Walt disney company competitive advantage

Walt Disney Company Case Study And Strategic Plan

Author(s): Anna(方榆安)，Adrien(安磊恩), Jackie(楊欣樺), Judy(洪靖雯),

Zoe(范氏黃英)

Class: 1 s t

and 2 nd

year of Department of International Business

Student ID: M0566104, M0400975, M0419066, M0401183, M0570968

Course: Global Strategic Management

Instructor: Dr. Dr. Fang-Yi Lo

Department: Department of International Business

Academic Year: Semester 1, 2016-2017

The Walt Disney Company Case Study

1 FCU e-Paper (2016-2017)

Abstract

In an ever-changing world, we researched how a company like Disney and more

particularly the Walt Disney Parks and Resorts division can become and stay a leader

in its industry.

We analyzed the different levels of strategy, created a strategic map, applied a

five forces analysis of the company, did a group analysis, did a VRIS and

Resource/Analysis, did a BCG matrix and Synergy analysis, a value chain analysis,

explained the diversification strategy.

These researches allowed us to define the key point that makes Disney the

reference in the amusement park industry: offer a unique, immersive and positive

experience to each visitor through a great storytelling that is constantly renewed. The

future success of the company depends on its ability to innovate and keep delivering

an outstanding user experience.

Keyword： Disney parks, amusement parks, strategy

The Walt Disney Company Case Study

2 FCU e-Paper (2016-2017)

Table of Content

Chapter 1 The Walt Disney Company ........................................................................... 8

1.1 Introduction ...................................................................................................... 8

1.2 Choosing Disney .............................................................................................. 8

1.3 Facts and Statistics ........................................................................................... 8

1.3.1 Company ............................................................................................... 9

1.3.2 Divisions: .............................................................................................. 9

1.3.3 Subsidiaries ........................................................................................... 9

Chapter 2 Strategic Level ............................................................................................. 10

2.1 Disney’s Corporate Level Strategy ................................................................ 11

2.2 Disney’s Business Level Strategy .................................................................. 11

2.3 Disney’s Functional Level Strategies ............................................................. 12

2.3.1 Research and Development ................................................................. 12

2.3.2 Human Resource ................................................................................. 13

2.3.3 Finance ................................................................................................ 13

2.3.4 Marketing ............................................................................................ 14

2.3.5 Tokyo Disney Resort ........................................................................... 15

Chapter 3 Strategic Map .............................................................................................. 16

3.1 Guest Experience ........................................................................................... 16

3.2 Telling Stories ................................................................................................ 18

3.3 Family Entertainment ..................................................................................... 18

Chapter 4 Five Forces Analysis ................................................................................... 19

4.1 Industrial Rivalry ........................................................................................... 19

4.2 Threat of Substitutes ...................................................................................... 21

4.3 Potential Entrants ........................................................................................... 21

4.4 Bargaining Power of Supplier ........................................................................ 22

4.5 Bargaining Power of Buyers .......................................................................... 23

Chapter 5 Strategic Group Analysis ............................................................................. 27

5.1 Single Location Theme-based Parks .............................................................. 28

5.1.1 Internal competition of cluster: Medium ............................................ 28

5.1.2 Mobility barriers: Medium .................................................................. 28

5.2 Single Location Mainly Theme with Few Rides Parks Cluster ..................... 29

5.2.1 Cluster internal competition: High ...................................................... 29

The Walt Disney Company Case Study

3 FCU e-Paper (2016-2017)

5.2.2 Cluster Mobility: Low-medium .......................................................... 30

5.3 Multiple Location, Mainly Theme with Few Rides Park............................... 30

5.3.1 International competition of cluster: Low ........................................... 30

5.3.2 Mobility barriers: Medium .................................................................. 30

5.4 Multiple Location Sensation-Based Cluster .................................................. 31

5.4.1 Cluster internal competition ................................................................ 31

5.4.2 Cluster Mobility .................................................................................. 31

5.5 Global Theme and Sensation Parks Cluster ................................................... 32

5.5.1 Cluster internal competition ................................................................ 32

5.5.2 Cluster Mobility .................................................................................. 33

Chapter 6 Resource and Capability Analysis ............................................................... 34

