MGTS7608
Business and Society
Learning Unit
2nd Semester 2018
Week 5: Managing Public Relations
Name: ……………………………………….. Student Number: ……………..…………...
How the general public perceives a business or industry can have a major effect on
its performance. Therefore building and protecting a positive relationship with the
public is essential.
Most businesses maintain a public relations office whose role is to advise the
executive and board upon strategy and to interact with the media and the public
with the sole objective of achieving that positive relationship with the public. A key
area of responsibility is to provide advice and key capability in the event of an
unanticipated crisis to ensure the application of principles of crisis management.
To prepare for this learning unit, you will need to read:
•
•
Chapter 19 of Lawrence and Weber (2017)
The Case Study: Carnival Cruise Lines: Wreck of the Costa Concordia, Foster,
Sorrentino, Florance & O’Rourke, (2017).
To complete this Learning Unit, you will need to answer one (1) skill building
activity and three (3) analysis questions relating to the course content, key
concepts and theories covered in the assigned readings.
Learning Activities
Skills Building: Researching & Referencing
1. Find and read one quality peer reviewed journal article relating to Public
Relations, Brand Management or Corporate Reputation in the Australian
Business Deans Council (ABDC) Database.
a. Summarise the article by identifying the main points or concepts.
b. Reference this article accordingly using the APA 6th style.
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1
MGTS7608
Business and Society
2nd Semester 2018
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Analysis
1.
Why is reputation management and corporate branding important to a business?
And, how does a crisis threaten a business’s reputation and brand?
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2
MGTS7608
2.
Business and Society
2nd Semester 2018
Why do firms create public relations departments? Outline the structure and
activities of a typical department.
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3
MGTS7608
3.
Business and Society
2nd Semester 2018
As new technologies have emerged, the variety of available channels of
communication has grown dramatically. Discuss the new technology-enhanced
channels for public relations and how they have affected the discipline.
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4
Carnival Cruise Lines: Wreck of the Costa
Concordia
Case
Author: Jeremy Foster, Mary Jo Sorrentino, Charles Florance & James S. O’Rourke
Online Pub Date: July 12, 2017 | Original Pub. Date: 2012
Subject:
Corporate Social Responsibility,
Leadership, Power & Influence,
Crisis
Management
Level: Intermediate | Type: Indirect case | Length: 3418 words
Copyright: © 2012. The Eugene D. Fanning Center for Business Communication, Mendoza
College of Business, University of Notre Dame
Organization: Carnival Cruise Lines | Organization size: Large
Region: Italy | State:
Industry: Travel agency, tour operator, reservation service and related activities,
Accommodation
Originally Published in:
Foster, J., Sorrentino, M. J., Florance, C., & O’Rourke, J. S. (2012). Carnival Cruise Lines:
Wreck of the Costa Concordia. 12-05. Notre Dame, IN: The Eugene D. Fanning Center for
Business Communication, Mendoza College of Business, University of Notre Dame.
Publisher: The Eugene D. Fanning Center for Business Communication, Mendoza College
of Business, University of Notre Dame
DOI: http://dx.doi.org/10.4135/9781526403643 | Online ISBN: 9781526403643
SAGE
SAGE Business Cases
© 2012. The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of
© 2012. The Eugene D. Fanning Center for Business Communication, Mendoza College of
Business, University of Notre Dame
This case was prepared for inclusion in SAGE Business Cases primarily as a basis for
classroom discussion or self-study, and is not meant to illustrate either effective or ineffective
management styles. Nothing herein shall be deemed to be an endorsement of any kind. This
case is for scholarly, educational, or personal use only within your university, and cannot be
forwarded outside the university or used for other commercial purposes. 2018 SAGE
Publications Ltd. All Rights Reserved.
This content may only be distributed for use within University of Queensland.
http://dx.doi.org/10.4135/9781526403643
Page 2 of 10
Carnival Cruise Lines: Wreck of the Costa Concordia
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© 2012. The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of
Abstract
On Friday, January 13th, 2012, around 9:40 p.m. local time, the Costa Concordia, a
luxury cruise ship carrying 4,200 passengers, punctured its hull off the coast of Italy.
