Walt Disney Company Insight & Competitive Analysis

Theme Parks & Resorts Division

By Salman Abdulaziz

COMPANYS EXTERNAL ENVIRONMENT

KEY ECONOMIC & INDUSTRY VARIABLES
Market Size
The global attractions and amusement industry was worth $24B in 2010.
341M visitors visited US theme parks in 2007 creating revenues of US 12B.
185.6M visitors attended the Top 25 theme parks in 2009
Market Growth
Global theme parks industry is expected to reach US 29.5B by 2015
US amusement and theme parks grew 34.8% between 1990-2007 and is expected to grow 34% between 2011-15.
123.6M attended the top 20 theme parks in North America, an increase of 1.8% from 2009.
189.1M attended the Top 25 parks in the world in 2010, an increase of 1.9% from 2009
Scope of Rivalry
Theme Parks
Walt
Disney

Walt DisneyCompany

Revenue 2010

966.6M

Merlin
Entertainment
Group
800.8M

Parques
Reunidos

Six Flags

Universal
Studios

516.8E

976M

N/A

PORTERS 5 FORCES
Competition: Intense
Walt Disney competes with several large players such as Merlin Group, Universal Studios and
Parques Reunidos along with some local regional players.
Substitutes: Low
Substitutes include zoos and museums which dont match the theme park experience.
Threat of entry: Medium
It takes significant investment to enter the market. Universal Orlandos Simpsons Ride,
Hollywood Rip Ride Rocket costs 275M and Harry Potter Wizarding costs about $310M.
Supplier Power: Medium
Suppliers include equipment manufacturers, construction companies and vendors.
Bargaining power for technology suppliers and construction companies is medium as
technologies are capital intensive and require support and maintenance. Food, toys and
clothing vendors have low power.
Buyer Power: Low
Buyers are end-consumers. Their power is low as prices are controlled by theme parks.
Conclusion
The industry requires significant investment to enter but attracts some competitors due to high
revenue generating opportunities.
COMPETITIVE ANALYSIS
Theme Parks
Walt Disney
Visitors in 2010

120.6M

Merlin
Entertainment
41M

Universal
Studios
26.3M

Parques Reunidos

Six Flags

25.8M

24.3M

KEY DRIVERS FOR THE INDUSTRY

Product Innovation
Different theme parks compete to provide unique movie themes and provide new rides never
experienced before to attract fans. In 2010, Disney launched an award-winning night-time
fountain spectacular show called Wonderful World of Colour which took five years to make. The
show helped attract destination park visitors during recession and maintain attendance in 2010.
Cedar Fair will be investing $75M in capital improvements which will also include 300-foot tall
swing rides at its four largest parks including Canadas Wonderland.
Marketing Innovation
Since visitation by tourists in Orlando reduced by 9% in 2009, Disney parks maintained healthy
attendance by building relationships with customers and focusing less on revenue. They
compensated for lower tourism levels by increasing regional attendance and repeat visits
through special passes and discounts.
Globalization
In 2008, the number of visitors to worlds top 25 theme parks is higher than the number of
tourists who visited Spain, China, Italy and UK combined. 49% of the visitors who attended
Disneyland Paris were international tourists. Major US companies have 13 parks under
development in international markets including Universal plan to expand in South Korea. This
makes global availability and mobility of resources necessary. Managers, operations staff,
planners, architects, engineers and designers travel abroad to accomplish these projects.

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Customer Preferences
Along with deals, parents also they also need ways to reduce the complexity of theme parks
which can be large and confusing. According to a study, customers put emphasis on staff
members, cleanliness, safety and security and 37% visitors in US stated that they would be
willing to pay extra to avoid long lines.
Competition
In 2005, more than 100 new attractions were launched or announced worldwide. Competitors
are launching new theme parks to capture market share. Wild Adventures Theme Park will
invest its 4M Splash Island Water Park Expansion with the addition of new family rides five
stories high and 9 VIP cabanas increasing the total attractions in Splash Island to 15. Danish
based Theme Park Group is planning to launch a theme park in Spains Majorca Island in the
Mediterranean.
Value Chain Analysis
Construction
companies are hired
to create theme
parks.