6.1 Resources ....................................................................................................... 35

6.1.1 Tangible resource ................................................................................ 36

6.1.2 Intangible resource .............................................................................. 37

6.1.3 Human Resources ............................................................................... 42

6.2 Capabilities .................................................................................................... 43

6.3 Resources and Capabilities Analysis ............................................................. 45

6.4 VRIS Analysis ................................................................................................ 47

6.4.1 Capability ............................................................................................ 47

6.4.2 Resources ............................................................................................ 48

Chapter 7 Value Chain ................................................................................................. 49

7.1 Firm Infrastructure ......................................................................................... 49

7.2 Human Resources Management .................................................................... 52

7.3 Technology Development .............................................................................. 53

7.4 Procurement ................................................................................................... 54

7.5 Inbound Logistics ........................................................................................... 55

7.6 Operations ...................................................................................................... 56

7.7 Outbound Logistics ........................................................................................ 56

7.8 Marketing & Sales ......................................................................................... 56

7.9 Service ............................................................................................................ 60

Chapter 8 BCG Matrix and Synergies ......................................................................... 63

8.1 BCG Analysis ................................................................................................. 64

8.1.1 ESPN Inc. - Dog ................................................................................. 64

8.1.2 Lucasfilm - Star ................................................................................... 64

The Walt Disney Company Case Study

4 FCU e-Paper (2016-2017)

8.1.3 Disney Channels Worldwide－Question Mark ................................... 65

8.1.4 Walt Disney Animation Studios - Star ................................................ 67

8.1.5 Pixar Animation Studios - Star ............................................................ 70

8.1.6 Disney Parks and Resorts - Cash Cows .............................................. 72

8.1.7 Disney Interactive – Question Mark ................................................... 77

8.1.8 Disney consumer product – Question Mark ....................................... 78

8.2 Synergy among SBUs .................................................................................... 80

Chapter 9 Vertical Integration, Outsourcing and Diversification Strategy .................. 81

Disney Integration Map ....................................................................................... 81

9.1 Disney Vertical Integration ............................................................................ 82

9.1.1 Park and Resorts ................................................................................. 82

9.1.2 Movie .................................................................................................. 82

9.1.3 Merchandise ........................................................................................ 83

9.1.4 ABC Networks Group ......................................................................... 85

9.2 SIC Code of Walt Disney Cooperation .......................................................... 86

9.3 Diversification of The Walt Disney Company ............................................... 86

Chapter10 Diamond Analysis ...................................................................................... 89

10.1 Factor endowments: Disney parks and resorts USA .................................... 89

10.1.1 Location ............................................................................................ 89

10.1.2 Infrastructure ..................................................................................... 90

10.1.3 Hospitality well-educated employees: .............................................. 90

10.2 Demand Conditions ..................................................................................... 91

10.2.1 Standard Operating Procedures ......................................................... 91

10.2.2 Economic scale ................................................................................. 91

10.2.3 Copy right ......................................................................................... 91

10.3 Related and Supporting Industries ............................................................... 92

10.3.1 Rides/Attraction Manufacturers ........................................................ 92

10.3.2 Transportation ................................................................................... 92

10.3.3 Food .................................................................................................. 92

10.3.4 Tourism Industry ............................................................................... 92

10.3.5 Consumer Merchandises ................................................................... 93

10.4 Firm strategy, structure, and rivalry ............................................................. 93

10.4.1 Firm strategy ..................................................................................... 93

The Walt Disney Company Case Study

5 FCU e-Paper (2016-2017)

10.4.2 Firm structure .................................................................................... 93

10.4.3 Rivalry ............................................................................................... 94

10.5 Government .................................................................................................. 94

Chapter 11 Conclusion ................................................................................................. 95

References .................................................................................................................... 97

Appendix .................................................................................................................... 111

The Walt Disney Company Case Study

6 FCU e-Paper (2016-2017)

List of Figures

Figure 1. Strategic Level .............................................................................................. 10

Figure 2. Strategic Map ................................................................................................ 16

Figure 3 Five Forces Analysis ...................................................................................... 19

Figure 4. Disney Industrial Rivalry ............................................................................. 20

Figure 5. Disneyland in Anaheim ................................................................................ 24

