Case

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Lecture 18

• Case
• Royal Caribbean Cruises Ltd

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Final Exam Outline

• 12 3pm, Wednesday June 14
• Half short and long answers on theory and
  principles from course
• Half case-study
• Closed book
• Sample questions next week

3
Royal Caribbean Profile

• No. 2 in industry
• Distant 2nd
• Profitable (even after 9/11)
• Strong balance sheet
• Compete on innovation and brand
• Built by acquisition and construction of new
  ships
• Very aggressive construction schedule
• Wrong side of economic scale
• Recently lost large acquisition morale problems
• 9/11 massively disruptive
• Recently recovered booking-wise
• Two brands with different images
• Challenge to squeeze back-office costs
• Commoditize standards in operations
• Maintain key elements of brand differentiation

4
IT Activities

• Pre-1996
• New IT leadership
• Cost frozen, reported to CFO
• Budget of 40million
• No innovation (even email)
• Home-grown legacy systems with code and data
  mixed together
• Low-level support environment
• Chosen not to compete in IT
• 1996 Sep 10,2001
• Caught up on IT
• COO Jack Williams from American Airlines
  background
• Doubled budget 40m to 80m
• New staff
• Tom Murphy, CEO
• Typical user background CEO
• Limited technical training
• Effective change agent
• Needs good tech people around
• Mike Sutton joined, now CIO

5
9/11

• Middle of repositioning
• Three options
• Modest cutback in development
• Significant reduction in development
• Complete stop of development
• Chose option 3 due to uncertainty
• Headcount 50 cut
• Budget slashed 83m to 42m
• Survial mode
• Move from strategic to factory quadrant
• Four weeks to cut 50 spending

6
Recovery

• How to allocate scarce resources
• How to move from defensive to offensive
• IT priorities managed by committee led by Jack
  Williams
• Meets 4 times per year
• Research lab on new IT applications for use on
  ships is maintained
• Innovation remains important
• Aggressive development of external interfaces
• Sophisticated website
• Still travel agent dominated
• IT enhances sales channel rather than replaces it
• Phasing out legacy systems
• Moving to packages with flexible architecture
• Operations dependence becoming more critical
  onshore
• Moving supply chain management problem
• Compare outsourcing this to Cathay Pacific

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Portfolio of projects

• Exhibit 6
• What should be priority?

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