Manufacturers
provide technology
and equipment for
amusement.

Suppliers provide,
food, clothing and
toys to be sold in
theme parks.

Corporate clients and

end consumers pay
for events, hotels,
vacations, cruises and
theme parks.

Some companies like International Theme Park Services provide services in developing,
operating and enhancing theme park facilities.

 The Walt Disney Imagineering Unit designs and creates concepts for new theme parks and
attraction resorts
Walt Disney Theme Parks Division creates destination theme park globally. Revenue is
generated through selling tickets (60%), food and beverages (17%) and merchandise (10%).
Conclusion about the Attractiveness of the Industry
The industry is moderately attractive. It requires significant investment to enter but attracts
some competitors due to high revenue generating opportunities. The average price of one day
ticket is $25 which when multiplied by the number of members in a family and added to
purchase of foods, clothing, toys and premium tickets provide significant sales.
Weighted Key Success Factors
Key Success
Weighted
Factors
Factors
Advertising
Quality Experience
Product Innovation
Customer Service
Global Presence
E-commerce

.2
.14
.12
.1
.15
.15

Walt
Disney

Merlin
Entertainment

Universal
Studios

9
8
8
8
8
7
6.93

7
7
6
7
7
6
5.75

7
7
8
7
6
7
5.99

Parques
Reunido
s
7
7
7
7
6
6
5.72

Six
Flags
7
6
8
6
5
6
5.45

Walt DisneyCompany

Disney is the industry leader as it has a more globalized business than its competitors. It
advertises aggressively and constantly innovates to maintain market share.

COMPANYS RESOURCE & COMPETITVE POSITION

CORPORATE STRATEGY
Walt Disney provides magical experiences in its theme parks and advertises them aggressively to
attract customers. It stays global to be the market leader and constantly innovates new
products to respond to changing customer tastes. The revenue is generated from sales of
tickets, hotels, merchandise, food and beverages along with sales and rental of vacation club
properties and cruise vacations.
FUNCTIONAL STRATEGIES
Partnerships
Disney completely owns and operates the theme parks in US but uses the partnership model to
expand in other countries. It has 51% ownership in Disneyland Paris and 47% interest in Hong
Kong Disneyland and receives royalties from Tokyo Disneyland which is owned and operated by
a local Japanese corporation.
Alliances with Movie Studios
Walt Disney partners with film-makers to provide unique and exclusive movie themes. It
partnered with James Cameron and Fox Entertainment to have mysterious universe of Avatar at
its theme parks. The agreement gives Disney exclusive rights to have franchise avatar theme
lands globally. Construction for the project will begin in 2013.
Flexible Pricing Strategy
Disney used demand based pricing and internet tickets to drive sales. Prices are adjusted when
parks are full. Increasing prices by 10% and losing 5% customers increases profits and prevents
overcrowding. Internet selling is beneficial as tickets and coupons are easily sold and customers
dont feel the expense when they dont pay in cash. They use customer relations tools to learn
about their customers and their needs to provide personalised services and special offers.

Walt DisneyCompany

COMPANYS VISION
To have a magical park where children and parents could have fun together.
MISSION STATEMENT
To be one of the worlds leading providers of entertainment. Using our portfolio of brands,
Disney seeks to develop the most creative, innovative and profitable entertainment experiences
around the world.

COMPETITVE ADVANTAGE
The company is able to leverage its multiple divisions to promote its products and create new
revenue generating opportunities. Disney can produce a movie using its Studios division,
promote it through the Media Networks division and use it to create themes and toys for theme
parks and consumer goods division.

