The substitute products, such as resorts or airplanes, satisfy similar needs of the traveler.
The demand for traveling is increasing as digital media has increased. Threat of Substitute Products or Services: Medium Therefore, growth strategies in the industry are constantly focused on differentiation, raising the bar for rivalry among existing firms. Consumers are seeking unique traveling destinations, and innovation. In order to gain a competitive advantage or remain competent, cruise lines must keep up to date with any change in demand. The demand for traveling, particularly to unique locations, is growing as local ports are also increasing. The growth rate in the cruise industry has been steadily inclining over the past years. For example, the probability of having more fun on a cruise to the Bahamas with Carnival Cruise than Royal Caribbean is low, and most likely similar in experience. These firms are known to be willing to match or beat prices, for there is low differentiation between these top cruise ships and the overall experience. Therefore, the strategies pursued by one firm is closely observed and countered. Carnival and Royal Caribbean are the leading cruise lines, controlling up to 75% of the market (Study Moose – Porters Forces). There are a few major players in the cruise industry in which dominate the market share. Lastly, entree to distribution channels for smaller firms is less accessible as established firms have developed long-term relationships and valued higher as demand is likely greater. The smaller firms will find it difficult to compete from an operation standup, incurring higher costs on average. In addition, the later described as economies of scale, protect companies who operate many ships as administrative and fuel costs decrease. A brands image and awareness of a well-known, established, reliable, safe and consistent cruise line will bridge the gap quickly for less known start-ups. Therefore, established brands in this industry have much power and significance to the perceived value of the consumer. There are numerous factors to remain competent and other barriers to entry such as brand equity and economies of scale. Given that you enter the market despite the high capital investment, this was only half the battle. As far as operation decisions, big ships cost around $200,000 per passenger, and luxury ships can amount up to $700,000 per passenger (Medium).Īs overall, building a ship in which was innovative and of high quality, in order to breach the market will incur a significant cost. The cost of building a ship is estimated around 1 billion dollars. The high capital requirements is one of the most prominent factors contributing to the high barriers of entry. An entry barrier is “an obstruction that makes it difficult for a company to enter an industry” (Wheelen,105). In fact, new companies forming in this industry is a rare occasion due of the extensive barriers to entry. The threat of new entrants in the leisure cruise industry is low.
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