NAME MEMBERS : ISHAK B. AB GHANI / EZUDDEAN B.

ZAINAL ABIDIN
: MOHD FAIZAL AZIZ
MATRIX I.D

: 2011424226 / 2011296836 / apai id

SUBJECT

: INB 780 INTERNATIONAL BUSINESSES

CASE STUDY

: CARNIVAL CRUISE LINE (Pg 68-73)

1) What global forces have contributed to the growth of the cruise-line industry?
Answer:
The global forces which have contributed to the growth of the cruise-line industry
are* Technological advance: the birth of industry was a direct respond to the
technological advance in air travel that made liner travel less attractive to business
people due the cost and time factors.
* Market liberalization and international cooperation: the liberalization of cross
border trade and resource movement had allowed the cruise line industry to force on
the cheaper yet competent labor resources. At the same time, the industry is able to
offer various global destinations and on land elimination package to its potential
customers.
* Support services: the development of new ports allows the cruise line expand its
destinations and provide varieties of offering to the customers. This will help attract
new customers, and the same time ensures the return of existing customers.
* Customers affluence: the growing income among the middle class in many
countries, particularly in the emerging market , contribute to the increase in
discretionary incomes that could be spent on tourism.
2) What specific steps have Carnival Cruise Line taken benefit from global
social changes?
Answer:
With globalization, businesses have gain advantages by expanding the business
around the globe. Globalization has made companies to gain greater businesses,

economic and social impact as well compared to before. As for Carnival Cruise
Lines, they have taken specific steps from globalization with the intention to maximize
their profit as mentioned follows:1. Political and Legal policies.
i-

Registration of the company

No doubt that political policies influence on how international businesses conduct its
operations in the respected country. As for Carnival Cruise Lines, the nature of its
business is international in scope. Therefore, in order to gain the benefits of global
business, the company is focusing on the international countries that table to provide
benefit so the business. The first step focused by the company is on the registration of
its legal entity. The company is focusing on countries which are able to give lower
taxes as well as less stringent labour law, suitable for the company. The Carnival
Cruise Lines was registered in Panama because it wanted to take advantage of
obscure provision in the U.S tax code which permits shipping companies to evade
taxes in corporate overseas as well as the freedom off lying foreign countries flags.
This has directly helped the company to uplift its burden of paying excessive taxes in
that particular country.
ii. Acquiring Ship
The company also leverages on globalization whenever it purchases carnival cruise
ships. The cost of acquiring a ship is extremely expensive because when a ship is
being build, it involves high usage of commodity product (i.e. steel) and people from
various specialties, background and expertise. Thus, in order to minimize their cost,
companies will then bid for less expensive ships available across the globe. Cost of a
ship can also reduce whenever the government provides subsidies to boost the
shipping industry of ascertain country. In this case, the Italian government awarded
the shipyard Ficantierie (which costs about $50 million) as subsidy for Carnival to
build five ships (sold at $2.5 billion). The company leverage on Italian governments
subsidy to buy ships which are less expensive. To further reduce the fluctuating
currency risk due to foreign exchange, the company also negotiated for their
purchasing contracts to be base dont he value of the US currency rather than
Euros.

2. Economics Forces.
i- Acquiring Labour Resources
To ensure competitiveness in the market, Carnival Cruise must ensure that its
customers are given the best services whenever they are on board on a cruise.
Excellent people service especially when it comes to interacting with people, fluency
in the English language is a must for all crew members. Seeing the importance of
having the right crew members in order to support the business, the company is
therefore hunting for right skilled and cheap labour in terms of reducing cost and in
order to maximize profit. Asean labour (especially Philippinos ), are highly
demanded for as crew because not only labour is cheap but they are also higly skilled
in customer service and majority of the mare also fluent in English.
ii. Casinos & Other amenities
The main revenue of Carnival Cruise is generated from its passengers or customers.
In order to attract customers, there are various ranges of ship board stores, products
and amenities for customers to spend on. Casinos and gambling on board of the
cruise is not restricted especially, because it is not taking advantages of any national
law as the cruises operates outside the jurisdiction of national authority. Moreover,
customers are also able to shop for merchandises all over the world not only on
board but also by increasing for land based tourism industry whenever the ship
embarked in any foreign country. Cruise companies are able to gain additional
income by being capable of building business relationship with the land-based
tourism company.
3) What are some of the national differences that affect the operations of cruise
lines?
Answer:
Cruise lines obtain flags of their convenience from about 30 different countries
because of the lower taxes and less stringent employment policies of those countries.
Few countries have shipyards capable of building cruise ships. These are the
national differences that affect the operations of cruise lines. The cruise line
operators can obtain flag of convenience and can benefit from the national

differences through factors such as economic, labor, environmental regulations and

safety stability.
4) How might the cruise lines increase sales to people outside the United States?
Answer:
Carnival Cruise Lines offers cruises to every continent on the global. The specific
steps to increase sales to people outside the united state are: Geographically pertinent themes Design tour package suit to location and
places by offering shorter cruises that embarks closer to home
Offered fixed cruise-price - Cost per cruise offer low than others.
Implemented strict health and safety measures - Avoided areas to make the
passengers free from political upheaval.

Dealt with economic recessions - Minimized staffing costs by sourcing

employees on a global basis.
5) What threats exist for the future performance of cruise-line industry and,
specifically, of carnival cruise lines?
Answer:
Millions of dollars are required in order to train and maintain employees,
besides that, the startup capital of a cruise line company is very huge that it
discourages and limits the number of potential entrants.
It is not easy for new entrants with low brand equity to complete with the
established cruise line companies in the industry. The availability of
diversified substitute adds to the competitiveness of the cruise line industry.
There are always alternative forms of cheaper accommodation for families.

 Cruise lines must be able to always offer competitive vacation packages

prices in order to secure sales during all seasons and also cater for people
during all sorts of economics stability. The cruise companies must provide
aggressive pricing to retain the customers stands a better chance to survival.
6) Discuss the ethics of cruise lines regarding the avoidance of taxes while buying
ships built with governmental subsidies.
Answer:
Carnival paying taxes only on revenues from princess and Holland Americas sales
of U.S. hotel and tour packages. Carnival secures bids from all over the world.
Because shipbuilding employs so many people and uses so much locally produced
steel, government often subsidize the industry a practice that work to the benefit of
the cruise line industry by offering less expensive prices for ships.