Carnival Corporation
Module 8 Assignment 2
Martha Anne Alvis
Argosy University
Abstract
Carnival Corporation (CCL) has been examined as to the nature of the industry. This paper studies the organizational structure from the Chief Operations Officer to the crew. Looking also into the global locations and the organizational work at several sites in which CCL operates. This paper examines the flow of information and the methods of resolution. Further offering information on strengths, weaknesses, threats and opportunities in the industry this analysis offers a strategic plan in which CCL could continue to grow its international opportunities through the purchase of another cruise line. A leader in entertainment, CCL remains vigilant for the future. Continuing to seek opportunities is one way to maintain leaderaship in this industry.
Carnival Corporation and Carnival PLC Carnival Cruise Lines is an American Dream come true. Started by Ted Arison, the company began operation in 1972 with a single secondhand ship, the Mardi Gras, and barely enough fuel for a one way trip from Miami to San Juan. The level of enthusiasm, Arison relied on to get his vision sailing, was barely adequate to start building the company into a full-fledged cruise line; and in two years, Carnival was still struggling. Arison remained focused on his goal and in 1974, he purchased full ownership of Carnival for $1 in cash and he assumed a debt of $5 million. Arison spent the rest of his life investing in Carnival. He finally turned the $1 investment into the most popular and profitable cruise line in the world. With a single ship, which was a converted ocean liner, the Mardi Gras was instrumental in Carnival’s growth. Carnival Corporation & PLC a global cruise company (Carnival Corp.), is one of the largest vacation companies in the world. The corporation includes: Carnival Cruise Lines, Holland America Line, Princess Cruises and Seabourn Cruise Line in North America; P&O Cruises, Cunard Line and Ocean Village in the United Kingdom; AIDA in Germany; Costa Cruises in southern Europe; Iberocruceros in Spain; and P&O Cruises in Australia. These brands are the most recognized cruise brands in North America, the United Kingdom, Germany, Southern Europe and Spain. The customers in whom the cruise lines cater are from a variety of cultures. Many languages and leisure-time preferences are considered with the variety of cruise opportunities. Two of the tour companies take advantage of the Alaskan and Canadian Yukon frontier and wilderness. These cruise lines are Holland America and Princess Tours. The entire vacation cruise companies combined cater to eight million guests each year. Carnival Cruise Lines, "The World’s Most Popular Cruise Line," sold common stock in 1987. This small 20 percent of common stock provided the capital to allow the company to expand. The name Carnival Corporation came into existence in 1994 when it was first traded on the New York Stock exchange and the London exchange. Later, Carnival acquired many cruise companies such as Holland America Line, Windstar Cruises and Alaskan and Canadian tour operator Holland America Tours, Seabourn Cruise Line in 1992, Genoa, Italy-based, Costa Cruises in Europe in 1997, and Cunard Line in 1998, which boasts the world’s largest ocean liner, the Queen Mary 2, a 150,000-ton vessel. In April 2003, Carnival agreed to combine Carnival Corporation with P&O Princess Cruises plc, creating the world’s first global cruise operator. The corporation has 12 highly recognizable brands which make the new company one of the largest leisure travel companies in the world. The merger with P&O Princess Cruises gained worldwide acclaim from the hit television series, “The Love Boat.” P&O Cruises is a British cruise operator. The brand P&O Cruises Australia is that country’s largest cruise operator. AIDA Cruises, based in Germany, is the number one cruise company there also. Two companies from the United Kingdom are Ocean Village and Swan Hellenic, both catering to different clientele. Carnival attributes its’ success as the world’s largest cruise operator to its ability to manage brand autonomy. Each major cruise line maintains separate sales, marketing and reservation offices, as well as through the industry’s most aggressive shipbuilding program. This global entity with cruise brands headquartered in the United States, United Kingdom, Italy, Germany and Australia, is one of the worlds largest travel companies. Carnival works to support the communities in which it operates, including both its’ headquarter locations, homeports and ports of call. Carnival Corp. supports and encourages the all of its employees tot be involved in a wide variety of programs which provide aid, donations and services to a variety of charitable organizations. Carnival Cruise Lines has its headquarters in Miami, with satellite offices in Miramar and Fort Pierce, Florida and Colorado Springs, Colorado. Carnival Corporation meets the criteria for this project for the following reasons. Carnival Corporation operates globally and it is listed on two international stock exchanges. Carnival has offices in over 10 locations around the globe with thousands of employees. They have a corporate structure that can be compared to other international companies. Their headquarters is in Florida; however they have many satellite offices supporting the corporation in other states and other countries. Their cash flow is substantial with opportunities to purchase or sell assets.
