Disneyland Hong Kong - Case Study Example

?Running Head: Disneyland Hong Kong Disneyland Hong Kong [Institute’s Table of Contents Introduction Theme park offered a drastic modification and departure from the customs of the amusement park. The first theme park, Disneyland, was developed during the year 1955 in Los Angeles, USA. “The fancy world of cartoons absorbed hundreds of millions of customers every year. Following Disneyland’s great success, theme parks were like mushrooms after the rain” (Surhone, 2011). In last couple of decades, the theme park business had experienced extraordinary growth globally. Nonetheless, with the quick expansion of the amount of theme parks, competition of theme parks is increasing as well. Keeping in view the growing amount of parks and the expansion of their activities, the continued existence of theme park has turn out to be a serious issue. Within Europe, the theme park industry goes on deteriorating because of a greying population, visitors that require better class and visitors that are more considerate as well as perceptive concerning how the accessible resources of spare time and disposable income are utilized. The 2008 financial disaster forced theme parks within Western Europe to arrive at its saturation point and the parks have to make provision for visitors who are becoming more and more knowledgeable as well as challenging. In the intensive situation, the majority of theme parks are making an allowance for extraordinary strategic alterations to recover clientele. China is a nation, which has created a centre of attraction for a huge amount of foreign investment as well as global business from a large number of countries all around the globe. From being an underprivileged nation during the 1970s, China has industrialized into being on its way to develop into one of the financial super-powers of the world. In accordance with Surhone (2011), on the whole, China’s real GDP has increased with more or less 10 percent per annum form 1978; this is an aggregate raise of roughly 700 percent. The expansion of foreign trade has an annual average of more or less 16 percent during the same time, which make a total of over 2000 percent. Having completed its sixth full year of operations since its grand opening in 2005, Hong Kong Disneyland (HKDL) stays focused on being the leading holiday and leisure destination within Hong Kong. As one of the most admired paid places in Hong Kong, Disneyland is a vital factor in maintaining Hong Kong’s place as among the world’s leading cities for vacation visitors as well as business visitors. HKDL is among the top 15 most liked theme parks around the world, the sixth within Asia and the “first in the Greater China region based on annual attendance, according to a public report” (Surhone, 2011). HKDL will carry on marketing its top-notch attractions, amusement and interactive experiences together with accommodation, dining and retail functions to develop its business. With the “Toy Story Land launch in November 2011 and the opening of the other two themed areas through 2013” (Surhone, 2011), HKDL will carry on to revive and increase its offerings with the aim of drawing fresh visitors and produce even better recurring visitation, identifying an growing marketplace as well as aggressive situation. Current Situation Hong Kong Disneyland functions by a joint-venture business of the Hong Kong Government and The Walt Disney Company. “The park cost $5.7 billion, of which the Government injected $3.25 billion and Disney Company injects $2.45 billion” (Choi, 2010). Hong Kong Disneyland is supposed to carry profits to Hong Kong in the future. It is anticipated that HKDL will create a centre of attention for millions of tourists every year, generate thousands of employment opportunities, improve the quality of life, and develop Hong Kong's global image. The HKDL was intended to give Hong Kong a net fiscal gain of more or less 150 billion USD during the coming 40 years. However, unfortunately, troubles have appeared earlier than gains. It was unable to prove high standard of assistance with its key financier, the Hong Kong administration. It did not permit the examiners from the Food and Environment Department to enter the park to look into the food poisoning issue. The park personnel compelled them to “remove their caps before entering the park” (Choi, 2010). This dishonour highlighted the fact that the HKDL is having a lot of unnecessary authority, and is apparently expedited from Hong Kong’s legislation. Secondly, HKDL has been unsuccessful to carry continuing fiscal gains to Hong Kong. It was approximated that HKDL would draw around 3.5 million inward visitors during the first year of its operations. However, it failed to meet the objective. In addition, it is just a ‘way in’ for the Disney Company to functions its clientele to mainland. A park within Hong Kong may facilitate the company to set up its business in China. Although, if the Disney Company develop a new larger scale Disneyland in Mainland, HKDL will not be able to go up against it. “HKDL would therefore fail to compete with the Mainland Disneyland and to boost Hong Kong tourism in the