Good Case Study On Strategic Issue And Recommendation For Royal Caribbean Cruise Line

Business

Section
Strategic Action for Royal Caribbean Cruise Line
A critical strategic issue facing the Royal Caribbean Cruise Line is to actively adopt environmentally friendly strategies.
What actions can the Royal Caribbean Cruise Line in order to actively adopt environmentally friendly strategies while at the same time achieving profit goals?

Stop dumping sewage into the oceans, ports and seas of the world using on-ship waste water treatment.

The strategic objective of the research project is to learn if Royal Caribbean Cruise Line can adopt an environmentally friendly way to discharge polluted water from the hull.

The financial objectives are to review the company’s annual report and find an affordable environmentally friendly strategy.

The strategic objective is to evaluate the opportunities the Royal Caribbean Cruise Line can adopt in order to meet environmental regulations on waste and wastewater discharges into the oceans and seas of the world.
The financial objective is to evaluate how much money needs to be spent to meet the environmental objectives and if profits will be negatively or positively impacted by the Royal Caribbean Cruise Line intention to become ecologically responsible.

Recommendation: Find a water treatment to treat the wastewater in the hull that will fit on board the ship.

Strategic: Compare the available models of ship wastewater treatment facilities to find the the most efficient and reliable model to try on one of the RCC cruise ships.
Financial: The net revenue for 2013 was approximately $7.960 billion, whereas the price for a PetroLiminator is less than $200,000. The cost is very low compared to the advantages of using the water treatment equipment on the ship before water is discharged at a port or into a marine system.

Action Plan

Part 1 Gantt Timeline
Issue: How can RCC Cruise Lines develop a better environmental friendly reputation in order to attract passengers?
Recommendations: Develop a strategy for discharging clean water from the ship’s hull instead of oil and dirty water into ports and marine systems. Advertise targeted audiences about the environmentally friendly and sustainable activity to improve perception of RCC Cruise Lines.

Objectives:

1) Find an affordable on-ship wastewater treatment facility that discharge clean water instead of dirty water. The facility needs to have low maintenance and provide reliable service. Improve the public assessment of a D on the Friends of Earth annual cruise report card.
2) RCC Cruise Lines will dramatically reduce the risk of a large oil and dirty water spill into ports, harbors, seas and oceans. The amount of insurance liability the company carries will be decreased. The 2013 Annual Report showed that the liability payment in case of a water pollution event is $349.4 million.

