Disney Cruise Line: An Analysis of the US

Ocean and Coastal Transportation Industry

Reagan Wheeler, Kristin Linn, Cari Tanner

 JUSTIFICATION OF ARENA:
According to IBIS World, Disney Cruise Lines overall industry is defined as the US
Ocean and Coastal Transportation Industry. This industry is rather large, with varying sectors,
however the Disney Cruise Line falls under the cruise and tourism sector of this industry. This
places them in the largest percentage of the industry, as 54.9% consists of deep-sea passenger
transportation (Appendix 1). The industry has had a huge push towards expansion over the past
few years, and globalization is high and the trend is increasing (Appendix 2). The increasingly
high push towards expansion has led cruise lines to purchases new ships, and build new ships to
grow their fleet and expand their product scope.
The push towards globalization has led many cruise lines to expand their port variety and
destination options. This has resulted in a consistently strong geographical arena among most
cruise lines. Disney Cruise Line is no exception. Despite their small fleet, they have focused on
expanding the variety of destination and port offerings, to globalize their business. Due to this, it
is not the most strategic choice to focus on the geographical arena, as this is strong amongst other
competitors.
Disney Cruise Line is owned and operated by The Walt Disney Company, and therefore
owns rights and privileges to all of Disneys affiliates and properties. Much of the company is as
vertically integrated as possible, and, when compared to other industry leaders, is extremely
strong. Though they could vertically integrate things such as ship construction, fuel, and ports,
they are already leading in this arena. Therefore, it is strategically recommended that they place
their focus elsewhere.
Disney Cruise Line is a relatively small fleet, currently only operating 4 ships along with
a private island, Castaway Cay. They offer a wide variety from a geographical perspective, but
from a product analysis, they are lacking. They market towards a very niche market, which
works in tangent with their differentiation business model. This niche market strategy has proved
successful for them, and it is not recommended that they abandon this strategy, as they it is not
probable they would be successful with a strategy similar to Carnival Cruise Line or Royal
Caribbean Cruises. However, it is justifiable to focus on the product arena, as it is recommended
for Disney Cruise Line to broaden their offerings, therefore expanding their product scope. By
doing so, Disney Cruise Line would become a stronger competitor in the product arena.
This analyses and recommendation details how Disney Cruise Line can maintain their
differentiation model, while also placing a focus on broadening their product scope and variety,
placing them as a strong competitor in all three arenas.
 EXTERNAL ANALYSIS:

Potential profitability in the US Ocean and Coastal Transportation Industry can be