future” (Choi, 2010). HKDL would fail to attain sustainable progress. Throughout the construction and development procedures, major deforestation and recuperation have hurt the marine creatures. In addition, Disneyland’s fireworks each night, additionally deteriorates Hong Kong’s poor air quality and is environmentally harmful. Furthermore, the Disney Company is not willing to use environmental friendly fireworks as it will raise its functional cost. The renovation as well as dredging of Penny’s Bay to make room for Disney has devastated the “coastline, coral reefs and a fish spawning grounds” (Choi, 2010). As mentioned by a Hong Kong newspaper, from the last part of year 2000, once Disneyland’s renovation work started, fish farmers in region of Penny’s Bay have mentioned the loss of more than “500,000 kilograms of adult fish and about three million juveniles from 260 species were killed” (Choi, 2010). Disney Company’s environmentally negligent and thoughtless strategy has made Hong Kong suffer. A few people may argue that the park did offer financial advantage, for instance, more than 15000 employment opportunities to Hong Kong. Nonetheless, it appears that Hong Kong had to suffer to a great extent before receiving getting any gains. At the moment, the park fails to improve to Hong Kong’s tourism business and brings more problems as compared to gains. There are a number of concerns which restrict the development of Disneyland in Hong Kong as well as cause an surprising performance of the theme park from 2005 till today. The Hong Kong Disneyland was aimed to prevail over the Ocean Park, a well-known theme park in Hong Kong from 1977 and then to develop into the market leader of the Hong Kong and China theme park business. Nonetheless, the concerns within administration, evaluation, market opponents, and internal as well as external environment policy are the obstacles to hinder the Disneyland to attain its objectives. External Analysis PESTLE Political With the sustenance of the ‘Closer Economic Partnership Arrangement’, which is a free trade contract with Mainland China, Hong Kong has advantages from both business and tourism. For instance, the individual visit system was launched with the goal of drawing sightseers from southern China to Hong Kong. Because of the introduction of the system, tourist influx has improved progressively with tourist onset doubling during 2004 and 2007. Hence, individual visit system has offered a better potential number of visitors to HKDL. As the Hong Kong Government would like to have this venture, it offered an outstanding arrangement for Disney. In accordance with the official HKSAR announcement, the government invested 3 billion USD. They as well gave the spot “near the new airport in Penny Bay town a 50-year lease at reasonable terms, and the rights to renew the lease for a further 50 years”. Besides, they suggested a link to the railway network “provided by the Mass Transit Railway and access via new road systems. Also, Disney has the option for 20 years to buy a site nearby in order to have further development” (Smith, 2012). Economic Hong Kong’s financial system has rapidly recovered from the fiscal turmoil with the assistance of China. Therefore, as one can notice, the number of tourists from mainland China raises considerably in 2011 and this chip in huge profits to the HKDL by diverse products and services. The positive reception of RMB makes the buying capability of Mainland people raise sharply, it causes them to raise the buying quantity in Hong Kong and HKDL can as well benefit from this assistance. Social The research carried out by Smith (2012) showed that Hong Kong has low “uncertainty avoidance” within its social set up. This proves that the customers in the country are likely not to plan their purchases. HKDL is considered to have a sturdy enduring orientation. This indicates that the customers in Hong Kong be likely to become loyal to a trade name as soon as they have been contented with its product and / or services.. Technological The Internet has turned into an admired way for promotion and client rapport. This is because of the fact that the Internet can present a great connection with enormous as well as endless potential market. This is vital because the business, mainly Disneyland is concentrating on its association to its universal market. Besides, it is as well key to consider the enhancement and expansion of the machinery industry related to theme parks. Legal Legal and parliamentary forces are generally recognized as being harmful external factors to a business. Ironically, in Disney's case, the Hong Kong Government contributed to a great extent in the HKDL project. The government invested more than 3 billion USD in the venture, built communication amenities, and provided Disney with tax assistance on cost of goods sold accounts. Besides, since the obstacles of entrance into the extremely focused industry within which Disney is functioning, opposition will find it tricky to infiltrate the company's highly diversified product and service mix. In addition, huge preliminary capital investments are essential to penetrate the industry. Environmental Hong Kong’s