Threat of Substitute Products Essay

Under Porter’s model the threat of substitute products refers to the competition created by similar products in different industries. A general review of the theme park industry demonstrates that marketing and consumer choice theory has favored the idea that consumer preference for theme parks remains consistent over time (Kemperman, Brogers, Oppewal and Timmermans, 4).

Even though this basic theory has provided a foundation for marketing and promotion in the theme park industry, Kemperman and coworkers go on to note that shifts in this theory have been noted when examining consumer behavior (4).While consumers were once believed the maintain their loyalty to a particular theme park, with more choice for leisure time activity, consumers are now seeking addition opportunities for expanding their range of tourism destinations and activities (5). In addition to the fact that preferences of consumers appear to be changing as the number of leisure time activities increase, research also suggests that cost issues may also play a significant role in shaping consumer behavior and attitudes toward theme parks and other leisure events.For instance, Zanola reports that ticket prices have played a significant role in shaping consumer behavior with regard to visiting the circus (159). Even though costs for circuses have increased over the course of the last several years, this event is one which provides entertainment at a cost of the fraction of theme parks (160). Families seeking more economic forms of leisure activities may begin to eschew the high costs of theme parks in favor of other venues for their leisure time spending. This issue is one that is of notable concern given the current economic downturn in the US.Increasing costs of theme parks coupled with the inability of consumers to manage the costs may place increased pressure on theme parks to remain the viable choice of consumers for their leisure spending.

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Finally, a review of the theme park and tourism industry provided by Lai, Yu and Kuo demonstrates that while theme parks continue to do well as an integral part of the tourism and leisure industry, there are specific variables which continue to impact these organizations and their ability to retain customers over the long-term (509).In particular, Lai and coworkers note that customer service in theme parks has emerged in recent years as a prominent issue of concern; one that has been primarily overlooked by theme park developers in the efforts to capture the attention of consumers (510). Poor customer service in a theme park can and has resulted in the inability of the theme park to retain customers and negative word-of-mouth advertising that can impact the organization.Overall assessment of the threat of substitutes on the theme park industry does suggest that the threat is increasing. As theme parks struggle to meet the changing demands of US consumers, increased costs and lower-cost alternatives for leisure activities continue to direct consumers away from large theme parks. If these trends continue over time, the end result will be an overall decline in the revenues and sales of theme parks as they attempt to effectively compete with companies outside of the theme park industry itself. Intensity of Competitive RivalryConsidering next the intensity of competitive rivalry in the theme park industry, a review of what has been noted in the literature suggests that competition within the industry itself is reaching a fevered pitch.

Researchers examining competition among theme parks in the US indicate that beginning in the 1960s with the explosion of leisure culture in the US, the number of theme parks has exploded (Raluca and Strutzen, 641). When theme parks first become part of American culture, they were novel experiences for consumers (642).Theme park owners were able to capitalize on this novelty and, as a result, the number of theme parks in the US has continued to increase over the course of the late twentieth century.

In terms of sheer numbers, competition in the theme park industry is quite intense overall (642). Even though the sheer numbers of theme parks in the US has increased dramatically, competition among these organizations has taken on a whole new life in recent years. According to Raluca and Strutzen in order for theme parks to remain competitive, they have had to change their approach to meeting the demands and needs of customers (642).Because large numbers of theme parks have been in the US for such a long period of time and further because so many consumers have visited these parks, remaining competitive in the industry requires more than just the ability to offer a leisure experience (643). As noted by Raluca and Strutzen theme park owners have had to consider the psychology of their consumers, invest in their parks and create new experiences that cannot be found at any other theme park in the US (643).

The intensity of the competition that has eveloped in the US theme park industry has clearly had an impact on the types of attractions that are now offered at these parks and the overall experiences of consumers when visiting these attractions. Raluca and Strutzen assert that as the industry continues to mature, theme park owners will need to consider the next steps forward as they attempt to remain competitive both within the industry and within the larger context of the leisure and tourism industry (643). Unfortunately, the scope of the industry and its maturity will continue to have notable implications as theme parks attempt to compete against one another.An overall assessment of the intensity of competitive rivalry in the theme park industry suggests that competition is quite high.

