m7a2so(Smart Writer)

The business environment is very dynamic and firms need to constantly keep pace with the changes that occur to stay competitive. The following is an analysis of Euro Disney using the five forces model of Porter. The firm faces the challenge of new entrants. Due to the firm’s ability to find a specific niche for its products, entering the industry is relatively tough. Additionally, the firm has utilized the diversification strategy through offering a wider variety of services and commodities to its customers, for example, theme parks, dining places and also the hotel business (Sehlinger, Testa, Peters & Cassar, 2010). This enables it to cut down on the operational costs by producing in large quantities (economies of scale) and thus making it special compared to other competitor firms as it can as well sell its products relatively cheaper to outdo them. This is made possible by its mass production capability. The firm is also popular in providing home entertainment and is therefore dominant in the market and all these make it hard for other firms to enter the market. Finally, the fact that the capital requirements for entry in to the entertainment industry are too high makes it hard for other firms to penetrate in the market (Roy, 2009).

In terms of the buyers’ power to bargain, the entertainment industry can be said to favorable. This means that this power is high in this industry. This is because the firm needs a lot of customers in order to operate and make profits. Therefore, its customers definitely have some rights and privileges. For example, the customers may choose not to buy movies that are priced too highly by the firm and since the firm needs the customers, it will act by lowering the price. This bargaining power is also increased when some clients do not understand the intangible benefits that they receive from purchasing these products and services (Sehlinger, Testa, Peters & Cassar, 2010).

The suppliers’ bargaining power in the entertainment industry can be said to be temperate. This is the case due to the nature of the industry which is characterized by lot of differentiation, distinctiveness, and high costs of switching from one business function to another. The suppliers for this industry have a few customer companies and Disney is one of them. However, the firm can be said to be the most important client for most suppliers and due to its big size, it has some advantages. Therefore, there is an important relationship between the firm and its suppliers especially due to the fact that the firm is very crucial to the success of the suppliers due to its bulk buying capacity (Moss, 2010).

Euro Disney can be said to be some how free or immune to the threat of substitutes entering the market. Therefore, this threat can be rated as being quite low as the firm has set price ceilings for most of its commodities. Additionally, the firm continually upgrades its services and commodities to ensure that it stays on top and rules out the possibility of being defeated in the industry by any competitor.

In terms of rivalry in the industry, the firm stands out. This is due to its competitive nature as it has many customers, offers a variety of products and services, embraces technological advancements to stay ahead of competition, has loyal customers, and also advertises its products and services to gain more customers. Additionally, in terms of the earnings, the firm is on top and its main rivals are Merlin Entertainment Group and 6 Flags among others (Ahlstrom & Bruton, 2009).

The entertainment industry is also affected by legal and legislative factors. For example, the government of France has helped the firm a lot. It provided a lot of financial help to the firm and gave it tax relief and this has helped the firm a lot. This together with the huge costs of entry into the market has helped the firm to stay ahead of its competitors and to bar others from entering in the industry.

Political factors and trends have also affected the entertainment industry. These include wars such as the Persian Gulf War, which triggered a decrease in the number of people travelling to Paris and therefore Euro Disney lost a lot of revenue (Ahlstrom & Bruton, 2009).

Economic factors and trends also affect the entertainment industry. For example, in times of depression in some countries, it is often hard for customers to purchase products and services for entertainment as this may often be considered as luxury products. This affects the firm in terms of reduced revenue (Adbulaziz, 2011). However, due to the diversification strategy of the firm by setting up many centers (branches) around the world, the firm continues to run as its other branches such as those in Japan continue making a lot of revenue thus covering for the operating costs of the affected branches. Another economic factor is competition. The firm faces competition from other firms. This is the case especially as new cartoons are created often by other competitor firms/rivals. Disney therefore needs to innovate more in order to prevent being faced out by other rivals. It also faces competition in its theme parks. Finally, the firm’s innovativeness and size also place it at a competitive edge (Sehlinger, Testa, Peters & Cassar, 2010).

The firm also faces challenges with its top management. This is because the firm is constantly changing its top leaders, which is a costly affair. This is because every time this happens, recruitment has to be done to get other managers. To increase efficiency, the firm must strategize on how it can maintain the current leaders to avoid these costs (Adbulaziz, 2011).

Economic factors and trends

1. Competition- Threat

2. Economic forces such as depression- Threat

3. Innovation- Opportunity

4. Competitive size- Opportunity

5. Management issues- Threat

Political factors and trends

1. Persian Gulf War- Threat

Legal and legislative factors and trends

1. Support by the French Government- Opportunity

References

Adbulaziz, S. (2011). Walt Disney- Company Insight & Competitive Analysis. New York: Slide share Inc.

Ahlstrom, D., & Bruton, G. D. (2009). International management: Strategy and culture in the emerging world. Australia: South-Western.

Moss, S. (2010). The entertainment industry: An introduction. Wallingford, UK: CABI.

Roy, D. (2009). Strategic foresight and Porter's five forces: Towards a synthesis. München: GRIN.

Sehlinger, B., Testa, L., Peters, E., & Cassar, A. (2010). The unofficial guide to Disneyland Paris. London: Wiley & Sons.