natural environment has constantly yielded to “human urban development” (Smith, 2012). Nonetheless, the level of the defilement in the last decade has exceeded that in any other 10-year duration in Hong Kong’s history. Such mega ventures were popular issues in the media at the time; however, with Disney’s offer to retrieve as well as expand Penny’s Bay, Hong Kong appeared set to lose yet another component of its responsive and deteriorating ecological unit. Only this time, the marks that were left would influence not just the natural setting, but also society in general and the political consistency of the Hong Kong government. Implication HKDL is dedicated towards operating the fireworks displays under most advantageous as well as protected situations. To this end, thorough systems are adopted for every display. Earlier than the beginning of every show, the fireworks supervisor, fireworks master and fireworks helpers gather and consider, with other issues, the climatic situations and the product performance from the earlier show. Only official and qualified technicians are allowed at the firing spot and fall out region before, during or following the show. Safety is essential for offering a protected setting for our Guests. Security Cast Members guard and control entrance to the property and facilities, and handle safekeeping permits for visitors, cast and parties with admission authorization. The security staffs at HKDL also collaborate closely with local law establishment. The Hong Kong law enforcement and Hong Kong fire services d have amenities as well as work force within the premises, which assist to accelerate reaction to urgent situations. Internal Analysis Value Chain The most essential element for the HKDL is to facilitate intermediary collaboration in a manner that involves all players in the value chain in a competent and prompt way. According to Porter, the value chain activities of a business could be classified under two groups. First are ‘Primary Activities’, which has direct link with producing and delivering a product and / or service. Second are ‘Support Activities’, which are not directly linked with creation but may boost the efficiency and competence. Disneyland’s primary activities include Operations, Marketing and Sales, and Service. The operation of HKDL “as to inputs are those stage actors that they hire in order to entertain their consumers, as to their outputs, it is the actual presentation itself which has been so entertaining for the consumers” (Wong & McDonogh, 2005). The information distribution of Disneyland is broad. It is not merely by its advertisement in the newspapers but as well from the ‘word of mouth’ of its clientele, which provides a good response about the business. The secondary activities are Procurement, HRM, and Technological Development. Disneyland hires Asian workforce, particularly individuals in Hong Kong as well as in Filipino. Therefore, in this way it facilitates on decreasing the unemployment issue within Asia. The core capability of the company gives it both advantages as well as disadvantages. It facilitated in knowing more regarding the activities and customs of their various local and foreign visitors. In addition, it as well allows the company to generate an image that is considered as one of the most significant part in achieving and retaining competitive gain. On the other hand, it also has a negative aspect because some part of the amenities and characteristics of the business are thought to be old, and in immense need for transformation; however, because of monetary aspect as well as effort that should be applied, it will require a little time to come up with the ever shifting demand of the overseas tourists for amusement and vacation. On the other hand, the competitive lead of the business, which concentrates on the cost benefit and differentiation benefit, is the outcome of the constant effort of the company in their association with the clientele as well as their continuous effort in process of research and expansion. Industry Analysis Porter’s 5 Forces Threat of New Entrants The threat of new entrants indicates the chance that new rivals may grind down the revenues of recognized companies in the particular business. With respect to the theme park business, the entry obstacle is extreme because of the necessity to invest huge sum of financial resources. In general, it is somewhere between 50 million USD and 3 billion USD, according to the real estate market. Besides that theme park needed more than 50 acres of land for a complete expansion; other can make use of 10,000 to 30,000 acres. The said issue is key since Hong Kong has a high price level for real estate. This is as well linked to the fact that the site of the HKDL is an extremely significant aspect. Threat of Substitutes All businesses, operating within a particular industry, challenge others of the same industry that creates the substitute products as well as services. Substitutes restrict the possible profits of a business by the method of putting a cap on the prices of the companies in the specific industry can beneficially charge. For Disneyland in Hong Kong, the threat of substitution