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Class Project- Cruise Line Industry Porters 5 Forces Model


Rare_payment91

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Hey everyone,

Just joined this forum because Im working on a class project and need advice. The assignment is to figure out an industry level assessment on Royal Caribbean using the strongest 2-3 of porters five forces model. So far out of that Ive come to believe the strongest are the threat of substitutes and bargaining power of suppliers. The threat of substitutes exists because people could just go to casinos or high end hotels for fear of traveling with COVID 19. Then bargaining of suppliers in the sense that there are advertising fees, gas/fuel suppliers, ship builders parts that increase efficiency of ships, and live entertainment on ships. My question to everyone on this forum is do you think there is anything I can add or use to defend myself even more?

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I agree on the threat of substitutes, however it would be interesting to know if there is any statistic out there on how many cruisers are repeaters. I think real cruisers are very loyal to this form of travelling and will not so easy substitute it with hotels / Casinos as you might think. If you can find a good statistic on how many customers are first timers, repeaters, and so on, you will be able to use it to make your point even stronger (or adjust it accordingly). 

I actually don‘t agree in regards of the suppliers. I think the more important threats is the number of competitors. If you compare the amount of big cruising company’s of today with maybe 20-30 years ago, you will see what i mean. Also, they are strong competitors and they play a lot with prices, sales, special offers and so on. Competition for the new customers is very strong, especially as i think cruisers are quite loyal to „their“ brand (once they choose their favourite ships, etc) and don‘t switch that often. So that’s why they try very hard to get new customers on their ships and so on. Also if you see how popular for example the loyalty program of RCCL is, it proves even more on how loyal the customers are. The cruise industry has been consistently growing over the past years (before Covid...) and as usually, if the cake gets bigger, more companies want a piece of it....  

I might be wrong here, but that’s my point of view on the cruise Industrie ?

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Welcome to the message boards!

So far the largest industry players have been very careful to only sell ships where they are unlikely to form a competitive threat.  However as this pandemic continues if one of the more significant cruise lines were to be forced to shed some more ships to survive it's possible a new start up could acquire the hardware at very low cost and present a rivalry to the existing industry players.   Consequently threat of new entry is a potential risk but not a primary.

I'm not sure suppliers play a large factor at this time.  It's possible some suppliers may have disappeared which could cause some disruption for thing like shore excursions however guests will likely find something to do through an available supplier so I don't think this is a significant threat.  Other suppliers are desperate as well and may need to increase prices to offset losses so there is some risk that supplier related costs may increase.  

Some people will take land vacations but only because they can while the government forces the cruise lines to stay closed.  The risk of infection is no less in a casino on land as it is in a casino on ship.   The virus has spread like wildfire on land so I don't think this is a threat to cruising.  Some people are not discouraged by the risk on land and they won't be discouraged by the risk on a ship.  Consequently the threat of substitutes exists because the government has shutdown the cruise industry while not shutting down land alternatives, not because of the level of risk of one over the other.

Threat of rivalry exists because the cruise lines are growing increasingly desperate.  A company in a more precarious financial position may take drastic measures to attract customers once the government lifts the ban.   They could lower prices or bundle in perks that are normally extra charge items.  If they face bankruptcy they might do crazy things to survive and steal customers from another company.  For example, loyalty status is important to many repeat cruisers so if such a company offered status match or equivalent loyalty perks it could motivate some loyal cruisers to book with a different cruise line.  Up to this point they haven't always played nice with each other but it's been manageable.  Going forward some may not play well with each other at a whole new level.  Consequently threat of rivalry may be higher at the moment.

This is a level of risk in the bargaining power of buyers, the consumer.  Many have been impacted financially by the pandemic so it's likely they aren't in a position to book any sort of vacation.  Pandemic mitigation protocols like wearing a mask will discourage some buyers initially.  With demand decreased by these factors it will be difficult for cruise lines to raise prices yet with substantial losses incurred they need to increase revenue.  It will take some time for the market to return so the cruise lines will need to accept lower revenue and lower pricing given the lower demand for several years into the future.  If they set pricing too high cruisers will not return in the numbers they need to offset lost revenue.  Consequently I think it is clear that with the some buyers impacted by financial losses themselves it presents risk to the industry recovery and will likely extend the recovery time frame.

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11 hours ago, Rare_payment91 said:

Hey everyone,

Just joined this forum because Im working on a class project and need advice. The assignment is to figure out an industry level assessment on Royal Caribbean using the strongest 2-3 of porters five forces model. So far out of that Ive come to believe the strongest are the threat of substitutes and bargaining power of suppliers. The threat of substitutes exists because people could just go to casinos or high end hotels for fear of traveling with COVID 19. Then bargaining of suppliers in the sense that there are advertising fees, gas/fuel suppliers, ship builders parts that increase efficiency of ships, and live entertainment on ships. My question to everyone on this forum is do you think there is anything I can add or use to defend myself even more?

Understand why clientele is drawn to cruises industry.  There are some good threads on this site which gathered a plethora of opinions.   I'm seeing in  other blogs that folks wanting to get back to travel are booking "all inclusive" resorts to more open  countries.  It will be interesting to see if loyalty shifts to that travel sector.   I have grown an interest in watching supply chain processes as they apply to the cruising industry, and amazed that there has not been as much leveraging within the larger groups like RCG and Carnival.  They individual lines retain a fair amount of autonomy (good for brand),  but not optimized for cost reduction.

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