I.

Brief introduction
Royal Caribbean International, owned by Royal Caribbean Cruises Ltd., is a cruise line brand
founded in Norway and based inMiami, Florida in the United States of America. As of May 2012,
with 21 ships in service, it controls a 17 percent share of the world cruise market.. All ships under
the Royal Caribbean International brand have had names ending in "of the Seas" since 1991.
Sister brands owned by Royal Caribbean Cruises Ltd. are Celebrity Cruises, Azamara Cruises,
Pullmantur Cruises and CDF Croisires de France.
1 History
-Royal Caribbean Cruises Ltd. (RCCL) was found in 1968.
-In 1997, RCCL acquired Celebrity Cruises
-In 2001, RCCL introduced its Voyager-class ships, the largest in the world.,beginning with
Voyager of the Seas in November 1999; and since then three additional Voyager-class ships, each
costing approximately $700 million; have been put into operation, with the latest, Mariner of the
Seas.
2 Vision Statement
"Providing the highest level of service and the best vacation experience on the land".
3 Mission Statement
RCCL strives to:
-Compete principally on the basis of quality of ships, quality of service, variety of itineraries,
and price
- Improve our competitive position with respect to the quality and innovation of our on-board
product and state-of-the-art cruise ships.
- Serve markets and provide itineraries worldwide
- Value its employees as the company's most valuable asset. They are counted on to present
the company professionally and so the utmost to serve the company's customers.
-Value the environment and remain committed to protecting and preserving environment
resources and preventing pollution.
-Maintain strong relationships with travel agencies, the principal industry distribution system
-Participate in and make grants to numerous community charity organizations with priority to
those helping children and families and education and the environment.

II. Business environment assessment

1. External factors
1.1. PESTEL
Sociocultural
Once considered a vacation for the elite, cruises are attracting a much more diverse group of
passengers. During the first half of 2000, an estimated 3.4 million people took cruise vacations,
including young couples and families. According to recent reports, nine of 10 passengers
indicated they would cruise again in the next five years. And service is one of the primary reasons
they cited. Eager to meet the needs of "family folks," most major cruise lines have set up day
camps on their ships. They not only offer children the chance to participate in supervised daytime
activities but also hold special dinner and after-dinner events to keep children happily occupied,
giving parents time to themselves. With growing single parent and double income homes, the
demographic makeup of todays family unit varies greatly from that of the past. Continually
emerging trade relations also provide potential target markets not only for new cruisers, but also
for previously unavailable ports of call. It is also vital to develop trusting relationships with these

emerging countries ensuring the breaking down of cultural barriers, while respecting local mores
and customs.
Economic
The lagging economy, teamed with lower interest rates and rising consumer debt, may prove to
be a challenge in the coming months to most companies and consumers. A higher cost of living
along with little increase in the living wage could force many consumers to skip the family
vacation all together, along with other "luxury" items, in an effort to maintain their current
lifestyle. Another tax cut could spur spending on non-essentials such as cruise vacations. While
many families now earn double incomes, this may leave them little to no time for leisure
activities, especially with the approaching holiday season. Many holiday shoppers plan to
decrease spending dollars the season, buying for the same people, but spending less. While
consumers are concerned about their bottom line currently, they are not totally cutting off
spending.
Technological
Todays high tech living and working has many people stressed over staying in touch with the
pulse of the world. They demand Internet connections and cellular capabilities even in the most
remote locations. Technology is shrinking the globe, yet more and more people are demanding to
"get away from it all," while remaining in contact with important interests. Those who feel
stressed about getting "away from it all," even on vacation, needn't worry: the high seas have
gone high tech. Most cruise ships are "connected" with 24-hour Internet cafes, onboard e- mail
addresses and video postcards. Some lines feature staterooms wired for Internet access and many
offer computer-learning classes. Friends and relatives back home can follow your progress via
Web cams scattered throughout the vessel.
Political
With the addition of several new countries to NATO recently, the potential for new consumer
markets is very promising. The introduction of the Euro has also stabilized many markets where
consumers are now more comfortable with spending. President Bush finally has passed his
homeland security bill and the War on Terror is picking up steam. Always looming in the
background is a threat of an oil embargo, causing higher fuel prices and an increase in air and sea
fares for travelers. Many businesses were affected after September 11, 2001 experiencing a drop
in sales revenues. More than a year later most industries seem to be bouncing back from post 9/11
effects.
Richard Fain, Royal Caribbean's chairman and chief executive, told analysts he was optimistic
about improved business because "the industry and our company are proving to be very resilient"
in recovering from the drop in business after Sept. 11. He echoed executives from other cruise
lines who have reported a better-than-expected recovery in business.
Environment
Environmental groups: environmental and health and safety regulations could increase the cost of
compliance.
Financial supporting ocean conservation groups.
In brief, stricter environmental and health and safety regulations brought about by this publicity,
could affect RCCL operations thereby increasing the cost of compliance and adversely affecting
the cruise industry.
1.2. Porters five forces
In the case of the cruise line industry,where growth is evident, it is important to analyze the
external reasons to the cause of their growth. With the help of the five forces by Michael E.
Porter(1979), the structure of the market a can be determined and the different strategies used in
the industry can be assessed, thus determine what influences the success of the growth of the

