Harvard Case - Hurtigruten: Sailing into Warm Water?
"Hurtigruten: Sailing into Warm Water?" Harvard business case study is written by Jan W. Rivkin, Kerry Herman. It deals with the challenges in the field of Strategy. The case study is 24 page(s) long and it was first published on : Jan 14, 2020
At Fern Fort University, we recommend Hurtigruten pursue a multi-pronged growth strategy focused on expanding into new markets while simultaneously reinforcing its core brand identity and embracing digital transformation. This strategy should prioritize sustainable practices and leverage strategic partnerships to navigate the evolving cruise industry landscape.
2. Background
Hurtigruten, a Norwegian cruise line, has built a strong reputation for its unique coastal voyages along the Norwegian fjords. The company faces a critical juncture, seeking to expand its reach beyond its traditional market while maintaining its commitment to environmental sustainability and authentic travel experiences. This case study explores Hurtigruten's strategic options for navigating the competitive cruise industry and achieving sustainable growth.
The main protagonists are:
- Daniel Skjeldam: CEO of Hurtigruten, tasked with leading the company's strategic direction and navigating the challenges of global expansion.
- The Hurtigruten Board: Responsible for overseeing the company's strategic decisions and ensuring alignment with its core values.
- The Hurtigruten Management Team: Responsible for executing the company's strategic plan and adapting to market dynamics.
3. Analysis of the Case Study
A. SWOT Analysis
Strengths:
- Strong Brand Identity: Hurtigruten is known for its unique coastal voyages, environmental sustainability, and authentic travel experiences.
- Experienced Management: Hurtigruten boasts a team with extensive experience in the cruise industry, particularly in navigating the complexities of operating in remote and challenging environments.
- Commitment to Sustainability: Hurtigruten's focus on environmental sustainability has resonated with environmentally conscious travelers, providing a competitive advantage.
- Strong Financial Position: Hurtigruten is financially sound, allowing for investment in expansion and innovation.
Weaknesses:
- Limited Geographic Reach: Hurtigruten's operations are primarily concentrated in Norway, limiting its potential market share.
- Dependence on Seasonal Demand: The cruise industry is highly seasonal, exposing Hurtigruten to fluctuations in demand.
- Limited Scale: Hurtigruten's fleet size is relatively small compared to its larger competitors, hindering its ability to offer diverse itineraries and cater to a wider range of travelers.
Opportunities:
- Growing Demand for Sustainable Travel: Increasing consumer awareness of environmental issues presents a significant opportunity for Hurtigruten to capitalize on its sustainability credentials.
- Emerging Markets: Expanding into new markets, particularly in Asia and South America, offers significant growth potential.
- Digital Transformation: Leveraging technology and digital platforms can enhance customer experience, streamline operations, and improve marketing reach.
Threats:
- Intense Competition: The cruise industry is highly competitive, with established players like Carnival Corporation and Royal Caribbean International vying for market share.
- Economic Fluctuations: Global economic downturns can significantly impact travel demand, impacting Hurtigruten's revenue.
- Environmental Regulations: Stringent environmental regulations could increase operational costs and limit expansion opportunities.
B. Porter's Five Forces Analysis
- Threat of New Entrants: The cruise industry has high barriers to entry, requiring significant capital investment and regulatory compliance. However, niche players focusing on sustainable practices or specific destinations may emerge.
- Bargaining Power of Suppliers: Hurtigruten's supplier base is relatively concentrated, but the company has leverage through its strong brand and commitment to sustainability.
- Bargaining Power of Buyers: Customers have a wide range of choices in the cruise industry, making them price-sensitive. Hurtigruten can differentiate itself through its unique experiences and sustainability focus.
- Threat of Substitute Products: Other forms of travel, such as land-based tours or river cruises, can be substitutes for ocean cruises. Hurtigruten needs to maintain its unique value proposition.
- Rivalry Among Existing Competitors: Competition is intense, with established players offering a wide range of itineraries and price points. Hurtigruten needs to differentiate itself through its brand identity and sustainability focus.
C. Value Chain Analysis
Hurtigruten's value chain comprises the following key activities:
- Inbound Logistics: Sourcing and procurement of materials and supplies for ship maintenance and operations.
- Operations: Ship management, maintenance, and operation; crew training and management; and port operations.
- Outbound Logistics: Delivery of passengers to destinations and handling of luggage.
- Marketing and Sales: Promoting Hurtigruten's unique experiences and attracting customers through various channels.
- Customer Service: Providing exceptional service to passengers throughout their journey.
- Technology and Innovation: Developing and implementing technology solutions to enhance customer experience, optimize operations, and improve sustainability.
4. Recommendations
Hurtigruten should pursue a multi-pronged growth strategy focused on:
1. Market Expansion:
- Target Emerging Markets: Focus on expanding into new markets with high growth potential, particularly in Asia and South America. Conduct thorough market research to identify potential destinations and tailor itineraries to local preferences.