What followed the collision was a chaotic evacuation, irresponsible actions from the
ship’s captain, and a lack of communication from the parent company, Carnival, all
leading to a public relations disaster.
Case
“The boat started shaking. The noise – there was panic, like in a film, dishes crashing
to the floor, people running, people falling down the stairs.”
—survivor Fulvio Rocci1
The Crisis
At 4:00 p.m. on the evening of January 13, 2012, the Costa Concordia set sail from Rome,
Italy for a seven-day cruise as it did every week. The ship was due to arrive in Savona, Italy
the next day. Around 9:15 p.m., the ship took a five mile detour to pass closer to the
picturesque Tuscan Island of Giglio (see Exhibit 1).2 Captain Schettino appears to have
misjudged the maneuver, and at 9:30 p.m., the ship collided with a rocky reef known as Le
Scole. The collision ripped a 160-foot-long gash in the hull of the ship, and the Concordia lost
power.
The captain is said to have performed the sail-by as a spectacle for head waiter Antonello
Tievoli who was a native of Giglio, and as a salute to former Costa captain Mario Palombo,
who retired in 2006. Tievoli had been invited to join the captain in the bridge as the vessel was
steered by the island. Palombo is reported to have not even been on the island to see the
spectacle on the night of the incident.3 In response to the incident, Palombo is reported to
have said:
“I cannot understand what could have happened, what passed through my colleague’s head.
The captain sets the course – on board the ship, he’s king. But I don’t want to be dragged
into this argument, for any reason.”4
Within 15 minutes of the collision, the ship started to take on water and began to list. At this
point, Captain Francesco Schettino likely realized his ship was in trouble and turned the ship
back towards shore in what appeared to be an effort to make it easier to evacuate.5 Shortly
following the collision, at 10:30 p.m., according to one of the ship’s cooks, Captain Schettino
ordered dinner for himself and a woman.6
At 10:35 p.m., the crew directed the passengers to report to their muster stations, saying that
the issue was an electrical problem, and technicians were working on it. At 10:58 p.m.,
Captain Francesco Schettino ordered abandon ship (see Exhibit 2).
What followed can only be described as chaos. Many passengers did not know the
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Carnival Cruise Lines: Wreck of the Costa Concordia
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© 2012. The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of
emergency procedure, or where their muster station was, as there had been no lifeboat drill
yet for the 600 passengers who boarded the ship on January 13th.7
Background
Carnival Cruise Lines
In 1972, entrepreneur Ted Arison formed Carnival Cruise Lines with one secondhand ship,
and only enough fuel to sail from Miami to San Juan. Through determination and hard work,
Mr. Arison built Carnival into a popular and profitable cruise line. In 1987, Carnival made an
initial public offering, which provided capital to allow the company to begin expanding through
acquisitions. Over the next few decades, Carnival acquired several well-known cruise
companies throughout the world, including Costa Cruises in 1997 (see Exhibit 3).8
In 2003, Carnival Corporation merged with P&O Princess Cruises plc to create one of the
largest leisure travel companies in the world. This merger added such cruise brands as P&O
Cruises, P&O Cruises Australia, AIDA Cruises, Ocean Village, and Swan Hellenic, resulting in
a global cruise company operating twelve different brands. Each of these brands continues to
operate separately, maintaining separate sales and reservation operations.
Carnival Corporation plc is currently headquartered in Miami, Florida, U.S.A. and London,
England. Carnival operates a fleet of 101 ships, and has another 10 ships scheduled for
delivery by March 2016. Carnival Corporation & plc brands include: Carnival Cruise Lines,
Holland America Line, Princess Cruises and Seabourn in North America; P&O Cruises and
Cunard Line in the United Kingdom; AIDA in Germany; Costa Cruises in Southern Europe;
Iberocruceros in Spain; and P&O Cruises in Australia.9 With so many well-known brands, at
any given time, there are more than 270,000 people sailing aboard the Carnival fleet.