industry.
Industry Rivalry
In the case of the cruise line industry, there are several disadvantages and advantages of being
part of an oligopolistic and horizontal integration market. The result of merging smaller
companies to a parent company is that there are not a lot of players. There are few major players
and therefore the market is reasonably transparent (easy to the competition).The few players are
usually well established and knowledgeable of the services and product.They are able to build
new ships, develop itineraries and attract market segment without much threat from smaller
lines.Generally a company will engage in horizontal integration to increase its share of the market
for a certain kind of product or service. In this case the industry is able to produce a large number
of the same product or similar product and to control a large share of the market;this is also
referred to as economies of scale. However, if the company gets too big, it can be more difficult
to run and to manage because there is more that needs to be taken care of.
To be more specific, Carnival Corporation ( as a competitor )
RCCL's principle competitor is Carnival Corporation. They compete on the basis of cruise
pricing and on the types of ships and services they offer.
Due to Carnival's larger market share ( 52% ) vs RCCL ( 33% ) and Carnival wide portfolio of
cruise's brands, it has stronger financial flexibility and greater access to capital markets than
RCCL.
Carnival also has better access to the travel agency distribution network and to berthing facilities
in various ports throughout the world.
Carnival Corporation is a global cruise vacation and leisure travel company that offers various
cruise brand serving the contemporary cruise sector through Carnival Cruise Lines and Costa
Cruises
Threat of new entrants
As mentioned above, the size of the cruise line industry is relatively small due to the fact there
are a few major companies. Therefore, the threats of new entrants are relatively low.This gives
the industry an opportunity to watch the competition closely for potential threats and if you are a
new player in the market, market entry may be difficult. This would also provide companies with
broader access to different unreached markets, resulting in an increase in demand of their
product. However it can be argued that there can be a lot of price war/competition, as it is easy
for customers to shop around and look for the best bargains. This can put a strain in profitability.
Another disadvantage of having few players is that of product differentiation. This can be a
struggle for the cruise industry as most amenities, excursions and ships can be imitated.
However, horizontal integration encourages the construction of niche brands. For example,
Carnival Cruise Lines, alongside other cruise lines, are able to attract younger passenger 's
interest.
Bargaining power of buyers
Since there are so many buyers and the industry can get enough customers to fill the ships,that
means the industry has most control over buyer, however the more ships that are built,the more
beds need to be filled, and unless demand increases at the same rate, this will give the customer
some bargaining power because with more ships they need more customers. If they can get
enough customers to fill the ships, then the cruise line is in more control, but they are also
competing against other forms of vacationing. Airlines are offering cheap flights as well and you
can get cheap charter trips. Once the ships are built there is a certain capacity in the market. If
some negative factor happens (war, disaster etc.) demand may suffer, which means less
customers, and then the customer can "control" the price, as everyone will fight to get the
customer, and that usually means lower prices.

