)Ship waste disposal is highly unregulated waste is dumped off shore without any consequences from a legal point of view. (CI5) sociocultural * The diversity o f customers that are traveling with Carnival Cruise Lines for their vacation get-away is very large. (CI2) * home run name is well known among the society. * Reached an symmetry with Italys Fincantieri shipyard to build a 2,660-passenger vessel for Holland America and a 4,000-passenger vessel for Carnival. Ships should be delivered by 2015. This forget generate more revenue in the future. CI2)Some people give birth a cruise with carnival just to gamble in the casino because some fixs do not have any casinos at all. 2. Threats Economic * Prices of fuel unvaryingly add-on. (CI6) * One of the largegest weaknesses that the company and the constancy itself are facing is hurricanes and bad weather during specialized seasons. Revenues go down, refunds go up. Technological * Technological problems on-board which can be a vainglorious threat for Carnival. For example, the latest incidence was lead month. Carnival ship was stuck at sea for almost a week because of technolo gical mishaps.This caused many lawsuits, refunds, and a bad character for the brand. (CI1) Political-legal * Progressive accumulation in piss waste caused the cruise line to pay millions in fines. * More regulators are arduous to baron Carnival and other cruise line companies to pay more taxes. (CI5)Major law-suits of the sinking feeling Costa Concordia. (CI3) Sociocultural * Seasick some people cant purpose a cruise because they get carsick after a spot. People that misplace from this generally do not board lengthy cruises. * Most people do not eat at the higher class restaurants because the dining room is complementary.Most passengers are generally not looking to dismiss more gold on a cruise that was already paying for and intelligibly states that it is all inclusive. (CI6) * For some people cruises can be very pricy. (CI6) 2. Some of these opportunities and threats are variant in other parts of the world because of different climate, frugal jazzs, and d ifferent regulations. III. Internal Environment Strengths and Weaknesses A. merged structure 1. Carnival Corporation and Carnival plc operate under a bivalent listed corporation structure with primary stock listings in the United States and the United Kingdom.Carnival embodied structure is installd on the arche cause of profit center. a. The decision making business office is decentralized. b. The corporation is a fleet organization planetary. For the most part, most of Carnival business runs in North America and Europe. 2. Carnival concurs telling its employees this phrase do one thing and do it better than anyone else. rise up that could sound very promising, but from a personal obtain I enjoyed royal Caribbean a lot more than I did with carnival. Whatever the CEO preaches to the employees does not rightfully justify the truth.To clarify, Micky Arison the CEO of the company quotes Carnival doesnt view a cruise the way Procter & Gamble would view toothpaste or Dial would view soap. Each of Carnivals lines has its own personality and merged focus. (CI2) 3. The current structure of the company is somewhat a great deal consistent with all of its objectives, strategies, policies and programs, as acquaintn and seen in their fiscal report their profit asseverates increasing. (CI2) 4. The structure of Carnival cruise is very similar to the other cruise companies that strive to succeed and make specie.B. Corporate culture 1. Carnival Corporation maintains a friendly, family-like standard atmosphere on all of its ships. I bear to this instituted on my previous get word on their ships. ( CI1) 2. In my touch, the corporate culture is consistent with current situations of objectives, strategies, policies and programs. They have an open door policy where each and any employee can communicate with upper division managers and let their example to be heard, and the reason for that is to benefit the employee and potentially even benefit the company. C I1) 3. Unique to the cruising intentness is its promotion to protect the environment. The core set include preserving the marine environment and, in particular, the pristine condition of the weewees upon which our vessels sail. This didactics is posted on the Carnival website and is the biggest crack that I have noticed with the company. They are constantly polluting the water, dumping trash into the water, and they chair a great deal to air pollution. then the statement above is not accurate. (CI4) 4.Carnival employs a variety of different kinds of people from various different cultural backgrounds. many employees that work for Carnival have different ethnic backgrounds but are all being treated equally(CI1) 5. The company does take into consideration the value of cultures of each nation the company operates in. This is shown in the diversity of Carnival employees and their cultural backgrounds from all around the world. (CI1) 3-B. Corporate Resources Finance IV. All num bers in millions except for ratios 2012 2011 2010 Carnival RC Carnival RC Carnival RCRevenues 15,382 7,688 15,793 7,537 14,469 6,753 Operating Income 1,642 403 2,255 932 2,347 803 Net Income 1,298 18 1,912 607 1,978 515 Net Profit Margin 8. 