- Strategic Acquisitions: Consider acquiring smaller, established cruise lines in target markets to gain market share and access local expertise.
- Partnerships: Form strategic alliances with local tourism operators and businesses in target markets to leverage their knowledge and networks.
2. Brand Reinvention:
- Strengthen Core Values: Reinforce Hurtigruten's commitment to sustainability, authentic experiences, and responsible tourism.
- Diversify Offerings: Expand beyond traditional coastal voyages to offer new itineraries and experiences, such as expedition cruises, river cruises, or cultural immersion programs.
- Enhance Digital Presence: Invest in digital marketing and technology solutions to improve customer experience, streamline operations, and expand reach.
3. Digital Transformation:
- Data Analytics: Leverage data analytics to understand customer preferences, optimize pricing strategies, and personalize marketing campaigns.
- Online Booking Platform: Develop a user-friendly online booking platform for seamless customer interactions.
- Mobile App: Create a mobile app to provide passengers with real-time information, onboard services, and personalized recommendations.
4. Sustainable Practices:
- Invest in Green Technology: Adopt innovative technologies to reduce emissions, minimize waste, and conserve resources.
- Partner with Environmental Organizations: Collaborate with environmental organizations to promote sustainable tourism practices and support conservation efforts.
- Educate Passengers: Develop educational programs to raise passenger awareness of environmental issues and encourage responsible travel behavior.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of Hurtigruten's strengths, weaknesses, opportunities, and threats, taking into account:
- Core Competencies: Building on Hurtigruten's core competencies in sustainable travel, authentic experiences, and operational excellence.
- External Customers: Meeting the evolving needs and preferences of environmentally conscious travelers seeking unique experiences.
- Competitors: Differentiating Hurtigruten from its competitors through its focus on sustainability, authentic experiences, and personalized service.
- Attractiveness: Evaluating the financial viability of each recommendation, considering potential return on investment and market growth opportunities.
Assumptions:
- Continued Growth in Sustainable Travel: The demand for sustainable travel is expected to continue growing, providing a favorable market for Hurtigruten.
- Technological Advancements: Continued advancements in green technology will enable Hurtigruten to further reduce its environmental impact.
- Government Support for Sustainable Tourism: Governments are expected to continue supporting sustainable tourism initiatives, creating a favorable regulatory environment for Hurtigruten.
6. Conclusion
Hurtigruten faces a significant opportunity to capitalize on the growing demand for sustainable travel and expand its reach into new markets. By embracing digital transformation, investing in green technology, and leveraging strategic partnerships, Hurtigruten can solidify its position as a leader in the cruise industry while contributing to a more sustainable future for tourism.
7. Discussion
Alternatives:
- Focus solely on the Norwegian market: This option would limit growth potential and expose Hurtigruten to market fluctuations.
- Merging with a larger cruise line: This option could provide economies of scale but may compromise Hurtigruten's brand identity and sustainability focus.
- Maintaining the status quo: This option would fail to address the evolving market dynamics and risk losing market share to competitors.
Risks:
- Economic downturn: A global economic downturn could significantly impact travel demand, affecting Hurtigruten's revenue.
- Regulatory changes: Stringent environmental regulations could increase operational costs and limit expansion opportunities.
- Competitor response: Competitors may respond to Hurtigruten's expansion efforts by adopting similar strategies, intensifying competition.
Key Assumptions:
- Continued growth in sustainable travel: The demand for sustainable travel is expected to continue growing, providing a favorable market for Hurtigruten.
- Technological advancements: Continued advancements in green technology will enable Hurtigruten to further reduce its environmental impact.
- Government support for sustainable tourism: Governments are expected to continue supporting sustainable tourism initiatives, creating a favorable regulatory environment for Hurtigruten.
8. Next Steps
- Conduct thorough market research: Identify potential target markets, assess market demand, and develop tailored itineraries.
- Develop a strategic plan: Outline specific goals, timelines, and resource allocation for market expansion, brand reinvention, and digital transformation.
- Invest in green technology: Explore and implement innovative technologies to reduce emissions, minimize waste, and conserve resources.
- Build strategic partnerships: Form alliances with local tourism operators, environmental organizations, and technology providers.
- Monitor progress and adapt: Continuously monitor market dynamics, competitor activities, and customer feedback to adjust strategies as needed.
By taking these steps, Hurtigruten can navigate the evolving cruise industry landscape, achieve sustainable growth, and solidify its position as a leader in responsible tourism.
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Case Description
As this case opens in 2019, CEO Daniel Skjeldam and his team have successfully reinvigorated Hurtigruten, a storied but struggling Norwegian ferry and cruise operator, and have established it as the leading provider of polar expedition cruises. They now face a critical decision: should they expand beyond the polar regions and begin operating expedition cruises extensively in warm waters? The case introduces students to relative cost analysis; illustrates how a market can be structurally unattractive despite a current boom; and explores the logic of expanding from one segment of a market into other segments.
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