The maturity of the industry has given rise to efforts on the part of existing theme park owners to best their competitors. While this invariably creates a high level of choice for consumers, it does have a negative impact on the ability of theme parks to effectively remain profitable against companies that are able to invest billions of dollars in expanding their operations.Intensity of competition will only accelerate in the coming years as existing competitors further attempt to attract consumers away from substitutes and other theme parks operating in the industry. Threat of New Entrants Examination of the US theme park industry with respect to new entrants indicates that new entrants into the market face some notable challenges. Specifically cost issues remain a pressing issue for companies seeking to develop theme parks (Dixon, 42). Currently market saturation in various areas of theme parks (e. g. , character theme parks, roller coasters, water parks, etc.

has created notable challenges for new companies to distinguish themselves. Additionally, given the size and scope of existing theme park operations, new entrants face the reality of developing ventures that can meet or exceed customer expectations (42). The costs associated with this process are quite high and require considerable capital outlays for initial investment. In addition to the fact that entrance costs for new theme parks are quite high in the US, a review of the theme park industry in a global context indicates that companies seeking to build theme parks are looking overseas, primarily to Asia (Kolesnikov-Jessop, 3).Asia now represents one of the fastest growing markets for theme parks in the world at the present time. In addition to the fact that there are few competitors in Asia, Kolesnikov-Jessop notes that the costs for development are less than they are in the US (3). Further, customer expectations for theme parks in Asia are not as high as consumers have not had theme parks as an integral part of their culture for more than 50 years (3).

When synthesized overall Asian markets now provide the most viable opportunity for the development of new theme parks.As a result many companies that may have considered operating a theme park in the US are now looking abroad to evaluate the potential for growing a theme park business in foreign territories. Challenges for existing theme parks have been noted with regard to the changes that have been needed to keep pace with the changing demands of the US labor force. In particular, Wagenheim and Anderson note that theme parks continue to face ongoing challenges with regard to high labor costs in association with human resource management issues such as retention (243).As the importance of customer satisfaction with theme parks becomes a more pressing issue shaping the ability of the organization to retain customers, theme parks have had to invest more heavily in training and benefit and wage packages for employees (243). As labor costs continue to increase entrants seeking to build new theme parks will have to contend with this issue in an effort to ensure that they are able to remain competitive with established businesses and to ensure that they can meet consumer expectations.Generally speaking the threat of new entrants into the US theme park industry appears to be relatively low. While it is reasonable to assume that new entrants will make their way into the market, the high costs of establishing a business coupled with the challenges of developing human resource practice to meet employee and consumer expectations represent significant barriers to entry.

Further, pull factors such as the rapidly developing demand for theme parks in Asia and other foreign countries may also serve as a barrier to attracting new competitors into the US market.  Given all of these variables, the threat of new entrants does not appear to be an important issue for the current industry.Works CitedDixon, Tam, “The Theme Dream Sprayparks. ” Parks & Recreation 39. 6, (2004): 40-44. Kemperman, Astrid A. , Aloys W.

J. Brogers, Harmen Oppewal and Harry J. Timmermans. “Consumer Choice of Theme Parks: A Conjoint Choice Model of Seasonality Effects and Variety Seeking Behavior. ” Leisure Sciences 22. 1, (2000): 1-18. Kolesnikov-Jessop.

Sonia. “Theme Park Developers Turn Their Attention to Asia, Where Business is Growing. ” New York Times Business/Finance, (2009): 3. Lai, Cheng-Neng, Tai-Kuei Yu and Jui-Kun Kuo. “How to Say Sorry: Increasing Revisit Intention Through Effects Service Recovery in Theme Parks. ” Social Behavior & Personality 38. 4, (2010): 509-514.

Raluca, Dridea Catrinel and Gina Strutzen. “Theme Park—The Main Concept of Tourism Industry Development. ” Annals of the University of Oradea 17. 2, (2008): 641-646.

Wagenheim, Matt and Stephen Anderson. “Theme Park Employee Satisfaction and Customer Orientation. ” Managing Leisure 13. 4, (2008): 242-257.

Zanola, Roberto. “Major Influences on Circus Attendance. ” Empirical Economics 38. 1, (2010): 159-170.