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The purpose of this case study is to discuss market entry strategies of Allure Cruise Line, the main competitors of this company in new markets, positioning strategy, and the difference between Allure and other companies.
Allure Cruise Line is a small company in the North America, which started its journey in 1993 with only three ships to sail out of Landerdale, Florida, San Juan, and other itineraries within the Caribbean Sea (Dereskey, 2007, p.1).
According to the part one of the case study, it has more than 1000 employees (including crews, managers, board members, engineers and so on) and this company recruited the crews from 40 different countries and nationalities considering complex culture and importance of advance communication system to provide quality service. However, the following two figures show Allure’s vision and mission statements and organizational structure –
Figure 1: Allure’s Vision and Mission Statements
Source: Dereskey (2007, p.1)
Figure 2: Organizational structure of Allure cruise Line
Source: Dereskey (2007, p.3)
The way of Market Penetration by Allure
The top-management team of Allure Cruise Line needs to research on the global cruise industry to find out potential market to enter and gain competitive advantages.
Before attempt to enter new markets, it is also essential for this company to consider its mission, vision, corporate structure, current challenges, political and cultural factors, financial position, legal barriers, leadership, human resource management, and market competition, size and growth of the cruise industry particularly North American, cruise industry and so on.
However, Dereskey (2008, p.35) pointed out the hierarchical model of market entry modes to help the companies select the suitable entry route strategy, for instance,
Figure 3: The hierarchical model of market entry modes
Source: Dereskey (2008, p.35)
The above figure demonstrates non-equity modes and equity modes of market entry; however, considering the service features of Allure Cruise Line, it can be argued that equity modes strategy would be suitable for this company to enter new zone.
In this context, the management of this company should contact with the management of small companies of the new selected markets to sign joint-venture agreement, which will give the opportunity to the Allure to share its resources and technologies with other companies; however, it is important for Allure to assess financial risk of joint-venture agreement.
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At the same time, the management team has the opportunity to acquire small cruise line companies to penetrate new potential markets, for instance, the company has significant prospect in the European or North American markets because target customers of this zone have enough financial capabilities to take service of this company.
On the other hand, the management of this company also considers the service categories and must try to sign joint venture agreement with different service providers and acquire the organizations, which offer similar services to avoid any financial risks; however, the following table provides more information regarding this issue:
|Features||Market entry modes|
|Adventure and expedition cruise ships||It is important to have smaller ships to access more destinations. The positive sector is higher passenger return visits.||Allure Cruise line can sign both acquisition or joint venture agreement to enter new markets.|
|Boutique cruise ships||It needs small cruise ships, but the marketers have to ensure quality service; however, higher passenger return visits influenced the business operators to penetrate this market.||The management has opportunity to acquire or joint venture with the cruise ship operators of new markets or ports.|
|Mid-size cruise ships||These ships have greater port infrastructure demands, require larger channel depths and wharf berthing.||Allure should consider joint venture agreement with other companies.|
|Mega-cruise ships||It should require the biggest cruise vessels, major port infrastructure, larger channel depth, longer wharfs for side berthing, and international traveler processing services.||At present, it is not possible for Allure Cruise line to enter this market.|
|Military vessels||This sector dominates by the large companies because of high operating costs (more than $400/ day per crew); in addition, it needs at least 5000 crews in one ship||Allure should not show any interest to enter this market as a small company in the industry|
Table 1: The way of Market Penetration by Allure
Source: Self generated
Allure’s main competitors in this market
Allure Cruise Line has to compete with both direct and indirect competitors in the national and international market; however, presence of numerous competitors is one the key challenge for this company.