Bargain power of suppliers

The bargaining power of the industry for the suppliers is both low and high. There are few ship
builders in the industry, and therefore the industry must take the prices and cost that are offered to
them and the large number of supplier of equipment, fuel, and food products allows them to
bargain for the best price. However, there are many different suppliers of food and equipment in
the industry, so companies can shop around for the best prices.
Threat of substitute products
To date the greatest competition for a cruise line is land-based resorts, which has a significant
impact on the attractiveness and profitability of the cruise line industry. Among those factors, the
industry also has to compete with travel agencies offering good package deals which play a big
part in the purchasing decision of consumers in the leisure industry. Therefore the cruise industry
must offer competitive prices to secure sales. However,research also indicates that cruisers have
expressed great a satisfaction rate.The size of global cruise industry still represents a small
integral of the tourism industry. An example of how small the cruise industry actually is can be
compared to the number of visitors coming to Las Vegas. In 2010 Las Vegas attracted around 37
million visitors, while the global cruise industry at that time carried about 18 million passengers.
Now that the industry has been analyzed thoroughly giving good reason for its success, it is
interesting to see what the customers perceive of the cruise line industry and understand why
there is a strong demand for cruise trips.
2. Internal factors
The Value Chain Analysis

Primary Activities:
Inbound Logistics
Royal Caribbean Cruise Ltd (RCCL) has two distinct supply chains which create a unique

challenge. Each supply chain is managed by a Provision Master. The first supply chain includes
all food, beverage, and lodging inventories that needed for the trips. The second supply chain
encompasses corporate spend materials, such as office supplies, printing services, hardware and
software, printed materials, computer supplies, marine consumables (spare parts, fuel, lubricants,
any and all services associated with the ship maintenance and etc).
The Provision Master for the first supply chain is required to prepare a list of materials needed for
the next cruise or sometimes for a few upcoming cruises and to disperse the inventory to various
cost centers on the ship which based on the cost centers requisitions.
The Provision Master is facing a challenge jobs because the Provision Master must analyze the
previous trips experiences, the season, and the current customer base so that enable to come out a
list which can satisfy the passengers need. The Provision Master may need to consider where the
passengers from like US based, European based or Asian based because different region
passengers consume different things. The Provision Master also has to consider the number of
child passengers on the cruise because they consume less than adult passengers. When the list is
finalized, it is transmitted to RCCLs procurement department, which then does an extract in the
system and sends purchase requisitions to suppliers via electronic data interchange (EDI), fax or
e-mail.
We want to work very closely with our suppliers so that we can effectively plan for the
deliveries of truckload quantities of materials to key strategic locations. In this way, we can fulfill
requirements to the fleet as needed, explained by Michael Allsup, RCCLs VP of supply chain
management. Besides that, RCCL do not specify on one supplier who provided goods or services
in excess of 10% of RCCLs expenditure because avoid suppliers access power on the prices.
Operation
These are the activities related to the production of products and services. This area can be split
into more departments in RCCL such as the marketing department responsible for promotion and
advertising, human resource department responsible for recruiting potential employees, financial
department responsible for the financial support and etc. Each department is work closely with
another department so that integration is made and achieves the company goal.
After the purchasing on materials is made, then it turns to operation part which is transforming
the raw material into finished food and services. Each ship contains up to six galleys that produce
high quality foods for different venues. The average Celebrity Cruise ship stores approximately
21, 600 pound of various cuts beef for an average seven-night cruise. The chefs on the cruise will
work together and transforming the raw materials into delicious food according to the menu.
After that, the food will be prepared and served on cruise. The crews will provide the best
vacation experience to the passengers based on their professionalism.
Outbound Logistics
These are all the activities concerned with distributing the service to the customers. For example,
RCCL would entail the unweaving commitment to service and a desire to deliver the best cruise
vacation possible. Besides that, RCCL improve their competitive advantage by improving
innovation of on-board products and state-of-the-art cruise ships.
Marketing and Sales

