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Kidzania: Case Analysis

International Corporate Strategy


Prof. Franois Bernard Duhamel

Abdi Martinez Guillen


Zaira Hernandez Munoz
Melina Martnez Romero
Rodrigo Xavier Pacheco
Samuel Mejia Aguilera
Ftima Prez Alonso

October 5th, 2016

1a) The Bargaining Power of Consumer in the industry is high because the
consumer can switch their channels due to the globalization which makes it easier
for them to access other sources of entertainment for children. Also because of the
availability of a great variety of alternative sources of entertainment. This
bargaining power is also due in part to the economy in that if low cost alternatives
are available, more families are likely to choose them. The availability of
substitutes makes the bargaining power of consumers, as the ultimate purchaser of
entertainment goods and services, increase. Consumers have a very wide
selection of programming to choose from and ease of access through increased
online programming and sources of entertainment. Increased globalization also
adds to the bargaining power of the consumer. Threat of New Entrants is low if we

consider the high sunk costs, the high capital requirement and the difficult access
to distribution. This industry is seen to have established companies and
conglomerates with significant presence in media networks and filmmaking, thus
creating a significant barrier of entry.
The threat of new entrants is so low, in fact, that industry insiders are
concerned that new, independent producers are prevented from having their voices
heard and getting their new, innovative products into the market. The evolution of
internet distribution channels is making this less of a concern with its accessibility
and immense distribution opportunities. The competitiveness within the Industry is
relatively high. It is quite evident how highly fragmented the industry is. Also the
high fixed costs, the highly perishable products used and the highly diversified
rivals make the environment very tough and competitive. The bargaining Power of
Suppliers is medium low due to the increasing number of content providers. The
threat of Substitutes is quite high. They are the reason of the high bargaining
power of the buyers, and we can attribute this threat to the film Industry, technology
and internet (tablets) and other cheaper or easier alternatives.
Considering who the customers are and what do they want we can
determine that the key factor of success in the children entertainment industry are
basically having an innovative concept, being family oriented, secure and reliable,
and well located facilities in order to have a good accessibility. Besides taking into
account what is needed for continuing in the business, companies have to
establish in large cities with a huge market. The quality of the facilities has to be
good in order to be attractive for customers as well they need to have sponsorships
to operate smoothly.
1b) The business model of Kidzania is based on a value or differentiation strategy
where by the company charges a bit more balancing it with the experience and
perception that the people have on a theme park as Kidzania. A more detailed
outline of the business model has been included in the format of the business
model canvas. The company is mostly composed of franchises which also makes it
easier for the company to expand as investors decide to adopt the park and
agree to the conditions which leads to the construction of the park. Another aspect
could be that the model used by the company is based on the success it had in
Mexico and this has had both a positive and negative impact.
1c) In simple words, the competitive advantages of Kidzania are the following: the
locations that it is found are very strategically placed. Malls and shopping centers
are key to the success of the6. company and this part was central part of the whole
concept even before it started. Another could be the presence of sponsors not only
through the capital they contributed but also in the activities involved in the facilities
for example being a pilot or being part of a supermarket were managed by the

brands in this case American Airlines and Walmart. This type of sponsorship is not
common and we believe it is a characteristic of Kidzania. The concept of
Edutainment is also very particular to the company and they have developed the
concept so well that the parks must have certain characteristics such as being part
of the network of the Kidzania nation. This may also be applied to the fact that the
facilities are unique and of high quality making it hard to replicate even if the
concept is the same. These are the most noticeable advantages that we found.
This section will be complemented with a table of the VRIO analysis so that this
question is answered in further detail and in a simplistic way.
1d) The success of Kidzania within Mexico is very big and has a big acceptance
from the population, specially by the kids. The concept and the innovation was very
unique because it let the kids to act like adults, so this is one of the reasons why
thousand of tourists visit the park every year. By 2006, the company choose Tokyo
as their first international market. Here is important to mention that according to
Papageorgiou (2013) companies go international after they started locally and
grew from the foundation; the case of Kidzania, it has the benefit of being first well
known as a first mover advantage inside Mexico because it has a unique model
business, also this could be applied overseas because it has not direct competitors
in the countries where is located.
On the other hand, the cultural, administrative, geographic, and economic
distance plays an important role in the internationalization of the company:
language barrier or gender roles are important roles in the cultural distance. For
the administrative distance, the different currency, the different types of
government and the different support from governmental institutions are very
important. Also, the geographic distance is very important because the location is
not strategic for a broader reach. The economic distance like costs of maintenance
and labor are also important for an international company like Kidzania.
Is important to say that Kidzania pursue a global strategy by competing in all
markets, providing the same product for each market, has a strong centralised
control, it identify customer needs across international borders, and do value
adding activities where they can achieve a lowest cost.
2) After all the data we have collected, the main recommendations that we have for
the company are that they target the main segment, since they are limiting the age
of the kids that can assist to the parks, also they need to have a business plan
model in order to convince the sponsors willing to assist the idea, also it is
extremely important that the company improves its brand awareness.
2a) Although thats why we considered that KFS shows all the advantages of
building a park, such as: infrastructure, security, amusement for the kids, building