examined through each of Porters Five Forces (Appendix 3). First, the rivalry in the industry is
quite strong, amidst fierce competitors fighting to be the largest at sea. With a majority of the
industry falling under the average generalized cruise market, with little to no differentiation, the
cruise line industry is comprised of many strategies that push the cruise lines to be the largest.
The infamous line from James Camerons Titanic where Rose quotes Sigmund Freud stating that
the his ideas about male preoccupation with size might be of particular interest to the cruise
line mogul reign true. The cruise line industry is continually competing to be the largest fleet, or
the largest ship. The industry also contains very little switching costs, which provide strict
competition among cruise lines. However, while rivalry in the industry is high, the threat of new
entrants is quite low. Due to the extremely high investment costs to build a ship, power a ship,
and dock a ship it is very risky for newcomers to enter the industry with no previous resources.
There are also high government regulations involved in the industry, which results in extremely
low incident reports compared to other transportation and tourism industries (Appendix 4). This
prevents potential new entrants from quickly and easily entering the industry.
The bargaining power of buyers in the industry are quite high, with much of the
consumers consisting of individuals from high economic and social classes, who have the liberty
to spend their money elsewhere, as the average cruise line passenger makes $98,000 a year or
more (Appendix 5). As previously stated, switching costs are very low, allowing consumers to
switch if they feel the cruise line is not meeting their expectations. Though the power of buyers
are high, the power of the suppliers is quite low, which raises profits for cruise lines as they have
high bargaining power and have low costs for necessary supplies. Finally, the threat of
substitutes is moderately low. While there are many alternative options to cruising for a vacation,
there is no direct substitute for a cruise. The US Ocean and Coastal Transportation industry is the
sole provider of cruise vacations, and has no direct substitutes. However, it must be mentioned
that people can choose other vacations options on land. Overall, the industry can be a profitable
one due to its low supplier power, low threat of entrants, and moderately low substitutes,
however its overall profitability would be ranked moderate due to its high buyer power and high
rivalry.
Due to the moderate profitable of the industry, key success factors are essentials for
success. Guest service is extremely important for success, as this is a tourism focused industry,
and is key to earning brand loyalty. Unique offerings are key due to the high rivalry in the
industry. Having a brand deal, or a renowned name tied to a line is key, which also ties into the
the ever important brand loyalty key of this industry. In conclusion, to be profitable in the
industry, one must focus on differentiation and being unique among competitors.
 BUSINESS LEVEL-STRATEGY ANALYSIS:
Disney Cruise Line has a differentiation strategy, that is, their product or service offers
unique attributes that are valued by customers, and customers perceive their cruises to be better
than or different from than those of the competition. The value of their cruises and their
amenities allows for them to price their voyages higher than that of others. Two major
competitors to compare product with are Carnival Cruise Line and Royal Caribbean Cruise Line
(Appendix 6).
When evaluating its economies of scale, the biggest asset to the company is its branding.
Disney brand is recognized world-wide, and is able to use its characters and tales in cruise
activities. This gives them a huge advantage over other cruise lines, especially in a family
market. Other cruise lines do have exclusive branding, such as Carnivals partnerships with Guy
Fieri and Dr. Seuss Enterprises, and Royal Caribbeans with MGM. Disney Cruise Line also
takes exclusivity with their private island, Castaway Cay. There are some areas where Disney
Cruise Line is lacking in, the primary one being their lack of ships and ports. In comparison,
Carnival has 25 circulating ships, and carries more customers than any other cruise line, while
Royal Caribbean is circulating 24 ships, both with international homeports. This aids in input
costs, however, as Disney Cruise Line holds highest advantage with only 4 ships in circulation
and lower maintenance costs to that of Carnivals 25 and Royal Caribbeans 24.
In technology innovation and design, there is some advantages for Disney Cruise Line.
They have been credited with their virtual portholes and for installing the first water roller
coaster at sea. Disney Cruise Line also utilizes screens around the ship to create the feeling of
being immersed into the world of their stories. Carnival combats this with mini-golf, their
skyride experience, IMAX theaters and their pioneering in ropes courses at sea. Royal Caribbean
also innovates with virtual balconies, an Aquatheater, and pioneering rock climbing and ice
skating at sea.
And finally, in efficiencies, all companies offer their own green advantage. Disney Cruise
Line, Carnival Cruise Line, and Royal Caribbean Cruise Line all use exclusively Liquified
Natural Gas to decrease their carbon footprint and air emissions, allowing for a cleaner voyage.
These comparisons are thoroughly evaluated in the following internal analysis.
 INTERNAL ANALYSIS:

Disney Cruise Line has many strengths over the tough competition present in the US
Ocean and Coastal Transportation Industry (Appendix 7). When compared to its two of the most
prominent competitors of the industry, Carnival Cruise Line and Royal Caribbean Cruises, they
are the most differentiated and unique out of the three. Examining Disney Cruise Lines
strengths expresses the most obvious strength, their brand. Disney Cruise Line is owned and
operated by The Walt Disney Company and therefore holds all rights and privileges to the
brands products, affiliates, and subsidiaries. This was initially what allowed Disney Cruise Line
to enter the industry, despite the risky moderate profitability and high entrance cost. Their parent
company is one of the most well known brands, and holds a strong reputation of exceptional
guest service and quality. Carnival and Royal Caribbean, while pretty well-known, began as a
Cruise Line, with no rights or privileges to a parent companys existing reputation. While they
both hold partnerships with entertainment corporations for rights to their characters, stories, and
shows, neither are as popular and well-received as Disney. Due to this, Disney also is vertically
integrated, as they own and produce most of their offerings, while their competitors must sign
deals and pay for these rights.
Though Disney Cruise Line is a strong competitor, they withhold weaknesses. In an
industry that is consistently maturing and has a focus on expansion, they are a relatively small
fleet (Appendix 8). With only 4 ships currently sailing on the ocean, they are a small fraction of
the size of Carnival and Royal Carribean, with each having 25 and 24 ships, respectively. Due to
this, Disney Cruise Line has a relatively small product scope when compared to its competitors.
Due to the low availability matched with the high demand, their pricing is also extremely high
when compared to the industry standard.
Disney Cruise Lines high price and low product scope are noticeable when comparing to
strong competitors such as Carnival Cruise Line and Royal Caribbean Cruises. However, they
hold many resources and capabilities that provide them with mature core competencies
(Appendix 9). As mentioned above, a strong resources is their brand, a they hold the rights to the
Disney name. They also have a private island, and exclusive rights to fireworks at sea. Their
focus on differentiation, and their natural strength of vertical integration has provided a
successful run for the cruise line, but their weaknesses are apparent and are noticeable by the
average consumer. A strategy that maintains the focus on differentiation, but increases the
product scope and offerings of the cruise line will allow a stronger competitive advantage over
other lines such as Carnival Cruise Line and Royal Caribbean Cruises.
 SUMMARY OF PRECEDING ANALYSIS:
In comparing Disney Cruise Line to its competitors there is a clear disadvantage in their
number of ships, and a huge advantage in the holding of the Disney brand.
Disney Cruise Lines competitors hold a larger number of home ports, as well as a
exponentially larger number of ships. Because Disney Cruise Line is so new to the market in
comparison to their competitors, theyre still developing their fleet. As of 2017, the company has
announced two new ships in the making, increasing its current fleet by 50%. Given the previous
ships, its somewhat understandable for the low numbers as they have higher standards to meet,
with innovative technologies and competition to these creations surely underway. Other cruise
lines have already created and coined their own innovations on-board, and offer a larger variety
of ports and locations to choose from. Until their fleet is on a similar scale, it will be difficult for
Disney Cruise Line to increase their presence in that area.
The biggest advantage to focus on is the Disney name. Families are usually targeted for
their cruise lines friendly magic feel, and as such Disney Cruise Line is able to market itself in
the cruise line industry as exclusively family friendly. Their select few ships make their
availability for mass numbers difficult, but allow them to really focus on each voyage and work
to give guests and their families the Disney Magic they come to expect in every trip. The prince
and princess feel, as well as the immersive magic of the Disney Universe, makes this niche
market one to really magnify.
 STRATEGIC RECOMMENDATION:

Disney Cruise Line is very successful with its family-friendly market. They have a large
fleet of ships and do very well with what they have and at what they do. There is not a ton of
room for improvement in most arenas. Ports and destinations have an incredible range with this
cruise line. Disney is such a large conglomerate of a company that they provide a lot of resources
for themselves. They offer a lot of great products but they could always stand to add more.
Disney Cruise Line could expand their theming behind their cruises and target a larger
demographic if they used a couple ships to cater to more niche markets. Many people, of all
ages, love Disney - not just kids. Over 50% of Disney Cruise Line passengers are 45 years old or
older, and over 86% are female (Appendix 10). Broadening the differentiated strategy to include
a new niche market, one of a much older demographic, will allow for Disney Cruise Line to
maintain their business strategy but be more competitive in the product arena. Also, catering to
those older millennials (that either do not have kids yet/at all or want a getaway) would help
increase Disneys revenue, as millenials have a desire to travel to more excotic and more mature
destinations in order to learn a new culture and see new things, with 78% willing to spend money
on hands on experiences (Appendix 11).
There is no need to create a new ship specifically for a new market. The standard design
of each ship could easily cater to any age or demographic. Another benefit to using the same
ships for both is taking advantage of off-seasons. Kids go to school, parents work; therefore,
families cannot go on cruises enough to keep Disney Cruise Line busy all year. Catering to more
adult demographics during those downtimes would be beneficial. A lot of the older demographic
(millennials) grew up knowing the Disney brand. They are also old enough to be coming into
disposable income and would be willing to spend the money on a fancy cruise and nostalgia.
These ships would take the Disney everyone knows and just put a more mature twist on it.
Themed alcoholic beverages and food would be featured. Balls, spas, and so on would be part of
a more mature entertainment lineup.
In addition to entertainment and amenities getting an adult overhaul, the ports and
destinations would also be more tailored to older generations. Paradise and romantic destinations
would be a forefront of the destinations for this version of the cruise line.
If this new cruise theme proves successful in one ship for the first three years of
operation, this theme will be expanded to more ships. Success is determined by whether revenue
increases during off-seasons for the family cruises. Revenue would also need to increase in
order for the implementation to be a success and worth implementing further.
Appendix 1: US Ocean and Coastal Transportation Industry at a Glance

Appendix 2: US Ocean and Coastal Transportation Industry Costs

Appendix 3: The Effect of Porters Five Forces on the US Book Retail Industry

Appendix 4: Cruise Line Industry Incident Report July 1, 2017- September 30, 2017
Appendix 5: Cruise Line Industry Demographics

Appendix 6: Cost Strategies of Disney Cruise Line vs. Competitors

Appendix 7: Strengths and Weaknesses of Disney Cruise Line

Appendix 8: Maturity of US Coastal and Ocean Transportation Industry

Appendix 9: Resources, Capabilities, and Core Competencies of Disney Cruise Line

Appendix 10: Community Analysis: Disney Cruise Line Demographics

Appendix 11: Millennial Travel Trends 2016
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TravelCarma. (2016, July 19). How Travel Agents can Woo Millennial Travelers The Segment

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United States Federal Government. (2017, October 1). CRUISE VESSEL SECURITY AND

SAFETY ACT (CVSSA) STATISTICAL COMPILATION. Retrieved December 4,

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