is comparatively small as the key substitute for the service is other features of leisure and tourism industry, for instance, sport and casino business. On the other hand, since of the reputation of the theme park industry in addition to the increasing amount of Chinese visitors, the industry is not that influenced. Bargaining Power of Suppliers Suppliers can apply a bargaining power on companies within an industry by intimidating to increase prices or even decrease the value of acquired supplies and services. In the case Disneyland, the suppliers does not have that much control due to the recovering and developing business of the theme parks’ equipment, that allows the technology trade between the various local as well as global players mainly within China. Other than that, the Airline industry, which is the key supplier of tourists for the HKDL, is also facing effect of competition in addition to the rising claims for low-priced travel packages. Bargaining Power of Buyers The buyer (or the visitors and tourists in case of HKDL) have a medium or mediocre power on the business since the products and services of the company is essential for the clientele. This is because of the fact that enjoyment is thought to be an important requirement of every family in Hong Kong, and also in the mainland China market. In addition, the said business cannot be changed by other alternative. Competitive Rivalry within the Industry Rivalry between the already present competitors takes the shape of process of “jockeying for the position” (Magretta, 2011). Businesses generally execute various approaches, such as, pricing competition, publicity battles, and product/service launch in addition to improved customer services. It is significant to think about the lack of differentiation that is why the clients’ selection supported mainly by the value and service, as a result creates stress for the extreme price and service rivalry. This can be witnesses in the theme park business of the country; as a result of high threat of competition, various competitors are executing special plans as well as taking actions, for instance, overhaul and launch of innovative attractions with the aim of acquiring the attention of the clients. Competitor’s Analysis The two major competitors of HKDL are Wetland Park and Ocean Park. Wetland Park is a conservation, learning and sightseeing facility that is situated in the northern part of Yuen Long. It has “10,000 square meter large visitor centre, Wetland Interactive World and a 60-hectare Wetland Reserve” (Ng, 2009). The major benefit of Wetland Park is that it provides a special form of service as compared Disneyland. The major objective of the business is to promote public responsiveness as well as perceptive about the values of wetlands all over the East Asian Region. The guests will be provided with an option to experience the wildlife with a number of animals that will facilitate them to be close with natural world and observe see various animals within the natural setting. On the other hand, the park will not be able to meet the requirements of those guests or tourists that are seeking thrills and enjoyment that can be experienced in different rides and parts in Disneyland. Another major competitor of Disneyland is Ocean Park. It is among the most important amusement parks in Hong Kong, and also in the world. Started in 1977 as China’s single local park with the legacy of providing family, enjoyment and fond reminiscences, it was selected by the people of the country as their ideal scenic spot during the year 2005, a little while before the start of HKDL. It was as well ranked seventh among the ten major amusement parks around the globe. Ocean Park joins the aspects of leisure, learning and preservation in their services. Its prime focus is on maintaining a strong financial position, while providing the visitors a varied choice of activities at economical rates. It is there for the benefit of the community and struggles with the intention of delivering the best standards of wellbeing as well protection and safety of visitors (Esty, 2005). The Ocean Park of Hong Kong is part of the emergent international business of amusement park round the world, as well as part of the tourism industry. The company is focused on international market, and profiting from the recuperating tourism industry of China, aiming at their visitors, irrespective of their age. The key target of Hong Kong Ocean Park is to be the global leader in offering outstanding guest experiences within a theme park setting that bonds individuals with the natural world. Objective The major objective of HKDL is to inspire contentment and offers an outstanding experience by means of inventiveness, great management and enthusiastic people. Hong Kong Disneyland provides the enchantment of an excellent leisure experience to individuals from every age group. Hong Kong is spot of the fifth Disneyland in the world and the city's landscape as well as lively, diverse traditions has encouraged the management HKDL to generate a range of amusement facilities that are exclusive for the Hong Kong. So far, Hong Kong Disneyland has received millions of