Carnival Corporation and Carnival PLC Organizational Structure The Boards of Directors, (The Board) of Carnival Corp. is accountable to the stock holders. It manages decisions and requirements to maintain a viable company on the New York Stock Exchange and the London Stock Exchange. The Nominating & Governing Committees annually review the requirements and characteristics of a Board member. The 14 member Board has authority to adopt and implement the rules of the Exchanges. This is at the highest organizational level which is centralized with authority to affect changes at all levels of the industry. Each member of The Board is a Director for one of the Cruise Lines. Each Director has full authority and is empowered with the responsibility to exercise their business judgment and to act in a way they believe to be in the best interests of the individual Company they represent. The Director has fiduciary duties to the Companies and their shareholders. The Directors are charged to manage the individual company as if his company were a single entity. The Directors then rely on the honesty and integrity of the Companies' senior executives. The senior executives report to the Director. They have outside advisors and auditors. Directors spend the necessary time to execute all of the duties to manage their individual cruise line. This is the second highest level of the organization which is still centralized. The non-management director’s will report to the senior executives. During this meeting the presiding director serves as liaison to the non-management directors. At this level, authority is becoming decentralized, however all decisions are forwarded to The Board. The Board allows Management, which in recognized as senior executives and non-management directors, to speak for the Companies. Individual members of The Board communicate with various companies are involved with the Company. It is expected that The Board members would manage all necessary business transactions as needed with the knowledge of Management. At this level in the hierarchy of the corporation, most decisions are decentralized. The opportunity to remain functional and diverse from other cruise lines is obvious at this level. The Board has multiple committees which include but not limited to: Audit Committee, Compensation Committee, Nominating & Governance Committee, and a Health, Environmental Safety & Security Committee. All of the members of these committees are independent directors. The Director has full knowledge of the committee assignments and the designation of the committee chair. The Board, Directors, and each committee have the power to hire independent legal, financial or advisors as needed. The Company provides the Committees with adequate resources to perform their duties. The Board has the authority to establish any additional committees as necessary. For these activities the cruise lines are considered decentralized. The Board is the primary leadership of Carnival Corp. Each Director is the primary leader for one of the cruise lines. Each cruise line has a board of directors which is the primary managerial head of that cruise line. The senior executives and the non-management committees are directly involved in all the decision making for the respective cruise line. In order to compare this organizations structure with another organization within the same industry would require another international cruise organization. Because there are no other significant cruise organizations of this size, we will be comparing an international Shipping organization, International Shipholding Corporation (ISC). ISC is an international corporation, listed on the New York Stock Exchange, has a board of directors, and multiple executive committees. According to the Corporate Governance guidelines of ISC, it lists many of the same functions and committees of Carnival Corp., and it has up to nine board members. These Board Members execute their responsibilities under a similar structure to that of Carnival Corp. Carnival Corp. has demonstrated that it is a leader in international cruise line. Through growth and developing into an internationally recognized name, it is safe to judge that the current organizational structure is a good fit for Carnival Corp. To identify improvement in the responsiveness of Carnival Corp. we will address three areas: customer service, financial viability, and leadership in the cruise industry. First, Carnival Corp. considers their customers to be the single most important entity for the success of the corporation. Addressing concerns as soon as possible with strong attempts to reconcile at the lowest level is a key to the success. Second, in order for the corporation to remain financially viable the individual cruise lines offer low fairs and do not compete with other lines. To fill a ship with passengers by offering cruises as a lost leader is more profitable due to the secondary expenses on board the ship. Third, continuing to seek advice from outside professionals about the industry and concerns of future endeavors, aids the corporation in anticipating future needs. In this way Carnival Corp. continues to be proactive while seeking ways to be innovative. In order for Carnival Corp. to continue to be the Worlds’ Leading Cruise Lines’ The Board must not allow itself to become complacent. All luxury items are at risk for failure during a difficult economy. This is an external environment issue that the corporation can not control. Internal environment stressors are change in senior executive personnel or a member of The Board. A change in the hierarchy of Carnival Corp. would cause a domino effect change downward to the individual cruise lines by a change in personality.
