WP Uncertainty Cruise Industry

8/8/2019 WP Uncertainty Cruise Industry

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Working Paper

International Cruise Industry:Coping with the Uncertainty

Michael P. Vogel

Bremerhaven, 11 th September, 2004

Contact: Hochschule BremerhavenMichael P. Vogel, Professor of Tourism ManagementAn der Karlstadt 8D - 27568 BremerhavenEmail: [email protected]

University of Applied Sciences


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M. P. Vogel: International Cruise Industry - Coping with the Uncertainty page 2

International Cruise Industry: Coping with the Uncertainty

Abstract

This empirical study aims to understand how the cruise industry perceives its past andfuture exposure to uncertainty; which sources of uncertainty it considers to be gainingimportance over time; and by which means it intends to cope with the uncertainty.

It is based on the hypothesis that cruise companies face uncertainty from four mainsources: demand, competition, distribution, as well as the economic and politicalenvironment. For each of these sources, the study proposes five to six indicators, or factors, of uncertainty, which can be observed and evaluated relatively easily.

In a written survey, cruise industry representatives were asked to rate the changes in the

importance of these factors of uncertainty that have taken place since the year 2000, andthe changes they expected to occur until the year 2010. The respondents further ratedthe importance of different business functions for coping with the uncertainty.

Overall, the findings suggest that three years after the 9/11 attacks, uncertainty in thecruise industry remains on a high level. In various respects, future developments areexpected to bring about even more uncertainty. But more importantly, the studyhighlights a fundamental qualitative shift in the respondents perception of uncertainty:for the period 2000 - 2004, uncertainty was associated with a mix of risks andopportunities, whereas for the period 2004 - 2010, uncertainty is seen as a provider of more opportunities than risks for the cruise industry.

According to the respondents, the most important business functions to cope with theuncertainty, and therefore to seize the opportunities provided by the uncertain futurechanges in demand, competition, distribution, and the industry environment, aretechnology and marketing. This should be reflected by cruise companies budgetary andinvestment priorities, management development activities, and strategies anticipatingcontinuously high uncertainty levels.

Acknowledgement

I am grateful for the support of the empirical survey by the Hochschule Bremerhaven.


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1. Introduction

Exactly three years ago, the attacks on the World Trade Center in New York and on thePentagon in Washington marked the beginning of a qualitatively new phase for thetravel, tourism and hospitality industries worldwide. What started with an immediateplunge in bookings, occupancies, and turnovers, leading to a radical short-term cutbackof investments and sending shockwaves through the entire sector, has triggered or accelerated many profound longer-term changes on both the demand and the supplyside, which still strongly influence the way tourism is developing today.

Also the cruise industry was severely hit. But the mobility of their ships allowed cruisecompanies to react faster and more flexibly than hotel chains. Capacities wereredeployed to destinations that were perceived safe, and flight-inclusive cruiseprogrammes were replaced by homeland cruises. Airlines went bankrupt, and so did

some cruise lines. But while the airline industry parked hundreds of aircraft in the desertin order to limit the cost of idle capacities, the cruise industry reduced prices and held itsbreath. Somewhat luckily, the strategy succeeded. Soon, demand recovered, and manycompanies returned to profitability.

Yet significant uncertainty remains. In some parts of the world, the geopolitical situationis becoming more complicated every day, and security concerns still abound. Demandremains highly price sensitive; technological progress is affecting the role and position of distribution intermediaries; the forced market exit of players like Festival, Renaissanceand Royal Olympic has changed market structures; and the industrys high innovationrates may turn winners of the past into the losers of the future.

The purpose of this study is to understand how the cruise industry itself perceives itspast and future exposure to uncertainty; which sources of uncertainty it considers to begaining importance over time; and by which means it intends to cope with theuncertainty.

Three terms which are central to this study need some clarification: uncertainty, risk, andopportunity. Uncertainty refers to future developments the outcomes of which are notcertain. Risk denotes uncertainty bearing chances of loss or damage for cruisecompanies. Opportunity, finally, is to be understood as a possibility for cruise companiesdue to a favourable combination of circumstances. Hence, risk and uncertainty in thecontext of this study are not identical with the homonymous concepts known fromdecision theory. 1

1 In decision theory, risk specifies situations with different possible outcomes which can be assignedspecific probabilities of their occurrence. Uncertainty also refers to situations with different possibleoutcomes, but here the outcomes cannot be assigned probabilities.


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2. Methodology

This study is based on an empirical survey conducted between February and April 2004.During this period, about 100 envelopes were sent to ocean cruise companies, oceancruise tour operators, and international passenger ferry companies in North America,Europe and Asia.

The envelopes were mostly addressed to human resource directors and contained acover letter as well as three copies of a questionnaire (see appendix A). In the letter therecipient was asked to complete and return one questionnaire, and to forward the other two questionnaires to a marketing or sales manager, and to a strategy or financemanager of her or his company. This way, 300 questionnaires have been distributed.

The objective of this procedure was to get different points of view on the same questionsfrom representatives of the same companies. These points of view could be expected tovary because of the different information available to each of the three respondents.

The questionnaire was divided into five sections. 2 Section 1 contained questions aboutthe company and the respondent. Sections 2 to 5 comprised questions covering four possible sources of uncertainty and asking how particular aspects of uncertainty haddeveloped since the year 2000; how these aspects were expected to change until 2010;whether the past and uncertain future changes were seen as opportunities or rather asrisks; and finally, how the companies would cope with the expected future changes.

With very few exceptions, all questions were closed-ended, offering a fixed range of fivepossible answers.

In the course of the analysis of the returned questionnaires, all answers were trans-formed into integer scores (variable name x) ranging from 1 to 5, so that for eachquestion, the mean score x and the empirical standard deviation s could be computed. 3 The mean scores x can be assumed to reflect, or to be proportional to, rates of change.Depending on the type of question, the mean scores x were then interpreted in thefollowing way:

1.0 x 1.5: strong increase / very important / mainly opportunities

1.5 < x 2.5: moderate increase / important / more opportunities than risks2.5 < x 3.5: no change / less important / opportunities and risks3.5 < x 4.5: moderate decrease / not important / more risks than opportunities4.5 < x 5.0: strong decrease / irrelevant / mainly risks

2 Actually, the questionnaire contained a sixth section, asking the respondents to validate a particular

management competency model. However, the findings of that section were not intended for, and takeninto account by, the present study.

3 Sample statistics: = xn1

x and =2 )xx(

1n1

s where n is the sample size.