Carnival Corporation & plc is one of the largest vacation companies in the world, in
accordance with its mission:
“To deliver exceptional vacation experiences through the world’s best-known cruise
brands that cater to a variety of different lifestyles and budgets, all at an outstanding
value unrivaled on land or at sea.”10
Costa Cruises
Costa Cruises is based in Genoa, Italy, and currently operates a fleet of 15 ships. Costa
distinguishes itself by what it calls “Cruising Italian Style,” an experience which is meant to
combine sophistication and fun.11
Costa Cruises was established in 1854, as a fleet of trading vessels. It wasn’t until 1948 that
Costa Cruises began operating passenger voyages. True to its entrepreneurial roots, on its
first passenger voyage in 1948, the “Anna C” was the first transatlantic ship to cross the
Southern Atlantic Ocean since World War II, and the first ship to offer cabins with air
conditioning to its passengers.12
In 1997, Carnival and another firm, Airtours, jointly acquired Costa Cruises. Carnival became
the sole shareholder of Costa Cruises after purchasing all Airtours shares in 2000, which was
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Carnival Cruise Lines: Wreck of the Costa Concordia
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© 2012. The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of
also the year Costa saw the Italian flag return to its ships. In 2004, Costa Cruises became the
first company to receive BEST 4 recognition, acknowledging their effort in quality, safety,
environmental protection, and social responsibility. In 2005, Costa began providing training,
education, and economic support to help the World Wildlife Fund protect the Mediterranean
Sea, the Greater Antilles, and North-Eastern Brazil. As further recognition of their commitment
to the environment, Costa Cruises fleet was awarded a voluntary Green Star rating by the
Registro Italiano Navale, certifying that their ships comply with the highest standards in
environmental protection.13
Costa Cruises commissioned the Costa Concordia 2004, and at the time of its launch, the
Costa Concordia was the largest Italian cruise ship in history. The ship was 952 feet in length
with a beam of 116 feet. At full capacity, the ship could carry up to 1,013 crew members with
3,780 passengers occupying the 1,502 staterooms.14
Cruise Industry
The U.S. cruise market size was roughly $26.2 billion by the end of 2011, and is projected to
reach $35.9 billion by 2016. The largest competitors in the industry are Carnival, Royal
Caribbean, and Norwegian Cruise Lines (see Exhibit 4).
It’s unclear what impact this event will have on the industry at large. Analysts at Zack’s Equity
Research expect a rather modest 3% dip in revenues,15 though cruise bookings in the weeks
after the event showed prices and bookings for the industry as a whole remained similar to
pre-incident levels. Carnival, however, saw sales drop about 15% below expectations in the
week that followed the shipwreck, but they claimed that the slump would likely be shortlived.16
Safety at Sea
At the time of the incident, the Maritime and Coastguard Agency required that “On any ship
carrying passengers where the passengers are scheduled to be on board for more than 24
hours, a muster of the passengers must take place within 24 hours of their embarkation.”17
During this drill, passengers are given instructions on how to properly fasten their life-jackets
and what actions they are to take when they hear the emergency signal. This includes what
muster station they are to report to.
Previous Problems at Sea
This isn’t the company’s first experience with trouble at sea. In the past three years, Carnival
has given consumers many reasons18 to reconsider booking:
In July 2011, Carnival ships Fantasy and Imagination collided while in port in Florida; no
one was hurt.
May 2011, Costa ship Deliziosa pulls 50 feet of pier from a Bergen port in Norway because
it failed to disengage its moorings.19
In November 2010, Carnival ship Splendor had an engine room fire, causing the ship to
lose power off the coast of Mexico.
In June 2010, Carnival ship Fascination malfunctioned and drifted for hours without power
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Carnival Cruise Lines: Wreck of the Costa Concordia
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© 2012. The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of
before eventually recovering.
