Costa Cruise SWOT Analysis: Environmental Scanning Report

Introduction

An environmental scanning report is a strategic planning tool that can be used by Costa Cruise managers to conduct a situational analysis of the organization. Costa Cruise is a leading cruise line brand in the hospitality and tourism industry. A SWOT analysis of Costa Cruise will establish internal factors such as strengths and weaknesses as well as external factors such as opportunities and threats. SWOT analysis is a critical management framework which aids brands like Costa Cruise to evaluate its business and performance metrics relative to competitors and industry parameters. This paper aims to provide an environmental scanning report that will establish the internal and external factors that Costa Cruise is facing in its current business environment.

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Key Stakeholders

A company is regarded as an economic entity whose primary goal is profit maximization. Besides, business objectives should be consistent with the interests of different stakeholder groups. Internal stakeholders include managers, employees, and shareholders. External stakeholders include customers (cruisers), suppliers, local communities, and the government (Rahman, 2019). Costa Cruise should reflect its willingness to satisfy the interests of the different stakeholder groups. A mission statement helps a firm to prioritize the interests of the most important stakeholders.

SWOT Analysis

Costa Cruise is a leading cruise line firm in its industry. The firm maintains its leading position in the cruise market by critically reviewing the SWOT analysis and the environmental scanning report. The SWOT analysis is a highly interactive and vigorous process that demands effective coordination and collaboration among various departments within the company (SWOT Analysis, 2012). Such departments include marketing, finance, management information systems, productions, and operations. The main purpose of the SWOT Analysis report is to identify the strategies that a firm can use to exploit the external opportunities, build on, and protect its strengths, eradicates its weaknesses and counter its threats.

Costa Cruise Strengths

As one of the leading brands in the hospitality and tourism market, Costa Cruise has numerous strengths that enable the firm to thrive in the industry. These strengths will allow the firm to penetrate new markets while also helping the company to maintain its share in existing markets. Costa Cruise enjoys a strong brand portfolio as a subsidiary of Carnival Corporation & plc, the leading cruise ship operator in the world (Zigu, 2016). Over the years, Costa Cruise has invested in building a strong brand portfolio that has enabled it to acquire a significant market share. The strong brand portfolio is extremely useful when a firm intends to expand into new product categories (Morello, 2016). Being a subsidiary of the Carnival Corporation & plc, enables the company to enjoy a significant cost advantage over other rival firms. Being part of a large corporation provide the firm with a steady free cash flow that allows it to expand into new projects.

Costa Cruise enjoys a strong distribution network and a global presence. By virtue of being affiliated with the Carnival Corporation & plc, Costa Cruise enjoys a reliable and robust distribution network that makes it possible for the firm to reach out to a majority of its potential market. The company has a global presence with a cruise line of 25 ships. The firm's global presence is further enhanced, with over 250 different destinations globally and over 60 embarkations ports worldwide (Zigu, 2016). The strong global presence makes the company an appealing brand to vacationers who would wish to visit different continents in a single holiday outing.

Besides, the firm's strengths are further enhanced by automation, superb performance, and reliable suppliers. The adoption of automation of operations has enabled Costa Cruise to achieve consistency of quality in its products and services (Zigu, 2016). Automation has also made it possible for the firm to scale up and scale down its operations accordingly based on the prevailing demand conditions in the market. Costa Cruise has built expertise in expanding to new markets, which enables the company to create new revenue streams and further diversify operations cycle risk in the existing markets. Costa Cruise enjoys a reliable supplier's network that allows the firm to counter any supply chain bottlenecks, thus ensuring a free flow of raw materials.

Costa Cruise Weaknesses

Weaknesses are the areas where Costa Cruise needs to improve upon to build on its strategic positioning and competitive advantage. The main areas of weaknesses include cases of accidents, less service differentiation, and intense competition. Cases of accidents in the past years have severely affected the brand image of Costa Cruise. The company suffered bad press following the accident that involved the Costa Concordia cruise liner. The accident occurred when the ship capsized in 2012, resulting in the death of 32 people aboard the ill-fated cruise liner (Safety4sea, 2019). The cases of accidents and the safety concerns of vacationers is a critical area of weaknesses that the firm needs to improve upon. Besides, there exists intense competition within the hospitality and tourism industry. There is little service differentiation that contributes to intense competition with rival firms such as Royal Caribbean Cruise Line and Star Cruise Line.