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The standard deviation s is a measure of the dispersion of answer scores x around their respective mean score x . Therefore, s can be regarded as an indicator for the level of consensus among the respondents regarding a specific answer to a question. Thepossible values of s were interpreted as follows:

0.0 s 0.5: strong agreement0.5 < s 0.8: some agreement0.8 < s 1.2: some disagreement1.2 < s: strong disagreement

In chapter 5 of this study, two additional parameters will be introduced, an average meanscore x and the standard deviation s calculated on the basis of individual mean scores.While the interpretation of the values of x will be the same as of x , the interpretation of s will be given in the context of the chapter itself.

3. Sample

The response rate of the survey was low. Only 11% of the 300 questionnaires distributedwere returned. Telephone calls to a small number of companies that had not repliedsuggested two main reasons for this response rate:

(a) Stock-listed companies or subsidiaries of stock-listed parent companies may nothave been allowed to disclose certain information or answer some of the questionswithout communicating the same information also publicly.

(b) Since uncertainty and risk are sensitive issues, companies did not want to beassociated with a study on this subject matter, the outcome of which was notforeseeable for them.

The 33 completed questionnaires were returned from twelve European companies basedin Great Britain, Finland, France, Germany, Italy, and Norway, as well as from four companies in the United States. Most of the responding companies were small or medium in size. Only two of them were subsidiaries of the Big Three (CarnivalCorporation, Royal Caribbean International and Star Group). This seems to confirm the

particular situation of stock-listed companies mentioned above.

The respondents occupied the following functions in their respective companies: humanresources (9x), sales (7x), finance or controlling (6x), marketing (6x), strategy (2x),managing director (2x), and information management (1x).

For reasons of confidentiality, the names or further details of the participating companiesand individuals cannot be provided.


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4. Sources of Uncertainty

The questionnaire design was based on the hypothesis that cruise companies faceuncertainty from four main sources: demand, competition, distribution, as well as theeconomic and political environment. Uncertainty about future technological progressitself is not a problem for a cruise line, but it becomes one if this technological changemay erode the companys competitive advantage (competition-related uncertainty) or weaken its position in retailing (distribution-related uncertainty).

Since the four terms specifying the sources of uncertainty are relatively abstract andrequire lots of explanations before respondents are able to understand and answer questions about them, sets of more operational indicators were needed that would makethe questionnaire as little abstract as possible.

Therefore, for each source of uncertainty, five to six factors of uncertainty were defined,which had to fulfil two criteria: to represent facets of the respective source of uncertainty,and to be very clear and concrete. The resulting hierarchic model of total uncertainty,sources of uncertainty, and factors of uncertainty is depicted in appendix B.

4.1 Demand

4.1.1 Demand as a source of uncertainty in 2000 - 2004

To investigate the importance of the demand side as a source of uncertainty for cruise

companies, respondents were asked how much, according to them, the following sixfactors, or indicators, of uncertainty had changed since the year 2000:

Demand for cruises Sensitivity of demand with respect to price Share of late bookers (< 30 days prior to departure) Predictability of demand Customers cruise-specific know-how Customers uncertainty about the geopolitical situation

With a mean score of x =1.88, the sensitivity of demand with respect to price was seenby the respondents as the demand-side factor of uncertainty having displayed thestrongest increase over the past four years. The associated standard deviation s=0.83equals the mean standard deviation calculated for all answers of the sections 2 to 5 of the questionnaire. In other words, there was an average disagreement among therespondents concerning the increase of the sensitivity of demand with respect to price.

Due to their fixed-cost structure, cruise lines have a strong incentive to offer pricediscounts to late bookers in order to fill empty capacity. A growing price sensitivity of demand makes this incentive even stronger, and should normally lead to a rising shareof late bookings. The respondents, however, confirmed this hypothesis just partly.According to them, the share of late bookers ( x =2.38 with s=0.92) has risen less


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significantly than the price sensitivity of demand since 2000. This is good news for thecruise industry because it largely seems to have escaped the downward spiral tantalisingthe airline and hotel business.

The predictability of demand was considered stable by the respondents. Its mean scoreof x =3.02 was the highest for any demand-side factor of uncertainty. It means thatdemand for cruises today was regarded as equally predictable as in the year 2000. Thestandard deviation of s=1.31, however, speaks a different language. It shows that therespondents disagreed significantly over this factor, and indeed, answers given by thecruise company representatives varied from 1.00 (strong increase) to 4.00 (moderatedecrease).

The reason for this heterogeneity could be the result of great behavioural differences of customers in the different geographical markets and market segments in which the

respondents companies operate.The remaining demand-side factors covered by the questionnaire - demand for cruises,customers cruise-specific know-how, and customers uncertainty due to the geo-political situation - achieved mean scores in the range 2.07 x 2.34 (with standarddeviations of 0.74 s 0.93), indicating moderate increases in all of them.

4.1.2 Demand as a source of uncertainty in 2004 - 2010

In a next step, the same six questions were asked again, but this time with respect to theexpected development until the year 2010.

In this context, a couple of results seem noteworthy. First of all, the respondentsexpressed optimism about the future of cruise demand. Scoring a mean of x =1.63, thedemand for cruises was expected to increase sizeably over the next six years, and thelow standard deviation of s=0.52 shows that most respondents agreed with thisstatement.

Some optimism is also reflected by the expectation that the sensitivity of demand withrespect to price ( x =2.36 with s=0.89) would almost stabilise until 2010. The stabilisingprice sensitivity of demand is consistent with the anticipation of an equally stabilisingshare of late bookers ( x =2.50 with s=0.91), provided that the cruise lines do notfurther expand their discounting activities in parallel.

The stabilising price sensitivity of demand could in part be the result of a gradualhabituation of the public to the post-9/11 world. According to the respondents, thecruise customers uncertainty due to the geopolitical situation will settle down over the next six years (x =2.47 with s=1.07), though on a higher level than in the year 2000.

The respondents also expected the customers cruise-specific know-how to improve

significantly until 2010, which was expressed by the mean score of x =1.82. The level of consensus on this point was impressive - the standard deviation of s=0.35 was amongthe lowest found in this survey. Implications of this development could be that the


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customers need for expert advice in the information, decision-making and bookingprocess prior to a cruise may decline, providing opportunities for new, less advice-oriented distribution channels and reducing the role of traditional travel agencies.