February 2010, Costa ship Europa collides with a pier in Egypt, killing 3 crew members
and injuring 3 passengers.20
The Aftermath
In the chaos that followed Captain Schettino’s order to abandon ship, passengers looked for
leadership that simply was not available. Under maritime safety regulations, the captain of a
ship is obligated to assist passengers and crew members in times of distress. However,
Captain Schettino is reported to have left his command and was sailing to safety in a lifeboat
before the evacuation of his ship was complete. In the course of the ship sinking, Captain
Schettino had a heated exchange with the Coast Guard who ordered him to get back on
board the ship and oversee the evacuation.21 (See Exhibit 5)
Following his arrest, Captain Francesco Schettino was recorded telling a friend that
management put pressure on him to pass by Giglio in order to provide a spectacle for
passengers and a salute to Captain Palombo, a veteran Costa Captain. Schettino was
recorded saying:
“Management was always saying ‘pass by there, pass by there.’ Someone else in my
position might not have been so amenable to pass so close but they busted my
balls: ‘pass by there, pass by there,’ and now I’m paying for it.”22
Captain Schettino was held under house arrest at his home in Meta di Sorrento, facing
charges of causing a shipwreck, abandoning ship, and multiple counts of manslaughter.23
The Italian Civil Protection Agency led the frantic search efforts for survivors. Five days after
the incident, on Wednesday January 18, 2012, with more than 20 people still missing, the
search operations had to be suspended due to a shift in the vessel’s position that rendered
the area unsafe. Operations were resumed the next day.24 As of January 22, 2012, of the
3,216 passengers and 1,013 crew members aboard the Costa Concordia, 13 bodies had been
recovered and another 19 were still missing and presumed lost.25 On January 31, 2012,
Italian divers ended their underwater search of the wreck, as the conditions inside had
become too risky. The Italian Civil Protection Agency did add that they would continue their
above-water search, using special equipment to search for bodies underwater.26
Because the Concordia sailed under an Italian flag and their port of origin was Civitavecchia,
the laws under which the Captain, Costa, and Carnival will be judged are Italian. Passenger
tickets indicated that any causes of law arising from problems at sea must be brought before
Italian courts27 and likely contain class-action protection for the cruise line and its employees.
Notwithstanding, two lawsuits, one filed in Illinois and the other in Florida, name Carnival
Corporation as defendant in a class-action case from passengers injured by the Concordia.
Combined, they sought damages of more than $500 million.
Environmental Effects
Concerns about the damage the accident caused to the environment were raised by the
residents of Giglio, many of whom depended upon tourism. Fortunately, the environmental
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Carnival Cruise Lines: Wreck of the Costa Concordia
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© 2012. The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of
effects to-date have been minor. While some oil spilled, the vast majority of it remained in the
Concordia’s fuel tanks, which stored nearly half a million gallons. There was a risk these
tanks would leak if action was not taken to remove them from the wreckage. Costa would work
to remove the tanks from the wreckage, but it would take at least another month to complete.
It may take another two years to move or salvage the Costa Concordia. Meanwhile, the ship
sits off the island of Giglio as a dramatic reminder of the cost in lives, money and Costa
Cruises’s reputation.28
Carnival’s Initial Response
Immediately following the incident, little was heard from Carnival as they left Costa to handle
the situation. CEO Micky Arison failed to appear at the scene of the incident, instead
expressing his condolences from Miami. It took five days after the incident before Arison
tweeted the brief sentiment, “I give my personal assurance that we will take care of each &
every one of our guests, crew and their families” and included a link to a press release issued
by Carnival on January 18 (see Exhibit 6).29 It was not until a week after the crisis began that
Howard Frank, a Carnival senior executive, was sent to Italy. However, it should be noted that
he appeared to be only at Costa’s headquarters in Genoa with no intention of making an
appearance at the scene of the incident itself.
Shortly after the crisis, Costa CEO Luigi Foschi offered an initial compensation consisting of a
refund and discount on future bookings. A spokesman for the cruise line stated, “The
company is not only going to refund everybody, but they will offer a 30% discount on future
cruises if they want to stay loyal to the company.” In response to this offer, passengers were
quoted as stating it was “ridiculous and insulting.”30 Costa Cruises later clarified the offer by
releasing the statement:
“Costa Cruises will refund the full cost of the cruise, either directly or through their
travel agency. The company will reimburse all travel expenses incurred both reaching
the port of embarkation and on the homeward journey, including any independent
arrangements made for transfers. Any on-board expenses also will be refunded, and
any credit card charges will be credited to the account and any cash deposits will be
refunded.
