Corporate Growth Strategy Essay Example

fundraising allowed the company to expand into new markets and operate internationally. By appealing to various market segments, Carnival effectively defended against competitors and potential new entrants. This horizontal growth strategy had positive outcomes for the company (Hunger J.).

D., 2011) states that according to the GP Wild reports 2010, Carnival Corporation owns the largest market share of 48% in the cruise industry (Vogel M., Papathanassis A., Wolber B., 2012). Currently, the company is continuing its expansion both externally and internally with the goal of delivering 2 to 3 newly built vessels annually. One of the key factors contributing to the company's success is its choice of competitive strategy. Carnival Corporation has adopted a cost leadership approach, striving to minimize costs to maintain a competitive advantage (Cunill, 2006).

The above text describes the ways in which the company has achieved cost savings and competitive advantage. This includes hiring international personnel from developing countries to reduce labor costs, registering the fleet in an off-shore zone to avoid taxes, choosing cheaper secondary ports for stops, and outsourcing low-profit departments and services such as photography, retail, fitness centers, and spa. The company's large market share allows for economies of scale and low supply costs, which, along with a diverse brand portfolio, provide a competitive advantage. Furthermore, the report discusses future growth possibilities, risks, and complications based on environmental scanning and situation analysis. Recommendations are also made for implementing growth strategies to maintain a leading position in the market. The cruise line industry is complex, comprising tourism, passenger carriers, and hotel businesses, and is influenced by external events.

The DEPEST model was used for macro-environment analysis, revealing that changes

in the economic, social, demographic, and technological environment have had the greatest impact on the industry. The credit crunch had a particularly strong influence on the industry. Despite the fact that the USA remains the primary market (62. 5% according to Cruise Market Watch), consumers significantly reduced or cancelled their vacation budgets due to the recession. However, there is an opportunity in the shift of the economy from West to East, with a focus on emerging countries like BRIC.

There has been a change in societal values and attitudes towards the environment and social responsibilities. The industry is experiencing technological advancements that favor larger ships, resulting in increased costs. However, there are benefits to using large vessels, such as higher revenues and economies of scale. It is important to conduct a thorough analysis of the industry in order to determine the factors that promote or hinder market growth. Grundy's (2004) linking technique has been employed to identify external factors that are interconnected with competitive forces within the industry.

According to Grundy (2006), the impact of the 5 forces on the cruise industry varies depending on the external environment. If the industry experiences growth in a hospitable environment, the impact of these forces will be mild. However, in an inhospitable environment, the competitive forces will cause more pressure. Porter's analysis of the five competitive forces reveals that the cruise industry is generally seen as an unattractive business. The industry's only favorable position is its low power of new entrants, which is attributed to the high cost of assets, high market concentration, and strict environmental and legal regulations (DEPEST).

According to Porter (2008), the strongest competitive force that determines company

profitability and strategy formulation is the power of rivalry. In the cruise industry, there are two dominant firms, CCL and Royal Caribbean International (RCI), with market shares of 48% and 22% respectively. These firms continuously compete for market share through the construction of large ships and mergers and acquisitions. Additionally, the bargaining power of buyers is significant, leading to price competition.

The Caribbean region has a strong power of substitutes because it has many land-based resorts. The power of suppliers is somewhat moderate because of the high purchasing volume. However, the company is highly dependent on the fuel market price, which is a significant expense on its balance sheet. When analyzing the micro-environment, a resource-based approach has been used. The company's resources for implementing the strategy, improving effectiveness, and contributing to competitive advantage are discussed in terms of the VRIO model (Barney & Hesterly, 2010).

Having a large market share, which includes well-known cruise brands and experienced management teams in international markets, is a valuable resource for maintaining a competitive advantage. This resource helps create a higher barrier for new competitors and decreases the power of buyers. The company operates in three major market segments (contemporary, premium, and luxury) which further strengthens its position. This resource is rare because of the structured market and difficult to replicate due to the high costs involved.

To maintain and utilize Carnival Corporation's resources, the company has implemented a divisional structure. This structure allows for strategic decisions to be made at the corporate level, while operational decisions are delegated to the divisions and brand offices. The strategic direction of Carnival Corporation is to provide exceptional vacation experiences through its various cruise brands

that cater to different geographic regions and lifestyles. Their mission is to offer value that is unparalleled both on land and at sea, and their mission defines the organization's character, identity, and reason for existence.