The following figure 1 summarises these findings diagrammatically by depicting the

mean scores of all six questions with respect to the periods 2000-2004 and 2004-2010.This representation allows comparing the respondents views on past developments of demand-side factors of uncertainty against their expectations about the future.

2.50

1.82

2.47

1.63

2.36

3.02

2.38

2.3 4

2.13

2.07

1.88

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Predictability of demand

Share of late bookers(< 30 days prior to departure)

Customers' cruise-specificknow-how

Customers' uncertaintydue to geopolitical situation

Sensitivity of demandwith respect to price

Demand for cruises

strongincrease

moderateincrease

no change

1.00

2000-2004

2004-20102.63

Fig. 1: Mean scores of demand-side factors of uncertainty

4.1.3 Demand as a source of uncertainty: summaryIn a separate set of summary questions, the respondents were asked what the changeson the demand side since 2000 had meant, and what the expected changes on thedemand side until 2010 would mean for their respective companies.

The period 2000-2004 was essentially associated by the respondents with anequilibrium of demand-related opportunities and risks ( x =2.77 with s=0.89). The period2004-2010, on the other hand, would bring more opportunities than risks (x =2.12 withs=0.64). This result is coherent with the findings of sections 4.1.1 and 4.1.2.


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4.2 Competition

4.2.1 Competition as a source of uncertainty in 2000 - 2004

The second potential source of uncertainty for cruise companies covered by the

questionnaire was competition. The respondents were asked how much, according tothem, the following six factors had changed during the period 2000-2004:

Overcapacities Market entries of new competitors Degree of concentration among cruise companies Insolvencies and market exits New product concepts; product differentiation Price level of cruises

Among those six factors, the emergence of new product concepts and productdifferentiation was perceived to have increased the most ( x =1.97 with s =0.51).Although for more traditional and less innovative companies, this tendency mayrepresent a risk which could even prove fatal, the industry as a whole clearly benefitsfrom it. Innovation and differentiation allow targeting new customer segments andmaintaining prices at higher levels.

According to the respondents, on average the price levels of cruises has remainedstable since the year 2000 ( x =3.19). In the presence of moderately increasingovercapacities ( x =2.26 with s=0.69), the successful avoidance of industry-wide pricebattles can be seen as the consequence of the tendency towards greater differentiationjust described.

Interestingly, the respondents disagreed strongly over the issue of price stability(s=1.25). Closer inspection of their answers revealed that most of them thought priceshad decreased moderately, but a few outliers felt that price levels had actuallyincreased moderately or even strongly. In two of these cases, the specific niche productsor markets may indeed have allowed the respondents companies to raise prices againstgeneral market trends. In the other cases it can only be conjectured that the respective

respondents actually wanted to express the opposite, but got the dimensions of thequestionnaire wrong.

The other competition-related factors contributing to uncertainty in the cruise industry - market entries of new competitors, market concentration, insolvencies and marketexits - were given mean scores of 2.39 x 2.71, indicating very moderate increases or no changes at all, with rather high degrees of consensus (0.46 s 0.71) among therespondents.


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4.2.2 Competition as a source of uncertainty in 2004 - 2010

When asked to rate the changes of the same six factors for the years 2004-2010, therespondents emphasised two points in particular.

First of all, with a high level of consensus (s=0.46), they expected an increase in entriesof new competitors in their respective local markets. The mean score of x =2.13 for thenext six years compares to a mean score of x =2.69 (no change) for the past four years.So it seems that the cruise industry is expecting competition to intensify in the futurethrough the arrival of additional players or of existing players in new geographicalmarkets and market segments.

According to the respondents, the entry of new competitors will be accompanied by amoderate increase in the degree of market concentration ( x =2.33 with s=0.52). Thehigher market concentration was not expected to result from insolvencies and marketexits ( x =2.88 with s=0.67), but rather from the acquisition of existing companies by thenew entrants. This explains why the anticipated market entries may not create newovercapacities ( x =2.64 with s=0.93).

Another aspect worth noting is the further increase in the industrys innovation rateexpected by the respondents. New product concepts and product differentiation willbe playing an even more important role in the period 2004-2010 (x =1.85 with s=0.64)than they have over the past four years ( x =1.97 with s=0.51; see section 4.2.1).

The industrys ability to diversify its offer and to serve a larger number of customer groups will allow companies to moderately raise the price level of cruises until 2010( x =2.31), after a period of stagnation since 2000 (see section 4.2.1). There was,however, some disagreement about this outlook among the respondents (s=0.96).

The following figure 2 summarises these results in the familiar manner.


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1.502.503.50

strongincrease

moderateincrease

no change

1.00

2000-2004

2004-20102.31

2.88

2.13

2.33

2.64

1.85

3.19

2.71

2.69

2.39

2.26

1.97

Price level of cruises

Insolvencies and marketexits

Market entries of newcompetitors

Degree of concentrationamong cruise companies

Overcapacities

New product concepts;product differentiation

Fig. 2: Mean scores of competition-related factors of uncertainty

4.2.3 Competition as a source of uncertainty: summaryThe respondents were then asked to summarise their view on the past and futurecompetitive developments by stating what the different changes since 2000 had meant,and what the expected changes until 2010 would mean for their respective companies.

Just like demand-side uncertainty, also competition-related uncertainty seems to haveprovided the cruise companies with a balanced mix of opportunities and risks since theyear 2000, with a slight tendency towards an excess of opportunities over risks( x =2.63). However, risks and opportunities have not been distributed evenly across the

cruise industry, because the replies show quite some disagreement among therespondents (s=1.06).

For the next six years, the competitive uncertainty was expected to offer modestly moreopportunities than risks to cruise companies (x =2.46), with a higher level of consensusamong the participants (s=0.76).


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4.3 Distribution

4.3.1 Distribution as a source of uncertainty in 2000 - 2004

As a third possible source of uncertainty for cruise companies, the distribution side of

their business was covered by the survey. In the questionnaire, the respondents wereasked to rate the importance of changes in the following five distribution-related factorsfor the period 2000-2004:

Degree of concentration in travel retailing Commission rates for cruise distribution Expert cruise know-how expected from travel agents Share of direct sales in total cruise sales Sales of cruises via the Internet

According to the respondents, the importance of cruise sales via the Internet hasincreased significantly since the year 2000 (x =1.89 with s=0.83). Although the turnover generated online with cruise products is still small, this is an interesting finding. Itchallenges the conventional wisdom that cruise customers require detailed advice andpersonal contact with an agent they have confidence in. It can be conjectured thatInternet buyers of cruises are mainly people who either look for the best available deals,not caring much about the specific product offered, or who are repeat buyers, alreadyknowing the product and therefore not needing any further advice.