Carnival Corporation: Location and the Organization

Headquartered in Miami, Florida, and London, England, Carnival Corporation (Carnival Corp.), has satellite offices that support Miami, in Miramar and Fort Pierce, Florida and Colorado Springs, Colorado. Carnival Corp. is the headquarters for all the following independently operated Cruise Lines: Holland America Line, Princess Cruises and Seabourn Cruise Line in North America; P&O Cruises, Cunard Line and Ocean Village in the United Kingdom; AIDA in Germany; Costa Cruises in southern Europe; Iberocruceros in Spain; and P&O Cruises in Australia. All of the cruise lines are charged with a variety of obligations to support the respective cruise line. Some of these include consumer relations or public relations (PR). Carnival encourages all employees to work to make a difference both nationally and internationally. The Headquarters in Miami is the place where most of Carnival Corporation completes its business. They have 1000 employees at the Miami location. Communicating in corporate meeting about the needs, problems and plans for the corporation, Miami is the hub of Carnival. Employees at this location are involved in many local non-profit opportunities. These opportunities include a variety of employee fund raisers and hands-on volunteer services such as: philanthropic programs, annual March of Dimes Walk America, Hands on Miami beautification project, and local clean up initiatives. Colorado Springs, Colorado is a call center for the Cruise line with only 400 employees. Costa is home based in Genoa, Italy and support 20 ships. They have offices in 28 cities in 16 different countries with individual locations relatively small. Costa employees about 15,000 people with 14,000 on board divided among the fleet. Shore side offices employ 1,000 people with 60% of them in sales and commercial departments. AIDA Cruise Lines is home based in Rostock, Germany; they employ about 2,300 staff from 25 countries. The Priccess corporate headquarters are located in Santa Clara, California. They also have offices in Seattle, Washington and Ft. Lauderdale, Florida. There are smaller field offices in Alaska and southwest Canada. On the shore side, the Princess campus is home to more than 2,000 professionals who support an direct the actions of more than 21,000 people working aboard the ships. The senior management continues to be responsible corporately when it comes to protecting the environment and other committee meetings such as the environment and publish an annual Environmental Management. Each of the operating lines provides reports on: Health, environment, safety, and security of passengers and crew. The Operating Line is charged with actively participating in and contributing to the process of determining the role of the cruise industry in addressing climate change. With Fuel oil as the main source of energy for the ship, energy reduction is of primary concern. All Operating Lines collect data on shipboard wastewater management reduction. This contributes directly to lowering costs to materials and for processing waste water. All Operating Lines have compliance committees for: Environment, training, certifications, health, safety, security, sustainability, and social responsibilities to the communities they respectively serve. Additionally, the Operating Line creates and publishes a financial report that is reviewed by The Board of Directors at the corporate level. The Operating Line offers clearly written forms of communication to prevent poor communication. All correspondence is written at the time of review or written post meeting and reviewed for accuracy prior to submitting to the respective board.

Communication Methods and Strategies

Carnival Corporation has established a top to bottom formal style of communicating. The Boards of Directors (The Board) while accountable to the stock holders maintains authority over all the individual cruise lines. All decisions made by an individual cruise line are referred to The Board. There are many committees with in the corporation and the individual cruise lines. All recommendation, actions, and reviews by the respective committees are also referred to The Board. Each cruise line Director must report to The Board all actions, committees, and reports for their respective Cruise Line. The Directors are empowered with full authority to act in the best interest of their Cruises Line; however all of the information acted on or planning on behalf of the Cruise Line is reported to The Board. Because all companies require two-way communication, the Directors receive reports from their senior executives which are reported directly from the non-management directors. The honesty and integrity of all of the management team is the strongest component to the success of the Corporation. The outside advisors and auditors are responsible to report to the individual committee or board of which they are employed. All committees formed are independent; however they operate within confines of the committee assignments. During a board meeting the presiding director is the liaison to the non-management directors where all decisions are forwarded to The Board. The Board allows Management: senior executives and non-management directors, to make all necessary decisions for the cruise line. At this point all results, conclusions and other appropriate information are forwarded through the Director to The Board. Individual members of The Board communicate with various companies that are involved with the Company. Evaluating the methods of communication within Carnival Corp., demonstrates the necessity of openly communicating in both directions. Communication flowing downward is based on the needs of the corporation while communicating to The Board is in the form of information of actions taken in the best interest of the cruise line. While all professional communication is written, there is frequent verbal communication that is put into writing afterward. The opportunity for errors, misjudgment, and deliberate misquotes is evident. This results in disgruntled employees and damage to the corporation. This is an opportunity for the organization to improve its’ communication. One opportunity is to have a stenographer present or to record the minutes using an electronic devise. This could later be written and forwarded with any report as needed.