Appendix

Strategic Objective: The purchase of one PetroLiminator OWS for treating owl and other petroleum wastes that collect on the bottom of the ship’s hull is highly recommended. The purchase of one PetroLiminator depends on RCC cruise lines to afford to purchase, install and maintain a PetroLiminator on-ship. he cost of for a PetroLiminator OWS was calculated as the average of the costs of three models that can be chosen to use on cruise ships. The calculation shows that the cost of the wastewater treatment project is approximately $160,000 per ship.
$177,000 + $155,000 + $146,000/ 3 = approximately $160,000
The PetroLiminator Oil Water Separator (OWS) produced by EnSolve Biosystems, Inc. cleans oily water in the ship before it is discharged at ports and into marine systems. The purchase of one PetroLiminator for one ship is approximately $160,000 whereas the purchase of one PetroLiminator for all 41 ships is likely to be considered prohibitive ($6,560,000).
(Source: http://www.ensolve.com/BC%20Shipping%20News-%20EnSolve-new.pdf)
Financial Strategy: The RCC total revenues of 2013 increased from $7.7 billion in 2012 to $8 billion (3.5 percent). The increased revenues are from ticket pricing and the money passengers spend onboard during cruises. The operation expenses reported in the annual report increased by 2.9 percent from $5.2 billion in 2012 to $5.3 billion in 2013.The RCC Debt to Capital ratio was reported to be 50.5 percent for 2012 and 47.8 percent for 2013. The Net Debt was reported at 8.295 billion for 2012 and 7.870 billion for 2013. The Net Debt-to-Capital was reported at 50.0 percent for 2012 and 47.2 percent for 2013. The company is limited to maintain net debt-to-capital ratio to less than or equal to 62.5 percent.
The US Coast Guard requires the RCC cruise lines to purchase insurance in case of a catastrophic water pollution event. The liability insurance cost is $349.4 million. The company reported in the 2013 Annual Report that paying the amount for insurance did not influence the operation and maintenance costs.
(Source: http://annualreports.com/Company/1249)
Work Breakdown Structure
Work Breakdown Structure
(Two Level 1 Tasks highlighted in red)
Budget Source
Time estimates
6 months to 1 year total
The develop time estimate is estimated to take six months to one year while careful evaluations of wastewater on-ship treatment equipment is undertaken The advertising campaign is scheduled for nine months and starts at the beginning of the project.
HRM will take the lead on employee scheduling policies and employee procedures
Benchmarks on the way to end goal will be established during first month of project. End of month celebration parties for meeting benchmarks in a fancy restaurant. If do not meet benchmarks meet at work lounge for pizza deliver
Develop cost estimates
Total Cost of Ownership (TCO) = annual operational costs + total cost/year, when the annual operational costs are computed using the following variables operating costs: power and maintenance costs and manpower requirements, the amount of waste generated, and Capital costs.
The TCO for one Petroliminator OWS is about $160,000 (annual cost for 10 years) whereas the TCO to equip all 41 ships run by the RCC cruise lines $6,560,000.
The Total Cost of Ownership for the ten years after installation was calculated for the treatment systems in figure 1. The median values were calculated and compared. Based on the medina cost data, the PetroLiminator’s TCO was “two to six times lower than the conventional OWS systems”
The financial advantages and disadvantages for purchasing one or more waste treatment on-board facility needs to be calculate.
Negligible cost for technological requirements on-board because the treatment facility requires no major construction projects. The space is available in the hull, so the only technological effort necessary by the RCC cruise lines is to ensure proper connection.
Prepare three different scenarios for costing: 1 facility for 1 ship, 20 facilities for 20 ships or 41 facilities for all 41 cruise line ships
Human, physical, technological & organizational resource requirements
The human requirements for a wastewater treatment system onboard requires two people to know how to maintain the biological reactions necessary for the system to work optimally. The two people can trade shifts so that the coverage is for at least 12 to 15 hours per day.
The organizational resource requirements are to make sure that the purchase cost and maintenance costs are budgeted into every budget. The salaries, social security, and benefits for the two employees needed to run the facility must be budgeted by the HRM.
Lean Sigma Six methods will be used with 15 minute Scrum (face to face) with entire project team daily to enhance communication
Performance requirements, deliverables & assignment of responsibilities
The performance requirements of the waste water treatment facility are established at the time of purchase.
Expert consultant needs o be hired for developing custom facility and/or to negotiate performance requirements. (20 days x $ contract must be budgeted to pay expert.
The deliverable is the clean water to discharge and the assignment of responsibilities is mainly the task of the two employees who know how to run the waste water treatment equipment.
At least one person at the senior management level needs to be supportive of the project to aid in receiving necessary resources or support.
Calculate potential increase in passenger ticket cells
Before project team members meet for first time management needs to appoint 1) project leader and 2) communication liaison for external
Pitch
Develop time estimates
Advertising project members to produce pitch involved from beginning of project to 9 months for planning and design of pitch for funding
Delays for shipment or implementation of treatment facility will not delay the advertising campaign; at the end of 9 months launch advertising campaign
Project members on developing advertising pitch component of the project will work half time on the project for the first six months and full time on project for the three months immediately before scheduled meeting
Develop cost estimates using the following and use the following for the presentation to gain funding. The following are recommendations of budget sources
The Net Debt-to-Capital ratio is calculated to determine the total long-term debt. The values include in the category of Net Debt-to-Capital Ratio are “the current portion of long-term debt, less cash and cash equivalents (Net Debt) divided by the sum of Net Debt and the shareholders’ equity”.
The amounts impacts from “Accumulated other comprehensive income (loss) on Total Shareholders’ Equity” are not included in the calculation for the Net Debt-to-Capital ratio
The values are reported under the category of Results of Operations in the annual financial report. Finally, the most important point for the research is that the company is that the RCC cruise lines’ net revenue is in excess of its financial obligations.
Human, physical, technological & organizational resource requirements
The administrative offices of RCC Cruise Lines offers the necessary paper supplies, computers, networking internally and networking externally with Internet
Lean Sigma Six methods will be used with 15 minute Scrum (face to face) with entire project team daily to enhance communication
Performance requirements, deliverables & assignment of responsibilities
HRM is in charge of employee payment and time record
For every benchmark one three day weekend is earned. For every benchmark missed no reward.
HRM works with Communication Liaison appointed by Senior management