The text can be condensed and rephrased as follows: It can be segmented into four interconnected components: purpose, strategy, behavior standards, and values (Campbell & Yeung, 1991). When analyzing the current mission, the purpose can be defined as "take the world on vacation"; the strategy is "World's best-known cruise brands", where the value of the product stands as the competitive advantage of the company; behavior standards involve "delivering exceptional experiences"; and the values consist of "outstanding value". According to Jones & Hill, a mission should encompass three aspects of an organization's business: customer groups, needs, and distinctive competences required to fulfill those needs.

The customer-oriented mission statement helps Carnival Corporation to anticipate demand shifts and exploit company resources in the changing environment. The mission defines customer groups as "world" in line with worldwide operations, however, the company needs to notice the demand shift from North America and Europe to new emerging markets. Needs are clearly defined as the need for vacation, and the corporation holds a brand portfolio with a variety of geographic regions and lifestyles to satisfy those needs. The company has a clear vision for the future, which is to maintain a constant focus on providing higher quality vacations at tremendous value to customers while also earning superior returns for shareholders. However, the vision is vague, and the organization may lose direction as it has already achieved market leadership with no new goals set. Collins & Porras have a more

extensive view on effective vision.

The text states that an organization's core ideology is a combination of its core values and purpose for existing, along with a vision for the future. While the values and purpose remain constant, the strategy adjusts to the changing environment and establishes future goals (Collins & Porras, 1996). The company's reason for existence is outlined in its mission statement. Carnival Corporation's core values are centered around delivering exceptional service, cultivating trust in business relationships, and upholding the highest ethical standards. This commitment extends to guests, employees, shareholders, and the world.

Carnival's vision extends to its customers (guests) and shareholders, as well as its employees (each other) and the environment. Therefore, the vision should be revised to include the missing components. Additionally, a future vision needs to be formulated in response to the globalization of markets and increasing competition (DEPEST), which requires the company to expand internationally and enter emerging markets. Taking all of this into consideration, a possible future vision could be: "... maintaining a constant focus on offering higher quality vacations with great value to our customers, while also taking care of each other and our environment."

Promoting and expanding the Corporation worldwide contribute to the bottom line and earning superior returns for our shareholders. Core competencies refer to skills and areas of knowledge that are shared across business units and result from the integration and harmonization of SBU competencies (Javidan, 1998). According to Prahalad & Hamel, core competencies require collective learning, involvement, and cross-SBU integration (Prahalad & Hamel, 1990). The Corporation's core competencies can be identified as entering new markets and developing new products while providing high-quality vacations.

The organization's core competencies

are backed by its resources, such as its portfolio of leading cruise lines and large market share (LA2), which contribute to its competitive advantage. The main goal of the corporate level strategy is to maintain or enhance the company's competitive advantage and profitability in its current business and any new ventures it enters (Jones & Hill, 2010). By remaining in a single industry, the corporation can concentrate its managerial, financial, and functional resources to establish a significant competitive advantage (Jones & Hill, 2010).

Carnival Corporation, through horizontal integration (mergers and acquisitions), has established itself as the dominant force in the cruising industry, capturing a substantial 48% market share. The Corporation's business model can be analyzed from four angles: customer value proposition, profit formula, key resources, and processes (Johnson, et al., 2008). Comprising of 10 cruise brands, Carnival is well-represented across various market segments including contemporary, premium, and luxury. Each brand also implements distinct generic strategies as outlined by Porter (2008).

For instance, Carnival Cruise Line, operating in the contemporary market, utilizes a cost leadership generic strategy while Holland America Line, a premium brand, follows a differentiation strategy. This allows the corporation to cater to various market segments with different needs and preferences (e.g. pricing, personalized service, customized activities). Additionally, the company's diverse portfolio enhances its market power by allowing it to subsidize one product with the profits from another, as stated by Johnson et al. in 2005. Furthermore, their significant market share enables them to reduce costs and benefit from economies of scale. The key resources, represented by their well-known brand portfolio, and processes, such as their divisional organizational structure with semi-autonomous brands, enable them to provide

value to both customers and the company. Therefore, even after the merging of multiple brands, each brand maintains a certain level of independence and retains its unique marketing function because they target different markets and geographic segments.