Figure 6. Queue time for major attractions and visitors .............................................. 25

Figure 7. Strategic Group cluster ................................................................................. 28

Figure 8. Value Chain................................................................................................... 49

Figure 9. Finding Nemo /Dory attraction/ride concept art .......................................... 57

Figure 10. Finding Nemo ............................................................................................. 57

Figure 11. Iron Man Experience .................................................................................. 58

Figure 12. Taylor Swift as Rapunzel ............................................................................ 59

Figure 13. Disney wedding .......................................................................................... 60

Figure 14. Strategic Level of Disney ........................................................................... 63

Figure 15. BCG Analysis ............................................................................................. 64

Figure 16. Cable Networks Segment Market Share ..................................................... 66

Figure 17. Walt Disney Animation Studios .................................................................. 67

Figure 18. Big Hero 6, Zootopia, and Moana .............................................................. 69

Figure 19. Pixar ............................................................................................................ 70

Figure 20. Disney Parks around the world ................................................................... 73

Figure 21. Internet Users in the World ......................................................................... 77

Figure 22. The Growth of Interactive Media Industry ................................................. 78

Figure 23. Disney Integration Map .............................................................................. 81

Figure 24. Merchandise Outsourcing ........................................................................... 84

Figure 25. Consumer product revenue of the Walt Disney Company ......................... 84

Figure 26. Repartition of 2013 Global revenue ........................................................... 87

Figure 27. Diamond Analysis ...................................................................................... 89

Figure 28. The U.S. and Global populations by income in 2011 ................................. 91

The Walt Disney Company Case Study

7 FCU e-Paper (2016-2017)

List of Tables

Table 1. The financial report for fiscal years 2015, 2014 and 2013............................. 12

Table 2. Numbers of Location and Sensation or/and Theme Park ............................... 27

Table 3. Resources ....................................................................................................... 35

Table 4. The World's Most Reputable Companies 2016 .............................................. 39

Table 5. The World's Most Valuable Brands, 2016 ...................................................... 40

Table 6. Capabilities ..................................................................................................... 43

Table 7. Departments within Disney Parks and Resorts .............................................. 44

Table 8. Resources and Capabilities Analysis .............................................................. 45

Table 9. VRIS Analysis - Capability ............................................................................ 47

Table 10. VRIS Analysis - Resources .......................................................................... 48

Table 11. The Total Consolidated Revenues of Disney Company ............................... 50

Table 12. Segment Operation Income .......................................................................... 50

Table 13. Investing Activities ...................................................................................... 51

Table 14. Social Media Platform and User Statistics ................................................... 58

Table 15. Revenue in Cable network ........................................................................... 65

Table 16. Network Viewers .......................................................................................... 66

Table 17. 2014-2016 Animated Films Total Lifetime Gross ....................................... 68

Table 18 Pixar Animation Studios ............................................................................... 71

Table 19. Worldwidw Ranking of Animation .............................................................. 72

Table 20. Disney Financial Report – the Fiscal 2016 .................................................. 74

Table 21. Operation Income ......................................................................................... 75

Table 22. Revenues ...................................................................................................... 76

Table 23. Market Share ................................................................................................ 76

Table 24. The Walt Disney Revenue and Segment Operation Income ........................ 79

Table 25. Disney Studios SIC Code ............................................................................. 83

Table 26. SIC Code of Walt Disney Cooperation ........................................................ 86

The Walt Disney Company Case Study

8 FCU e-Paper (2016-2017)

Chapter 1 The Walt Disney Company

Disney, the kingdom of entertainment founded by Walt Disney and Roy O.

Disney in 1923, is hands down a benchmark in its industry. The Walt Disney

Company continues to bring joy and happiness to its consumers around the globe, and

would never stop surprising us with its visions.

1. 1 Introduction

Behind all the wonders that Disney has brought us, are the visionaries of

Disney’s leadership team who strive to generate creativity, foster innovation, and

utilize the latest technologies. Disney is a multinational, cross-platform conglomerate.

Their business flourish in many different domains, including parks and resorts,

consumer products, studio entertainment, media networks, and interactive media. The

company is currently operating in more than 40 countries, and they really have taken

issues such as labor, ethics, environment, philanthropy and etc., very seriously.

