INTRODUCTION The amusement park industry has been in continuousevolution due to the importance of adapting to new trends and technologies toattract visitors.
Walt Disney Company, is one of the most prominent media andentertainment corporation worldwide that seem to have reached immortality.Mickey, Winnie and their friends are steeped in the collective memory. Thesecret of their durability? Mastering a strategy focused on synergy andcreativity. Today the company operates in five business segments: medianetworks, studio entertainment, consumer products, interactive media and parksand resorts (The Walt Disney Company, 2016). Thisessay critically analyses the theme park industry and the competitivepositioning of Walt Disney Company. These insights are then examined conjointlyto highlight strategic challenges that the companies will face and to providejustified recommendations. MARKET ANALYSIS 1- Industry Environment Theidea of organizing amusement areas emerged in 1955 when Walt Disney openedDisneyland (Milman, 2001).
Following the opening, plenty businesses werecreated with the same philosophy, resulting in a global industry over theyears. Thisindustry represents a multi-billion-dollar sub-category of the travel andtourism industry (Theseus, 2017). In the United States, the revenuegenerated from amusement and theme parks was around 20.49 billion U.S.dollars in 2016 and this is expected to continue to rise in the future(Statista, 2017). According to IAAPA, global theme park spending totaled anestimated $40.4 billion in 2015, up 7.
4% from 2014. Growth was primarily theresult of a 5.2% increase in attendance, the most significant gain during thepast five years, helped by the introduction of popular attractions. In general,about 55% of the overall park revenues are earned through admission fees andabout 30% through food and merchandise sale. Parking fees, commission incomefrom third-party exhibitors, advertising and fees for hosting events make upthe remaining 15% (Hoover’s, 2013). Moreover,theme parks can be considered as an economic booster as consumers are notsolely spending money on attractions but also on hotels, restaurants, andretail establishments. Indeed, it is proved that the building of anamusement/theme park in various chosen areas, has boosted the local communitiesin different ways, directly and indirectly (National Recreation and PakAssociation, 2010). However,economic conditions such as business cycle, exchange rates fluctuations or oiltransportation prices can have a direct impact on the profitability of theleisure industry (Walt Disney Annual Report, 2016).
Therefore, Walt DisneyCompany needs to estimate and forecast possible elements of its macroenvironment that could negatively affect the profit.2- Porter’s five forces analysis Inthis section, a Porter Five Forces analysis will be performed in order toassess the external factors that influence Walt Disney Company and to evaluatethe attractiveness of the market (Porter’s 5 Forces, PORTER, M. E 1980).
Asthe prices across different theme parks are not significantly different, thebargaining power of buyers is relatively high. Indeed, if consumers are notsatisfied, they are able to visit other amusement parks (which areespecially in the U.S, located in the same areas) as the switching cost is low.Therefore, Disney needs to offer superior value in order to enhance and sustainthe customer satisfaction. The bargaining power of suppliers is relatively low. This can beexplained by the brand’s image of high quality. The company has its ownpreferred suppliers that are able to cope with the demand and the globalrequirements (Wasko, 2001).
Moreover, firms which construct rides are ratherdependent on huge theme park providers like Disney. However, it may be that somesuppliers gain strong bargaining depending on their status within the industryor irreplaceability of the products (Lazzarini, Claro and Mesquita, 2007) Dueto immense capital requirements, the entrance barriers are relatively high.Disney has been able to secure a very special niche in the industry and thecompany pretty much dominates the family entertainment market.
It would be a difficultfor a new organization to develop brand recognition and to penetrate inDisney’s existing market (Pearce & Robinson, 2005). Moreover, huge parkslike Disneyland can also profit from economies of scale in operations andadvertising. Nevertheless, it is crucial for Disney to focus thedifferentiation aspect in all their marketing activities as brand image andidentification can also create strong entry barriers by forcing new entrants tospend heavily to overcome Disney’s huge brand equity (James, 2013). Walt Disney has created an image of luxurious amusingplace specifically on the Disney resorts attracting in majority the upper middleclass. As a result, the threat of substitutes is rather high for the wholeindustry because cheaper options are available to the customers.
Therefore,parks need to have a strong brand image in order to positively influence thecustomers’ preferences. Walt Disney’s theme parks are positioned very wellbecause they are continuously upgrading and reviewing the product line andservice to keep their customers happy and loyal (Bunnell, 2004).Finally, as the major competitors of the industry(Disney, Universal Studios, Six Flags & SeaWorld) have huge marketingbudgets to influence customer preferences and are all targeting the youngaudience and their parents, the rivalry in the industry can be considered asintense. It is therefore critical for Disney to communicate itspoint-of-differences and its emotional benefits in order to keep up its strongbrand image and to contrast itself from competitors.
BUSINESS ANALYSIS 1- High quality standard Thestrict standard in quality of the Walt Disney Company has been one of the majorfactors contributing to the success of Disney (Pearce & Robinson, 2005).Indeed, in Disney theme parks of Paris and Tokyo the operations need to complywith the standard of the original park in California. This towering standardcan explain the reasons behind the ever-successful Walt Disney in havingreturning customers on its resort. 2- Capital unconscious For the past four generations, Disney has used fantasyas an expression of Capital’s will to power over the imaginary.