4% 0. 2% 12. 1% 8. 1% 13. 7% 7. 6% EPS 1. 67 0. 08 2. 42 2. 80 2. 47 2. 4 OperatingCash Flows 2,999 1,382 3,766 1,456 3,818 1,663 Debt to AssetRatio 39% 58% 38% 58% 39% 60% V. pecuniary Analysis The chart above displays a list of relevant protrudes and ratios for the Carnival Corporation. It is most-valuable to highlight that some of these numbers show increasingly negative results each year.If this negative trend continues it would represent a portentous problem for the company, as it would become un bankable. scarcely how does Carnival compare to others in the pains? Two key players dominate the cruise constancy. According to a report by Cruise Market Watch, Carnival Corporation watchs 48% of the market share, kingly Caribbean co ntrols 23%, while the rest is controlled in nice portions by over 30 other companies (Cruise Market Watch). By generating double the revenues of Royal Caribbean, Carnival is clearly the leader in this industry.For the purpose of this variance of the paper, we analyzed the financial statements of Carnival Corporation to measure the health of the company. We will also use financial ratios which best allow us to compare Carnival side by side to its smaller but closest adversary, Royal Caribbean. A notable decline can be seen in the operating income. This figure is considered by analysts to be one of the most of import on financial statements because it reflects to a great extend the strength of the company and success of its core business operations (Kennon).Operating income is arrived at by subtracting operating cost and be from gross revenues. It is the profit that is left to invest, expand, pay debt, distribute to shareholders, and achieve other objectives that a company whi tethorn have (Kennon). For Carnival Corporation, Operating income declined 27% from 2011 to 2012. allows see why. Carnival mainly generates its revenue from the sale of cruise tickets and onboard items and overhauls (Carnival). Although revenue has remained stable in the past years, operating income has been declining which indicates that the company is making less and less profit of the revenue it generates.This could be due to several(prenominal) reasons, but in the case of Carnival Corporation, there are two major factors. One is the rising expenditure of fuel. Cruise companies are heavily hooked on fuel and any change in its price has a operative touch on on the companys financials (Carnival). From 2011 to 2012, the carnivals fuel expense increased 7% or $188 million. some other factor that has refered profits for the company is accidents. In its annual report for fiscal year ending 2011, Carnival Corporation included a note to its shareholders regarding the tragic even t of the Costa Ship (Carnival).It states that the company takes careful measures to prevent accidents such as the Costa cruise incident (Carnival). In the 2012 Income pedagogy, Carnival Corporation reported $28 million for ship incident-related expenses that were not cover by insurance, including a $10 million insurance deductible related to trio party personal injury liabilities (Carnival) CI3. It is safe to expect that in the 2013 financial statements, Carnival Corporation will over once again report incident expenses not cover by insurance and possibly higher ones due to the Triumph ship incident CI4.Although Carnivals decline in operating income is significant, Royal Caribbeans 56% decline truly is worrying. Even though Royal Caribbean had nothing to do with the Costa ship incident, there were substantiative consequences that takeed the company. Royal Caribbean had to report a $413. 9 million impairment injustice because booking volumes and pricing are down substantially in Spain due to the seismic disturbance of additional austerity measures there, the lingering impact of the Costa Concordia tragedy and other factors(Royal Caribbean).Now lets compare the two companies in terms of efficiency generating profit. The profit allowance account ratio shows how more after-tax profits are generated by each dollar of sales (Kennon). It is a good indicator of how efficiently a company manages its resources and how well it keeps be under control. Carnival Corporation has an 8% profit brink. In other words, of every(prenominal) dollar that the company receives from sales, only eighter from Decatur cents represent profit. With expenses increasing more than revenues each year, a low profit margin represents another sign of potential unprofitability.However, taking into consideration Royal Caribbeans 0. 