Shanghai Disney Expansion Project - Case Study Example

Shanghai Disney Expansion Project Strategic Market Planning Every business owner will at some point require developing a strategic marketing plan as this plays a pivotal role in the determination of the business’ future. Even though some companies spend a considerable amount of resources, many of these plans go unimplemented. As for the companies having an intention to implement, it is critical to understand what makes an effective strategic marketing plan. First, this plan is divided into three categories with market segmentation being on top. In this step, a business owner has to understand various factors about the business including the geography, demographic statistics, psychographic and the behavior of the people. That is to say, that even before a strategy is developed; it has to focus on these factors. In essence, it is at this stage that business owners normally analyze the current situation of the business concerning the aforementioned areas. A SWOT analysis is normally created at this point with an aim to give the overview of the company including its competitors, social and legal environment. The second step involves market profiling whereby the owner focuses on a number of issues including the revenues, market-share, and the expected profitability. In order to create this step effectively, a business owner has to be focused primarily on the customer1. Often, business people tend to introduce products in the market with little, if any, regard as to the customer’s need. It is through understanding the need of the customer that the development of a product and its subsequent marketing ought to take place. It is at this level that one sets targets for the products and rolls it out to the intended market, which has already been analyzed. Once market identity is complete and the projections of revenues and profits are set, the business owner has to create a market segment strategy. Here, the business has to decide the mode of making marketing and sales. That is to say, options such as direct or indirect sales ought to be analyzed, mass marketing and so forth. Business owners will have to set up product, pricing, promotional, distribution and marketing strategies. The essence of this step is to ensure that the targeted market has been reached, revenues projected is realized as well as guaranteeing market share. Concerning how this plan could benefit Disney, the company ought to take a few steps in its quest for expansion in the areas of Shanghai. Firstly, Disney has to follow the steps outlined above with the first one being aware of the behavior of the local people. The area where the company intends to expand onto has a 40 million population. Additionally, a further half a billion could access the site by boarding flights meaning this is a potential market. Also, if the same group of people is reported to have spent at least $100 billion traveling, it would mean Disney have an opportunity to expand. This is because; the first step of Strategic marketing planning involves understanding the behavior of people. With Disney being a company offering services of theme park, this could provide chance for more profits. Secondly, the company has to profile the market to ascertain that the great number of people will actually be converted into real customers. Whereas, the area may have all the characteristics, it is imperative to carry out a market study that would show the actual interests of the people. Brassard and Suhong reported that only 150 million local people are in the upper-class category, it would be vital to conduct this search. Apparently, a large population is not outright indicator of a market; instead, businesses owners have to carry out a study to make assumptions do not lead to misjudgment2. Understanding that the figure of the Chinese people whose income is in the aforementioned class assists the company in making plans. It is estimated that by the year 2025, there will 900 million Chinese in the upper-middle class category meaning that Disney could utilize this opportunity. The company has to focus mainly on the future and not let the day-to-day issues affect its long-term goals. Disney’s SWOT Strength Disney is one of the renowned companies in the world whose brand image is its added advantage especially among parents. Despite some shortcomings, Disney Shanghai land will see the some of the people in the targeted market embrace its service mainly because of the name. It was noted that a company’s brand is imperative to its success in overseas3. Similarly, Disney Shanghai land will use this as a platform to attract is clients in this area. Additionally, the company has various services like entertainment for children and families. By having a variety of services and limiting themselves to tourism-related activities, Disney displays this as strength. Embracing and fervently promoting diversity is an additional strength that could work well for the company, as the local people would prove to be helpful. Finally, the company is the largest in terms of animation business meaning. Weaknesses One major weakness of Disney is failure to accommodate other businesses in their parks. For instance, it was noted that in most of their parks, the company insists on selling only food, which is its own work. Moreover, many of the commodities sold in these parks tend to be costly and this could be a major deterrent in its Shanghai venture. In addition, the