Advertisement Essay- Disney Them Parks Essay Example for Free

Advertisement Essay- Disney Them Parks Essay The external environment of the theme park industry on the Gold Coast plays a significant role in determining if the industry is profitable. According to Hubbard, Rice and Beamish (2008), the external environment is the factors outside the organisation that influence strategy and is made up of two environments; the macro-environment and the industry environment. The macro-environment includes the general factors that affect growth of an industry, whereas an analysis of the industry environment determines the profitability of an industry. An analysis of the Gold Coast theme park industry environment will determine the industry’s profitability by analysing the strength of the following five forces; the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, power of substitutes, and the intensity of industry rivals (Hubbard, Rice Beamish 2008; Porter 1980). Due to the strength of these forces being quite low, the analysis of theme park industry on the Gold Coast indicates a profitable industry. The threat of new entrants into the Gold Coast theme park industry is determined by the strength of the barriers to entry as well as the expected retaliation. Such a barrier to entry is product differentiation which means that ‘established firms have brand identification and customer loyalties, which stem from past advertising, customer service, product differences, or simply being the first into an industry’ (Porter 1980, 9). Therefore, for a new firm wanting to enter the Gold Coast theme park industry would need to invest in building a brand name as a way of trying to overcome existing customer loyalties to the other theme parks. This would require large capital requirements for up-front advertising which would be unrecoverable and along with the unknown brand name would indicate a significant barrier to entry (Hubbard, Rice Beaming 2008). The low threat of new entrants is also strengthened by the fact that all the theme parks on the Gold Coast are owned by two companies. Dreamworld and White Water World are owned by Macquarie Leisure Trust Group and Village Roadshow owns Warner Brothers Movie World, Wet ‘n’ Wild Water World, Sea World, Australian Outback Spectacular, and Paradise Country (Roller-Coaster 2008B, Online). This effectively means that any potential new entrant would be competing against two companies who have the established resources which would enable them to try and drive the new entrant out of the industry through increased advertising or by lowering their prices (Porter 1980). The strength of the possible retaliation as well as product differentiation and large capital requirements determine that the barriers to entry into the Gold Coast theme park industry are quite substantial and therefore the threat of new entrants is quite low. The bargaining power of suppliers could also have an impact on the profitability of the theme park industry on the Gold Coast (Hubbard, Rice Beamish 2008; Porter 1980). One factor that influences the power of suppliers is the supplier concentration relative to industry concentration (Hubbard, Rice Beamish 2008). In other words if there are a small number of suppliers then the suppliers are going to have the power. In terms of theme parks, the main input that needs to be supplied is the rides. These are the inputs that theme parks market their parks around and what attracts visitors to these parks. The bargaining power these roller-coaster suppliers hold over the theme park industry on the Gold Coast is quite weak due mainly to the large number of roller-coaster manufacturers that are located all around the world. If a theme park requires a roller-coaster to be designed for their park, the firm are able to choose between over 40 manufacturers to design their ride so as a result the power of the supplier is quite weak (Coaster Gallery 2008, Online). Furthermore the bargaining power of suppliers in the theme park industry is weak due to theme parks being roller-coaster manufacturers only industry in which they can sell their product. Therefore for the roller-coaster manufacturers, the theme park industry is an important customer and their fortunes are ‘closely tied to the industry and they will want to protect it through reasonable pricing and assistance’ (Porter 1980, 27). For the theme park industry on the Gold Coast this low level of power held by the roller-coaster suppliers means that any of the theme parks will be able to discuss their needs with a number of manufacturers due to the large number available to choose from and due to the suppliers reliance on the theme park industry to sell their products, prices will be reasonable which will also be helped by the fact that there is large competition between the suppliers due to their numbers. The profitability of the theme park industry on the Gold Coast can also be impacted by the bargaining power of buyers (Hubbard, Rice Beamish 2008; Porter 1980). One factor where the bargaining power of buyers is low is the industry concentration relative to buyer concentration. The theme park industry on the Gold Coast is quite large with seven theme parks located within the region; however these seven parks are owned by only two companies; Macquarie Leisure Trust Group and Village Roadshow (Roller-Coaster 2008B, Online). Therefore due to there only being two companies within the region, the amount of competition between the parks isn’t as fierce as it would be if each park had a different owner. For this reason the buyer doesn’t have as much power against each park based on price. This being said, the buyer still has the power to choose one company over another which provides the buyer some degree of power but not as much as would have been attributed to them with more than two companies. In the Gold Coast theme park industry, the decision makers’ incentives do give buyers a degree of power (Hubbard, Rice Beamish 2008; Porter 1980). Such incentives are prevalent in the industry and are aimed at enticing customers to each company’s respective theme parks. Village Warner offers â€Å"3 Park Super-passes† which provide customers unlimited entry into Movie World, Sea World and Wet ‘n’ Wild for 14 days at a discounted rate. Also Macquarie Leisure Trust Group offers a â€Å"World Pass† which provides customer’s access to both Dreamworld and White Water World at a discount rate. These incentives offered within the Gold Coast theme park industry gives buyers power to choose between the companies based on the perceived benefits of which they are offering. Therefore if one of these offers isn’t perceived to be as valuable as the other offer then the buyer has the power to choose one over the other which can have an impact on the company’s profitability either positively or negatively. The power of substitute experiences can also have an impact on the profitability of the Gold Coast theme park industry (Hubbard, Rice Beamish 2008; Porter 1980). The intensity of this power depends on a number