The degree of concentration in travel retailing was felt to have increased moderately( x =2.13 with s=0.83) since 2000. A higher concentration can have an ambiguous effecton the cruise industry. On the one hand, it could gradually shift the balance of negotiation power in favour of the retailers and lead to the risk of rising commission ratesor other distribution costs. But the respondents did not perceive such a developmentover the past four years: they largely agreed that commission rates for cruisedistribution have largely remained stable ( x =2.79 with s=0.49).

On the other hand, a higher concentration of the distribution side may be associatedwith the emergence of more professional and more efficient retail networks, investing

more in training and technology. Both would improve the quality of the sales process,and benefit those types of products in particular, which tend to be consulting-intensiveand more complicated to book - cruises for instance. In this case, concentration would beseen as an opportunity by the cruise industry.

The importance of training is highlighted by the respondents view that the level of expert cruise know-how required from travel agents has also increased moderatelysince 2000 ( x =2.10 with s=0.71). This judgement is in line with the previousobservation that cruise products seem to be getting increasingly differentiated (seesections 4.2.1 and 4.2.2).


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The share of direct sales in the cruise industry , finally, seems to have remained largelystable over the past four years ( x =2.57), though there was some disagreement amongthe participants of the survey on this issue (s=1.07). Less than in other parts of organised tourism, direct sales in the cruise industry are a domain of the Internet. A

much bigger business for cruise lines is the on-board direct sale of cruises to their ownpassengers.

4.3.2 Distribution as a source of uncertainty in 2004 - 2010

For the period 2004 to 2010, the respondents expected further increases in all fivedistribution-related factors of uncertainty, and at even higher rates than during the pastfour years

First of all, the Internet as a sales channel for cruises will continue to gain importance.Of all factors analysed in this study, Internet sales were expected to demonstrate thestrongest increase over the next six years ( x =1.59 with s=0.74). This could be the resultof the two trends mentioned in the last section: bargain hunting and repeater business.But it could also point towards the cruise companies and intermediaries growing abilityto appropriately present and explain their products on the web, and to provide simpleand secure payment solutions.

Secondly, according to the respondents, intermediaries should start worrying a littleabout the erosion of their strong position in the distribution of cruises. The share of

direct sales was expected to grow slowly ( x =2.42 with s=1.03) until 2010. This may bea consequence of the cruise companies professional customer relationship manage-ment and their on-board sale of cruises, of their efforts to save distribution costs bycutting out middle-men, and of the customers growing ease with Internet bookings.

A third important finding is that the process of concentration in travel retailing wasexpected accelerate in the future ( x =1.74 with s=0.62). This process would not beaccompanied by rising commission rates for the sale of cruises ( x =2.63 with s=0.77),but it could help improve the quality of sales staff (see section 4.3.1). The latter isparticularly critical because expert cruise know-how required from travel agents wasanticipated to increase significantly over the next six years ( x =1.63 with s=0.52).

The perceived past and expected future changes in distribution-related factors of uncertainty are summarised by figure 3.


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1.502.503.50

strongincrease

moderateincrease

no change

1.00

2000-20042004-20102.63

2.42

1.74

1.63

1.59

2.79

2.57

2.13

2.10

1.89

Commission rates for cruise distribution

Share of direct sales intotal cruise sales

Degree of concentration intravel retailing

Expert cruise know-howexpected from travel agents

Sales of cruises via theInternet

Fig. 3: Mean scores of distribution-related factors of uncertainty

4.3.3 Distribution as a source of uncertainty: summary

Overall, the changes on the distribution side of the cruise industry were seen as sourcesof more opportunities than risks. This view, although not shared by all respondents, wasexpressed for the period 2000 - 2004 (x =1.98 with s=0.93) as well as for the period2004 - 2010 (x =2.13 with s=0.83). Interestingly, the respondents were a little morereserved about the future developments than they were about the past.

4.4 Economic and political environment

4.4.1 Industry environment as a source of uncertainty in 2000 - 2004

The fourth potential source of uncertainty taken into account by the survey was the

economic and political environment in which the cruise industry operates. Thequestionnaire asked the respondents to rate the importance of changes in the followingsix factors for the period 2000-2004:

Disposable household income General propensity to consume Uncertainty about the future economic situation Impact of political crises on the cruise industry Safety and security regulations in the cruise industry

Uncertainty about the future geopolitical situation


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The environment-related factor of uncertainty that was perceived by the respondents tohave changed the most over the past four years is the uncertainty about the futuregeopolitical situation . The mean score of x =1.61, indicating a significant increase inthis factor, and the low standard deviation of s=0.52 reflect the general concern of the

cruise industry about issues such as terrorist threats, Islamic fundamentalism, or theuncertain future influence of the U.S., the NATO, the U.N. and other powers in some of the more unstable parts of the world.

It is remarkable that the respondents implicitly believed that their customers uncertaintyabout the future geopolitical situation ( x =2.13; see section 4.1.1) had increased lessthan the actual uncertainty. In other words, according to the respondents, cruisecustomers seem to underestimate geopolitical uncertainty. Is this one reason whydemand for cruises could recover relatively quickly after 11 th September 2001?

Closely related to the geopolitical situation is the impact of (current) political crises onthe cruise industry . Not surprisingly, the respondents felt that the impact of such criseshad also increased since 2000 ( x =2.03 with s=0.95).

As a reaction to terrorism in particular, security regulations for passenger shipping havebeen tightened. For cruise lines and passenger ports, especially the ISPS code has beenan object of debate for the last two years. The end of hassle-free cruising and the costsof implementation were feared to curb the demand for cruises. The findings of thissurvey, however, do not fully support this position. Although the mean score of x = 1.72says that safety and security regulations did increase, this increase was considered onlymoderate by the respondents, not strong (only a score below 1.50 would have signalleda strong increase). With s=0.44, consensus about this rating was very high.

It should further be pointed out that the perceived tightening of security regulations isfully in line with the perceived increase of uncertainty about the future geopoliticalsituation ( x =1.61; see above). Obviously, the respondents felt that the appropriatemeasures had been taken to protect the passenger shipping business.