2% profit margin, which subject matter that they keep more than less than a penny for every dollar they sell, Carnival Corporation is playing much bette r than Royal Caribbean. Off course, there are additional expenses that are not calculated in operating income like interest and tax expenses. It is worth mentioning that carnival corporation currently does not pay any U. S. federal income taxes because it qualifies for the benefits of section 883 of the Internal Revenue Code (Carnival). Section 883 basically states that some non-U.S. corporations that generate income from the operation of ships are not subject to federal income tax in the United States (Carnival). However, the gag rule of this tax loophole could become a potential threat for Carnival, as it would significantly strike their net income in subsequent years CI 5. Senator Jay Rockefeller of West Virginia confronted representatives of the cruise industry in a hearing conk out year (Walker). Senator Rockefeller questioned why Carnival, a company that sells to many American and extensively benefits from the resources of xl U. S. ederal agencies, gets to pay no federal i ncome taxes (Walker). Lets analyze the Debt to Asset ratio, measured with total assets and total liabilities. Carnival Corporation has a 38% Debt to Asset ratio which by itself represents an okay picture. More specifically this means that debt was used to finance 38% of the assets. On the other hand, Royal Caribbean has a 58% debt to asset ratio which indicates that the company may run into problems borrowing more notes in the future. For its debt, Carnival salaried $336 million in interest in 2012, a healthy amount compared to the $2. 3 billion operating income (Kennon).Operating income divided by interest expense gives us interest reporting ratio, which indicates problems when it is below 1. 5 (Kennon). barely carnival has a 4. 8 interest coverage ratio which means that there is still room for earnings to decrease before the company would default on bonds and loans for not being able to keep up with interest (Kennon). But will Carnival be able to see to it short liabilities ? The current ratio is short-term indicator of the companys ability to pay its short-term liabilities from short-term assets how much of current assets are usable to cover current liabilities (Kennon).A healthy current ratio is greater than 2, but for Carnival Corporations is only 0. 25 which indicates that opposition current obligation could be a problem for the company (Kennon). But again we see that Royal Caribbean may have a bigger of a problem since their current ratio is only 0. 08. other important factor to point out from the financial statements is that operating cash flows show a declining trend. From 2011 to 2012, cooperating cash flows declined 20%.What this means is that unless the current trends change, the company may start running out of cash and become unable to fulfill its obligations, which could lead the company into filing for bankruptcy. Interestingly, Royal Caribbeans cash flows also declined 20%. However, it is worth mentioning that cruise companies have t he advantage of receiving money for honorary revenues because cruise tickets are generally paid in advance. Its like acquire loans at 0% interest. Another important figure to analyze is fee per Share (EPS), which is especially important to stockholders.Carnivals $1. 67 EPS means that if net income was divided amongst all outstanding shares, investors would receive $1. 67 per each share owned. Although a good EPS does not of necessity represent company strength or weakness, its changes feign the price of a companys stock and thereof it is one of the most looked at figures by investors (Kennon). Based on EPS only, Royal Caribbean may not be an attractive extract of stock since their EPS is only $0. 08. Corporate Resources Marketing Product ( help) Carnival sells cruise tickets for vacations around the globe.Although Carnival markets the hump on the cruises as the vacation destination, their ships go to hundreds of destinations worldwide. Carnival sells numerous products and work onboard either directly or through independent concessionaries from which a delegacy is collected. Some of the onboard products and dishs byeed that are not included in the ticket price include liquor and some non-alcoholic drink sales, shore excursions, casino gaming, introduce shop class sales, photo sales, full service spas, dialogue services, art sales, a wide variety of dining woofs and laundry services (Carnival).Moreover, Carnival offers shore excursions and activities, and depending on the destinations, it owns or has spot in hotels where customers are offered a roost in a vacation package. In addition, carnival owns or rentals private islands where it operates among other things, beach bars and restaurants, water sports, tack lifts, cabana rentals and a surf rider attractive force (Carnival). Promotion Carnivals annual report states that each of its brands has comprehensive advertising programs knowing to attract the local market. The principal mean(a)s used for merchandising and advertising are television, magazine, radio, outdoor billboards, direct mail, e-mail, online websites, online advertising and mixer media (carnival). Social medias utilize are facebook, Twitter, YouTube and Pinterest. In 2012, Carnivals facebook pages reached over five million likes. In addition, Carnival has past guest light programs designed to give past guests incentives such as reduced prices and gifts in order to create customer loyalty.Price by its many brands, ships, and packages, Carnival claims to provide an option for every generation, taste, lifestyle, and off course, cypher. The company categorizes their cruise experiences as contemporary, bounteousness, and luxury. A contemporary experience is the cheapest and most casual alternative, lasting a week or less. A