The above elements can be seen as critical success factors, with the company's ability to address factors valued by different customer segments and outperform rivals with the support of corporate resources (Johnson, et al. , 2005). Carnival Corporation employs a successful business model; however, in a fast-growing industry and changing environment, the organization must react to changes and adjust the business model to sustain market leadership. The company operates worldwide, with a high concentration in North America and Europe. Considering that growth opportunities in these regions are becoming limited due to market saturation and shifts towards emerging markets (DEPEST), I recommend expanding globally by entering new markets, particularly South East Asia. This region has continuous growth of domestic demand and GDP (the World Bank).

The text suggests two scenarios for the expansion: acquiring Star Cruises, the leading cruise operator in the Asian market, or establishing a home base in the AP region and repositioning existing lines. The first scenario requires a large investment, which could potentially put the corporation at risk given the financial consequences of the Costa Concordia accident. Therefore, it is recommended to consider the latter scenario. Expanding globally will provide opportunities for increased profitability and market share growth (Jones & Hill, 2010). However, one main threat for the corporation will be the lack of experience in operating cruises out of the AP region.

In order to decrease the risk, it is necessary to establish a corporate office in

Asia. This office will oversee operations and the pursuit of the cruise strategy in this region. To successfully implement this strategy, management must connect the strategy and its specific objectives with operational processes. This ensures that the company's overall corporate strategy of expanding and entering new markets is supported by the business strategy of the single cruise line and functional strategies, which are connected to operational activities (Kaplan & Norton, 2008).

These activities for strategy execution can be defined and organized using a business model that creates and delivers value proposition (Richardson, 2008). In order to gain a competitive advantage in new markets, Carnival Corporation should adopt a business model framework that offers greater value to customers compared to competitors operating in this region. This can be achieved in three steps: the value proposition. The cruise business is relatively young and immature industry in Southeast Asia.

Despite operating in the geographic region for many years, cruise lines primarily target consumers from North America and Europe rather than the local market. Star Cruises, the main operator in Asia, heavily relies on gambling services. However, as the Asian market develops and the number of vacationers and travelers increases, Carnival Corporation will introduce new valuable products to satisfy various customer needs. By repositioning cruise liners of different brands like CCL, Costa, and Princess, the company can target different market segments and employ different generic strategies to capture value. Additionally, by considering the preferences and cultural differences of Asian consumers, introducing additional services on board such as larger casinos, shopping options, and dining choices will generate extra revenue and contribute to the profit margin. Overall, in order to deliver the proposed

value to the customer, it is important to take action and consider the mentioned strategies.The establishment of a corporate office in the Asia region is necessary in order to access current market information, gain insights into the local competitor environment, and understand market peculiarities.

Furthermore, in order to effectively implement and adapt to external environmental changes, it is important to designate a management team based in Asia. This team should consist of executives who have experience in repositioning and should be held accountable for making operational decisions and ensuring the firm's profitability. A clear allocation of decision-making authority and a strong information flow are essential for successful strategy implementation, as they promote motivation and contribute to an effective organizational structure (Neilson, et al. 2008).

To effectively monitor and evaluate strategic performance, an ongoing process of monitoring and evaluation is required. Regular management meetings should be held to discuss operational activities, track progress, address challenges to strategy execution, and assess and adjust the strategy if necessary. This ensures a balance between short-term operational goals and long-term strategic objectives (Kaplan & Norton, 2008).

The review of operational activities should include weekly and monthly assessments of both financial and non-financial key performance indicators (KPIs). This is necessary to evaluate short-term goals and find solutions to operational issues. During these meetings, areas such as guest satisfaction, occupancy rates, and sales revenue can be addressed.The Kaplan and Norton developed strategy review balanced scorecard system can be utilized to monitor organizational performance against strategic goals.

Using the balanced scorecard, which considers perspectives such as customers, internal business processes, learning, and growth, goes beyond the traditional way of measuring financial performance. This approach allows management to

gain a deeper understanding of the company's actual situation, evaluate financial performance, monitor future growth potential, and establish a connection between current actions and future outcomes (Kaplan & Norton, 2007).

The following are suggestions for the measures and targets of the balanced scorecard:

Financial performance:
Generated revenue increase by N%.
Costs do not exceed N%.
Increase shareholder value by N%.

Customer perspective:
Maintain occupancy at the N%.
Increase brand awareness by N%.
Increase number of repeat guests by N%.

