Improving Yield & Reducing Costs at Carnival

This blog is a long one, and based on what I currently understand about Carnival Corporation & PLC, as well as economic principles which I learnt in sixth form and at Maersk Line during yield management. There is no doubt flaws, but I’m a student, so tell me what you think.

Carnival is an amazingly successful business, which has delivered strong earnings and growth, however its internal set up confuses me as an outsider and I just feel that there is an easier way to do business. I have used the three main headings: Intergrate, Outsource, Internationalise.

Aim

The aim of this report is to suggest possible options on how to improve clarity in how Carnival Corporation & PLC operates, as well as reduce costs and improve yield. Basically if I was Micky Arison I would do this…

Intergrate

As a legacy of being separate companies Carnival appears to operate semiautonomous divisions namely:
Holland America Line – Seabourn and Holland America
Princess Cruises – Princess Cruises
Costa Crociere – Costa Cruises, Aida Cruises, Ibero Cruises
Carnival UK – Princess Cruises UK, Cunard, P&O Cruises, P&O Australia
Carnival Cruise Lines – Carnival Cruises

I would dissolve all these separate divisions, instead splitting the company into managing its business in regions, with Carnival UK managing all Carnival brands in the UK. In Europe, Carnival Europe (Costa Crociere) dealing with all Carnival brands in Europe and so on. I believe this is how Royal Caribbean operate, but again don’t know.

My example for Intergrate would be at Carnival UK were Holland America Line and Carnival Cruise Lines have separate offices from P&O, Princess and Cunard who are based in Southampton. HAL and CCL are based in London, surely there is enough space, perhaps by moving some desks round to combine the offices in Southampton, releasing expensive office space in London.

Another example being Holland America and Princess who are both on America’s east coast, I would combine the offices, there would be duplicated jobs which could be removed, HR, Payroll, Purchasing. I would also centralise many departments under the corporate banner.

As part of this integration I would effectively stop each brand being responsible for several functions they previously managed (as they had been centralised), there is a problem of the brands then slowly losing focus. But by creating Brand Ambassadors who would manage the marketing, and lobby the centralised functions for their brand could keep the distinct brand image. The brand ambassadors would be like a board of directors whose sole aim is to improve their brand.

Outsource

I’ve called this section ‘Outsource’ but it doesn’t necessarily relate to outsourcing. Firstly my example is that Maersk Line moved a significant amount of functions to Liverpool in order to move out of London, there was two reasons for this, the wages in Liverpool are lower than that of London, and there is also a large talent pool to choose from. Secondly office rental prices are MUCH lower in Liverpool, saving significant amounts of money.

In addition Maersk Line also outsourced functions which could be performed overseas in cheap countries to them countries, by implementing strong communications links between the offices, it became just as easy to speak to someone in India than someone across the office. Maersk also used Six Sigma to sort supply chain problems, but without working in the industry this would be impossible to consider applications for passenger shipping, but small changes in business operation yielded great results.

An example of outsourcing in the container shipping industry meant that online bookings which were previously completed by staff in the UK was transferred to lower cost countries, jobs which involve basic data entry made sense to move overseas as the internet has made such possible, easily.

I would pause from moving ‘contact centres’ overseas as people hate phoning overseas call centres and it can ruin a person’s opinion of a brand, which is what Carnival is building.

Internationalise

Carnival have previously commented that Cunard is their sole international brand, I believe Holland America and Seabourn both can be ‘internationalised’ under these new plans, which these larger possible audiences and the new corporate structure Carnival could charge higher prices, as the market for the product is larger, improving yield, also both of these fleet operate worldwide itineraries meaning there is no need for redeployment.

Why Holland America? – Well I believe there is no European equivalent to Holland America, and with an aging population in Europe I believe Holland America would make a great fit in the European market if more people where aware of the product. Its closest rival in my mind being Celebrity Cruises seem to be doing well in Europe naming Celebrity Silhouette in Hamburg earlier this year.

Why Seabourn? Again, Like Holland America I believe that Seabourn could, through bet promotion as part of the Carnival family improve sales in Europe, Asia and Australia. Its new ships providing a great opportunity to go worldwide.

The theory behind ‘Internationalise’ is that of Kraft’s purchase of Cadbury, which then allowed Kraft’s brand of chocolate ‘Milka’ to piggy back into news agents and supermarkets on the back of Cadbury’s Dairy Milk.

Summary

I believe that Carnival is taking slow steps towards this model, as in the United Kingdom Carnival UK represents Princess Cruises, but this could just be a legacy of how the former P&O Princess used to operate. I expect Carnival already outsources a lot of functions already. 

I think the plan outlined above would work, and simplify the Carnival product line up, It would be great to hear from someone at Carnival on what they thought of my plans and suggestions.

Well I’m not sure how this one will go down, viewing figures for some blogs have confused me in the past week. The stuff i thought would be popular hasn’t been! (I’m not expecting this to be too popular) But Ship Visits always go down well!

Let me know what you think! Twitter, Facebook, Email & Comment. If you liked this Try: Cruise Line Brand Posistioning & Where Does Princess Fit?

Thanks,
Liam
Liam@Crociere.co.uk
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