premium experience is designed for experienced consumers with an tenseness on quality, comfort and style and lasts from a week to two weeks.The most high-ticket(prenominal) alte rnative is the luxurious, which provides high standards of accommodation and service in a smaller cruise. All cruise tickets include dining and amusement but other options are available at additional prices. Carnivals brands all offer special promotions, early booking or past guest realisation programs that reduce the regular price of a vacation. But regardless of the character reference of experience and discounts taken, cruise ticket prices can vary due to many factors including ingest and season.To have little bit of an idea of prices we went through the steps of booking a vacation on carnivals website. The first thing we noticed on the carnival-U. S. website was a sale of up to $200 off + free upgrades for 3-5 day sailings or up to $four hundred off + free upgrades for 6+ day sailings. Using this sale, for travel in July and departing from Miami on a cruise to Bahamas, the cheapest alternative per person came out to be $330. On the other hand, high-end vacations can cost tho usands of dollars. Place Consumers can always book their cruise vacation directly on the companys website.But according to Carnival Corporation, their cruise vacations are sold mainly through travel agents, including wholesalers, general sales agents and tour operators that serve our guests in their local markets (Carnival). Accordingly, the company puts a lot of emphasis on their family with travel agents. Carnival provides additional agency incentives to travel agents in order to impel them to sell more of carnivals vacations. Carnival also provides agents with educational beams such as training seminars, online courses, and videos for them to better understand and sell Carnivals products and services (Carnival). . TASK ENVIRONMENT Threat of sunrise(prenominal) Entrants specialty * Economies of scale expansion of current companies is the greatest weapon against naked as a jaybird entrants. The few leading companies, Carnival, Royal Caribbean, Disney, purchase or build larg er ships or speed up older ships. Carnival, the leading giant of the industry, As of January 2011, the company operated 98 cruise ships with a passenger mental object of 191,464 berths. The company operates through four segments North America cruise brands Europe, Australia and Asia (EAA) cruise brands cruise support and tour and other. (Global hotels, 2012) * governance regulations as a global industry, it is very backbreaking for political relation of any particular countries to impose regulations. Therefore lack of enforcement or adherence to regulations regarding employment, safety, and health requirements make it less bureaucratic for a innovative entrant. * Capital requirements large capital is required to own and maintain a ship. * Product differentiation many companies offer a variety of solution cruises to attract or cater to different of necessity or preferences. It is an opportunity for a saucily comer although quite difficult to grasp. entrance fee to ports cann ot be so easily obtained. There are very few ports embarkations in populated cities. Giant companies sometimes share ownership of ports when they financially contribute with state regimen to build them. Rivalry medium high * Capacity emersion the cruise industry is driven by capacity maximization every square butt of space moldiness be utilized to accommodate and maximize the experience of the passenger. * Service characteristics cruises and ships are designed to cater to the various wants and preferences of different demographic around the world.Many cruise lines difference themselves by the amenities or destinations they provide or offer. This uniqueness in the service adds an edge to the competitive field. creative thinking is key in designing cruise themes that respond to or attract fallow market niches. * Rate of industry growth based on various reports the industry is growing at a much fainter pace in North America than Europe and Australia. The slow growth may be because of the economic downturn that we are facing or it may be the result of how difficult it is for the cruise industry to reach the wallets of more Americans. progeny of competitors the industry is somewhat fragmented and few competitors have a hand in multiple niches. Competition is very high in the industry because they are engagement for a bite of a pie that is already small. The companies try to maximize their revenues by oblation attractive prices and exotic destinations to customers. (Lester, Thyne, Weeden, 2011) * Switching cost can be high or low based on the type of cruise that is analyzed. Threat of Substitute Products or Services medium high * humans of substitutes land-based vacations are the biggest threat to the industry.The cost is half or one third less expensive, the vacationer has more control in land than over sea, greater mind of security towards land than sea. Although land rapture does not provide the sea experience that a cruise does, it is by farthestt her preferred to sea transportation. Also, a cruise is considered a luxury item and can be compared to the purchase or acquisition