This functional area essentially analyses the needs and wants of customers and is responsible for
creating awareness among the target market of the company about the firms products and
services. RCCL make use of marketing communications tools like advertising, sale promotions
and etc to attract customers to their cruise service.
The target market of RCCL is focuses on active families and adults who are vacation enthusiasts
interested in exploring new destinations and seeking new experiences. The advertising campaign
brings together a variety of media, including print, television, and Internet to increase the name
recognition for RCCL.
Service
RCCL commit to provide best quality service and best cruise vacation experience to the
passengers. The crew is the most valuable assets to RCCL because they counted on to represent
the company professionally and serve the companys customers. RCCL also handling the
complaint issues from the passengers to unsure that improvement are continuously.
Support activities
Procurement
This function is responsible for purchasing the materials that are necessary for the companys
operations. An efficient procurement department should be able to obtain the highest quality
goods at the lowest prices. To improve processes within both supply chain, RCCL decided to
institute a collaborative commerce approach.
We want to work very closely with our suppliers so that we can effectively plan for the
deliveries of truckload quantities of materials to key strategic locations. In this way, we can fulfill
requirements to the fleet as needed, explained by Michael Allsup. The closer of RCCL work
with the suppliers, the better of reducing overall cost in the supply chain.
The company saw that it needed to provide much more guidance and much more timely
information about inventory positions, itinerary changes, or even menu changes that could drive
or change consumption patterns. RCCL then needed to translate the needs of these operations
programs into purchasing and supply chain requirements. RCCLs procurement and logistics
processes together spend in excess of $600 million of the companys $2.9 billion in total revenue.
Technology Development
Technology is an important source of competitive advantage. Companies need to innovate to
reduce costs and to protect and sustain competitive advantage. RCCL develop the E-Commerce
which operate web sites with customer booking capabilities or provide electronic documents to
the customers. RCCL is using the latest information technology software to manage its
operations. These software packages enable the company to optimize decisions about pricing,
inventory, and marketing actions. Besides that, RCCL was the first company in the cruise
industry to develop an automated booking system.
Human Resource Management

RCCL realized that employees are an expensive and vital resource. RCCL value its employees as
the companys most valuable asset. They are counted on to represent the company professionally
and do the utmost to serve the companys customers. Hence, RCCL would manage recruitment
and selection, training and development to the employees.
Firm Infrastructure
The RCCL infrastructure includes planning and control systems, such as finance, accounting,
corporate strategy and etc. For example the Provision Master planning and forecast the
customers need and make purchasing on raw material to avoid wasted.
SWOT Matrix
STRENGTHS

WEAKNESSES

1.
2.
3.
4.

Increase net revenue yields

Revenues growing
Capital expansion of Celebrity Cruise Line
Expanding passenger capacity deal sign
Finlands Kvaerner-Masa Yards to build
bigger Ultra Voyager ships with capacity of
3,600
5. Using latest information technology
software to manage operations

1. During 2002 & 2003 RCCL experienced

weaker margins due to pricing pressure
caused by a weak U.S. economy, traveler
safety concerns, and increasing capacity
2. Net income falling
3. Higher marketing costs due to reduced
demand because of weak economy and
ongoing conflict in the Middle East
4. RCCL financed recent shop acquisitions by
issuing debt
5. Highly leveraged with LT debt-to-equity
ratio of 1.31

OPPORTUNITIES

THREATS

1. Expansion of fleet has allowed RCCL

increasing amount of destinations,
itineraries, and markets
2. Flexible strategy, moving their fleets
throughout the year to meet the seasonal
demand
3. RCCL operates the websites with customer
booking capabilities for both Royal
Caribbean and Celebrity Cruises
4. Offers competitive price on goods and
services offered from suppliers in packaged
deals.
5. Demand for cruises has increased and is
predicted to continue to increase

1.
2.
3.
4.
5.
6.
7.
8.

Terrorism
Viral outbreaks
Decreased tourism since 9/11
Challenging U.S. economy
Environmental lobbyists
Illnesses aboard cruise ships
Reports of physical attacks while on board
Carnival Corporation

Solution
S-O Strategy

O-W Strategy

S4O1O2: Expand Fleets with more

passenger Capacity to fit the flexible
demand
S5O4O5: Using top of the line software
technology to keep the competitive
edge to keep demand increasing

S-T Strategy

III.