In general, the economic environment of the cruise industry seems to have remainedmore stable than the political environment since the year 2000. No significant changes in

disposable household incomes was registered by the respondents ( x =2.75 withs=0.71). On average, the households propensity to consume seems to have remainedstable, too, although there was some disagreement among the respondents concerningthis point ( x =3.13 with s=1.13). Only the uncertainty about the future economicsituation was perceived to be higher today than in 2000 ( x =2.27 with s=1.04)


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4.4.2 Industry environment as a source of uncertainty in 2004 - 2010

Based on the survey it would be too much to say that the political and economicenvironment of the cruise industry will be brighter in the future than it is today. However,all six environment-related factors contributing to uncertainty in the cruise industry thatwere tested in this survey were better for 2004 - 2010 than for the period 2000 - 2004.Especially the economic outlook has become more optimistic.

With a high level of consensus, disposable household incomes and the propensity toconsume were expected to rise again moderately ( x =2.15 and x =2.00 with s=0.35 ands=0.55 respectively) after a phase of stagnation.

According to the respondents, the uncertainty about the future economic situation willstop rising and stabilise, yet at a higher level than in the 1990s (x =2.95 with s=0.53).

Unlike the economic environment, the political environment of the cruise industry wasexpected to get still more difficult over the next six years, but at lower rates than duringthe past four years: safety and security regulations ( x =2.14 with s=0.64) , uncertaintyabout the future geopolitical situation ( x =2.20 with s=0.71), and the impacts of political crises on the cruise industry ( x =2.38 with s=0.74).

Figure 4 summarises and illustrates these findings.

1.502.503.50

strongincrease

moderateincrease

no change

1.00

2000-20042004-2010

2.00

2.15

2.95

2.38

2.14

2.20

3.13

2.75

2.27

2.03

1.72

1.61

General propensityto consume

Disposable householdincome

Uncertainty about the futureeconomic situation

Impact of political crises onthe cruise industry

Safety and security regulationsin the cruise industry

Uncertainty about the futuregeopolitical situation

Fig. 4: Mean scores of factors of uncertainty related to the economic and political environment of the cruise industry


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4.4.3 Industry environment as a source of uncertainty: summary

Overall, the respondents felt that between 2000 and 2004, the economic and politicalenvironment had confronted cruise companies with more risks than it has provided themwith opportunities ( x =3.63 with s=0.92). Since over the same period, the changes onthe demand side, in competition, and on the distribution side were generally perceivedas rather beneficial than harmful for the individual players of the cruise industry (seesections 4.1.3, 4.2.3, and 4.3.3), the industrys environment can now be identified, or rather confirmed, as the main source of risk.

For the next six years, on the other hand, the respondents expected also the cruiseindustrys environment to develop more favourably, and thus to improve the operatingconditions of the worlds cruise lines ( x =2.73 with s=0.89).

The following figure 5 depicts a comparison of the summary findings of sections 4.1.3,

4.2.3, 4.3.3 and 4.4.3.

1.502.503.50

more opportunitiesthan risks

opportunitiesand risks

2.7 3

2.12

2.46

2.13

2.77

2.63

1.98

Changes in the economicand political environment

Changes on the demand side

Changes in the competitiveenvironment

Changes in cruise distribution

3.63

more risks thanopportunities

2000-20042004-20102000-20042004-2010

Fig. 5: Mean scores of the summary questions about the meaning of different types of

past and expected future changes for cruise companies

The diagram highlights the fundamental shift in the respondents perception of uncertainty: for the period 2000 - 2004, uncertainty was associated with a mix of risksand opportunities, whereas for the period 2004 - 2010, uncertainty is seen rather positively as a provider of more opportunities than risks for the cruise industry. So even if uncertainty overall continues to be high, the way of looking at it and thinking about itseems to be changing. This is clearly an important message of this study.


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5 The importance of business functions for coping with the uncertainty

5.1 Approach

After investigating the importance of changes in different factors of uncertainty for the

cruise industry, the question arises how cruise companies are coping, or planning tocope, with the uncertainty, and what role different business functions can play in thiscontext. Therefore, the questionnaire proposed a list of seven business functions. Therespondents were asked to rate each of them in terms of their usefulness, or relevance,for coping with each one of the four sources of uncertainty. The business functionsproposed were:

Technology (e.g. IT infrastructure, data networks, knowledge-based systems,reservation systems)

Organisation (e.g. responsibilities, (de-)centralisation, distribution of tasks,processes, outsourcing)

Human resources (e.g. recruitment policy, training, management development,headcount reductions)

Strategy (e.g. company objectives, business model, acquisitions, alliances, newmarkets)

Capacity management (e.g. own ships, charter contracts, occupancy guarantees,distribution capacity)

Marketing (e.g. target group definition, CRM, cruise ship concepts, product

development, pricing, communication) Finance (e.g. capital lockup, debt ratio, raising equity, sell and lease back)

This list of functions was rated four times by the respondents, each time with respect toanother source of uncertainty. The resulting four mean scores x of each businessfunction (one for each source of uncertainty) were then used to derive four profiles of functional importance. The full graphical representation of these four uncertainty-specific profiles can be found in appendix C.

As will be shown further below, these four profiles exhibit a remarkable resemblance,which suggested aggregating them into a single synthetic profile. The values used for this single synthetic profile were average mean scores, i.e. the arithmetic means of thefour uncertainty-specific x . The average mean scores are denoted by x , and their valuescan be given the same interpretation as the values of x (see chapter 2).

Based on the four uncertainty-specific mean scores x relating to each business function,also the standard deviation s was calculated. The meaning of s deviates from that of s.While s is a measure of the consensus among the respondents concerning the answer toa specific question, s is a measure of how well the synthetic profile summarises the four uncertainty-specific profiles with respect to a particular business function.

A low s says that x is a good representation of the respective four mean scores x . Theparameter s is considered low if s 0.2, and high if s 0.4.


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5.2 Findings

The complete synthetic profile is depicted by the dotted line in figure 6. It is graphicallyembedded in the four original uncertainty-specific profiles, showing the resemblancebetween them. The values given in the figure are the average mean scores x .

1.502.50

very importantimportant

1.00

Finance

Capacity Management

Human Resources

Organisation

Strategy

Marketing

Technology

3.00

less important

Separate profiles for thefour sources of uncertaintySynthetic profile combiningall types of uncertainty

1.38

2.57

2.12

1.92

1.78

1.61

1.36

Fig. 6: Synthetic profile of mean scores for the importance of different business functions to cope with uncertainty

With only one exception, all business functions proposed in the questionnaire and listedin section 5.1, scored remarkably low average means of 1.36 x 2.12, which meansthat the respective functions were considered important or even very important.Compared to other parts of this study, such low scores really stick out. The pre-selectionof suitable business functions by the author cannot alone explain these ratings, sincealso the sources and factors of uncertainty (see appendix B) had been pre-selected in thesame way.