of luxurious items such as jewelry, elegant automobiles or whatever else discretionary money is used for. A cruise is not a necessity it is a choice, a reward or a gift to oneself or loved ones.The rating of medium high is mostly due because of the fact that choosing a cruise over a road trip, a flight, a hotel is find by preference and affordability. * Switching cost the only cost is the loss of the experience of the cruise. Power of Buyers medium low * As a luxury item, the cost of a cruise is not negotiable. The lookout of a high cost is lightly brushed with the promise that a cruise will not drain a savings account. The buyer does not have a significant influence on the price. Prices are more inelastic than elastic. Backward consolidation is quite impossible, the capital necessary to lease or purchase a ship is over tens of thousands dollars. Av erage passengers cannot afford it. * substitute(a) suppliers do exist but high product differentiation does not allow the buyer to compare oranges with oranges, more potential the buyer has a choice mingled with grapes or oranges. Moreover, the same company under different names may offer different theme or figure cruise. Cruise companies own more than one cruise lines, therefore choosing one cruise line over another may not represent a competitors advantage.Carnival and Royal Caribbean cater to different income brackets, Windstar offers exotic destinations for adventurers, Disney Cruise Lines are more family oriented. (Deep sea, 2012). * Due to the hefty price of a cruise, the buyer has a high expectation about the service. The demands and expectations of buyers greatly influence the selling techniques and expansion projects that cruise companies undertake. Brand recognition is a magnet to create and keep on customers and helps increase demands. Power of Suppliers medium high * Supplier dominance only a few companies build ships, provide staff and services to cruise companies. Forward consolidation for suppliers is less likely but cacuminal integrating for the cruise line industry is highly possible. Carnival uses slow integration to reduce costs and retain control of how its ships are built. * Product and services that the suppliers provide to cruise lines is very unique and specific to that industry switching cost is high. What these suppliers make or produce can only be sold to the cruise industry. * Economies of scale purchasing industry is very important to the supplier. All the major cruise companies own at least 5 to 10 cruise lines which strengthen their purchasing power.However, there are not that many suppliers to choose from. Having limited purchasing options, increases the power of the suppliers. carnal knowledge Power of Other Stakeholders very high * Special interest groups environmental activists voice their concerns to the industry an d directing their attention to fuel emissions, waste water dumping and few others. Thousands gallons of sewage and water bathroom water are discharged untreated in the ocean daily. Onboard observers are placed on ships that use ports in Alaska to ensure that sewer water is sanitized before being dumped in the ocean (Klein, 2011).In his obligate, Klein also indicated in his article that the daily fuel emission of one cruse ship could be equivalent of that of thousands of cars. * incorruptible customers their perception regarding the safety of the industry affects their decision about whether to use discretionary money on a cruise or elsewhere. It also taints their views of the brand recognition. They are less likely to refer that cruise line or to become repeat customers. * sound agencies most cruises are sold and announce by travel agencies.Travel agencies are expound by Cruise Lines International companionship (CLIA, 2011) as the distribution channel oblation the best servi ce to the cruise industry. * Government regulations even though some of the big companies have headquarters in the USA, they are incorporated in Antillean territories such as Panama, Bahamas, and Virgin Islands. Doting a ship with a flag registered in countries like Liberia and Panama, becomes a convenient vitiateance tool that shields the cruise companies from adhering to labor and environmental laws, health and safety regulations, and most importantly avoid paying corporate taxes. Airlines industry they provide means of transportation to different ports (from one state or one region to another), when airfares are high, it adds to the cost of transportation to a port. To overcome this dependence more ports are being built in areas that can be driven to. * Local communities when a cruise ship arrives at a destination, the community of that foreign location receives the passengers. How passengers and the cruise line are received affect how the cruise experience is perceived. * Glob al custody many describe the work environment as sweat ship and it does not project positively on the companies.In the cruise industry, employees are in contact with passengers 24 hours a day and for several days an unhappy or miserable employee is contagious. It does affect indirectly the bottom line of the company. want of respect, living quarters, rigorous demands of the job, being underpaid, lyric poem and culture