company has to contend with the changing trend in viewership as well as a decline in cinema with the emergence of digital media. Opportunities Notwithstanding its weakness, Disney has various opportunities it could utilize and turn them into profitable ventures. On top of the list is the tendency of the Chinese families to go on vacation. Having established that most families spend up to three days while on vacation, it means that the company could ensure that the local people flock its Shanghai land. Secondly, with estimates showing around 150 million of Chinese living in the upper class gives Disney a ground for targeting them in a bid to lure them into being clients. Further, number of people spending money on tourism is large and if plans are well laid, Disney will benefit a lot. Looking into the future, the number of people going to join the upper middle class is going to increase significantly thus more business opportunities. Whereas the local people may not share cultural beliefs, Disney could actually use this as an opportunity to develop programs that favor the locals. Whenever a business ventures abroad, the local people are very important in determining the strategies and even decisions to make4. Therefore, inasmuch as Disney may have its culture and policies, its primary focus ought to be the locals. Threats Even though the company has diversified its services by offering more than one in a bid to attract more clients, the issue of piracy is rife. At a time when there is a surge in the technology advancement, the company has little ability to curb piracy5. This could be detrimental to its operations, which could end up affecting other ventures it currently is involved in. additionally, the regulations in the country as well as cultural differences could adversely affect the company’s plans unless mitigated6. Experience curve It was discovered sometimes in the 60s that there existed a relationship between the cumulative production quantity and the cost of production. There was a decline of about 20% for each of the double cumulative production quantity. At times, this would go up to 30% and it was adopted by many businesses7. Drawn in an axis format, the experience curve has the vertical axis showing the real unit cost of the adding value including the expenses incurred in the increase of materials. It is not to be confused with the learning curve, which usually gives a description of the reduction in terms of direct labor. The experience curve considers the labor as well as the processes relevant to the same8. Whenever strategic marketing planning is mentioned, the experience curve becomes an integral part of implementing the same. This is because if a company gains a better market share in comparison to its competitors, prices could be considered which could help in the market penetration. If a company chooses to use an experience curve in the strategies, several factors have to be considered. Among them is what is commonly known as fallacy in composition whereby if all companies competing are not careful could end up having an oversupply. This would of course mean higher supplier and lower demand hence low investment return. The technology used by other has to be considered as well because competitors could use it to ensure the cost of production is low. Consequently, this would be a blow to others who may not either afford or are unaware of the same9. Therefore, before a company rushes to use this method, it is important to analyze the market and understand the competitors properly. In order to get more information, business owners need to ensure business intelligence is conducted. It is further recommended that the focus be on the customers by observing the behavior. Normally, this happens when one asks questions as to why clients buy from a particular company and seeking to meet the need in a better way10, As to whether Disney will use the experience curve, this would be appropriate; as it would see, the company benefit a lot. For instance, by using the experience curve the company could see the profit increase because some activities do not require additional input11. The experience curve implies that the more production one does the cheaper and easier it gets in overall. Therefore, by utilizing this theory, Disney will in the end realize it cost of production go down thus an increase in profitability. Focus strategy Currently, the generic strategy applied by Hong Kong Disney is the focus, which seeks to have unique products for a market. Usually, this strategy works well where there is clear market information on the need of the consumers. When utilized the right way, this strategy normally sees a soaring in profits as it usually connects customers with the company products12. In other words, it makes it easier to have loyal customers because the company’s products are unique and in demand. This is the strategy applied by Disney in Hong Kong. However, when it comes to Shanghai, this needs to be changed because, as stated elsewhere, the culture may vary. Instead, the company ought to consider applying the Differentiation strategy. In this one, a company seeks to offer different services or better ones from those of the competitors. Bibliography Marber, Allen, and Dorina Filippini. "Disney Turns To Strategic Marketing For Their Expansion Into Shanghai: A Case Study In The Disney Effect." Proceedings of the Marketing Management Association (Spring2014 2014): 104-108. Business Source Premier Read More