Possibly, the respondents wanted to emphasise the necessity to combine severalbusiness functions in order to succeed. But equally well, the respondents judgementsmight have been systematically biased against everything that had to do with risk andpassiveness, and biased in favour of everything that implied action and success.

Therefore, these results need to be interpreted with some caution.


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As can be seen from figure 6, technology was almost consistently rated the mostimportant function of all for coping with uncertainty. With its average mean score of x =1.36 and a standard deviation of s =0.27, technology was broadly considered veryimportant. Of the four individual mean scores x ={1.25; 1.31; 1.13; 1.75}, only one did

not fall into the very important category. The respondents felt that technology is not sowell suited for dealing with uncertainty originating from the political and economicenvironment of the cruise industry ( x =1.75).

In the context of sales-side uncertainty, technology was assigned the greatestimportance ( x =1.13). This is not surprising, given the power of todays reservationsystems, yield management instruments, knowledge management tools, and the rate of technological progress in these areas.

Technology was very closely followed by marketing as a business function employed to

cope with uncertainty. The low standard deviation of s =0.10 shows that the averagemean score of x =1.38 is a very good representative of the individual mean scoresx ={1.46; 1.34; 1.25; 1.47}. This means that marketing activities play an almost equallyimportant (and always very important) role, be it in the context of demand-sideuncertainty, competitive uncertainty, sales-side uncertainty, or political and economicuncertainty facing cruise companies.

According to the respondents, strategy as a business function follows on third positionwith an average mean score of x =1.61 (important) and a fairly low standard deviationof s =0.21. From the individual mean scores x ={1.52; 1.38; 1.88; 1.66}, it follows thatstrategy is regarded as particularly effective in the face of competition-related uncertainty( x =1.38). In comparison with the functions of technology and marketing, however,strategy still only occupies the third place with respect to this source of uncertainty.

This provokes the question whether, ultimately, it is not companys strategy thatdetermines the use of technology and marketing tools (structure follows strategy). If thisis so, i.e. if the concrete forms of technology and marketing applied by a cruise companyare actually consequences of strategic decisions, why did the respondents not putstrategy on top of the list of business functions?

The reason could lie in the narrow definition of strategy proposed in the questionnaire(see section 5.1 above). Another reason could be that technology and marketing mayhave been regarded as the most effective business functions to fix unforeseenemergency situations, whereas strategic reactions take time and are thus more limited.A third possible explanation is that the majority of respondents perform rather operational functions in their respective companies (see chapter 3), and therefore mayhave assumed more operational points of view when completing the questionnaire.

Organisation achieved an average mean score of x =1.78. It was thus considered an

important business function for cruise companies to cope with uncertainty. A look at theindividual mean scores x ={1.61; 1.49; 1.63; 2.38} explains the high standard deviationof s =0.40. In coping with uncertainty originating from within the cruise industry itself -


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demand, competition, distribution - the role of organisation was considered important or even very important, whereas in the face of uncertainty related to the economic andpolitical environment of the cruise industry, organisation was rated less important( x =2.38).

With an average mean score of x =1.92, human resources were only placed on fifthposition in the ranking of the most effective business functions for coping withuncertainty in the cruise industry. Given the fact that nine out of 33 respondents were HRmanagers, this result could be expected to be biased. However, a statistical test 4 comparing the replies of HR managers with those of all other respondents did not reveala significant difference. In other words, HR managers did not systematically rate thehuman resource function higher or lower than everybody else.

The standard deviation of s =0.23 and individual mean scores x ={1.75; 1.69; 2.13;

2.11} are inconspicuous, confirming that human resource management was not regardedas a very important business function with respect to any source of uncertainty.

Capacity management was considered the least universal business function for copingwith uncertainty from the different sources. Its average mean score of x =2.12(important) is associated with a very high standard deviation of s =0.59, which resultsfrom the diversity of individual mean scores x ={1.63; 1.76; 2.93; 2.15}. Naturally, therespondents felt that capacity management is most effectively applied when dealing withdemand-side and competitive uncertainty, since capacity management is about the cost-efficient adjustment of a companies capacities to market demand and to thecompetitors capacity supply.

The business function considered to be least effective in coping with uncertainty in thecruise industry was finance . Its average mean score of x =2.57 shows that therespondents regarded financial management only as less important. The low standarddeviation of s =0.17 and the individual mean scores x ={2.38; 2.52; 2.77; 2.63} indicatethat this judgement was made consistently with respect to the different sources of uncertainty.

4 A two-sided test using the normal distribution did not reveal a significant difference between the twosample means at a 5% level of significance.


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6 Some implications of uncertainty for the cruise industry

Overall, the findings of this study suggest that three years after the 9/11 attacks,uncertainty in the cruise industry remains on a high level. In various respects, futuredevelopments are expected to bring about even more uncertainty. The respondents of the empirical survey clearly did not believe that the clock could be turned back, and thatthe world, and with it the cruise industry, would return to the more stable conditions of the past.

6.1 Scenario building

The factors of uncertainty with the highest expected rates of change (i.e. the lowestscores for the period 2004 - 2010) were:

Sales of cruises via the Internet ( x =1.59)

Expert cruise know-how expected from travel agents ( x =1.63)

Degree of concentration in travel retailing (x =1.74)

Customers cruise-specific know-how ( x =1.82)

New concepts; product differentiation ( x =1.85)

All of these factors are industry-internal, and not the results of changes in the economicor political environment. So, according to the respondents of the survey, the greatestdrivers of uncertain dynamics lie within the cruise industry. Companies should observethese factors and develop scenarios of how they might shape the industry landscape inthe future. Such a scenario development could also be taken care of by a cruise industryassociation, or by a neutral research institution. In any case, concrete scenarios wouldhelp all players to cope better with the uncertainty.

6.2 Reactive versus proactive approach

Beyond that, cruise lines should consider making a conscious and fundamental decisionabout the way they want to deal with uncertainty. Such a decision could force managersto face the reality that things may be less predictable and controllable than they wouldlike them to be.