differences separate the cruise manpower from the visibles and the invisibles. The cruise industry is part of the service sector an unhappy, mistreated, undervalued work force does not contribute to a pleasant experience for the passenger (Agaard, Larsen, Marnburg, 2012). SWOT ANALYSISStrengths1- wide variety of theme cruises circumstance answer 6 2- largest ship capacity causal agency issue 63- backward integration4- heavily invest in marketing side issue 65- experienced managenent issue issue 1, 3 4 Weaknesses1- Corporate culture regarding ship workforc e subject area issue 12- PR handling of current sea tragedies movement issue 3 43- HR employee training and recruitment Case issue 1 Opportunities1- partnership with travel agencies Case issue 62- leader in environment protection safety Case issue 3 43- Adopt a global standard of ethics conduct Case issue 14- develop a positive rapport with ship workers Case issue 15- treat labor force as valuable contributors Case issue 1 Threats1- Extra costs (taxes, unsullied waste water) Case issue 52- slow growth of North American market3- workforce motif Case issue 14- land-based transportation and hotel resorts Case issue 65- brand recognition mudded by sea tragedies Case issue 3 4 MODIFIED TOWSSO comprehend referencing * The capability of backward integration puts Carnival in a better position to build ships that are safer friendlier to the environment while controlling costs. S3, O2 Case issue 3 4 * Experienced management can develop standards that could help improve the workforc e environment on board. S5, O3, O4, O5 Case issue 1 * Sharing marketing techniques with travel agents may improve and strengthen their relationship. O4, S1 WO home run referencing * The tone starts at the top. A workforce that feels valued and adequately paid strengthens the base of any company. W1, O3, O4, O5 Case issue 1 * carry outs speak louder than words. W2, O2, Case issue 3 4 * Treating employees as valuable contributors helps HR in their recruitment strategy.W3, O5 Case issue 1 ST Cross referencing * Experienced management can use their expertise to create a working environment that empowers and values the ship employees. S5, T3 Case issue 1 * Marketing techniques is the best weapon to undermine the threat of substitutes and clean the brand. S4, T2, T4. T5 WT Cross referencing * When esprit de corps is low, the ship may sink. Employees are the foundation of companies, the weaker the base, the less solid is the company. W1, W3, T3 Case issue 1 * A PR is the voice of the c ompany. subsequently a tragedy, responsibility, reassurance, and compensation is key in re-building confidence. The opposite drills the hole deeper. W2, T4, T5 Case issue 3 4 5. EVALUATE STRATEGIC ALTERNATIVES selection 1Pause/ lapse with Caution Strategy Proceed with wariness until they are able to evaluate how the modern font-sprung(prenominal) tax and fuel regulations will affect the company and how to go about decrease lawsuits due to employee exploitation and onboard guest safety. (CI 1, 3, 4, 5) Pros * Customers will continue to do business with Carnival if they feel that they are working to improve the ships safety. * Employees put onwards more effort if they do not feel as though the company is taking advantage of them and increased motivation from the staff can increase the companys bottom line. Cons * Only making small changes gives the contest a fortuity to catch up. * Nothing can be done to stop naked regulations, so the company is bound to lose profits if ther e is an increase to fuel prices and taxes. Alternative 2No-Change Strategy Since Carnival Corporation PLC has the largest ship and passenger capacity in the cruise industry with many diverse brands they can continue to do what they have been doing and hope they remain ahead of the opposition even with the replacement of Mr. Arison in the future (CI 2). Pros * Carnival is already one of the most profitable cruising companies with a 47% market share in the UK, 68% in Italy, 51% in Germany and 45% in France, so they are dominating the global market competing mainly with Royal Caribbean. * Doing nothing new gives the company time to fix some of the current issues. Cons * Competition could pass and take control of market if Carnival sits lazily by especially with growing customer concerns about safety of the ships. Profits are already decreasing from previous years so doing nothing new could keep the company from enjoying profits that could be acquired with groundbreaking ideas. Alter native 3 Horizontal fruit Concentration Strategy Carnival can increase operations in the current European market as well as range out to new regions (CI 6). Pros * Carnival derives a majority of its revenue ( nigh 52%) from US customers which is currently on the decline, so it would be beneficial to pink into other markets around the world. * Carnival already has market presence in Europe, so it would not be as difficult to increase capacity in that region as opposed to starting fair somewhere else. Cons The value of the dollar against Euro comprehended from 1. 60 in January 2010 to 1. 