FINANCIAL ANALYSIS
Gross Profit Margin
Operating Profit Margin
ROA
ROE
Current Ratio

2007
19.23%
16.1%
7.7%
9.56%
0.99%

2008
19.67%
6.48%
7.08%
8.61%
1.00%

2009
15.76%
13.29%
5.72%
5.86%
1.33%

2010
17.6%
12.24%
6.23%
10.96%
1.11%

Gross profit margin has shown a gradual decline indicating that percentage of revenues
available to cover operating expenses is lower than before. The operating profit has decreased
by 3.86% and has been consistently decreasing indicating a decline in profitability of current
operations. The ROA has a small decline which is usually common in the industry with ongoing
capital investments. The ROE indicates a stable dividend return for shareholders. The current
ratio of 1.0 and above in the last 3 years indicates Disney is able to pay its liabilities. Overall, the
company is financially stable.
SWOT ANALYSIS

Walt DisneyCompany

Strengths
Walt Disney is the industry leader. 120.6M visitors attended Walt Disney in 2010. It has
Europes largest theme park Disneyland Paris which received 15M visitors in 2010, 2,32M
more than 2008. It is also the most globalized theme park company with 10 of the Top 25
theme parks under its belts.
Creative Advertising. Disney placed 7th on the Ad Ages 100 Leading National Advertisers
report with spending of 124M on parks and resorts in 2011.
Solid Management Team. The senior employees possess a wealth of experience to lead the
company. Chairman of Disney Parks and Resorts Thomas Staggs presides over the vacation
and travel business which includes 11 theme parks at five destination resorts in United
States. He played an important role in a wide variety of Disneys strategic and operating
initiatives and corporate transactions including the acquisitions of Capital Cities/ABC, Pixar
Animation Studios and Marvel Entertainment.
Weaknesses
Disney has ignored the key decision makers the parents who purchase the tickets by
focusing only on the young audience. Parents visit theme parks to for the sake of their
children but do not have any desire to go for themselves.
Disney rides are not as high or as fast as their competitors Cedar Fair and Six Flags.
Opportunities
Even though Americans are still budget conscious, they are becoming more comfortable
spending on travel. Growing interest in traveling and vacations, along with promotions
offered by theme parks, will create growth in the future.
33% respondents mentioned they buy tickets online which provides theme parks to shape
the visit before it begins. Theme parks can offer coupons along with tickets to increase
spending.
Growing demand in Asia. 83.3M attended the top 15 Asian theme parks in Asia in 2010, 7.3%
increase over 2009. The attendance in Disney Japan and Hong-Kong Disney increased by
800,000 and 600,000 in 2010 respectively. Furthermore, Shanghai government and Disney

announced a detailed agreement to launch a Disney theme park in the Pudong District of
Shanghai by 2016.
Growing demand in Latina America. 13.3M visitors attended the top 10 theme parks in
Mexico and Latin America, 8.2% increase from 2009 and 20.5% since 2006
Disney Tokyo fed and sheltered many customers stranded in the park during the earthquake
which allowed them to build customer loyalty.

Walt DisneyCompany

Threats
Risk of park related accidents. According to US Consumer Product Safety Commission 78 site
related injuries required overnight hospital visit in 2003
Disneys global presence means it has repatriate profit from different currencies exposing it
to foreign exchange risks.
Theme Park insurance is expensive. It depends on various factors like revenue, number of
rides and previous loss experiences of different parks. Amusement parks are covered under
general liability insurance which includes slips and falls to ride malfunctions. Due to high
risks, few insurance are willing to undertake the risks.
Strong competition in Europe. Merlin Entertainment Group is the market leader in Europe
and Europa-Park attracted over 4M visitors in 2010 with more than 20,000 visitors in peak
days. It also held Euro Dance Festival and Miss Germany 2011 intensifying the competition
for Disney.
Intellectual property is necessary to provide unique themes and experiences. The
unauthorized use of intellectual property rights can increase the cost of protecting it.

COMPANY ISSUES
Product Innovation: Consumer tastes and preferences change with time which can potentially
reduce demand for existing products.
Economy: Poor economy, political climate, adverse weather conditions, natural disasters, health
concerns and terrorist attacks can negatively influence demand.
Competition: The theme park industry is highly competitive facing competition from large global
players and small regional parks.