Disneylandfocuses on creating a place “where dreams come true” (Disneyland Resorts, 2016). As described by Tom Staggs, the Chairman of WaltDisney Parks and Resorts, “we are in the guest experience business. The greatshared memories that guests cherish and create every day at our parks helpskeep people coming back year-after year” (Academia, 2017) 3- I.C.A.R.
E. model Based on the five principles of the I.C.
A.R.Emodel (Impression, Connection, Attitude, Response, and Exceptional), Hoffman,B., & Ritchie, D.C describes how Disney has been able to achievethis level of experience, and how any organization can do it with the rightstrategy and attention to detail. When the experience is enhanced, theopportunity arises to convert customers to ambassadors who will share their experiencewith others. Through this model, Disneyhas been able to distinguish itself from its competitors and position itself asone of the world’s most valuable brand (Interbrand, 2006). Indeed, the companyhas successfully delivered to itscustomers a safe, fun environment that is open for business all year (Molella,2008).
Moreover, in order to enhance the customer’s experience, Disney offersspecial deals for families, such as discounts on flights, car rentals and hotelrooms (Walt Disney Company Website, 2017) However, If Walt Disney Company has grown todiversify their business over the years to becomea worldwide entertainment company, it currentlyhas a vast customer base, and with the intense competition springing up fromother companies, there is the possibility that they are going to be sharingtheir customer base. CORPORATE ANALYSIS 1- The vision of one man The theme park industry, is a fascinating example ofhow the vision of one man, Walt Disney, shaped what is today a global industrythat generates billions of revenues. His vision was to create a company thatwill operate in various segments that might look idiosyncratic at times, butbeneath the surface, they create a harmonized entertainment conglomerate withworld-class core competencies.Anintricate flow chart drawn in 1957 (pictured) lays out the company’s strategy,with films at the center surrounded by theme parks, merchandise, music,publishing and television. Each piece of the business provides content andleads to sales for the others. Putting films back at the heart of the businessis a reboot of the Disney family’s original scheme to dominate theentertainment industry by using content to appeal to a bigger, globalaudience. It has enabled the company toaccess what were previously unexplored markets in order to perform a “BlueOcean Strategy” (Kim and Maugborgne, 2005) and to maintain a competitiveadvantage (Porter, 1980 ; Pertusa-Ortega et al.
, 2009). 2- Diversification In the words of Chief Financial Officer, Jay Rasulo:”… unlike other media companies, we really do have a very clear strategy ofan ecosystem in which we both own the franchises and own the means of distributionto get those franchises out across almost all consumer touch points (Linkedin,2017).” As we have seen above, there exists a tremendousspectrum of variety in the company’s operations. One of the growth strategiesthat have helped the conglomeration reach its current level of success is thefact that the organization has expanded, both vertically and horizontally, intonew markets by targeted segmentation.
Furthermore, it is only through thediversification in branding that Disney has grown simply because the children’sbrand is comparatively limited in terms of the target demographic. It is alsothe same diversity that minimizes the systemic risk involved with operating intoo narrow of a portfolio. CHALLENGES AND OPPORTUNITIES According to Iger (Disney’s CEO):” There’s some really interesting opportunities, given what’s going on from atechnological perspective, to both improve our businesses and also improve theconsumer experience by selling directly to consumers (The Star, 2016).” Moving toward a future of advancing technology andglobalization, it is crucial for Walt Disney Company to make new decisions.Until now, the company’s strategic goals have been to fully develop itsfranchise and increase its international presence.
However, if the omnipresenceis important in the United States, Disney needs to translate its successoverseas and attract the rising middle cases in emerging countries in order togrowth “to infinity and beyond” (The Economist, 2015). “Thesuccess of our businesses is highly dependent on the existence and maintenanceof intellectual property rights in the entertainment products and services wecreate” (Disney Annual Report, 2016). If the law’s protecting the company’sintellectual property rights are drafted or interpreted in ways that limit theextent or duration of Walt Disney rights, or if the ability of the company togenerate revenue from intellectual property may decrease.Therefore,the company is required to devote substantial resources to protectingintellectual property against unlicensed use.
Changes in economic conditions can have anegative impact on the profitability of the company. For instance, an increasein price levels in the energy sector or the inability of those with whom thecompany makes business can result in a shift in consumer demand to anothersector and therefore affect revenues and increase the costs for Walt DisneyCompany. It is therefore crucial for the company to analyze the possible risksof all the external factors that could possibly influence the company’s profitMoreover, the unpredictable change in public andconsumer tastes could also affect the profitability of the company as it wouldreduce demand for the products offerings of Walt Disney. This social aspect isthe most important for the company whose success depends heavily on consumerpreferences.
Walt Disney Company should respond to competition and changes intastes by predicting and quickly adapting to these evolutions (Walt Disney Company Annual Report, 2016). CONCLUSION After an in-depthanalysis, there’s no doubt that the Walt Disney Corporation hascreated an empire that is hardly match-able. The organization is constantlystriving for excellence, performance and yet is continually changing to adaptto the consumers’ taste (Bunnell, 2004). The company has many options and opportunitiesto expand its product lines and expand globally (Molella, 2008).
However, onlya couple of organizations that deal with yearly reports about the multibilliondollar Parks and Resorts industry (IAAPA, TEA, etc.). Therefore, there is stilla lot to learn and plenty of space for growth.