The first alternative would be to adopt a reactive approach, where they take ad-hocaction when fate - or uncertainty - strikes. Sufficient flexibility and responsiveness tochanging operating conditions provided, a reactive approach could prove cheaper andless complicated. Especially when decisions can be made and implemented quickly, likein the case of an owner-manager, a more formal, strategic approach may be unnecessary

and rather obstructive than helpful. Therefore, the decision to follow that road may beespecially attractive for smaller, less bureaucratic cruise companies.


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The alternative would be to take a proactive stance by systematically anticipatingpossible future developments, by preparing contingency plans and counter-strategies,and by trying to actively influence some of the factors of uncertainty. This proactiveapproach is organisationally and technically quite demanding. It requires the installation

of a risk monitoring system, a permanent risk analysis and evaluation, sets of policies for handling risk in order to decentralise decisions, and a disciplined management whichrespects the rules. All in all, this more sophisticated approach may be better suited for large, less entrepreneurial cruise companies, with many levels of hierarchy, operations inseveral countries, and also the financial resources to build up and run the necessarysystems.

6.3 Role and priority of business functions

Independent from the specific approach to dealing with uncertainty, there seem to be anumber of measures that should be taken in any case. The respondents largely agreedthat certain business functions were much more useful than others in coping withuncertainty from different sources. This assumes of course, that the business functionsare performed effectively. Therefore, it seems recommendable for cruise companies toreview the performance of these functions in their own businesses with respect todifferent sources of uncertainty. If high uncertainty is really here to stay, the key businessfunctions should become

priorities for performance optimisation,

priorities of budget increases,

priorities for special management education and trainings.

So much about the technical side of coping with the uncertainty. But equally important isthe right attitude. It is important that optimism and a positive spirit return to the cruiseindustry.

This study has found, that while uncertainty in the period 2000 - 2004 was associated bythe respondents with a mix of risks and opportunities, future uncertainty until the year

2010 was seen more as a provider of more opportunities than risks for the cruiseindustry. This looks like the kind of spirit needed to tackle the uncertain challenges thatlie ahead.


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Appendix A: Questionnaire

Survey: The Impact of Uncertainty on the Cruise Industry

Dear [name or Respondent]:

In autumn 2003, Bremerhaven University of Applied Sciences, located on the shore of the German North Sea, has launched thefirst degree course in Cruise Industry Management worldwide. It is a 3-year Bachelor programme which has been developed incooperation with major cruise companies in Germany.

With the present survey we want to explore the impact of uncertainty on the cruise industry. The information gathered will beused to prepare a research report. It can further help us to adjust our study programme to the specific needs of the cruiseindustry with regards to the handling of uncertainty.

We kindly ask you to contribute to our study by completing this questionnaire and returning it before the end of April 2004 to:

Hochschule BremerhavenProf. Dr. Michael VogelAn der Karlstadt 827568 BremerhavenGermany

Alternatively, you can fax it to +49 471 4823 285, attn. Michael Vogel.

If you are not able to answer a question, or if you are not allowed to disclose certain information, please leave the line blank. Allanswers will be treated confidentially. No information that can be associated with you or with your company will be given to thirdparties in any form.

In return for your completed questionnaire you will receive a copy of the final report via email.

Your participation is very much appreciated.

Part 1: Respondent and Company

1.1 What are your companys name and address?

1.2 What is your name, phone number and email address?

1.3 What is your job title or function in your company?

1.4 What is your companys Internet address?

1.5 How many employees does your company have? 0 - 20 20 - 100 100 - 500 500 - 2000 > 2000

1.6 Which term describes your company best? Shipping company Tour operator Travel Agency Other

1.7 What type of cruises does your company offer? Ocean Coastal River Ferry Others

1.8 In which countries / markets does your company sell itscruises?

1.9 Do you want to receive information about the studyprogramme in Cruise Industry Management?

Yes No


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Part 2: Demand

According to you, how much have the following factorschanged in your market since 2000?

strong no strongincrease change decrease

1 2 3 4 5

2.1 Demand for cruises

2.2 Sensitivity of demand with respect to price 2.3 Share of late bookers (< 30 days prior to departure)

2.4 Predictability of demand

2.5 Customers cruise-specific know-how

2.6 Customers uncertainty due to geopolitical situation

According to you, how much will the following factorschange in your market until 2010?


1 2 3 4 5

2.7 Demand for cruises

2.8 Sensitivity of demand with respect to price

2.9 Share of late bookers (< 30 days prior to departure)

2.10 Predictability of demand

2.11 Customers cruise-specific know-how

2.12 Customers uncertainty due to geopolitical situation

mainly opportunities mainlyopportunities and risks risks

1 2 3 4 5

2.13 What did the changes on the demand side since 2000mean for your company?

2.14 What will the expected changes on the demand sideuntil 2010 mean for your company?

How important will the following functions be for your company to cope with these demand-side changes?

very notimportant important

1 2 3 4 5

2.15 Technology (e.g. IT infrastructure, data networks,knowledge-based systems, reservation systems)

2.16 Organisation (e.g. responsibilities, (de-)centralisation,distribution of tasks, processes, outsourcing)

2.17 Human resources (e.g. recruitment policy, training,management development, headcount reductions)

2.18 Strategy (e.g. company objectives, business model,acquisitions, alliances, new markets)

2.19 Capacity management (e.g. own ships, charter contracts, occupancy guarantees, distribution capacity)

2.20 Marketing (e.g. target group definition, CRM, cruise shipconcepts, product development, pricing, communication)

2.21 Finance (e.g. capital lockup, debt ratio, raising equity,sell and lease back)

2.22 Other (please specify)


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Part 3: Competition



1 2 3 4 5

3.1 Overcapacities

3.2 Market entries of new competitors 3.3 Degree of concentration among cruise companies

3.4 Insolvencies and market exits

3.5 New product concepts; product differentiation

3.6 Price level of cruises



1 2 3 4 5

3.7 Overcapacities

3.8 Market entries of new competitors

3.9 Degree of concentration among cruise companies

3.10 Insolvencies and market exits

3.11 New product concepts; product differentiation

3.12 Price level of cruises


1 2 3 4 5

3.13 What did the changes in the competitive environmentsince 2000 mean for your company?

3.14 What will the expected changes in the competitiveenvironment until 2010 mean for your company?

How important will the following functions be for your company to cope with these competitive changes?