stronger relations among families, accessibility meaning that the facilities will be
located in places of convenience where kids will be able to play, also in the 5
forces analysis we suggest that since they are not a unique brand, because as we
know in USA there are many entertainment parks where kids can go. Therefore
Kidzania must become more efficient, more productive in order to compete with
substitutes and rivals.
2b) One reason why Wannado City failed was to believe that future earnings would
be the same as those of Ciudad de los Ninos in Mexico City. Another reason is that
the place where it was located was inadequate for the number of people that are in
that city, also that is too small for this project.
The sector of the market that is targeted was not adequate to cover all the
costs that the company had to face. Children could not go to the park in the middle
of the week because of school and because the location was not a vacationing
place all year round, then this caused the park to have inactive times. Most
customers going to this park only go on weekends and given that input costs were
not competitive with their substitutes such as museums, zoos and others similar to
these. This consequently resulted in the company being unable to cover their fixed
costs.
Lack of enough sponsors was also a factor that affected this park because
they did not have enough investment to have constant innovation and create better
future flows. These investments that the park needed can take place by promoting
other types of attractions in the park. Also not have a good advertising campaign
caused that the potential customers would not be aware of the parks existence
and attractiveness.
2c) The main competitive advantages for Kidzania, entering the new market, are
that the company has their own unique facilities, where kids can play and have a
good time, living a real-life experience. Therefore, the location of the facilities in
commercial centers make the company more attractive since there are more than
207,000 malls around the US (Statista, 2016) Parents can be granted that their
children will have a great time, and they can leave them playing for long periods of
time, since all activities are supervised and every kid is being taken care off.
One recommendation for the company entering the new market will be that
they should consider high quality standards in the facilities, since competitors have
invested a lot of money in their parks, considering security and safety for the kids
and community involved. Kidzania should also make a strong advertising campaign
since nobody knows the concept of the company, establishing the facilities in the
biggest cities will help the company to gain more profit and more purchasing power
parity.

To conclude, entering the US market will be due to the investment that


sponsors give, and that could be one of the biggest threats for Kidzania, since
investors need to believe in the project, we recommend that the company do a
business plan where they established a financial analysis including: initial budget,
advantages, disadvantages and the gaining of the company in the long run. With a
strong and specific business plan investors can be convinced or not to accept the
project.
References
Heskett, James L., Javier Reynoso, and Karla Cabrera. KidZania:
Shaping a Strategic Service Vision for the Future. Harvard Business School
Case 916-402, August 2015. (Revised August 2015)
Ghemawat, P. Distance still matters. Use the CAGE framework for
analysis of global expansion (2001)
http://mbi.dirkjanswagerman.nl/static/files/MBI/Module%2021/Distance
%20still%20matters.pdf Read on October 4, 2016
Where Wannado City Went Wrong. Biz Journals. (2010)
http://www.bizjournals.com/southflorida/blog/2010/11/where-wannado-citywent-wrong.html Read on October 4, 2016
Where Child Labor is Childs Play. Forbes Online. (2004)
http://www.forbes.com/forbes/2004/0920/205.html Read on October 4, 2016
Statistics of commercial centers, 2016 USA. Read on October 3,
2016
https://www.statista.com/statistics/208059/total-shopping-centersin-the-us/