Costa Cruises also will reimburse any medical expenses incurred as a result of the
accident. Every effort will be made to return the valuables left in the cabin safe.
Information on the return of personal belongings and other forms of compensation
will be communicated. The 30 percent future cruise discount, in addition to a full
refund, is intended for people scheduled to sail on Costa Concordia from Jan. 14
onward.”31
Financial Implications
Moody’s estimates that total costs including the vessel, environmental, and passenger liability
costs could reach $1 billion, but many of those costs were offset by the Concordia’s
insurance. Costa Cruises’s insurance deductible on the vessel itself was $40 million. The
reduction in Carnival’s market cap greatly exceeds the direct costs to Concordia, suggesting
that there were long-term concerns about the effect of the crisis on the industry in general
and Carnival specifically.
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Carnival Cruise Lines: Wreck of the Costa Concordia
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© 2012. The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of
Carnival Corporation’s stock appears to have weathered the crisis relatively well, though the
market has priced in a greater reduction in market capitalization than the direct effect of
current financial liabilities warrants. As of mid-February, 2012, the stock had stabilized down
roughly 13% from its value prior to the crisis (see Exhibit 7). The timing of the crash may have
helped mitigate the impact on share price, as the Concordia capsized Friday after the market
had closed, and the market was closed the following Monday, which may have reduced
downward momentum selling. Nevertheless, the reductions in stock price still translate to a
market cap reduction of $2.7 billion.
Discussion Questions
Should Carnival distance themselves from Costa Cruises during this crisis or support the
subsidiary, and how?
What actions, if any, should Carnival take to minimize the impact of the crisis on future
cruise purchases for the industry as a whole and Carnival specifically?
How should Carnival compensate passengers?
What messages should Carnival communicate and to which audiences?
What long-term changes, if any, should Carnival make in its corporate structure to improve
crisis management and communication?
References
1. Akwagyiram, Alexis. “Italy cruise ship Costa Concordia accident eyewitness accounts,” BBC
News. 14 Jan. 2012. http://www.bbc.co.uk/news/world-europe-16561382
2. Agar, Michael & Blenkinsop, Andrew. “Concordia: How the disaster unfolded,” The
Telegraph. 16 Jan. 2012.
http://www.telegraph.co.uk/news/interactivegraphics/9018076/Concordia-How-the-disaster-unfolded.html
3. Squires, Nick and Ward, Vicky. “Cruise disaster: captain was bringing crew member close
t o h i s i s l a n d h o m e , ” T h e T e l e g r a p h . 1 6 J a n . 2 0 1 2 .
http://www.telegraph.co.uk/news/worldnews/europe/italy/9017767/Cruise-disaster-captainwas-bringing-crew-member-close-to-his-island-home.html
4. Ibid.
5. Agar, Michael & Blenkinsop, Andrew. “Concordia: How the disaster unfolded,” The
Telegraph. 16 Jan. 2012.
http://www.telegraph.co.uk/news/interactivegraphics/9018076/Concordia-How-the-disaster-unfolded.html
6. “Cruise ship’s cook says captain ordered dinner after crash,” CNN Europe. 20 Jan. 2012.
http://edition.cnn.com/2012/01/19/world/europe/italy-cruise-cook/index.html
7. Beyette, Beverly. “Costa Concordia capsizing spotlights cruise ship safety,” Los Angeles
Times. 19 Jan. 2012. http://www.latimes.com/travel/la-tr-insider-20120122,0,4033122.story
8. “Mission & History,” Carnival Corporation & PLC. http://phx.corporate-ir.net/phoenix.zhtml?
c=200767&p=irol-history
9. “ C o r p o r a t e I n f o r m a t i o n , ” C a r n i v a l C o r p o r a t i o n & P L C .