visitors, both local as well as global. HKDL is a powerful addition to Hong Kong's portfolio of family centric attractions, and from its launch, Hong Kong has witnessed regular boosts within family tourism. During 2011, the city's overnight tourists, accompanies by their kids, increased by almost 25 percent as compared to 2010. Competitive Strategy When a given business maintains its revenue in a way that goes beyond the standard for its industry, the business is considered to have a competitive lead against its opponent. This can be observed in the present position of HKDL, on its direct competitors, which are Wetland Park and Ocean Park. Hong Kong Ocean Park is applying the cost benefit, in which it presents economical ticketing system for adults and kids both. Other than to that, HKDL obtained a better spot in comparison with Ocean Park or Wetland Park. In addition to that, HKDL also presents a differentiation gain as it is thought to be larger as compared to its competitors, hence, “enabling the first organization to offer more and new features and shows than the second organization. It also offer different features and services compare to its competitors primarily the Disneyland, because it focuses on showing the reality regarding the nature, while Disneyland focuses on fantasy” (Fung & Lee, 2005). The status of the business is its most significant asset. Eventually, status has fiscal value to the business, as it will be hard to imitate. Competitors cannot just copy the exclusive attributes as well as intricate practice that created the status. The fact that the company features recreational aspects and the healthy environment, gives it a status that is close to life. This is essential because of the rising knowledge of the people about the various natural as well as ecological issues, mainly global warming. Growth Strategy Before Disney’s Hong Kong theme park plan, Disney theme parks had an extensive record of insistent market extension. During 1955, Disneyland started in Anaheim in Southern California. Only after 15 years, during 1971, the company started a second park, Disney World in Florida. With two big theme parks within the United States, Disney then started to search for prospects at some other place. During 1983, the primary foreign Disney theme park launched in Tokyo, and during 1992, Disneyland Paris, known as Euro Disney at that time, launched in France. The company depends on this formulated policy to obtain continuous revenues. By launching Disneyland in California during 1955, Disney successfully drawn clients from the western region of North America. Following the market saturation, it shifts its focus towards Florida. At the same time, Disney developed its existing services at Anaheim. This two-pronged policy - developing existing parks whereas simultaneously penetrating fresh territories - was Disney’s trademark approach in getting worldwide success. In other words, repeat recurring visitors were attracted to the earlier one by the innovative park improvements, and first-time visitors were drawn to the latter mainly due to their accessibility in a formerly unexploited market. “Feeding on the success of its two flagship American parks, Disney took its theme parks abroad” (Tsang & Lee, 2011). In acknowledgment of Japanese affinity as well as allure for American customs and animation on the whole, it launched Tokyo Disneyland during 1983. The timing of the launch was perfect because at that time the Japanese financial system was flourishing by the economic boom of the 1980s. The outcome was unparalleled revenues, which furthered Disney’s desire for international development. With the likely creation of the European Union, Disney approached Europe for its subsequent theme park. Unfortunately, for the business, it had ignored crucial social, fiscal, and administrative concerns in its European operation. The outcome was monetary disaster. The situation was so severe that the CEO of that time threatened to wrap up the operations during 1994. However, a little while before the stated deadline, a contingency plan formed, and all parties, with the exclusion of a small percentage of shareholders, profited. This mistake did not prevent Disney from its global growth efforts. In fact, the company carried on to talk to governments all over the world, together with those at home. To accomplish its aspiration for an existence on the Eastern Seaboard, it approached the state of Virginia with a suggestion. In spite of powerful public disagreement, however, Disney eventually withdrew its proposal. The company then tried to approach the Australian government with its offer of a theme park in Sydney. Once again, the people did not approve, and conciliations ended quickly. In Hong Kong, the company started the theme park in 2005. Here, its target market includes mainly of family centric Asian visitors, mainly those from mainland China, Taiwan, and Southeast Asia. During 2009, mainland China accounted for 35 percent of tourists’ influx, and Taiwan and Southeast Asia for 60 percent. At the time of HKDL’s establishment, Hong Kong already benefitted from flourishing business and tourism industry, but the government thought