Hong Kong Disneyland's competitive positioning and strategic advantages in Asia

HK Disneyland

Hong Kong Disneyland has been successful thus far, and has a generally favorable operating environment. The park faces strong competition, however, and must take steps to improve its product/service offering, its marketing program and its partnerships with related firms in the industry in order to bring more business to its park and improve its market share.

Hong Kong Disneyland opened to visitors in 2005, representing a new wave of theme parks in Asia. The park entered into direct competition with Hong Kong's existing theme park, Ocean Park, which has been in business since 1977. A new challenger is also emerging in Shanghai, where Disney is set to open a park in 2014 (Chiang, 2009).

Hong Kong Disneyland is well-positioned against its rivals. Its facilities are much newer than those of Ocean Park and its attractions are newer and fresher. That said, Ocean Park sits ahead of HK Disneyland with over 5 million annual visitors to Disney's 4.5 million, with Ocean Park responding to its rival through promotion of its Chinese heritage vs. Disney's American heritage (Yeung, Lee & Kee, 2008). Disney recently announced that the new Shanghai park would be much smaller than originally intended, and seeks to only draw audiences from northern and central parts of China, with the Hong Kong park servicing southern China and Southeast Asia (Chiang, 2009).

PESTLE Analysis

The political environment for Hong Kong Disneyland is favorable. The park was devised as a public-private partnership, with the government of Hong Kong as the park's largest shareholder (Shen, Platten and Deng, 2006). This affords Hong Kong Disneyland several key strategic advantages, including a direct metro link to the park, the ability to use reclaimed land and favorable loan conditions. With the backing of the Hong Kong government, the HK$3.3 billion in debt financing required for the project had favorable conditions, allowing it to be syndicated globally, spreading risk and allowing for efficient and effective acquisition of capital for the project (Esty, 2005).

The mainland Chinese government has lent Hong Kong Disneyland a favor with its stringent visa requirements. Whereas most Westerners and Southeast Asian nationals do not need to acquire a visa in advance of their visit to Hong Kong, China does have such demands. This inherently limits the attractiveness of Shanghai's Disneyland to non-Chinese.

The social environment was difficult for Hong Kong Disneyland. While Hong Kong residents are familiar with the theme park concept from Ocean Park, they are also wary of cultural imperialism, a function of their British rule and Western influence on their education and political systems (Luk, 1991). Such concerns echoed the challenges Disney faced in launching Euro Disney outside of Paris (Hamelink, 1996). As an international city that is neither wholly Asian nor Western, Hong Kongers view their split heritage as relating to their sense of national identity (Henderson, 2002). To address these concerns, the Hong Kong Disneyland project was imbued with a greater sense of Chinese heritage than other Disney projects, yet not so much that the project felt influenced by mainland China, which would also violate the Hong Kong sense of national heritage.

The economic environment is not favorable at present for Hong Kong Disneyland. According to Disney, the park was intended to draw visitors from Hong Kong, the south of China and from Southeast Asia (Chiang, 2009). The current economic malaise has struck most parts of the world heavily. The year-over-year growth rate of Hong Kong's GDP is current -2.4%, for example (Hong Kong SAR, 2009). Many Southeast Asian economies are also suffering from the downturn. The downturn, however, is less evident in southern China. While many factories have closed, the economy overall has continued to grow throughout the economic crisis, a function of artificial currency exchanges rates and heavy government stimulus.

The technological environment is only somewhat favorable, in part due to issues in the political environment. There are many important roles for technology, including the development of attractions and marketing. The engineering for the project -- including developing attractions and reclaiming land -- is favorable, and there are no major concerns. There is also a strong role for marketing. The Hong Kong Disney site is relatively remote by Hong Kong standards, since the main areas around Central and Kowloon have already been built up. Therefore, it is important for HK Disney to engage in substantial amounts of promotion to attract visitors. In addition, technology can be utilized to build relationships between HK Disney and potential customers both in Hong Kong and throughout the Southeast Asia region. As powerful as emerging technology and social media can be, however, they are limited in usefulness to HK Disney because many social networking sites are banned in mainland China, ruling out that marketing tactic for hundreds of millions of potential customers. Chinese sites such as QZone, with 200 million users (Eldon, 2009) may be a more effective means to reach this market, to the extent that the Chinese government continues to allow even domestic social networking sites.

On a more basic level, the Hong Kong Disneyland website has been built to meet the needs of three distinct user groups -- Hong Kong, Chinese and Western -- each of which have their own specific preferences for content and interactivity (Yip & Law, 2002).

The legal environment is favorable. With the Hong Kong government as the park's largest shareholder, many of the legal risks to HK Disneyland either disappeared or were taken on by the government. The government, for example, took on the risks associated with site acquisition (Shen, Platten & Deng, 1006). This could have been a difficult legal situation for Disneyland's private shareholders had they attempted to do this on their own, as the project includes reclaimed land. However, the Hong Kong government was able to successfully apply option pricing theory to assess land values to minimize downside risk associated this project (Yeung & Hui, 2002). With many legal risks attributed to the public sector, the legal environment for the park is exceptionally favorable.

Lastly, the environmental environment is moderately favorable. Hong Kong is not noted as a hotbed of environmentalism and the use of reclaimed land for the Disneyland project was more or less without controversy. The project did not meet any environmental protests or struggle to meet any environmental regulations. The main environmental concern for the project was actually Hong Kong's high pollution level, which Disney felt might deter tourists from coming to Hong Kong (Douglass, 2002).

For the most part, the trends in these environmental factors are relatively stable. The notable exception is with the economy. While China's economy appears to be stable, the economies of Southeast Asia and Hong Kong can be expected to reverse their downward trend in the coming months, spurred by gradual signs of recovery in the West. The broad social implications of the project have been centuries in the making and are unlikely to change. Government involvement in the project ensures a continued favorable legal and political environment. The technological environment is trending towards social media, and this is trending upward.

Conclusion

Hong Kong Disneyland has been successful thus far, but faces numerous challenges, none more so than those presented by a weak economy and stiff competition from Ocean Park, the other major Hong Kong theme park. HK Disneyland faces a generally positive operating environment, so is in a position to take advantage of opportunities in brand-building, partnerships, and marketing with an orientation to driving repeat business as opposed to a continual cycle of new customers. Taking better advantage of technological developments in market is the most important recommendation for HK Disneyland, but improved special event and constant reinvention of facilities and attractions are also recommended to maintain interest among consumers in the park's offerings.

Works Cited:

Chiang, S. (2009). Dinkey Disney springs a Shanghai surprise. The Standard Retrieved November 26, 2009 from http://www.thestandard.com.hk/news_detail.asp?pp_cat=11&art_id=91058&sid=26202974&con_type=1

Shen, L., Platten, A. & Deng, X. (2006). Role of public private partnerships to manage risks in public sector projects in Hong Kong. International Journal of Project Management. Vol. 24, 7, 587-594.

Esty, B. (2005). Structuring loan syndicates: A case study of the Hong Kong Disneyland project loan. Journal of Applied Corporate Finance. Vol. 14,3, 80-95.

Yeung, B. & Hui, E. (2002). Option pricing for real estate development: Hong Kong Disneyland. Journal of Property Investment & Finance. Vol. 20,6, 473-495.