The amusement park industry has been in continuous
evolution due to the importance of adapting to new trends and technologies to
attract visitors. Walt Disney Company, is one of the most prominent media and
entertainment corporation worldwide that seem to have reached immortality.
Mickey, Winnie and their friends are steeped in the collective memory. The
secret of their durability? Mastering a strategy focused on synergy and
creativity. Today the company operates in five business segments: media
networks, studio entertainment, consumer products, interactive media and parks
and resorts (The Walt Disney Company, 2016).
essay critically analyses the theme park industry and the competitive
positioning of Walt Disney Company. These insights are then examined conjointly
to highlight strategic challenges that the companies will face and to provide
1- Industry Environment
idea of organizing amusement areas emerged in 1955 when Walt Disney opened
Disneyland (Milman, 2001). Following the opening, plenty businesses were
created with the same philosophy, resulting in a global industry over the
industry represents a multi-billion-dollar sub-category of the travel and
tourism industry (Theseus, 2017). In the United States, the revenue
generated 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 an
estimated $40.4 billion in 2015, up 7.4% from 2014. Growth was primarily the
result of a 5.2% increase in attendance, the most significant gain during the
past five years, helped by the introduction of popular attractions. In general,
about 55% of the overall park revenues are earned through admission fees and
about 30% through food and merchandise sale. Parking fees, commission income
from third-party exhibitors, advertising and fees for hosting events make up
the remaining 15% (Hoover’s, 2013).
theme parks can be considered as an economic booster as consumers are not
solely spending money on attractions but also on hotels, restaurants, and
retail establishments. Indeed, it is proved that the building of an
amusement/theme park in various chosen areas, has boosted the local communities
in different ways, directly and indirectly (National Recreation and Pak
economic conditions such as business cycle, exchange rates fluctuations or oil
transportation prices can have a direct impact on the profitability of the
leisure industry (Walt Disney Annual Report, 2016). Therefore, Walt Disney
Company needs to estimate and forecast possible elements of its macro
environment that could negatively affect the profit.
2- Porter’s five forces analysis
this section, a Porter Five Forces analysis will be performed in order to
assess the external factors that influence Walt Disney Company and to evaluate
the attractiveness of the market (Porter’s 5 Forces, PORTER, M. E 1980).
the prices across different theme parks are not significantly different, the
bargaining power of buyers is relatively high. Indeed, if consumers are not
satisfied, they are able to visit other amusement parks (which are
especially 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 sustain
the customer satisfaction.
The bargaining power of suppliers is relatively low. This can be
explained by the brand’s image of high quality. The company has its own
preferred suppliers that are able to cope with the demand and the global
requirements (Wasko, 2001). Moreover, firms which construct rides are rather
dependent on huge theme park providers like Disney. However, it may be that some
suppliers gain strong bargaining depending on their status within the industry
or irreplaceability of the products (Lazzarini, Claro and Mesquita, 2007)
to immense capital requirements, the entrance barriers are relatively high.
Disney has been able to secure a very special niche in the industry and the
company pretty much dominates the family entertainment market. It would be a difficult
for a new organization to develop brand recognition and to penetrate in
Disney’s existing market (Pearce & Robinson, 2005). Moreover, huge parks
like Disneyland can also profit from economies of scale in operations and
advertising. Nevertheless, it is crucial for Disney to focus the
differentiation aspect in all their marketing activities as brand image and
identification can also create strong entry barriers by forcing new entrants to
spend heavily to overcome Disney’s huge brand equity (James, 2013).
Walt Disney has created an image of luxurious amusing
place specifically on the Disney resorts attracting in majority the upper middle
class. As a result, the threat of substitutes is rather high for the whole
industry because cheaper options are available to the customers. Therefore,
parks need to have a strong brand image in order to positively influence the
customers’ preferences. Walt Disney’s theme parks are positioned very well
because they are continuously upgrading and reviewing the product line and
service 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 marketing
budgets to influence customer preferences and are all targeting the young
audience and their parents, the rivalry in the industry can be considered as
intense. It is therefore critical for Disney to communicate its
point-of-differences and its emotional benefits in order to keep up its strong
brand image and to contrast itself from competitors.
High quality standard
strict standard in quality of the Walt Disney Company has been one of the major
factors contributing to the success of Disney (Pearce & Robinson, 2005).
Indeed, in Disney theme parks of Paris and Tokyo the operations need to comply
with the standard of the original park in California. This towering standard
can explain the reasons behind the ever-successful Walt Disney in having
returning customers on its resort.