that the latter would be refreshed by the formation ‘family tourist’ niche, which was absent at that time. At the time of Hong Kong Disneyland’s launch, the mainland Chinese financial system was thriving, and its residents were getting formidable buying power. China’s gross domestic product was rising at an unparalleled rate of 10 percent per annum, reaching upwards of 1 billion USD during the first part of 2000 alone, making it the newest component of the world’s seven leading financial systems. Besides, China’s purchasing power parity was ranked second in the world, following only that of Unites States, causing a rise in outbound tourism. In recognition of this trend, the Chinese government loosen up a few of its travel constraints. Evaluation and Control With revenues going down to20 percent in its theme parks, the Disney Company has to expand globally with the purpose of growth in these rough financial conditions. Therefore, it is looking towards Shanghai China as its the next spot for a Disney-inspired theme park. If developed to full capacity, the new park could prove to be a tough competitor for Disney World Florida, which draws more than 40 million yearly guests. The park will cost more or less 4 billion USD to build and Disney will own around 40 percent of the park in Shanghai. The remaining will be owned by a holding business created by a conglomerate of Chinese businesses chosen by the government. This park will set Disney on the correct trail to meet its objectives of producing around 50 percent of its yearly revenues from foreign sales. At the moment, global sales indicate about a quarter of profits in addition to operating income. The company’s aims for Shanghai are huge, in proportion to the prospective market of 1.5 billion Chinese. The park will incorporate a combination of shopping facilities, hotels and a “Magic Kingdom-style theme park on 1,000 acres in the Pudong district” (Dong, 2011). The theme park is projected for 100 of those acres. It will be a somewhat bigger as compared Disneyland in Hong Kong, but more or less of the similar size as Disney's flourishing parks within Paris and Tokyo. Eventually, the company aims to develop the park to over 1,700 acres, and raise capacity to competitor Disney World in Florida. The company has been in conciliations with China for about 20 years, but the idea of generating a huge number of jobs during the existing financial situation was what made this covenant possible ultimately. Of course, opening a park is not Disney's single strategy for growth and expansion of its functions. The company would like to utilize the park to publicize all of Disney's products, together with DVDs as well as video games. Some raised concerns that this upcoming park from the same company would take customers away from HKDL; however, that is comparatively small and cannot deal with its existing crowds. Besides, mainland Chinese should acquire a visa to visit Hong Kong, which restricts the park's demand. Hong Kong's secretary for commerce and development told Bloomberg that China's population offers an adequate level of market potential for both Disney theme parks. “New international Disney parks probably won't make much of a dent in traffic to the company's U.S. parks. For example, Tokyo Disneyland, which got 27.2 million visitors in the fiscal year that ended March 2009, found 95.8 percent of its visitors were Japanese, and most were people who could not afford a trip to the U.S.” (Dong, 2011). Disneyland in Paris has been functional from the year 1990s and it surely has not affect traffic at Disney properties within the United States. The French park had almost 16 million guests during 2011, and, as a result, new hotels are developed for the adjoining region. At the moment, Disneyland Paris is Europe's most admired leisure point with more visitors as compared to the Eiffel Tower and the Louvre combined. As long as Disney cautiously chooses locations that do not challenge one another, there is always a chance for growth. While turnout at United States’ Disney theme parks has held sound - regardless of huge traffic drops at other U.S. theme parks - they may have reached at their maximum potential here. Probably Disney cannot grow extensively without developing its park's trade name globally. References Choi, K. W. (2010). Remade in Hong Kong: How Hong Kong People Use Hong Kong Disneyland. LAP LAMBERT Academic Publishing. Dong, J. (2011). ‘Cooperation Pattern and Coordination Mechanism between Hong Kong Disneyland and Tour Operator’. Journal of China Tourism Research. Vol. 7(3), pp. 310-325. Esty, B. C. (2005). ‘Structuring Loan Syndicates: A Case Study of the Hong Kong Disneyland Project Loan’. Journal of Applied Corporate Finance. Vol. 14(3), pp. 80-95. Fung, A. and Lee, M. (2005). ‘Localizing a global amusement park: Hong Kong Disneyland’. Continuum: Journal of Media & Cultural Studies. Vol. 23(2), pp. 197-208. Magretta, J. (2011). Understanding Michael Porter: The Essential Guide to Competition and Strategy. HBR Press. Ng. J. (2009). Paradigm City: Space, Culture, and Capitalism in Hong Kong. OUP. Smith, D. (2012). 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