1.2 Choosing Disney

Upon deciding what case we want to explore in this class, we struggled quite a

bit trying to come up with something that is well-known but not cliché. Our eyes lit

up when spotting a group member’s t-shirt that has a cartoon character on it: it was

Dale, from “Chip n Dale” the Disney cartoon chipmunks. When we think of business

cases we often think of products and their brands, such as H&M in the fashion

industry, or Apple in the consumer electronics industry; rarely do we think of the

entertainment industry. We chose to look into Disney because it has been part of our,

if not everyone’s childhood. Those classic fairytales and adventures taught us about

love, about courage, and about faith. Furthermore, like we do, Disney matures

overtime, bringing more diversity and innovation into its works, connecting and

bringing happiness to people of different generations.

1.3 Facts and Statistics

The rich backstory of Disney could not be easily simplified into a few pages of

writing, therefore certain facts and statistics that we found important to illustrate this

company has been cherry-picked and listed below.

The Walt Disney Company Case Study

9 FCU e-Paper (2016-2017)

1.3.1 Company

■ Founding Date: October 16, 1923 (93 years ago)

■ Products: Theme parks, cable television, films, publishing, broadcasting,

radio, web portals, music, video games

■ Number of employees: 180,000 (2014)

■ Net income: US$8.38 billion (2015)

■ Total assets: US$88.18 billion (2015)

1.3.2 Divisions:

■ Walt Disney Parks and Resorts

─ Featuring the company's theme parks, cruise line, and other

travel-related assets

■ Walt Disney Studios

─ Includes the company's film, music recording label, and theatrical

divisions.

■ Disney Media Networks

─ Includes the company's television properties.

■ Disney Consumer Products and Interactive Media

─ Produces toys, clothing, and other merchandising based upon

Disney-owned properties, as well as including Disney's Internet,

mobile, social media, virtual worlds, and computer games operations.

1.3.3 Subsidiaries

■ Walt Disney Studios

■ Walt Disney Animation Studios

■ Disney Theatrical Productions

■ The Walt Disney Company India

■ Pixar Animation Studios

■ Marvel Entertainment

■ Marvel Studios

■ Lucasfilm

■ The Muppets Studio

■ Disney–ABC Television Group

■ ESPN Inc. (80%)

■ A+E Networks (50%)

■ Radio Disney

■ Hulu (32%)

■ UTV Software Communications

■ Maker Studios

The Walt Disney Company Case Study

10 FCU e-Paper (2016-2017)

Chapter 2 Strategic Level

For this week’s assignment, we are attempting to describe the strategies that The

Walt Disney Company took in different levels and segments of its business. However,

Disney operates in many aspects of entertainment, including amusement parks, TV

channels, consumer products, movies, and so on. We chose to study about Disney’s

parks and resorts in further detail, making this segment of the Disney entertainment

kingdom our focus in this course.

Figure 1. Strategic Level

The Walt Disney Company Case Study

11 FCU e-Paper (2016-2017)

2.1 Disney’s Corporate Level Strategy

As we have introduced in previous passages, Disney’s businesses flourish in

different aspects of entertainment industries, its divisions include: Walt Disney Parks

and Resorts, Walt Disney Studios, Disney Media Networks, and Disney Consumer

Products and Interactive Media. Despite their differences in operation, the core of

these businesses are united, that is Disney’s mission statement.

DISNEY'S MISSION STATEMENT

"The mission of The Walt Disney Company is to be one of the world's leading

producers and providers of entertainment and information. Using our portfolio of

brands to differentiate our content, services and consumer products, we seek to

develop the most creative, innovative and profitable entertainment experiences and

related products in the world."

These words, carefully chosen, summed up the Disney’s vision as an

entertainment tycoon. Everything that its business units carry out aim to realize

Disney’s mission statement.