53 by April 2010 against the Pound. If the dollar strengthens it would record lower revenue than is actually earned. * The European economy is also faltered, so profits are not guaranteed and an increase in operations could kind of cause a company lose. testimonial I would recommend that Carnival take with the pause and proceed with caution strategy for at least 1 to 2 years. This would give t hem time to get the company back in line with the tendency of earlier business days when the safety and satisfaction of customers and employees came before the profits of the corporation (CI 1,3).Once they are back on extend I would then recommend for Carnival to go forward with the horizontal growth. It is in their best interest to reach out to untapped markets particularly since there is a decline in the current US regions and they are looking for ways to increase revenues since Carnival is only currently reaching 20% of the total US market (CI 6). Growing horizontally in any market has significant financial implications for a cruise company. Considering that the newest Carnival Dream-class ships cost $740 million each (Shipcruise. org), it is a very expensive strategy to implement. In addition, the company would have to engage in research, planning, training, and marketing activities which can be very costly.Because Carnivals balance sheet shows $465 million in cash, it will mo st likely be necessary for the company to borrow money to finance their growth. But borrowing money would not cause any problems for Carnival Corporation because as we analyzed earlier, the company has a healthy interest coverage ratio which measures the ability to pay interest on outstanding debt (Kennon). Although it is costly and risky, spend the money to expand into new and existing markets now, Carnival would have the potential to increase its revenues in the future years to outset the increasing costs. Carnival is already in the process of building two new ships to be entered to service in 2013 and 2014 and estimates that these two new ships will increase their passenger capacity by 19% (Carnival).Also, a continuous growth by the largest company in the industry could drive some of its competitors out of business and capture a larger market segment. 6-A. Implementation After an extensive in-depth review of the Carnival Corporation PLC, it is apparent, as with any large corpo ration it has many strengths and weaknesses. Carnival and its subsidiaries have a dominating nearly 50% market share and strong support base among its customers. With plenty of loyal customers, and many recognizable and respected brands it wouldappear to have fewproblems. However, despite all the good attributes, several recent negative events have arisen concerning bothsafety and corporate concerns, which have agitate the company and its shareholders. 6-B.What must be done? 1. shareholder Confidence 2. safe annoyances 3. Improvements and New Ship twist Action step duty Start-End monetary impacts Questions? Concern WHO? WHEN? HOW much? What Must be done? 1. shareowner Confidence Micky Arison (CEO), Upper Management 4/1/13-Ongoing run into Future Earnings 2. Safety Concerns Upper Management,Howard S. Frank (COO) 4/1/13- 12/31/13 Cost of Training and current safety assessment 3. Improvements and New Ship Building Upper Management, Design Team,David Bernstein ( CFO) 4/1/13- 4/1/16 inured budget for cost of researchShareholder Confidence everywhere the last 5 years Carnivals stock price hascollapsed. Granted, the worldwide economy has endured one of the worst periods in history, but In 2008 the stock was employment roughly 15% higher than what it is today, and between that time it fell as much as 70% to the 2009 lows. I retrieve Micky Arison (CEO) should be focusing on how to re-energize and grow the company in the face of some very difficult times. I reckon this could be achieved by continuing to expand to new entrant markets in Asia, Europe and Australia. The United States has been saturated for some time, with little growth and shrinking profit margins due to rambunctious competition.In addition the company must provide a great experience for clientele in order to ensure repeat business, which is essential to Carnivals success. Safety Concerns Over the last couple years Carnival has experienced several bad events and even worse pub licity. This has caused many to suspect wrong doings and create concerns over safety. Incidents like the MS Costa Concordia in 2012, which was one of the worstdisasters in modern cruising history, in which 34 people were killed and the ship was a total loss cost nearly 600 million dollars are a incubus for a cruise line. In a more recent case, the Carnival Triumph endured an engine fire disabling the ship and causing the boat to be desolate at sea for several days.Although no one was hurt, itcaused a severe cark to the passengers and junto. Tales of rotten food and overflowing toilets ran for several days on international media. Safety should always be of utmost concern with any industry. The last thing people want or need is to have a feeling of insecurityon a vacation. Cruises overall have been very safe for many years but still in the back of many peoples minds the thought of the big lingers. Carnival take to make sure people know that safety isthe top priority of the Carni val Corporation. Although it shouldnt be