Strengths, Weaknesses, Opportunities, &Threats Analysis As strengths are analyzed, CCL demonstrates financial viability. One tool used is a cash flow forecast in which a prediction model permits CCL to see the flow of money. The model allows CCL to analyze whether a project will be sufficiently profitable to justify any further effort. Completed on a spread sheet, CCL can determine the impact of changing factors outside of CCLs’ area of control. Some of the areas the corporation will study are: sales and costs of a certain product, the time period to study a product is usually one to two years, salaries, utilities, marketing, and research. CCL is the largest cruise line in the industry therefore they have an opportunity to set industry standards. CCL uses this as leverage to negotiate contracts with builders, maintenance organizations, and when planning new products. CCL also offers rewards for loyalty to The Board, Management, non-management, and employees. While the cruise lines offer rewards to the customers. Strengths demonstrate the corporations’ potential progress and growth. One area of strength is the diversity of The Board of Directors. Each of the cruise lines has a Director, he serves on The Board. This individual represents his cruise line and brings his unique knowledge, culture, and expertise to the corporation. CCL then relies on the Directors’ diverse specialties and styles to enhance CCLs’ market share and maintain all of the qualities that make it The Worlds’ Largest Cruise Line. The benefits of a corporate monopoly in the cruise industry are the ability to function in a complex market. Profit sharing firms strive toward pure monopoly and oligopolistic which is a market form in which an industry is dominated by a small number of competitors. CCL is able to promote advances in the market through growth in the industry with minimal competition. While CCL is not a true monopoly, being the largest in the industry allows them to react to supply and demand most effectively. As we discuss weaknesses in CCL there are two that are more critical. The many languages that are spoken within senior management require CCL to take precautions to insure that all communication is professional and accurately understood. Dialects within a language also create occasional miscommunication. While CCL continues to work to maintain its’ market share, another area of concern is the large amount of crew turnover. All industries struggle to hire and maintain the best employees. The individual cruise lines are required to absorb much of the expenses of training, however through their larger parent company, CCL, they are able to offer: training, medical coverage, and compensation packages at a lower rate than competitors. CCL and the individual cruise lines seek opportunities to curve the expenses by requiring employees to sign employment contracts, usually one year at a time. CCL has survived and grown with the reputation of “The Fun Cruise Ship, and The Worlds’ Largest Cruise Line.” As part of their marketing strategy, they are diligent to locate and enter more ports of call, (POC). This is another way that CCL advertises and gains market share. In order to diversify into more POC, the individual cruise lines must analyze the opportunity for a ship to be serviced, provide unique opportunities for passengers at the POC, and identify the large ships to be accommodated within that POC. In order for the World’s Largest Cruise Line to continue to be successful, flexibility is necessary. There are always problems coping with: large corporations, large ships, large numbers of passengers, and unpredictable weather. CCL has attempted to negate bad press with positively rewarding the passengers after a problem cruise. Managing press is the responsibility of the individual cruise line; however after a serious problem, the cruise line is responsible to communicate with CCL in order to continue to manage and monitor the press. This communication is necessary to prevent CCL from financially liability which can have a direct affect on the CCL value. In February 2002, Carnival Corp. made purchase offer for Princess Cruise Lines, (P&O) in order to prevent P&O from merging with Royal Caribbean Cruise Lines, (RCCL) which would have made RCCL and P&O the largest cruise line in the world. Carnival Corp. paid $5.4 billion for P&O. In order for the purchase to go forward, the share holders had to accept the offer, reject the RCCL offer and pay a settlement fee to RCCL of $62.5million. Through the purchase of P&O, CCL was later primed to purchase RCCL. This opportunity negated a potential threat to CCL. Through these purchases, this allowed CCL to become the largest corporation of cruise lines in the world. Had the shareholders of CCL rejected the proposal RCCL and P&O would be the largest in the world and be in a position to offer a hostile take over of CCL. Other threats that CCL must consider as it grows is to offer new opportunities for customers. With the industry continuing to demand larger and grander vessels, finding a POC to accommodate the vessel, passengers and offering unique opportunities requires long term planning at both the corporate level and the individual level. Smaller POCs have demonstrated difficulty accommodating larger vessels and passengers. This lost opportunity offers a market share opportunity for smaller competitors. All POC have legal requirements, to which, the vessels entering must adhere. CCL considers factors such as politics that will negatively affect the passengers, vessel, and crew prior to contracting with a POC. The corporation must maintain a positive status at all POCs in order to continue to remain financially viable. Abiding by the laws of a new country is necessary for this political function. CCL recognizes the importance of cultural diversity and considers this a positive opportunity to negate the threat in a new POC.