2.2 Disney’s Business Level Strategy

Walt Disney Parks and Resorts is one of Disney’s most profitable business units,

currently operating in six different locations around the world, including California,

Florida, Paris, Tokyo, Hong Kong, and Shanghai. When it came to expanding

overseas, entering international markets, Disney did more than just copy its success at

home. Instead, based on past experiences and conditions of the hosting country,

Disney went with one of two ways: licensing or joint venture. Disney licensed its

The Walt Disney Company Case Study

12 FCU e-Paper (2016-2017)

brand to a Japanese company called Oriental Land Company, Disney had not been

involved in operation, only did they receive royalties and parts of Tokyo Disney

Resort’s (TDR) revenue in return. Whereas in Paris, Hong Kong, and Shanghai,

Disney chose to collaborate with local entities and run its business in the form of joint

venture. Due to these different strategies, different functional level strategies were

then sketched out and performed.

2.3 Disney’s Functional Level Strategies

2.3.1 Research and Development

Investing Activities

According to the financial report posted on Disney official website, people can

know that Disney Company had invested in park and resorts more and more for R&D

each year until now. As a result, it is obvious that they really put emphasis on

Research and Development this part to meet this changing world.

The financial report for fiscal years 2015, 2014 and 2013 are as follows:

Table 1. The financial report for fiscal years 2015, 2014 and 2013

The main capital expenditures for the Parks and Resorts are expansion, new

attractions, cruise ships, capital improvements and systems infrastructure. The

The Walt Disney Company Case Study

13 FCU e-Paper (2016-2017)

increase capital expenditure in domestic parks and resorts was to construct new

attractions in Walt Disney World Resort. While the higher capital expenditures are in

international park and resorts are due to the construction of Shanghai Disney Resort.

2.3.2 Human Resource

The strategy of Human resource in Disney Park and Resorts is one of the factors

make them such success. They have standard operation procedure when hiring,

training, and encouraging their employees. When recruiting new employees, the first

priority is “attitude”, then their skills.

They like to talk about the worst situation at first. Before job seekers applied the

recruitment form, they were asked to see a video, which illustrate the company's

culture and practices. For example, they have to work on weekends, holidays and at

night. For another example, they have strict restrictions on clothing. They can’t even

unveil their tattoo when they are working.

Besides, Disney asks supervisors humble themselves. When the receptionist on

the front line are busy, those supervisors will assist them directly. They can do

everything from sell popcorns to even put the merchandise on the shelfs. From an

aspect of the company, there are three benefits when they doing so. Firstly, supervisor

share responsibility of workload with staff. Secondly, front line workers know that

company pay high attention on their works. Thirdly, supervisors could have chance to

interact with customers directly.

2.3.3 Finance

Owns and operates:

 Walt Disney World Resort in Florida

The Walt Disney Company Case Study

14 FCU e-Paper (2016-2017)

 Disneyland Resort in California

Manages and has effective ownership interests:

 81% in Disneyland Paris (recapitalization)

 47% in Hong Kong Disneyland Resort

 43% in Shanghai Disney Resort

Licenses intellectual property to a third party for the operations:

 Tokyo Disney Resort in Japan

2.3.4 Marketing

Disney puts a lot of emphasis on marketing to continually attract visitors. The

following were what they effort:

Embrace New Technology

The park has always been quick to embrace technological advantages, like

launching an app to keep visitors informed, or their new MagicBands wearables.

Use Data to Inform Decisions

The MagicBand provides tracking data on all of the park’s guests, which allows

Disneyland to optimize everything from staffing to the location of a food vendor.

Optimize User Experience

Disney always consider customer experience and work to streamline the process

of purchasing, using, and servicing product.

Balance Accessibility with Exclusivity

Design a way to make customers feel special, and they will respond with

customer loyalty.

Deliver Unexpected Moments of Magic

Disneyland capitalizes on this affinity with live characters, surprise performances,

parades, and exceptional customer service. Making an effort to surprise and

The Walt Disney Company Case Study

15 FCU e-Paper (2016-2017)

delight customers at every turn will always pay dividends.

2.3.5 Tokyo Disney Resort

Aging trends in Japan has led to a decrease in TDR’s targeting market, TDR had

to find new ways to appeal to potential customers other than children and young

adults, their original target customers. In order to maintain attendance of its parks and

resorts, TDR attempted to motivate the Japanese population of forty or above, and

defined these people as “New Age”. The “New Age Marketing” targeted guests that

age forty to sixty, promoting that Disney’s parks were not just for kids or young adults.

