The U.S. and the European cruise industry a comparative study by Mareike L. Hilbig Msc International Business and Management July 2009 Rijksuniversiteit Groningen Faculty of Economics and Business Supervisor: Drs. Stek, H. C. Referent: drs. Vries, R. W. de ABSTRACT This thesis comprises a comparative industry analysis of the U.S. and European cruise industry. The extent to which the two industries show differences concerning their level of competition is researched. Porter’s Five Forces Model served as the theoretical framework. Profile charts of both cruise industries derived from detailed analyses, which revealed that the U.S. and European cruise industry only differ to a marginal extent. Key words: comparative industry analysis; level of competition; Porter’s Five Forces Model; cruise industry. 2 TABLE OF CONTENTS Referent: drs. Vries, R. W. de .............................................................................................. 1 ABSTRACT ............................................................................................................................ 2 This thesis comprises a comparative industry analysis of the U.S. and European cruise industry. The extent to which the two industries show differences concerning their level of competition is researched. Porter’s Five Forces Model served as the theoretical framework. Profile charts of both cruise industries derived from detailed analyses, which revealed that the U.S. and European cruise industry only differ to a marginal extent. ..................................................................................................................... 2 Key words: comparative industry analysis; level of competition; Porter’s Five Forces Model; cruise industry. .......................................................................................................... 2 TABLE OF CONTENTS ....................................................................................................... 3 LIST OF TABLES, FIGURES, AND GRAPHS ................................................................. 5 CHAPTER 1 - INTRODUCTION ........................................................................................ 6 INTRODUCTION .................................................................................................................... 6 RESEARCH OBJECTIVE ...................................................................................................... 6 CHAPTER 2 – RESEARCH DESIGN .............................................................................. 10 RESEARCH QUESTION ................................................................................................... 10 CHARACTERISTICS OF BOTH CRUISE INDUSTRIES ........................................... 11 Characteristics of the U.S. cruise industry ............................................................................. 11 Characteristics of the European cruise industry .................................................................... 12 Type of cruising ..................................................................................................................... 14 Cruise categories .................................................................................................................... 14 Flag of registration ................................................................................................................. 15 OUTLINE .............................................................................................................................. 16 CHAPTER 3 – THEORETICAL BACKGROUND ........................................................ 18 LITERATURE REVIEW .................................................................................................... 18 PORTER’S FIVE FORCES MODEL ............................................................................... 22 Threat of new entrants ............................................................................................................ 22 Threat of substitutes ............................................................................................................... 24 Threat of buyers ..................................................................................................................... 25 Threat of suppliers .................................................................................................................. 27 Industry competitors ............................................................................................................... 28 Summary ................................................................................................................................ 29 CHAPTER 4 - METHODOLOGY .................................................................................... 30 DATA COLLECTION AND DATA QUALITY .............................................................. 30 SAMPLE SELECTION ....................................................................................................... 32 DATA ANALYSIS ............................................................................................................... 33 CHAPTER 5 – FINDINGS U.S. CRUISE INDUSTRY ................................................... 36 U.S. CRUISE INDUSTRY ANALYSIS ............................................................................... 36 Threat of new entrants ............................................................................................................ 36 Threat of substitutes ............................................................................................................... 46 Threat of buyers ..................................................................................................................... 48 Threat of suppliers .................................................................................................................. 55 Industry competitors ............................................................................................................... 59 CONCLUSION –COMPETITIVE BEHAVIOR OF THE U.S. CRUISE INDUSTRY ...... 65 3 CHAPTER 6 – FINDINGS EUROPEAN CRUISE INDUSTRY ................................... 66 EUROPEAN CRUISE INDUSTRY ANALYSIS ................................................................. 66 Threat of new entrants ............................................................................................................ 66 Threat of substitutes ............................................................................................................... 74 Threat of buyers ..................................................................................................................... 75 Threat of suppliers .................................................................................................................. 78 Industry competitors ............................................................................................................... 81 CONCLUSION - COMPETITIVE BEHAVIOR OF THE EUROPEAN CRUISE INDUSTRY ............................................................................................................................ 85 CHAPTER 6 - CONCLUSION ........................................................................................... 87 COMPARISON - COMPETITIVE BEHAVIOR U.S. AND EUROPEAN CRUISE INDUSTRY ........................................................................................................................... 87 ANSWER TO THE RESEARCH QUESTION .................................................................... 88 IMPLICATIONS FOR MANAGEMENT ............................................................................ 91 IMPLICATIONS FOR ACADEMIA .................................................................................... 92 FUTURE RESEARCH .......................................................................................................... 92 LIMITATIONS ...................................................................................................................... 93 REFERENCES ....................................................................................................................... 95 Internet references .................................................................................................................. 95 Paper references ..................................................................................................................... 99 4 LIST OF TABLES, FIGURES, AND GRAPHS Table 1: U.S. cruise companies Table 2: U.S. cruise market share in 2009 Table 3: European cruise companies Table 4: European passengers on board of cruise ships 2006-2008 Table 5: List of entry barriers according to Porter (1985) Table 6: List of employed entry barriers Table 7: Threat of substitutes according to Porter (1985) Table 8: List of employed threats of substitutes Table 9: Determinants of buyer power according to Porter (1985) Table 10: List of employed determinants of buyer power Table 11: Determinants of supplier power according to Porter (1985) Table 12: List of employed determinants of supplier power Table 13: Rivalry determinants according to Porter (1985) Table 14: List of employed rivalry determinants Table 15: Cruise industry companies Table 16: Three-point scale Table 17: Original costs U.S. cruise ships Table 18: Total population 27 European countries Table 19: Population projection 27 European countries Figure 1: The elements of industry structure Figure 2: Profile chart ‘threat of new