For the past four generations, Disney has used fantasy
as an expression of Capital’s will to power over the imaginary. Disneyland
focuses on creating a place “where dreams come true” (Disneyland Resorts, 2016). As described by Tom Staggs, the Chairman of Walt
Disney Parks and Resorts, “we are in the guest experience business. The great
shared memories that guests cherish and create every day at our parks helps
keep people coming back year-after year” (Academia, 2017)
Based on the five principles of the I.C.A.R.E
model (Impression, Connection, Attitude, Response, and Exceptional), Hoffman,
B., & Ritchie, D.C
describes how Disney has been able to achieve
this level of experience, and how any organization can do it with the right
strategy and attention to detail. When the experience is enhanced, the
opportunity arises to convert customers to ambassadors who will share their experience
with others. Through this model, Disney
has been able to distinguish itself from its competitors and position itself as
one of the world’s most valuable brand (Interbrand, 2006). Indeed, the company
has successfully delivered to its
customers a safe, fun environment that is open for business all year (Molella,
2008). Moreover, in order to enhance the customer’s experience, Disney offers
special deals for families, such as discounts on flights, car rentals and hotel
rooms (Walt Disney Company Website, 2017)
However, If Walt Disney Company has grown to
diversify their business over the years to become
a worldwide entertainment company, it currently
has a vast customer base, and with the intense competition springing up from
other companies, there is the possibility that they are going to be sharing
their customer base.
The vision of one man
The theme park industry, is a fascinating example of
how the vision of one man, Walt Disney, shaped what is today a global industry
that generates billions of revenues. His vision was to create a company that
will operate in various segments that might look idiosyncratic at times, but
beneath the surface, they create a harmonized entertainment conglomerate with
world-class core competencies.
intricate 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 and
leads to sales for the others. Putting films back at the heart of the business
is a reboot of the Disney family’s original scheme to dominate the
entertainment industry by using content to appeal to a bigger, global
audience. It has enabled the company to
access what were previously unexplored markets in order to perform a “Blue
Ocean Strategy” (Kim and Maugborgne, 2005) and to maintain a competitive
advantage (Porter, 1980 ; Pertusa-Ortega et al., 2009).
In the words of Chief Financial Officer, Jay Rasulo:
“… unlike other media companies, we really do have a very clear strategy of
an ecosystem in which we both own the franchises and own the means of distribution
to get those franchises out across almost all consumer touch points (Linkedin,
As we have seen above, there exists a tremendous
spectrum of variety in the company’s operations. One of the growth strategies
that have helped the conglomeration reach its current level of success is the
fact that the organization has expanded, both vertically and horizontally, into
new markets by targeted segmentation. Furthermore, it is only through the
diversification in branding that Disney has grown simply because the children’s
brand is comparatively limited in terms of the target demographic. It is also
the same diversity that minimizes the systemic risk involved with operating in
too 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 a
technological perspective, to both improve our businesses and also improve the
consumer experience by selling directly to consumers (The Star, 2016).”
Moving toward a future of advancing technology and
globalization, it is crucial for Walt Disney Company to make new decisions.
Until now, the company’s strategic goals have been to fully develop its
franchise and increase its international presence. However, if the omnipresence
is important in the United States, Disney needs to translate its success
overseas and attract the rising middle cases in emerging countries in order to
growth “to infinity and beyond” (The Economist, 2015).
success of our businesses is highly dependent on the existence and maintenance
of intellectual property rights in the entertainment products and services we
create” (Disney Annual Report, 2016). If the law’s protecting the company’s
intellectual property rights are drafted or interpreted in ways that limit the
extent or duration of Walt Disney rights, or if the ability of the company to
generate revenue from intellectual property may decrease.
the company is required to devote substantial resources to protecting
intellectual property against unlicensed use.
Changes in economic conditions can have a
negative impact on the profitability of the company. For instance, an increase
in price levels in the energy sector or the inability of those with whom the
company makes business can result in a shift in consumer demand to another
sector and therefore affect revenues and increase the costs for Walt Disney
Company. It is therefore crucial for the company to analyze the possible risks
of all the external factors that could possibly influence the company’s profit
Moreover, the unpredictable change in public and
consumer tastes could also affect the profitability of the company as it would
reduce demand for the products offerings of Walt Disney. This social aspect is
the most important for the company whose success depends heavily on consumer
preferences. Walt Disney Company should respond to competition and changes in
tastes by predicting and quickly adapting to these evolutions (Walt Disney Company Annual Report, 2016).
After an in-depth
analysis, there’s no doubt that the Walt Disney Corporation has
created an empire that is hardly match-able. The organization is constantly
striving for excellence, performance and yet is continually changing to adapt
to the consumers’ taste (Bunnell, 2004). The company has many options and opportunities
to expand its product lines and expand globally (Molella, 2008). However, only
a couple of organizations that deal with yearly reports about the multibillion
dollar Parks and Resorts industry (IAAPA, TEA, etc.). Therefore, there is still
a lot to learn and plenty of space for growth.