It is difficult for this company to compete in this industry by penetrating new market with only three small ships; in addition, the company has many barriers like communication problems and social misunderstanding, unethical behavior of the crews, old technology, global financial crisis, threats of terrorist attack/pirating, unusual accidents and so on. However, the following table gives more information about the main competitors:
|Major Companies||Key characteristics|
|Carnival Corporation (CCL)||Market leader of cruise ship industry as it generated $24.32 billion in 2011 and it operates more than 90 ships in the global market. In addition, it has more than 91,300 employees, net profit was 1.62 billion and gross profit margin was 33.75% in 2011.|
|Royal Caribbean Cruises Ltd||It is second largest company in this industry and it is operating largest cruise ship; however, in 2011, net profit was about 607.42 million, gross profit margin was 34.42%, and total employees was 60,300.|
|Genting Hong Kong Limited||It is a private company in this industry; however, in 2011, total income was more than $68.10 million, and total employees was only 4,430.|
|Norwegian Cruise Line Holdings Ltd||Norwegian Cruise Line is another private company in this industry; however, in 2011, total profit was over $22.60 million, and total employees was more than 13,769.|
Table 2: Direct and indirect competitors of Allure Cruise Line
Source: Self generated from Yahoo Finance (2012)
Uniqueness of Allure from Its Competitors
The dynamic operational strategy of Allure Cruise has aimed pose itself distinguishable in the cruise industry relation to its competitors, the organization has emerged with its unique operation from its human resource management, marketing and customer relationship management that contributed the company with tremendous growth of its passengers and crews.
In fact, in the cruise market the major challenge is high rate of employees’ turnover, the industry has an overall turnover rate of 35%, while Allure reduced it at 31% and the HR policy Allure allowed its crews to entertain as a family without discriminating the culture, ethic group, ranks, and position.
In the operation of Allure Cruse, the crews enjoy definitely a ‘brotherhood mentality’ among the management and crewmembers who hate to class difference, without differentiating nationality it has developed a culture to be more collective, quiet, with cooperative attitude that delivers best performance of the employees.
In Allure Cruse, there are crews’ almost forty different nations with different culture and habit with different age group from nineteen to forty, rather than any other players of the industry Allure mitigate this difference with unique strategy fundamentally different from others. For instance, while there are different tastes among the crews of different nationalities about their food habit and all of them would like to get attention and priority, Allure introduced to serve three times rice everyday for all crews at their dining.
For the cruise industry, there are so many recruitment agencies and all the competitors uphold their recruitment process through those agencies, but Allure’s recruitment process is extremely different from its competitors. The company uses the service of the recruitment agencies for only souring the candidates from different forty countries, but selection, recruitment and training of the company would be conducted by Allure itself, as a result, the company gets more competent candidates than the competitors in the industry.
For cost effective solution, most of the competitors use common training from the outsourcing agents; but Allure have its own standard of training both shore and onboard and the company spend 65% of its total cost for labor.
Allure has most sophisticated training system to train the crews onboard while it allow full pay for the trainees before starting work, the trainees also get similar dining and living facilities without any discrimination. Such differential operational practice provided the company enough space to generate a strong base of satisfied passengers that contributed the company for not to be affected by the incident of nine eleven.
Positioning Strategy of Allure Cruse Lines
According to the following figure, the position of Allure Cruise Line in this industry is not in satisfactory level due to existence of many established brands like RCL and CCL; therefore, the mission of this company is to provide unforgettable and unique vacation experience to the passengers to become larger market player in this sector (Dereskey, 2007). However, the following figure shows Brand positioning map of Allure –
Figure 4: Brand positioning map of Allure Cruise Line
Source: Self-generated from Yahoo Finance (2012)
Allure bring into beginning of fundamentally different ways of competing in the market through its positioning strategy that pointed the lower rate of employees as a competitive advantage within the cruse industry.
However, the company provides sophisticated training and satisfactory compensation package to its crews that has generated higher extent of crew’s service quality and produced large base of satisfied passengers; consequently, the management has dared expand its target market in new routes.
In the following figure, it has demonstrated that the cost leadership and uniqueness of the services are the source of Allure’s competitive advantage, while Allure Cruse has aimed to drive from lower target market to higher definition market through right use of its resources and capabilities.
Figure 5: Positioning Strategy of Allure Cruse Lines
Source: Self generated
The management of Allure Cruise explored its intention for further expansion of business while the senior leadership team has alarmed that there are few factors of the crewmembers onboard may impede to implement the superior business plans that the company is going to introduce and it could put at risk for the accomplishment of the Mediterranean extension of service.
Dereskey, H. (2007). Allure Cruise Line*—Challenges of Strategic Growth and Organizational Effectiveness: Part 1. Web.
Dereskey, H. (2007). Allure Cruise Line*—Challenges of Strategic Growth and Organizational Effectiveness: Part 4. Web.
Dereskey, H. (2008). International management, managing across borders & cultures. Web.
Yahoo Finance. (2012). Direct and indirect competitors of Royal Caribbean Cruises Ltd. Web.