of factors which includes the relative price/performance of the substitutes (Hubbard, Rice Beamish 2008; Porter 1980). This involves comparing the relative performance of the industry to the available substitutes as well as comparing the relative prices, both of which can impact on whether the industry in question or its substitutes better meet the needs of the potential consumer. In relation to the Gold Coast theme park industry, the performance aspect expected of their experience could be to have â€Å"fun†. Therefore, the possible substitutes of going to the beach, movies or shopping most likely wouldn’t meet the performance desired in comparison to going to a theme park. However, if the performance desired by potential customers was â€Å"thrill-seeking†, sky-diving may be a strong substitute. Along with performance, price also needs to be taken into consideration. Therefore, the substitutes of going to the beach or movies are quite cheap, which makes their price performance quite strong. However, skydiving in comparison to theme parks is quite expensive so its price performance is quite weak in comparison to attending a theme park. Overall the power of the substitutes is quite strong especially with their price performance and can therefore have an impact on the Gold Coast theme parks industry’s profitability. The level of ease in which buyers can switch from the industry product to substitutes can also impact on the Gold Coast theme park industry’s profitability (Hubbard, Rice Beamish 2008). This factor provides a lot of power to substitutes because customers within the theme park industry can easily switch to substitutes such as the beach, movies or skydiving because they can simply just experience those products rather than go to a theme park, there is nothing holding people back from doing so. Due to this fact and the favourable outcome for substitutes based upon performance and price, the power of substitutes is quite strong. The final force which impacts on an industry’s profitability according to Porter (1980) is the level of industry rivalry. Industry growth rate is a factor that impacts on the level of rivalry because if the ‘industry is growing fast, the amount of industry rivalry will be relatively low, because there will be room for most or all organisations to prosper’ (Hubbard, Rice Beaming 2008). The theme park industry on the Gold Coast is still experiencing growth mainly due to the overall Gold Coast tourism industry growing with domestic visitors increasing 6% to 3. 7 million in the year ending June 2007, and international visitors increasing 3. 5% to 858,000 in year ending June 2007 (Tourism Queensland 2007, Online). As a result Sea World, Movie World, and Wet ‘n ‘ Wild increased attendances 17%, 4. 3% and 22% respectively, while Dreamworld’s attendances decreased slightly by 2% (Roller-Coaster 2007A, Online). Due to there still being strong growth in the Gold Coast theme park industry the rivalry isn’t as intense as it would with little to no growth and will therefore have little impact on profitability. Industry profitability can also be impacted if organisations within an industry have undifferentiated products (Hubbard, Rice Beaming 2008; Porter 1980). By having undifferentiated products rivalry would be extreme due to organisations targeting the same markets, whereas if products were differentiated the organisations within the industry would target different market segments. The theme park industry on the Gold Coast has traditionally been quite differentiated with a water park, movie-themed park, thrill-ride park and a marine-life themed park. As a result the different theme parks were able to target differing market segments which meant the rivalry between the parks was evident but not that strong. Today however the rivalry between Macquarie Leisure Group Trust and Village Roadshow has intensified due to Macquarie Leisure opening a water park called White Water World which is in direct competition with Village Roadshow’s Wet ‘n’ Wild. This has lead to strong advertising campaigns and discount offers by both organisations in an attempt to gain market share. Due to the opening of the new water park which has created two undifferentiated products in the industry, the overall industry profitability could be impacted because both Macquarie Leisure and Village Roadshow are going to be competing fiercely to try and persuade potential customers to come to their respective water park which could have been avoided if they have differentiated products with different target markets. By analysing the Gold Coast theme park industry using Porter’s (1980) five forces it is evident that the industry is profitable due to an overall low level of power attributed by most forces. The low threat of new entrants is evident due to the barriers to entry of established product differentiation and the expected retaliation of Macquarie Leisure and Village Roadshow. Also the power of suppliers is low due the large number of competing roller-coaster manufacturers and their reliance on the theme park industry, furthermore the power of buyers is low due to two companies owning all the theme parks on the Gold Coast which reduces the level of competition between the parks and limits potential savings for buyers and helps the industry’s profitability. However, profitability in the industry can be impacted by the considerable strength of substitutes based upon price and the ease of which customers can switch to these substitutes. Furthermore, profitability will be further impacted by the increasing competition between the two water parks in the industry as they fight for market share. Despite the presence of these forces on industry profitability, there strength is quite weak and the Gold Coast theme park industry will remain profitable due to the other forces outweighing any negative impact on industry profitability. Reference List. Coaster Gallery 2008, ‘Roller Coaster Manufacturers’, Roller Coaster Information (online), Available: http://www. coastergallery. com/Manu. html [Accessed 13 April 2008]. Hubbard, G. , Rice, J. Beamish, P. 2008, Strategic Management: Thinking, Analysis and Action, 3rd edn, Prentice-Hall, Frenchs Forest. Porter, M. 1980, Competitive Strategy: Techniques for Analysing Industries and Competitors, The Free Press, New York. Roller-Coaster 2007A, ‘Attendance Up Across the Board’, Roller-Coaster Theme Park News (online), Available: http://www. roller-coaster. com. au/article.php? aid=143 [Accessed 14 April 2008]. Roller-Coaster 2007B, ‘Theme Park Performance Drives Village Profits’, Roller-Coaster Theme Park News (online), Available: http://www. roller-coaster. com. au/article. php? aid=142 [Accessed 14 April 2008]. Tourism Queensland 2007, ‘Business and Leisure Drives Gold Coast’s $2. 6 Billion Domestic Tourism Industry’, Tourism Queensland News (online), Available: http://www. tq. com. au/destinations/gold-coast/news/news_home. cfm? col2Includes=infopieces. dsp_story_fullobj_uuid=0195C856-CDFC-D308-72CF-6DC3FA3B4C62 [Accessed 13 April 2008].