Business Case Holland America Line by Anderson Hexsel Denis Nascimento Felipe Raffani Ingrid Almança 1

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Business CaseHolland America Line

byAnderson HexselDenis NascimentoFelipe RaffaniIngrid Almança

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Agenda

• HAL Situation• Economic Situation• Short-term strategy• Long-term strategy• Financial Analysis• Conclusion

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HAL SITUATION

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HAL Situation

• What is the company?– Premium Cruise Company– Founded in 1873– Subsidiary of Carnival Inc.– 14 Ships– Cruises to all of America, Europe, Asia and

Oceania

HAL Situation Economic Situation

Short-term Strategy

Long-term Strategy

Financials Analysis Conclusion

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HAL Situation

• Good aspects:– Company is still filling their ships– Operations are stable amidst crisis– Board of Directors is confident and optimistic– Mother company’s shares are increasing– Already present in new medias


Short-term Strategy

Long-term Strategy


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HAL Situation

• Bad aspects:– Discount rate is too high– Mother Company has stopped paying dividends– Market is threatened as a whole


Short-term Strategy

Long-term Strategy


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HAL Situation

Brazil

Mexico

USA

Canada

Australia

ItalyUK

Peru

• Some International Cruises:


Short-term Strategy

Long-term Strategy


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ECONOMIC SITUATION

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Economic Situation

• World engulfed in crisis– Unemployment is staggering– World purchasing power is falling rapidly– “No country is immune to the Crisis”

-Dominique Strauss-Kahn, Managing director of the International Monetary Fund

– USA and Europe facing a huge recession


Short-term Strategy

Long-term Strategy

Financial Analysis Conclusion

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Economic Situation


Short-term Strategy

Long-term Strategy


• USA Unemployment Chart

Source: Bureau of Labor Statistics, April 2009

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Economic Situation

• When will it end?– “[...] nothing before 2010, when you will be

technically out of a recession”

– “[…] but the effects […] such as unemployment will last for at least two more years.”

- Nouriel Roubini, New York Times economist


Short-term Strategy

Long-term Strategy


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Economic Situation

• How will the recovery be?– “[...]it takes nearly three and a half years for an

economy to return to the peak level of growth before a global financial crisis.”

– “Recoveries from such events take twice as long on average”

- Marco Terrone, economic author


Short-term Strategy

Long-term Strategy


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Economic Situation

• Based on those views, we have:

– End of Crisis: 2010 ± 1 year

– End or Recovery: 2015 ± 2 years


Short-term Strategy

Long-term Strategy


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Economic Situation

• Based on those views, we have:

2007: Beginning of crisis 2010: End of formal recession


Short-term Strategy

Long-term Strategy


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Economic Situation

• After the crisis:– Customer buying habits will change• “Frugal way of life”

– A sharp inflation may happen in many countries


Short-term Strategy

Long-term Strategy


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Economic Situation

• Results:– HAL prices will have to be kept below pre-

recession levels


Short-term Strategy

Long-term Strategy


Unless a new value is created

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SHORT-TERM STRATEGY

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Short-term Strategy

• Clients: – 25% : first time travelers– 45% : repeaters– Average 46 years of age– Annual household income ($93,000)– Clients want to feel special– Minimize risky investments


Short-term Strategy

Long-term Strategy


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Short-term Strategy

• Premises:– Clients want to feel special– Minimize risky investments– Maintain “beds filled” – Increase on-board spending• On-board specials (credits, rewards)

CRM implementation


Short-term Strategy

Long-term Strategy


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Short-term Strategy

• Premises:– Maintain “beds filled” – Increase on-board spending• On-board specials (credits, rewards)

CRM implementation


Short-term Strategy

Long-term Strategy


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Short-term Strategy

• Value aggregation based on CRM:

• POST CRUISE ACTIVITIES• TIME SHARING– Preferred customers invited to participate– Creates sense of uniqueness/elite– “Cruise Owner” idea– Increase customer – HAL loyalty and relationship


