Bargaining Power of Supplier
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,
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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.
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The buyer group demand is higher suppliers
Figure 5. Disneyland in Anaheim
During special events, it’s common to see thousands of people on Main Street, U.S.A.
at Disneyland in Anaheim. Here, they celebrate the park’s 60th anniversary with a
24-hour party that began at 6 a.m.
There are fun facts about Disneyland:
● 0-25 minutes: 0-25 minutes is the average waiting time in line in low attendance
day in Disneyland. But this is rarely happened, and you might have to wait for an
hour + often.
● Forecast rain: It might be larger attendance days before rain forecasted days.
● Busy days: Week days are the least busy days. Saturdays are busier than Sundays.
Long Weekends can be 3 times busier.
● Discount ticket: Disney rarely offers discounts on single ticket. Because Walt
Disney focuses on middle class, its prices are reasonable. The price changes are
based on season which is high when the market is good and reduced during low
season. For Knott’s and Six Flags, their tickets are lower than Walt Disney (in
range of $40-50 ). However, Six Flag has discounts frequently (bringing Coke
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cans to get 50% off), and Knott’s ticket price promotion can be found at
supermarkets. Unlike some of its competitors, Disney not often give discounts on
single ticket purchases. They said that when the lower price, the quality is also
affected.
● Raising pass price and parking price: Some people speculated that Walt Disney
ticket price raising is needed way to reduce that large crowds during weekends
and hot season the recent ticket increases are a much-needed way to reduce the
large crowds that occurs at Disneyland during some weekends and high-demand
seasons.
Parking prices at the Disneyland Resort also raised. New prices for annual
passholders increases from $169 to $199. Theme park parking raised $1, to $18.
Downtown Disney now only offer two hours of free parking, the hourly parking price
now is doubled from $6.
Figure 6. Queue time for major attractions and visitors
This graph is for US Disney Resorts, which include Disneyland, Disney
California Adventure & Walt Disney World, Florida (WDW includes: Magic Kingdom,
EPCOT, Disney Hollywood Studios & Animal Kingdom) and is very generalised. The
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Tokyo Disneyland, Disneyland Paris and Disneyland Hong Kong theme park
attendance patterns will differ due to holidays that don’t match with the USA.
The products is differentiated: Disney park and resort has their own
spaciality and so are competitors. The feeling and experience is not the same for every
kind of theme park so may be visitor will consider before making decision.
Many switching costs on the part of the buyer: althought there is different
among substitues but switching cost is not very high, because for the entertainment
service, different experience is necessary.
Summary
The amusement park industry is a mature and profitable market in western
countries. Most of Disney’s established competitors are in North America. The
company also faces competition in China where they recently opened a new park in
Shanghai. The threat of substitutes to amusement parks is relatively high however
Disney has a strong brand and offers a unique experience making the visit of a park
still attractive. Disney parks are relatively free of potential entrants as opening a park
requires a huge capital. The bargaining power of suppliers is medium because there
are only a handful of attraction makers and switching may cost a lot of money; once
Disney makes a company build an attraction they have to stick with them several
years for the maintenance. The visitors have very low bargaining power as the entry
ticket prices are fixed and cannot be negotiated. Finally, Disney Park and Resorts has
many strengths, its future success will be determined by its ability to innovate and
keep offering a unique experience to its visitors.
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Chapter 5 Strategic Group Analysis
In this strategic group analysis, first we discussed and found some popular theme
or sensation parks and resorts in the world, which is Disney, Six Flag, Lego land,
Universal, Puy du fou, Europa Park, Tivoli, Wanda city and HK Marine Park. And we
chose the two variable is Numbers of Location and Sensation or/and Theme Park.
Table 2. Numbers of Location and Sensation or/and Theme Park
Numbers of location Sensation/Both/Theme
Disney 6 Both
Six Flag 13 Sensation
Lego land 8 Both-theme
Universal 4 Both
Puy du fou 1 Theme
Europa Park 1 Sensation
Tivoli 1 Both-Theme
Wanda city 2 Sensation
HK Marine Park 1 Theme