A separate online homepage called “Disney for Adults” was set up, promoting the 45+

Passport to adults. This passport features services that aimed to bring a more

customized entertainment experience to its adult users. Tokyo Disney Sea (TDS) was

also built to provide a more “grown-up experience” for Tokyo Disney’s older

customers, where they would be less surrounded by “cuteness” such as Mickey Mouse

or its fellow characters.

Mid-Long Term Strategies

TDR had planned out its future strategies, surrounding its core plan of

maintaining a theme park attendance figure of 30 million guest per year. To achieve

that number, TDR aimed to “build stronger family entertainment” and “increase guest

comfort”. Budgets and plans were invested and planned out to be carried out through

the next decade.

The Walt Disney Company Case Study

16 FCU e-Paper (2016-2017)

Chapter 3 Strategic Map

The main objective of Disney Parks and Resort is to create happiness for their

guests, which is supported by three goals: guest experience, telling stories, and family

entertainment.

Figure 2. Strategic Map

3.1 Guest Experience

● Meet and exceed the needs of customers

+ Customer loyalty: loyalty is generated through increasing customer

satisfaction

+ Customizing: customizing customer service allows Disney to meet the

different needs of its different customers: parents or children, young or

elder, and etc.

+ Employee training

The Walt Disney Company Case Study

17 FCU e-Paper (2016-2017)

▪ Regulations

▪ SOP

▪ Attitude: Disney makes sure that its employees share the same

attitude and values as the company

▪ Value sharing

▪ Workload sharing: managers would supervise and help with the

work of other employees, even if it is selling hotdogs or picking

up trash. It all comes down to providing guests the best

experience in the parks.

+ High quality service standard

● Comfortable surroundings

+ Cleaning staff

+ Stroller guy: One simple yet thoughtful service makes guests more

comfortable

● Attendance control: In order to provide the guests with the best Disney

experience, Disney controls attendance number. In which the guest could be

comfortable with the park space, service quality, and plentiful time to enjoy.

+ Ticket price management: The price is much higher than other

amusement parks, especially in hot seasons. Additional payments may

be needed for premium services.

+ Special passports: some passports allows guests to enjoy the rides

without having to wait in the long queues.

● Data Collection

● Embrace new technology

The Walt Disney Company Case Study

18 FCU e-Paper (2016-2017)

3.2 Telling Stories

● Deliver unexpected moments of magic: For example, Disney characters may

show up to entertain the guests in queues, creating an element of surprise.

● Consumer merchandise

● Live characters

● Setting atmosphere

+ Infrastructure

+ Background music

+ Restaurant (and food) designs

3.3 Family Entertainment

● Renew themes and rides

+ Creativity

+ Purchasing popular franchises: Disney acquired popular franchises

such as Marvel and Star Wars, which they can now build new

theme-based rides to attract more guests.

● Parades

● Stage shows

● Photo services

● Cruise trips

● Accessible environment

● Customize packages

The Walt Disney Company Case Study

19 FCU e-Paper (2016-2017)

Chapter 4 Five Forces Analysis

Building on the previous parts we have discussed on Disney’s theme park

segment, Disney Park and Resorts, we continue to look into this case with a critical

eye. Using Porter’s five forces analysis, we studied what kind of external threats that

Disney might have encountered, or would come across in the future. By understanding

more about the industrial environment, the business is in, it helps the company to

navigate its way towards sustainability and success.

Figure 3 Five Forces Analysis

4.1 Industrial Rivalry

For Disney Parks and Resorts, there are four main rivalry in the amusement park

industry, they are Universal Parks and Resorts, Cedar Fair, Six Flags, Cedar Fair, and

Merlin Entertainment. These amusement parks are located mainly in the US, some

expanded abroad globally like Disney itself. Disney also competes with local theme

The Walt Disney Company Case Study

20 FCU e-Paper (2016-2017)

parks in locations outside USA, such as China.

Each of these parks tried to out-perform their competitors in order to attract new

customers and keep their old customers coming back. Ticket prices of these parks do

not differ much from one another, so it would be the differences in themes and

experiences that makes them unique in their own way. New attractions, rides,

infrastructures and restaurants are the keys to making that “sprint” to be head in the

game. For example, Universal added the Harry Potter franchise, the Wizarding World

of Harry Potter, into its parks, and its customer visits sky-rocketed. This success of

Universal stimulated Disney’s expansion of its Magic Kingdom which began in 2012,

over one billion US dollar was invested in order for Disney to maintain its leading

position in the theme park industry.