|Strengths |Weaknesses |
|Financial viability |Multiple languages spoken within senior management |
|Largest organization of cruise line |Turn over of crew & training, morale |
|Diversity of management |Necessity to change POC |
|Monopolies – competitive advantage | |
|Opportunities |Threats |
|Diversity into small ports with older smaller ships |Merging of other lines to form larger corporations |
|Purchases of other cruise lines |Small ports, inability to accommodate large vessels |
|Changing POC |Legal complications, port authority |

Strategic Plan: Purchase an Additional Cruise Line Carnival Corporation (CLL), the worlds largest cruise line, did not become the largest by accident. CCL has been acquiring smaller cruise lines and ships for many years. The most recent acquisitions were P&O Cruises which comprised Princess Cruises, P&O Cruises, Ocean Village, AIDA, and P&O Cruises Australia. While there are over 33 cruise lines in the world, most of these have small fleets or are independently operated. In June 2001, American Hawaii Cruises (AMCV) stock dropped to $3.40 a share. They filed for chapter 11 bankruptcy protection which allows a company to renegotiate its’ debts while continuing to operate. In 2002, Greek operated cruise line Royal Olympic Cruise Lines (ROCL) filed for bankruptcy protection in Greece, similar to chapter 11. Shortly after filing, ROCL withdrew from filling financial status in the US. Both corporations were under pressure and the financially distraught cruise lines were primed for a hostile take over. These two examples are offered to explain how CCL can continue being the worlds largest cruise line through acquisition. CCL must examine their current financial status; using a cash flow model, CCL is able to analyze the flow of money and determine if the projected purchase is profitable enough justify the acquisition. Determining the impact of changing factors outside of area of control requires CCL to have knowledge of the industry. Some areas the corporation will study are: sales and costs, history of the ailing cruise line, directors, and corporate financial documents. Because CCL is an industry leader, salaries, utilities, marketing, and research are a known factor. Locating an asset best suited for CCL requires a working knowledge of the industry. The acquisition we are targeting is Windstar Cruises. The parent company, Ambassadors International, (AMIE) began selling assets in 2009 to avoid bankruptcy after posting a loss of $4 million in the first quarter; Ambassadors blame the decrease on the current economic situation and the grounding of one of their ships. They operate seven US–flagged river boats including Windstar. The riverboats would provide CCL a new niche in the cruise industry by offering intimate luxury cruises. These smaller sailing vessels are able to enter river ports and cruise open waters. Because the ships are luxury vessel, CCL has an opportunity to expand its’ packaging and promote the high-end sailing ships to an elite clientele. Windstar Cruises operates three sailing vessels in five locations including the Greek Isles and a trans-Atlantic voyage. Currently NASDAQ posts AMIE common stock for $0.50 down from over $11.00 in 2008. All common stock must list for $1.00 or more in order to remain listed with NASDAQ. CCL has adequate funds to purchase large blocks of the necessary shares of AMIE which would position CCL to own a majority of AMIE common stock. Purchasing of the AIME common stock would provide AIME with some funds; however it is unknown if the purchase would be adequate to increase the value of the stock to $1.00. At the time of ownership CCL can submit to a seat on the board of directors. If a seat is not available, CCL can submit a request to purchase Windstar Cruise Line from AMIE for the shares held by CCL. Although this is an aggressive and hostile move, the reality of the purchase depends on the need for financial capital by the parent company, AMIE. CCL has purchased cruise lines in past years; therefore CCL is aware of the need for professionalism when looking to enhance their reputation through an acquisition. While every purchase is unique this purchase requires finesse because Windstar clientele would retaliate if the move was anything but flawless. The Windstar organization must be allowed to remain in place for a year while CCL becomes intimately familiar with the inner workings of the Windstar line. Board of Director, Arthur A. Rodney, is the former President of Disney Cruise Line, Crystal Cruises, and Princess Cruises. He is familiar with the management and directorship of the industry; he should be targeted to continue as the Director for Windstar Cruise Line. This allows for a smooth transition to CCL and reduces the anxiety for the crew members of the three vessels in the acquisition. Predicting the impact this acquisition would have on CCL’s organizational performance requires a look into the past. Researching the mergers, purchases and growth of CCL over the years we are able to see the purchase of Seabourn Cruise Line in 1992 with CCL selling for 8.06 on the NYSE. In 1997 with the purchase of Costa Cruises in Europe, stock was at 27.69. In 1998, CCL acquired Cunard Line and the stock sold for 48.00. In April 2003 Carnival Corporation combined with P&O Princess Cruises plc, stock listed for 34.59, and by the end of 2003, it sold for 39.73. Today with the recession nearing a recovery, all stocks are down including CCL which closed today for 35.75. Looking at these figures and the potential to add three luxury vessels to the CCL fleet, it is easy to determine that the market value would increase over the short and long run on the market.

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