ir.net/phoenix.zhtml?c=200767&p=irol-prlanding
Page 8 of 10
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© 2012. The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of
10. “Mission & History,” Carnival Corporation & PLC. http://phx.corporate-ir.net/phoenix.zhtml?
c=200767&p=irol-history
11. “Costa Cruises,” Carnival Corporation & PLC. http://phx.corporate-ir.net/phoenix.zhtml?
c=200767&p=irol-products#costa
12. “ T h e
C o m p a n y
H i s t o r y , ”
C o s t a
C r u i s e s .
http://www.costacruise.com/contents/corporate/STORIA_COMPLETA_USA.pdf
13. “ H i s t o r y o f C o s t a C r u i s e s , ” C o s t a
http://www.costacruise.com/B2C/USA/Corporate/history/thehistory.htm
C r u i s e .
14. Dake, Shawn. “A Short History of the Costa Concordia,” Maritime Matters. 22 Jan. 2012.
http://maritimematters.com/2012/01/a-short-history-of-the-costa-concordia
15. Z a c k s E q u i t y R e s e a r c h , “ C a r n i v a l T o p s , T r i m s G u i d a n c e , ” 0 9 M a r c h 2 0 1 2
http://www.zacks.com/stock/news/71068/carnival-tops-trims-guidance
16. Sloan, Gene. “Cruise bookings noticeably down after Costa incident,” USA Today 30
January 2012.
http://travel.usatoday.com/cruises/post/2012/01/carnival-bookings-costaconcordia-accident/616043/1
17. “Musters, drills, on-board training and instructions, and Decision Support System,”
Maritime and Coastguard Agency, MGN 71 (M), page 5, Section 5.3,
http://www.dft.gov.uk/mca/mgn71.pdf
18. C a r t e r , A d a m . “ 5 T r o u b l e s o n C a r n i v a l C r u i s e s , ” C B C N e w s . 2 8 F e b . 2 0 1 2 .
http://www.cbc.ca/news/world/story/2012/02/28/f-carnival-cruise-ship-incidents.html
19. “ C r u i s e S h i p D a m a g e s Q u a y , ” S h i p w r e c k L o g , M a y 2 1 , 2 0 1 1
http://www.shipwrecklog.com/log/tag/costa-deliziosa/
20. “ B r i t s H u r t i n E g y p t i a n B o a t C r a s h , ” T h e S u n . 2 6 F e b . 2 0 1 0 .
http://www.thesun.co.uk/sol/homepage/news/2869843/Brits-hurt-in-Egyptian-boat-crash.html
21. Dake, Shawn. “A Short History of the Costa Concordia,” Maritime Matters. 22 Jan. 2012.
http://maritimematters.com/2012/01/a-short-history-of-the-costa-concordia/
22. Squires, Nick. “Costa Concordia captain Francesco Schettino ‘under intense pressure to
sail close to Giglio’,” The Telegraph. 25 Jan. 2012.
http://www.telegraph.co.uk/news/worldnews/europe/italy/9037602/Costa-Concordia-captainFrancesco-Schettino-under-intense-pressure-to-sail-close-to-Giglio.html
23. Ibid.
24. “Costa Concordia: Search resumes for ship survivors,” BBC News. 19 Jan. 2012
http://www.bbc.co.uk/news/world-europe-16626640
25. Dake, Shawn. “A Short History of the Costa Concordia,” Maritime Matters. 22 Jan. 2012.
http://maritimematters.com/2012/01/a-short-history-of-the-costa-concordia/
26. “ D i v e r s a b a n d o n s e a r c h o n C o s t a C o n c o r d i a , ” R T E N e w s . 1 F e b . 2 0 1 2
http://www.rte.ie/news/2012/0131/italy.html
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© 2012. The Eugene D. Fanning Center for Business Communication, Mendoza College of Business, University of
27. Bodzin, Robert & Brown, Burnham. “Will class-action law protect Costa Concordia
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http://dx.doi.org/10.4135/9781526403643
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Carnival Cruise Lines: Wreck of the Costa Concordia
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