The business is not devoid of challenges, which demand actions to maintain the industry on course. In helping to understand the industry better, this paper analyses the industry using Porters Five Force model. The five forces include threats of new entry, threats of substitution, competitive rivalry, buyer power and supplier power.
“Threats of New Entry” force determines the ease by which new enterprises can enter into the market. Where new entry can penetrate the market comfortably, the market share is expected to shrink affecting the stability of the business. Vacation Cruise industry has been on an increasing which reduces the company’s’ threat to new entry. The fact that international waters have usage policies further reduces possibilities of new entries. Other barriers to entry include high cost of fuel, escalated advertising cost and level of operation capacity.
When there are ample and favorable substitutes the risk of losing customer escalates. Cruise faces risks of substitution from other vacation such as air travel, beach vacation, theme park, and train travel. These risks are exacerbated by the fact that cruise only represent 2% of vacation market and many customers associate it with high status classes of customers. This leaves doors open for customers to fall out for other substitutes.
“Competitive Rivalry” determines how well the industry is established in the market in respect to the strength and number of competitors. Competitors force the vocation cruise lower their cost and at the same time maintain their services competitive. The quality services demanded are crucial in withstanding the stiff competition.
“Buyer Power” involves the capability of the buyer to influence the trends in pricing the products and services. Vacation Cruise relies with the word of mouth and travel agents in selling its products. Travel agents play an imperative role in customers’ choices. Buyers have the accessibility of comparing products and services of cruise online; thus multiplied ability to influence charges.
One of the weaknesses in the suppliers’ docket power is that ports, drinks and foods industries have minimal power in the market. However, fuel being the main source of energy is eminently influential. The cost of fuel is influenced by the fuel industry, thus has the power to influence cruise.
In conclusion, the forces changing the industry to change are mostly triggered by stiff competition and the availability of substitute in the market. These are the two forces that seem to mount pressure to operationalization of vacation cruise industry.