Royal Caribbean Cruise Ltd. Harvard Case Solution & Analysis

Royal Caribbean Cruise Ltd. Case Solution


Company Background

The Royal Caribbean Cruise Ltd was founded in 1969, incorporated in Liberia and has headquarter in Miami. The founder, Edwin W. Stephen, founded the company with a vision to provide cruise experience through specially designed cruise ships for the pleasure from the Caribbean nature gifted water. The business was started with the help of IM Skaugen, Anders Wilhemsen, and Gotass-Larsen, all of them provided financial support for the company. Currently, Richard Fain is the chairman and CEO of the company.

The firstship of the company, Song of Norway, which has the capacity of about 724 passengers was sailed in November 1970 from Miami. The company adopted the strategy of development and expansion, as the cruise ships become more bigger and better with increased capacity and more utilities and amenities. Currently, the company has the largest ship with capacity of 3200 passengers.

In 1988, the company merged with the Admiral Cruises and gained from the heavy growth obtained through the merger. Subsequently, Royal Caribbean Cruise wentpublic in 1993, and listed its shares in the New York Stock Exchange. In 2003, Royal Caribbean Cruise ranked second in the industry, having $3.4 billion in revenues and $351 million in net income. The company has sail routes that go through Alaska, Bermuda, England, Canada, Europe, Mexico etc.

 The Celebrity Cruises were acquired in 1997 by Greek Chandris Lines.

Problem statement

There is an I.T development plan initiated by the Tom Murphy, CIO, and he has three options that he considers to put up towards the board member. He is considering continuing with the current expenditure budget and developing the system with slow steady pace as time goes on. The second option is to demand increase in the budget of about 8 million dollars. The third option is to request for more aggressive investment amount to accelerate the development project.Apart from this, he has to make sure that the investment project should be in line with the objectives and strategy of the company. With many other projects going on in process, this task is a difficult one to convince the company’s board to grant the investment fund.

Industry background

The cruise industry is highly competitive and volatile. There were Four Major Business Segments in, this industry, which include Contemporary, Premium, Luxury and ultra-luxury cruises. Royal Caribbean Cruise has two brands that it offers, Royal Caribbean International and Celebrity Cruises.

The cruise market is dominated by three primary cruise companies that include:

Carnival Corporation

 It has extended fleet of ships that provides services to about 49% of the market. The recent acquisition of P&O Princess, which it has snatched from the Royal Caribbean Cruise, has helped the company to maintain its leadership and further solidified its competitive advantage. The pre-acquisition revenue for the company was$4.4 billion and the net profit accumulated to 1.01 billion.

The company has adopted the strategic policy to be a cost effective market leader. It has implemented several costs saving tactics that include the ship building and designing as well. It avoids high cost and less valued facilities adoption in the ship design such as rock-climbing walls and ice-skating rinks. Thus, with less cost it has greater competitive advantage in the industry..............

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