Costa Cruise Opportunities

The opportunities are external strategic factors that Costa Cruise can tap into to enhance its market positioning. The main areas of opportunities include expansion to luxury liners, mergers, and acquisitions, market penetration in Asia, among others. There exists an unsaturated market in the luxury liners services, which provides higher operating margins. Costa Cruise can expand its services from cruise liners to luxury liners to cater to elite customers and therefore realize higher margins (Zigu, 2016). There exists an upsurge in demand for cruise ships service across the globe, and as such, the company can invest in additional ships to address the rising consumer demand. Costa Cruise can engage in strategic mergers and acquisitions of smaller players to increase its cruise line and capture more market share. The low penetration of cruise liners in the Asian market offers an exciting growth opportunity for Costa Cruise (Zigu, 2016). Investing extra resources to capture the Asian market will enable Costa Cruise to take advantage of the growing demand for luxury liners, especially in China.

Costa Cruise Threats

The threats are external factors that may negatively impact on the profitability and sustainability of Costa Cruise. The main areas of threat include tax regulations, competition, and cases of accidents, among others. New tax regulations could seal all loopholes that have been utilized by the Carnival Corporation & plc to avoid paying corporate taxes in the United States (Zigu, 2016). The impact of the new tax regulations could cause a dent in the company's profitability. The cases of accidents and the safety concerns of travelers is also another potential threat that could affect the brand image of the company. Besides, stiff competition in the sector has put downward pressure on the overall sales and profitability of players in the industry.

Risk Analysis

Risk involves the chance of an occurrence happening that will have an impact on the performance and profitability of an organization. Risk is often measured in terms of likelihood and possible consequences. In conducting a risk analysis for Costa Cruise, it is important to consider internal and external risk factors. Internal risks include human factors, technological factors, and physical factors. In contrast, external risks include economic factors, natural factors, and political factors. Understanding the likelihood and consequences of the occurrence of risks will aid in devising appropriate control methods. An analysis of the partial capsizing of the Costa Concordia cruise liner will help in understanding the internal and external factors underlying risk occurrence.

Internal factors

Internal risks include human factors, technological factors, and physical factors.

Human Factors

Following the accident of the Costa Concordia cruise liner, considerable attention was paid towards crew training and the captain's actions. The captain was greatly criticized for his actions and was held personally liable for the disaster (Calamur, 2015). Serious concern arose as to the capacity of the crew members to handle such emergencies, and questions were asked as to whether the training that they receive is sufficient. Training alone is inconsequential if the crew's behavior is questionable. Such human factors pose a significant threat to the safety concerns of passengers and thereby can be considered as internal risks to Costa Cruise.

Technological Factors

Lack of adoption of technological elements such as automation of operations is an internal risk that could impact on the performance of Costa Cruise. Technological factors affect the way brands serve and engage their customers. Technology is an indispensable tool, and therefore firms must utilize it to devise innovative ways of doing business. Technology is a crucial driver for change since it has revolutionized service delivery and the customer experience in the tourism industry.

Physical Factors

The size of the cruise ship is a key factor that contributes to internal risks. The Costa Concordia was among the largest cruise ships ever built with a passenger capacity of nearly 4000 passengers. The increase in ship size and passenger capacity leads to economies of scale, but in contrast, it becomes a safety nightmare. The large ship size and design pose a serious threat in cases of emergencies as the evacuation process can be severely hampered.

External Risks

External risks include economic factors, political factors, and natural/environmental factors.

Economic Factors

Economic factors such as recession and consumer purchasing power influence the hospitality and tourism industry to a great extent. Recession periods are characterized by low economic activity, and thus firms need to restructure their operations (Jurevicius, 2013). The demand for luxury vacations and products is seasonal, and therefore low economic activity during peak season can affect the profitability of firms. The depreciation of the currency, such as the US dollar, is a genuine concern for many luxury cruise brands since it brings immense pressure to the tourism industry.

Political Factors

Political factors affect the operations of firms in the hospitality and tourism industry. Political regulations can vary from wage requirements, hygiene, and food quality standards (Silva, 2016). In the tourism sector, the minimum wage standards are high, and therefore the associated costs of labor are also high. Other political factors, such as the effect of Brexit, could have potential consequences on employment and labor regulations in Europe (Eversham, 2016). Brexit could also affect the supply chain in the hospitality and tourism industry.

Environmental Factors

Sustainability is a critical factor that has influenced the changes in the tourism industry globally. The rise in environmental awareness has forced companies to adopt a greener approach to doing business. The Paris agreement provides new environmental regulations that could affect existing product categories. Companies in the hospitality and tourism industry face enormous pressure to ensure that their supply chains are compliant and sustainable. Brands need to ensure compliance with government regulations on recycling and waste management.