1 2 3 4 5










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Part 4: Distribution



1 2 3 4 5

4.1 Degree of concentration in travel retailing

4.2 Commission rates for cruise distribution 4.3 Expert cruise know-how expected from travel agents

4.4 Share of direct sales in total cruise sales

4.5 Sales of cruises via the Internet



1 2 3 4 5

4.6 Degree of concentration in travel retailing

4.7 Commission rates for cruise distribution

4.8 Expert cruise know-how expected from travel agents

4.9 Share of direct sales in total cruise sales

4.10 Sales of cruises via the Internet


1 2 3 4 5

4.11 What did the changes in cruise distribution since 2000mean for your company?

4.12 What will the expected changes in cruise distributionuntil 2010 mean for your company?

How important will the following functions be for your company to cope with distribution-related changes?


1 2 3 4 54.13 Technology (e.g. IT infrastructure, data networks,knowledge-based systems, reservation systems)





4.18 Marketing (e.g. target group definition, CRM, cruise ship

concepts, product development, pricing, communication)




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Part 5: Economic and Political Environment



1 2 3 4 5

5.1 Disposable household income

5.2 General propensity to consume 5.3 Uncertainty about the future economic situation

5.4 Impact of political crises on the cruise industry

5.5 Safety and security regulations in the cruise industry

5.6 Uncertainty about the future geopolitical situation



1 2 3 4 5

5.7 Disposable household income

5.8 General propensity to consume

5.9 Uncertainty about the future economic situation

5.10 Impact of political crises on the cruise industry

5.11 Safety and security regulations in the cruise industry

5.12 Uncertainty about the future geopolitical situation


1 2 3 4 5

5.13 What did the changes in the economic and the politicalenvironment since 2000 mean for your company?

5.14 What will the expected changes in the economic and thepolitical environment until 2010 mean for your company?

How important will the following functions be for your company to cope with these changes in its environment?


1 2 3 4 5









Thank you very much for participating in this survey! Now please do not forget to send back the questionnaire.


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Appendix B: Hierarchic decomposition of uncertainty

U n c e r t a i n t y

R e

l a t e

d t o t h e

d e m a n

d - s

i d e

C o m p e t i t i o n - r

e l a t e

d

R e

l a t e

d t o t h e

s e l l

- s i d e

R e

l a t e

d t o t h e

e c o n o m

i c a n

d

p o

l i t i c a

l e n v i r o n m e n t

D e m a n

d f o r c r u

i s e s

S e n s i t i v i t y o

f d e m a n d w

i t h r e s p e c t t o p r i c e

S h a r e o

f l a t e

b o o

k e r s

( < 3 0

d a y s p r i o r t o

d e p a r t u r e

)

P r e

d i c t a

b i l i t y o

f d e m a n

d

C u s t o m e r s

c r u

i s e - s

p e c i

f i c

k n o w - h

o w

C u s t o m e r s

u n c e r t a

i n t y a

b o u t t h e g e o p o

l i t i c a

l s i t u a t

i o n

O v e r c a p a c i t i e s

M a r k e t e n t r

i e s o

f n e w c o m p e t i t o r s

D e g r e e o

f c o n c e n t r a t i o n a m o n g c r u

i s e c o m p a n

i e s

I n s o

l v e n c i e s a n

d m a r k e t e x i t s

N e w p r o

d u c t c o n c e p t s ;

p r o

d u c t

d i f f e r e n t i a t i o n

P r i c e

l e v e

l o f c r u

i s e s

D e g r e e o

f c o n c e n t r a t i o n

i n t r a v e

l r e t a

i l i n g

C o m m

i s s i o n r a t e s

f o r c r u

i s e

d i s t r

i b u t i o n

E x p e r t c r u

i s e

k n o w - h o

w e x p e c t e

d f r o m

t r a v e

l a g e n t s

S h a r e o

f d i r e c t s a

l e s i n

t o t a

l c r u

i s e s a

l e s

S a

l e s o

f c r u

i s e s v i a t h e

I n t e r n e t

D i s p o s a

b l e h o u s e

h o l d

i n c o m e

G e n e r a

l p r o p e n s i t y t o c o n s u m e

U n c e r t a

i n t y a

b o u t t h e

f u t u r e e c o n o m

i c s i t u a t i o n

I m p a c t o

f p o

l i t i c a

l c r i s e s o n t h e c r u

i s e

i n d u s t r y

S a

f e t y a n

d s e c u r i t y r e g u

l a t i o n s

i n t h e c r u

i s e

i n d u s t r y

U n c e r t a

i n t y a

b o u t t h e

f u t u r e g e o p o

l i t i c a

l s i t u a t i o n

S o u r c e s o

f u n c e r t a

i n t y

F a c t o r s o

f u n c e r t a

i n t y


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Appendix C: Importance of business functions to cope with uncertainty

1.502.50


1.00

2.38

1.6 3

1.75

1.61

1.52

1.46

1.25

Finance

Capacity Management

Human Resources

Organisation

Strategy

Marketing

Technology

2.57

2.12

1.92

1.78

1.61

1.38

1.36

2.57

2.12

1.92

1.78

1.61

1.38

1.36

3.00

less important

Demand-side uncertainty

All types of uncertainty

Fig. B1: Comparison of mean scores for the importance of different business functions to cope with demand-side uncertainty and with all types of uncertainty combined

1.502.50


1.00

Finance

Capacity Management

Human Resources

Organisation

Strategy

Marketing

Technology

3.00

less important

2.52

1.76

1.69

1.49

1.38

1.34

1.31

2.57

2,12

1.92

1,78

1.61

1.38

1.36

Competitive uncertaintyAll types of uncertainty

Fig. B2: Comparison of mean scores for the importance of different business functions to cope with competition-related uncertainty and with all types of uncertainty combined


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1.502.50


1.00

Finance

Capacity Management

Human Resources

Organisation

Strategy

Marketing

Technology

3.00

less important

1.38

2.57

2,12

1.92

1.78

1.61

1.36

Sell-side uncertaintyAll types of uncertainty

2.77

2.93

2.13

1,63

1.88

1.25

1.13

Fig. B3: Comparison of mean scores for the importance of different business functions to cope with sell-side uncertainty and with all types of uncertainty combined

2.63

2.15

2.11

2.38

1.66

1.47

1.75

1.502.50


1.00

Finance

Capacity Management

Human Resources

Organisation

Strategy

Marketing

Technology

3.00

less important

1.38

2.57

2,12

1.92

1.78

1.61

1.36

Environment-related uncertaintyAll types of uncertainty

Fig. B4: Comparison of mean scores for the importance of different business functions to cope with environment-related uncertainty and with all types of uncertainty combined

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