The external environment of the theme park industry on the Gold Coast plays a significant role in determining if the industry is profitable. According to Hubbard, Rice and Beamish (2008), the external environment is the factors outside the organisation that influence strategy and is made up of two environments; the macro-environment and the industry environment. The macro-environment includes the general factors that affect growth of an industry, whereas an analysis of the industry environment determines the profitability of an industry. An analysis of the Gold Coast theme park industry environment will determine the industry’s profitability by analysing the strength of the following five forces; the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, power of substitutes, and the intensity of industry rivals (Hubbard, Rice & Beamish 2008; Porter 1980). Due to the strength of these forces being quite low, the analysis of theme park industry on the Gold Coast indicates a profitable industry.
The threat of new entrants into the Gold Coast theme park industry is determined by the strength of the barriers to entry as well as the expected retaliation. Such a barrier to entry is product differentiation which means that ‘established firms have brand identification and customer loyalties, which stem from past advertising, customer service, product differences, or simply being the first into an industry’ (Porter 1980, 9). Therefore, for a new firm wanting to enter the Gold Coast theme park industry would need to invest in building a brand name as a way of trying to overcome existing customer loyalties to the other theme parks. This would require large capital requirements for up-front advertising which would be unrecoverable and along with the unknown brand name would indicate a significant barrier to entry (Hubbard, Rice & Beaming 2008).
The low threat of new entrants is also strengthened by the fact that all the theme parks on the Gold Coast are owned by two companies. Dreamworld and White Water World are owned by Macquarie Leisure Trust Group and Village Roadshow owns Warner Brothers Movie World, Wet ‘n’ Wild Water World, Sea World, Australian Outback Spectacular, and Paradise Country (Roller-Coaster 2008B, Online). This effectively means that any potential new entrant would be competing against two companies who have the established resources which would enable them to try and drive the new entrant out of the industry through increased advertising or by lowering their prices (Porter 1980). The strength of the possible retaliation as well as product differentiation and large capital requirements determine that the barriers to entry into the Gold Coast theme park industry are quite substantial and therefore the threat of new entrants is quite low.
The bargaining power of suppliers could also have an impact on the profitability of the theme park industry on the Gold Coast (Hubbard, Rice & Beamish 2008; Porter 1980). One factor that influences the power of suppliers is the supplier concentration relative to industry concentration (Hubbard, Rice & Beamish 2008). In other words if there are a small number of suppliers then the suppliers are going to have the power. In terms of theme parks, the main input that needs to be supplied is the rides. These are the inputs that theme parks market their parks around and what attracts visitors to these parks. The bargaining power these roller-coaster suppliers hold over the theme park industry on the Gold Coast is quite weak due mainly to the large number of roller-coaster manufacturers that are located all around the world. If a theme park requires a roller-coaster to be designed for their park, the firm are able to choose between over 40 manufacturers to design their ride so as a result the power of the supplier is quite weak (Coaster Gallery 2008, Online).
Furthermore the bargaining power of suppliers in the theme park industry is weak due to...
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