Short-term Strategy

Long-term Strategy


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HAL Ownership

• How does it work? – HAL invites customers to be a part of their

program – Customers pay a program entrance fee (diluted in

the first year) and a monthly upkeep cost – Customers can use up to two weeks of cruise time,

paying only for onboard purchases and get special credits and bonuses


Short-term Strategy

Long-term Strategy


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• Why Own a Cabin?– Customers get the opportunity to get custom-

fitted cabins (enabled by CRM)– Amenities rivaled only by in-shore resorts– Amenities include tennis courts, swimming pools,

Jacuzzi, minigolf and spa– Every accessory needed to enjoy amenities are

included and customized

HAL Ownership


Short-term Strategy

Long-term Strategy


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• How does Purchasing Work?– Buyers pay for the use rights– Buyers may pay cash, credit card or finance

company– Price depends on ship, size of unit and season– Average HAL Ownership will sell for approximately

US$ 2,760.00 per person.

HAL Ownership


Short-term Strategy

Long-term Strategy


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Product

Price

Place

Promotion

Physical Layou

Provision of Customer

Service

Processes

7-Ps

•Experience of Personalized Cabin•Shows•Theme Cruises

Product


Short-term Strategy

Long-term Strategy


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Product

Price

Place

Promotion

Physical Layout


Service

Processes

7-Ps

•Practice same price before crisis•14 days for the price of 12

Price

HAL Situation

Economic Situation

Short-term Strategy

Long-term Strategy


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Product

Price

Place

Promotion

Physical Layout


Service

Processes

7-Ps

•RCI partnership•Retailers•Exchangeable Timeshare

Place

HAL Situation

Economic Situation

Short-term Strategy

Long-term Strategy


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Product

Price

Place

Promotion

Physical Layout


Service

Processes

7-Ps

•World Class Events Association•Theme cruises•Own social network and Web 2.0•Referencing

Promotion


Short-term Strategy

Long-term Strategy


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Product

Price

Place

Promotion

Physical Layout


Service

Processes

7-Ps

•Custom decoration•Perfect hygiene•Favorite brands•“My own cruise” ideal

Physical Layout


Short-term Strategy

Long-term Strategy


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Product

Price

Place

Promotion

Physical Layout

Customer Service

Processes

7-Ps

•Serve well the client:•Website•Call center•Ships•CRM

Customer Service


Short-term Strategy

Long-term Strategy


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Product

Price

Place

Promotion

Physical Layout

Customer Service

Processes

7-Ps•Salespeople•Partnership with companies for incentive programes•Trainning•CRM•WEB 2.0

Processes


Short-term Strategy

Long-term Strategy


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LONG-TERM STRATEGY

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Long-term Strategy

• Expanding the business on a global scale is the best way to grow after the crisis

• Premises:– Focus on countries that will have a stable

economy after crisis– Minimize risky investments– Work on pre-existing ports and distribution

channelsHAL Situation Economic

SituationShort-term

StrategyLong-term Strategy


S. America

Long-term Strategy

Europe AsiaEurope Asia

S. America


Short-term Strategy

Long-term Strategy


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Long-term Strategy

• South America– “Brazil [...] has stable banks, high levels of reserves

and sturdy domestic demand for products that keeps many businesses humming along. “

Joshua Partlow, the Washington Post


Short-term Strategy

Long-term Strategy


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Long-term StrategyWhy Brazil?• Strong banking system• Growing wealthy population• Classical touristic destination• Pre-existing distribution channels• Starting point to other ports in

South America

What are the Risks?• Luxury market is still small• Buying offshore is part of culture


Short-term Strategy

Long-term Strategy


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Long-term Strategy

• The known destination

Europe• Many classic tourism destination • Rich, surviving countries

The risk• Countries with problems due to

recession• Lack of distribution channels


Short-term Strategy

Long-term Strategy


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Long-term Strategy

• Our plan:– Create supply chains in Europe to enable port

utilization– Grow bases in Brazil’s northeast and South

America


Short-term Strategy

Long-term Strategy


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Long-term Strategy

• The timeline:

2011: World Recession Ends2014: World Soccer Cup in Brazil, Start

line operation


Short-term Strategy

Long-term Strategy


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Long-term Strategy

• The Brazil Strategy– Ports may be used as entrance for South American

Luxury places

– Competition is almost non-existent in the luxury market

– Build strong distribution channels to enable port utilization in northeast (CRM helps)


Short-term Strategy

Long-term Strategy


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Long-term Strategy

• The Brazil Strategy– Marketing Strategy:• Orkut• Big University parties• Company rewarding programs• Association with world-class events


Short-term Strategy

Long-term Strategy


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Long-term Strategy

• The European Reclamation– Distribution channels have to be reinforced– Will allow for new lines


Short-term Strategy

Long-term Strategy


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FINANCIAL ANALYSIS


Short-term Strategy

Long-term Strategy


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Current Cash Flow

1Q - 2008 2Q - 2008 3Q - 2008 4Q - 2008 1Q - 20090

500

1000

1500

2000

2500

Net Income/Starting Line

Net Income/Starting Line

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Improvement Signs

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Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

Real GDP Growth Projection

United States Euro AreaTable 1.0 Summary of Projections - Real GDP Growth

2008 2009 2010

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

United States -0.5% -6.2% -7.2% -4.3% -1.8% -0.4% 0.5% 0.9% 1.2% 1.8%

Euro Area -1.1% -5.9% -6.8% -4.2% -2.2% -0.8% 0.2% 0.7% 1.1% 1.4%

SOURCE: OECD

HAL Situation

Economic Situation

Short-term Strategy

Long-term Strategy


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Financial Analysis

• Why change the strategy?– Sharp fall in fuel prices will change flow of variable

costs– The economy already shows signs of improvement

– which may heat markets


Short-term Strategy

Long-term Strategy


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Financial Viability

• New strategy could change market scenario and allow for quick capitalization

• NPV = $1,673,662.04• IRR = 27.57 % per quarter


Short-term Strategy

Long-term Strategy


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CONCLUSIONS

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Conclusions

• The financial crisis is not a short-term problem• There must be a plan to keep income up

during the recovery• Loyalty of customers cannot be

underestimated• Plans must be put into practice as soon as

possible to minimize risks and maximize gains


Short-term Strategy

Long-term Strategy


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Thank you!

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Sources

• Interview with Dominique Strauss-Kahn: http://www.blinkx.com/video/no-country-immune-to-crisis/gdStJIm3-MFWospfoQzwQw

• Nouriel Roubini’s writings and interviews: http://www.rgemonitor.com/blog/roubini/

• Marco Terrone’s interview: http://blogs.wsj.com/economics/2009/04/16/imf-sees-slow-weak-global-recovery-even-with-strong-response

• Joshua Partlow’s Article: http://www.washingtonpost.com/wp-dyn/content/article/2009/04/16/AR2009041604010.html?hpid=topnews

http://www.blinkx.com/video/no-country-immune-to-crisis/gdStJIm3-MFWospfoQzwQw

http://www.blinkx.com/video/no-country-immune-to-crisis/gdStJIm3-MFWospfoQzwQw

http://www.rgemonitor.com/blog/roubini/

http://blogs.wsj.com/economics/2009/04/16/imf-sees-slow-weak-global-recovery-even-with-strong-response

http://blogs.wsj.com/economics/2009/04/16/imf-sees-slow-weak-global-recovery-even-with-strong-response

http://www.washingtonpost.com/wp-dyn/content/article/2009/04/16/AR2009041604010.html?hpid=topnews

http://www.washingtonpost.com/wp-dyn/content/article/2009/04/16/AR2009041604010.html?hpid=topnews

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Sources

• “Crisis after crisis”:http://www.ft.com/cms/s/0/538ce910-2779-11de-9b77-00144feabdc0,s01=1.html

http://www.ft.com/cms/s/0/538ce910-2779-11de-9b77-00144feabdc0,s01=1.html

http://www.ft.com/cms/s/0/538ce910-2779-11de-9b77-00144feabdc0,s01=1.html

Documents

Business Case Holland America Line by Anderson Hexsel Denis Nascimento Felipe Raffani Ingrid Almança 1