That being said, Disney Parks and Resorts generate astronomical revenues every

year. As the chart shows, not even if all of its competitors’ revenue added together

could come close to Disney’s massive success. In general, the bargaining power of

Disney’s rivalry would be seen as medium.

Figure 4. Disney Industrial Rivalry

The Walt Disney Company Case Study

21 FCU e-Paper (2016-2017)

4.2 Threat of Substitutes

“Substitutes can be defined as those products or services that meet a particular

consumer need but are available in other market. A substitute product is a product

from another industry that offers benefits to the consumer similar to those of the

product produced by the firms within the industry”.

“The Threat of Substitutes means the availability of a product that the consumer can

purchase instead of the industry’s product”.

In this case of Disney Parks and Resorts we think the Threat of Substitutes is

relatively high for the following reasons:

● Cheaper alternatives to active entertainment, such as: Zoo, Museum, Movie,

Concert, Sports.

Theme parks are meant for active entertainment. Consumers could choose to go

to the movies, park, sporting event or concert, just to name a few, instead of

going to a theme park.

● Disney maintains relevance because of unique experience.

Because Disney theme parks have a distinctive competency of their animated

characters and their family fun rides, consumers cannot get the Disney

experience anywhere else – making Disney relevant.

4.3 Potential Entrants

In Western countries the threat of potential entrants is low. The market of

amusement park is mature with more than 400 amusement parks and attractions in the

U.S. and about 300 in Europe.

Building a new park requires a significant capital. As example $5.5 billion have

The Walt Disney Company Case Study

22 FCU e-Paper (2016-2017)

been invested in Shanghai Disney. In my opinion this the main limitation for potential

entrants as finding such a capital is really challenging. Adding that in the last years

some amusement parks have shown to be unprofitable. So potential investors may

consider putting their money into other businesses.

In China there are many opportunities in the amusement park market however

the competition is already intense with many new theme park projects. So it is

difficult for a newcomer to succeed.

Disney parks have by far the strongest brand and loyal customers. Another

strength that limits the threat of new entrants.

4.4 Bargaining Power of Supplier

“Suppliers are those who supply the organization with what it needs to produce the

product or service. As well as fuel, raw materials and equipment, this can include

labor and sources of finance. Suppliers can exert bargaining power on participants in

an industry by raising prices or reducing the quality of purchased goods and services.

Powerful suppliers can thereby squeeze profitability out of an industry unable to

recover cost increases in its own prices” (Michael, 1980).

In the case of Disney Park and Resorts we think the Bargaining Power of

Supplier is Medium for the following reasons:

● Limited suppliers

Not many companies are in the industry of producing, building and maintaining

amusement rides. The few major of them are Bollinger & Mabillard, Intamin,

Vekoma, Arrow, Premier Rides, The Gravity Group, and S & S Power. Their

products could be found in most of the theme parks throughout the world. Thus,

The Walt Disney Company Case Study

23 FCU e-Paper (2016-2017)

those companies have large flexibility to bargain with Disney.

● Switching costs

The unique products and service is not only unique but also popular among

Disney’s customers. For the industry of producing toys or character related

products, they had lower bargaining power. Disney has the pattern right on it,

so it can ask any company to produce merchandise. However, in amusement

rides industry, Disney can only buy specific rides from limited company. If

Disney wants to change the supplier, the switching cost would be high.

● Supplier sustainability

The company size may be an advantage to Disney. Suppliers do not control the

bargaining power strongly because Disney they would want to keep their

business. Suppliers know that Disney is a stable company that could provide

business for many years to come.

4.5 Bargaining Power of Buyers

In the parking and entertainment industry, there are four big bosses that are

Disney, Six Flags, Seawood and Universal. While Disney is the leader in this

Oligopoly service industry, buyers’ bargaining power is much lower.

The buyers group is non concentrated: Disney park and resort has three competitors

in their amusement park operate. For the 7 billions population in the world, they have

no many choices for this kind of entertainment and the fact that, Disney Park and

resort still stand steadily at first rate.