PRODUCT INNOVATION
Theme parks have to create new attractions to attract customers on a regular basis. 39% US
visitors say they would visit a theme park to try new rides or attractions. The lure of new rides,
shorter lines and grown-up entertainment help entice future theme park visitors. Disney is
growing slower than its competitors as its innovations are not matching its rivals. Teenagers
who are 3 times more likely to visit a theme park compared to adults have shown interest in Six
Flags as it provides some of countrys tallest, fastest and wildest heart pumping rides. Six Flags
also introduced the Terminator Salvation Ride where riders are transported into a deserted
future to fight along a post-apocalyptic legion of soldiers. As a result the revenue for Six Flags
grew by 77M or 9% to 976M in 2010 due to in-park sales, admission ticket sales and sponsorship
fees. Furthermore, Universal Studios Orlando created the award-winning Wizarding World of
Harry Potter which met the expectations and created an immersive guest experience. It
attracted 15% of the American teenagers who visited theme parks and increased the visitor
attendance by 1.7M, more than Disneys global growth of 1.57M visitors in 2010. The new Harry

Walt DisneyCompany

Potter theme in Universal Orlandos Wizarding and King Kong 3D in Universal Hollywood will
attract more teens in the near future. Also, Universal is also trying to address the needs of key
decision makers the parents. In partnership with American Express, Universal will provide a
new air conditioned lounge for customers who purchase multi-park tickets or annual passes
through American Express credit cards. This will allow people to relax and recharge with chilled
beverages and light refreshments while kids enjoy the theme park. Since 29% of American
consumers mentioned they would be willing to pay extra for entertainment geared towards
adults such as concerts, comedy clubs and bars, this will address a market need. Disney needs
further innovation which can be challenging as consumer preferences changes with time and

wrong predictions on consumer tastes can result in losses. Also, creating new themes can cost
between 75M-300M which increases capital requirements and may require parts of the park to
be closed for a period.
ECONOMY
The International theme park and attractions industry suffered due to global economic
recession. Number of theme park visitors for Top 25 theme parks worldwide declined by .7M to
186M in 2008. Weak tourism in Los Angeles and Orlando caused double digit declines in major
theme parks in 2009. European theme parks which depend on visitors taking long vacations
were impacted negatively and the total attendance for the top 20 European theme parks
decreased by 1.8 percent from 2009. Also, unemployment which hovers in US (9%) Euro zone
(10.3%) and Greece (18.3%) with rising oil prices increasing the cost of travel impacts
profitability. As a result more and more consumers have preferring low-cost regional parks,
zoos, museums and staycations to recreate within a budget. Furthermore, incidents of civil
unrest, natural disasters and terrorism reduce the perception of safety in theme parks by 30%.
Earthquake in Japan resulted in closure of Disneyland Tokyo for one month and since consumers
lost their properties and savings it will take some time for them to seek recreation again. Also,
Attractions in Latin America and Mexico were impacted due to recession and H1N1 virus in
2009. Disney had to respond by aggressive discounting and advertising to maintain sales in
challenging periods which reduced their margins and increased advertising costs.
COMPETITION
Walt Disney is among the top 8 theme park companies which had 20M+ visitors globally in 2010.
However, Disneys growth rate is lowest among major competitors and below the average
industry growth rate of 2%. It had the lowest growth of 1.3% compared to 11% for Universal

Walt DisneyCompany

Studios, 8.1% for Cedar Entertainment and 6.5% for Merlin Entertainment. Disneyland Hong
Kong is the only Disney theme park in the list of Top 10 fastest growing theme parks of 2010.
Furthermore, Disney has a weak presence in Europe where it competes with 300 amusement
parks and Merlin Entertainment leads the market with 41M visitors compared to just 15M
visitors for Disney France in 2010. Also, it does not have any theme park in Mexico and Latin
America where Six Flags and Parques Reunidos attracted 2M and 1.1M visitors in 2010.