pushed to the point where people get scared, it unquestionably ask to be continuously addressed.Carnival needs to constantly implement the most modern safety techniques and they must educate the crew how to keep passengers as safe as possible. Improvements and New Ship Building Because of the fierce competition in the cruise industry it is vital to constantly upgrade older ships and build larger and more plummy new ships with more features and amenities. A new trend in the industry over the last couple decades is to build bigger and bigger ships. Cruise lines such as Royal Caribbean have been very successful over the last decade by initially building100,000 Gross piles ships. Since then the Oasis Class that is well over 200,000 Gross Tons has been put in service. Carnival and its subsidiaries arent necessarily building the biggest ships but they are uilding larger ones as well. I believe this is very important because more and more people are going on cruises for the frolic rather than the ports. Many cruise goers are like the typical individual who want the newest and the best and this is the reason it is pivotal for Carnival to keep up with the new trends of constant upgrades and services. 6-C. How should it be put into action? Action Steps Responsibility Start-End Financial impacts Questions? Concern WHO? WHEN? HOW MUCH? How should it be put in action? Micky Arison (CEO), Howard S. Frank (COO), Upper Management 4/1/13 Determine budget in conjunction with finance dept. Concerning safety, it must be a top priority to follow the standard government mandated procedures, which are attached to the entire Cruise Industry. Carnival can go above and beyond this by simple measures such as drills and employee training. They can go beyond the recommend amount of life jacket and lifeboat requirements. I believe the biggest concern is to hold top officials such as the police chief responsible for such disasters as the MS Costa Concordia. Carnival is doing a great job in terms of ship building and upgrades. They have kept up with the competition so in my personal opinion I believe the company needs to make security a given so that passengers focus on the amenities of the cruise ship.The company should also take guest recommendations seriously and look at what competitors such as Royal Caribbean are doing in newer ships and follow as well. As for the Shareholders it is important for Carnival to insure that it is strong and well managed, generating consistent profits and growth. This is very important to any shareholder and I believe this can be achieved by expanding to new markets inAsia, Europe and Australia. Logistics is also important to have available ships to move to these new ports to expand. 6-D. Who should do it and when should it take place? Action Steps Responsibility Start-End Financial impacts Questions? Concern WHO? WHEN? HOW MUCH? Who Should Do it and when should it take place? Micky Arison (CEO) Howard S. Frank (COO), Upper Management, 4/1/13 Determine budget in conjunction with finance dept. Carnival and its subsidiaries future expansion and safety goals need to be implemented and enforced at senior management levels in order for the employees to know that it truly is important to the companys success. It takes a strong leader to do whats necessary for future growth and endure off new fierce competition within the industry. It is important to start as soon as possible because the competitors within the industry will try to take advantage of Carnivals recent problems.I believe safety is a big concern with two major issues within a year of each other. This has brought bad press and will most likely follow up with loss of customers in the future. 6-E How much will it cost? Action Steps Responsibility Start-End Financial impacts Questions? Concern WHO? WHEN? HOW MUCH? How much will it Cost? Upper Management,Micky Arison (CEO),David Bernstein (CFO) 4/ 1/13 Set budget for cost of research Modern cruise shipscost no less then 250 million dollars, with the most expensive costing well over 1 billion dollars. Carnival as well as the rest of the industry has absorbed these costs by constantly upgrading ships every year or two rather then building many ships at once.They also have sold older ships to other cruise lines, or even created new cruise lines with their older ships to cut costs and continue making more money with new locations around the world. As far as safety is a concerned it shouldnt cost much considering a large amount of the cost of new cruise ships is equipping them with the most modern safety equipment available. It is very important for the employees be able to use and know this safety equipment because it is worthless if the staff doesnt know how to use such equipment. Work Cited Carnival PLC. (2012, March 03). Carnival corporatoion plc 2012 annual report. Retrieved from http//phx. corporate-ir. et/phoenix. zhtml? c =140690p=irol-reportsother2 Carnival PLC. (2010, March 03). Carnival corporatoion plc 2010 sustainability report fiscal year 2010. Retrieved from http//phx. corporate-ir. net/phoenix. zhtml? c=140690p=irol-sustainability_env Carnival Corporation PLC. 2012 Annual Report. Washington, DC. 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