SANTA CRUZ AMUSEMENT PARK INDUSTRY 6
Analysisof the Santa Cruz Amusement Park Industry
Analysisof the Amusement Park Industry
SantaCruz Amusement Park is located in Santa Cruz –California. The parkwas founded in the year 1907 and is the oldest surviving amusementpark on the western coast of the United States. The park has aboardwalk that extends along Monterey Bay coast to the San LorenzoRiver. The following paper is an evaluation of the externalenvironment faced by Santa Cruz Amusement Park. Environmentalanalysis is a tool used in strategic planning. It guides in theidentification of external and internal factors that affect theperformance of organizations. It entails assessing the level ofthreats as well as opportunities that exist within an organization`senvironment (2013 theatrical market statistics summary, 2014).
Amusementparks belong to the leisure industry. They are composed of facilitiessuch as mechanical rides, games, shows, themed exhibits, refreshmentstands, water rides as well as other shows and attractions. Theamusement industry in the United States is composed of more than 480businesses. The industry generated total revenue of 15.4 billiondollars in the year 2013. Various industry analysts have termed theindustry as growing and with a high potential. However, the industryhas faced reduced attendance in the recent past due to the 2007- 2008economic recession. Also, the amusement park industry is heavilydependent on a declining demography made up of children between theages of 10- 19 years (Mind Tools Editorial Team, n.d.).
Thestrength of key stakeholders in the amusement park industry is high.In the case of Santa Cruz, they are comprised of suppliers forvarious amusement items. They are animated figures, animations,robotics, effect and show controls, batting cages, climbing walls,costumes and, mascots, fireworks show flags, banners, misters and fogmachines lighting and theatrical equipment as well as go-kartmanufacturers. There exists a principal supplier of the amusementparks- Roller Coaster Manufacturers. Although nine companies havedominated the amusement parks supply industry in the past, severalcompanies have ceased operations -Arrow Dynamics and Giovanola.Consequently, there are fewer competitors in the supply market foramusement parks. The existence of few suppliers increases theirbargaining power (Levitt, 2014).
Thethreat of new entrants
Theamusement park industry has high barriers to entry. First, four keycompanies – Universal, Cedar Fair, Six Flags and Disney, controlthe industry. The four companies can increase the importance ofestablished conducts of business as well as economies of scale.Besides, the establishment of new parks is related to high capitalexpenditures in land and money. For example, an amusement parkrequires a minimum of 300 acres of land. Besides, there is a need tocreate public facilities as well as rides. Other barriers to entryinclude high competition, concentration as well as intensity (MindTools Editorial Team, n.d.).
Thethreat of substitutes
Thethreat of substitutes in the amusement industry is high. It is causedby the limited leisure time available to consumers. The similarity ofkey competitors also contributes to the threat of substitutes sincemost of the consumers prefer movies, theatres, sports events, andtourist attractions. In the United States, there are approximately42,800 cinemas in contrast to slightly more than 400 amusement parks.Video games have also emerged as competitors due to the ability ofconsumers to participate in leisure activities that require noadmission fees (Mind Tools Editorial Team, n.d.).
Thebargaining power of buyers in the amusement park industry is medium.The power is well demonstrated by the effect of the 2007-2008economic downturn that saw a decline in the revenue of amusementsparks by 7%. The drop in the purchasing power of customers due to jobinsecurity reduces their willingness and ability to spend money onleisure sites. Consequently, amusement parks such as Santa Cruz areobliged to offer deals such as discounts to customers during theperiod of economic hardships. Whenever economic conditions worsen,affected consumers often choose to travel for shorter distances toaffordable amusement parks. Besides, the parks are forced to act in amanner that attracts customers during various situations such asthose of bad weather. Most rides are outdoor, and consequently,guests are unwilling to visit during cold or inclement weatherconditions (Levitt, 2014).
Afterfacing a revenue decline during the American recession, the amusementindustry has witnessed a revenue growth of 2.4- 5.6 percent. Economicprospects in the industry have indicated that the amusement industrywill continue to experience growth in revenues as the economyregains. With the growth of the economy, the number of domestic tripsby Americans has increased from 700 million trips in 2014 to morethan 800 million in the year 2016. Consumer spending is also expectedto rise by 3- 4% (Levitt, 2014).
Thedemographic composition of America indicates a declining populationof people aged 10- 19 years due to declining birth rates in the years2008- 2010. The demographic change is expected to change theattendance of amusement parks. Consequently, the parks should aim atattracting more people between the age 10 – 19 years. Besides, theparks should undertake a strategic plan to create attractions formiddle aged between 25 and 35. The plan includes the introduction ofdiscount packages, new technology as well as attractions such as dayspas. It is imperative for competing for amusement parks to identifythe current arms race to create new thrills that attract and maintainpatrons. Besides, the parks should adopt strategies to reduce costsby hiring skilled workforce for seasonal jobs. Additional costcutting procedures should be taken for maintenance and upkeep as wellas the adoption of new technologies (2013 theatrical marketstatistics summary, 2014).
2013theatricalmarket statistics summary, (2014). MotionPicture Association of America,Inc.Web. Retrieved on 16 March 2016 fromttp://www.mpaa.org/wp-content/uploads/2014/03/MPAA-Theatrical-Market-hStatistics-2013_032514-v2.pdf
Levitt,J. (2014). Strategic analysis – Six Flags EntertainmentCorporation. Johnson and Wales Scholars Archive.http://scholarsarchive.jwu.edu/cgi/viewcontent.cgi?article=1030&context=mba_student
MindTools Editorial Team, (n.d). The TOWS Matrix. MindTools Ltd.Web. Retrieved on 16March 2016 fromhttp://www.mindtools.com/pages/article/newSTR_89.htm