W3W5O1O3: Cut debt by having

increasing online bookings on website
rather than through travel agents which
will also help decreasing marketing
costs by showing more about Royal
Caribbean on website

W-T Strategy

S3S4O8: Use capital expansion to

increase amount of tourists to keep
ahead of Carnival Cruiselines

SPACE analysis

Financial Strengths
1. Negative working capital $ -974.7 million
2. Net income as on 2003 is $ 280.7 million compared to $ 351.3 million
in 2002
3. Earnings per share of $1.45 compared to last year $1.8
4. Return on Equity is 6.5%
Average

Rating
1.0
2.0

Industrial Strengths
1. Passenger growth of 9% in 2003
2. Annual growth rate of 9% in North America
Average

Rating
5.0
5.0
10/2 = 5

Competitive Advantage
1. Market share of 33% in 2003

Rating
-2.0

2.0
3.0
8/4 = 2

2. Quality of services
3. Leader in cruise design
Average
Environmental Stability
1. Inflation rates in 2003 remained low
2. High barrier to entry
3. Risk involved in business
Average

-1.0
-1.0
-4/3= -1.3
Rating
-3.0
-3.0
-4.0
-10/3 = -3.3

SPACE Matrix
FS
Conservative
- Market penetration
- Market development
- Product development
- Related diversification
CA

Aggressive
-Vertical integration
-Market penetration
-Market development
-Diversification
IS

Defensive
-Liquidation
-Divestures
-Retrenchment

Competitive
-Horizontal integration
-Product development
-Market penetration
ES

Strategies for RCCL:

1. Acquiring smaller cruise companies
2. Expanding more new destinations in Asian
3. Increasing marketing activities

IV.

QSPM

After using many tools to analys the internal and external factor of RCCL to find the solution for
RCCLs issue, we had given many recommendation for company, and we also dicided two best
strategies for company in this time. Expanding fleets by two boats with larger capacity for
passengers and Capital expansion to increase the amount of revenue to surpass the larger
competitor Carnival Cruiseline are the suitable strategies in this case.
Althouth we find two best strategies for the company but they can do the both in the same time
because of their current capabilities do not allow. Therefore, it is important to find out the final
decision to be the right direction for the company. To solve this problem, we choose QSPM tool.
Capital
expansion
AS
TAS

Expanding
fleets
AS
TAS

0.05

0.15

0.2

0.05

0.15

0.2

0.05

0.1

0.15

Key factors

Weigth

External
Opportunities
Expansion of fleet has allowed RCCL increasing
amount of destinations, itineraries, and markets
Flexible strategy, moving their fleets throughout
the year to meet the seasonal demand
RCCL operates the websites with customer

booking capabilities for both Royal Caribbean

and Celebrity Cruises
Offers competitive price on goods and services
offered from suppliers in packaged deals.
Demand for cruises has increased and is predicted
to continue to increase
Threats
Terrorism
Viral outbreaks
Decreased tourism since 9/11
Challenging U.S. economy
Environmental lobbyists
Illnesses aboard cruise ships
Reports of physical attacks while on board
Carnival Corporation
Internal
Strengths
Increase net revenue yields

0.05

0.15

0.15

0.15

0.45

0.6

0.1
0.05
0.1
0.05
0.05
0.05
0.05
0.2
1

1
2
2
3
2
2
2
4

0.1
0.1
0.2
0.15
0.1
0.1
0.1
0.8

2
2
2
3
2
3
3
3

0.2
0.1
0.2
0.15
0.1
0.15
0.15
0.6

0.07

0.21

0.28

Revenues growing

0.2

0.8

0.8

Capital expansion of Celebrity Cruise Line

Expanding passenger capacity deal sign Finlands
Kvaerner-Masa Yards to build bigger Ultra
Voyager ships with capacity of 3,600
Using latest information technology software to
manage operations
Weaknesses
During 2002 & 2003 RCCL experienced weaker
margins due to pricing pressure caused by a weak
U.S. economy, traveler safety concerns, and
increasing capacity
Net income falling
Higher marketing costs due to reduced demand
because of weak economy and ongoing conflict in
the Middle East
RCCL financed recent shop acquisitions by
issuing debt
Highly leveraged with LT debt-to-equity ratio of
1.31

0.2
0.03

0
3

0
0.06

3
4

0.6
0.12

0.1

0.3

0.4

0.1

0.2

0.3

0.05
0.05

2
2

0.1
0.1

3
0

0.15
0

0.1

0.4

0.1

0.2

TOTAL

5.05

5.6

Decision: We have decided to add two other boats to the entire fleet and they will be finished by
2Q 2006