Internal business process:
Increase corporative fleet presence in the Asian market by N%.
Standardize operational processes.
Improve direct marketing.
Optimize pricing strategy.

The text discusses the importance of learning and growth in terms of corporate culture, safety and security procedures, cultural differences, and newly hired trainings. It states that the strategy needs to be evaluated and adjusted annually with the corporate headquarters office. This evaluation involves analyzing the economics of existing products and customers, conducting statistical analysis of performance metrics, and considering new strategy options (Kaplan & Norton, 2008). Examining cost and profitability reports can help assess the economics of existing product lines and customer segments.

It may be perceived that targeting a different market segment could yield greater profits and attract customers to a substitute cruise brand. It is essential to conduct a statistical analysis to determine the impact of expanding into the new market on the overall profitability of the corporation and expected return on investment (ROI). To perform this analysis, the balance scorecard system should be utilized. The continuous evaluation process, taking into account the evolving internal and external environment, can give rise to new strategic options. In conclusion, it is recommended to conduct the

aforementioned analysis and adjust strategies accordingly.

Carnival Corporation exemplifies the successful use of a growth strategy through horizontal integration achieved by merging and acquiring competing brands. Nevertheless, given the ongoing globalization of markets, the most effective approach to sustain corporate growth is by adopting an internationalization strategy and entering new markets. The possession of valuable corporate resources is advantageous for implementing this new strategy and aligns corporate activities with its capabilities.

There is a risk involved in implementing the internationalization strategy, as entering new markets does not guarantee profitability. Because of this, the corporate office needs to constantly monitor and evaluate business performance. By entering South East Asia and creating a strategic hub in that region, the Corporation gains a pioneering position in the market, as the cruise industry is not well-established there yet. Additionally, I suggest expanding into other emerging markets such as Brazil and Russia using a similar approach, but adapting to the specific characteristics of each region.

The text below discusses the differences in required assets and operational size in Brazil and Russia (Black Sea) compared to South East Asia. The text also provides various works cited references related to strategic management and competitive advantage.

"For example, entering Brazil and Russia (Black Sea) will not require high assets as there are established headquarters for the European and American market, and the size of operation is significantly smaller than for the South East Asia." (Barney, J. B. & Hesterly, W. S., 2010)

Works Cited:
- Barney, J. B. & Hesterly, W. S., 2010. Strategic management and competitive advantage. 3rd ed. New Jersey: Prentice Hall.
- Campbell, A. & Yeung, S., 1991. Brief Case: mission, vision and strategic intent.In:

P. J. Smit, ed. Strategic Planning Readings. Cape Town: Juta Academic, pp.127-132.
- Collins, J. C. & Porras, J. I., 1996. Building your Company's Vision. Harvard Business Review, September - October, pp.42-55.
- Cunill, O. M., 2006. The growth strategies of hotel chains.In: Binghamton: The Haworth Hospitality Press, pp.1-69.
- Grundy, T., 2006. Rethinking and reinventing Michael Porter's five forces model.Strategic Change, Issue 15, pp.213-229.
- Hunger J. D., W. T., 2011.Essentials of strategic management.In: New Jersey: Pearson Education, pp.94-113.
- Javidan, M., 1998.Core Competence: What does it mean in practice?. Long Range Planning, 31(1), pp.60 - 71.
- Johnson, G., Scholes, K. Whittington, R., 2005. Exploring Corporate Strategy. In: Essex: Prentice Hall, pp.279-339.
- Johnson, M. W., Christensen, C. M. & Kagermann, H., 2008. Reinventing Your Business Model. Harvard Business Review, December, pp.57-67.
- Jones, G. R. & Hill, C. W., 2010. Theory of Strategic Management. 9th ed. China: South Western CENGAGE Learning.Jones, G. R. and Hill, C. W., 2010. "Theory of Strategic Management." In: 9th ed. China: South Western CENGAGE Learning, pp.14-16.

Kaplan, R. S. and Norton, D. P., 2007. "Using the Balanced Scorecard as a Strategic Management System."

The given text is a list of citations from various articles in the Harvard Business Review journal, along with the corresponding page numbers. The citations include information about management systems, strategy execution, competitive forces, and core competencies. The text is enclosed in paragraph tags ("

") to indicate a single paragraph.