Ocean Parks Business Level Strategy approaches

Ocean Parks Business Level Strategy approaches The Ocean Park has been opened in Hong Kong for more than 30 years, the Ocean Park have already been a special logo to the Hong Kong residents and a famous scenic spot for the foreign visitors. As per the mission statement from the Park is provides all guests with memorable experiences that combine entertainment and education, while inspiring lifelong learning and conservation advocacy. The Ocean Park is doing the entertainment businesses in Hong Kong with its theme park that delivers the integrated entertainment services to its guests. This paper will study the business level strategy approaches by using different analytical tools to analyze the related industry environment and the macro-environment that the Park is doing business with. Furthermore, it will also study the internal and external environment that would leads to some threats or opportunities for its further development. Chapter 1 Introduction Ocean Park Hong Kong, a theme park operates by the Ocean Park Corporation that delivers entertainment business in Hong Kong. The Park was officially opened in 1977 by the then Governor of Hong Kong, Sir Murray MacLehose. It was built at a cost of HK$150 million funded by the Hong Kong Jockey Club and free land provided by the Hong Kong Government. The Park is situated on the southern side of Hong Kong Island and it is the Hong Kong primer educational and entertainment theme park that covers more than 870,000 square meters of land and features a diverse selection of world-class marine attraction, thrill rides and shows divided into three major areas: Lowland, Headland and Tai Shue Wan. Over the years, the Park has consistently rejuvenated and reinvented itself to better serve its guests, establishing itself as a major tourist attraction both locally and abroad. Since its opening more than 30 years ago, over 95 million guests have visited Ocean Park. Over 5 million guests visit The Ocean Park each year. Being the one of the largest theme park in Hong Kong, Ocean Park delivers not only thrill rides but also the educational and conservation of wildlife and habitats through various campaigns. The Ocean Park Conservation Foundation (OPCF) was found in 1993 and the Foundation wished to significantly improve the attitudes and practices towards conservation in Hong Kong and Asia through cooperative programs with other conservation organizations. Not even at all, The Hong Kong Society for Panda Conservation (HKSPC) was also launched in 1999 to educate the community and support conservation of the giant pandas and their habitat. Both the HKSPC and OPCF were merged into a single organization on 1 July 2005 as the Ocean Park Conservation Foundation Hong Kong (OPCFHK). Vision and Mission The vision of Ocean Park is aspires to be a world leader in providing excellent guest experiences in a theme park environment connecting people with nature, whilst the Mission of the Park is to provides all guests with memorable experiences that combine entertainment and education, while inspiring lifelong learning and conservation advocacy. Our aim is to maintain a healthy financial status, while striving to deliver the highest standards of safety, animal care, products and guest service. Furthermore, the Park expresses its core value by several elements: Fun, Service, Safety, Education and Conservation and Respect for People. (Ocean Park, Corporation Information. URL: http://www.oceanpark.com.hk/html/en/footer/corporate-information/vision.html) The key stakeholders would be those customers that have the expectation to the Ocean Park which a theme park could provide with special features together with exciting, education and conservation. With its vision, mission and core values, the Park has differentiate itself from the other theme parks which it aims to provide elements of entertainment, education and conservation at an affordable price to meet with its customers expectation. In this report, the objectives are to analyszs the current position of the Ocean Park through various analytical tools and to find out its strength, weaknesses, opportunities and threats and finally makes recommendation to encounter the potential risks. Chapter 2 Analysis 2.1 Porter 5 Forces Analysis Porters five forces is a framework for the industry analysis and business strategy development developed by Michael E. Porter. It is an analytical tool to analyses and determines the competitive intensity and therefore the attractiveness of the market. The tool is referred to these five forces as the micro environment and the more intense study to the market competition. Yet competition for profit goes beyond established industry rivals to include four other competitive forces as well: customers, suppliers, potential entrants, and substitute products. The extended rivalry that results from all five forces defines an industrys structure and shapes the nature of competitive interaction within an industry. (Porter E., 2008:25) Rivalry among Existing Competitors Although Hong Kong is a small city with limited area, however, the Ocean Park had been open since 1977 and being the largest theme park in Hong Kong. Throughout the time, the Park had no major competitor for more than 20 years until the other theme park was confirmed to construct in Hong Kong, The Disneyland Hong Kong. This has created intense competition greatly decrease the market share of Ocean Park. Threat of New Entrant The increase of new theme parks in other East Asia country has created the threats posed by the entry of new competitors. This has forced the numbers of visit down and put much more pressure to the entry numbers for both local and international visitors. Moreover, as stated on the above, the limited space of Hong Kong to set up another new theme park among Ocean Park and Disneyland will be very difficult. In such case, the force of the threat of new entrant is considered low comprising those factors. Threat of the Substitutes The Park provides the entertainment business in Hong Kong and to retain visitors mainly by fun and education. However, from the view of micro environment to the provision of the entertainment business, it would possibly has other substitutes service that providing the similar services, just likes the Ngong Ping 360 and The Peak Experience, etc. These new travel scenic spots provide similar services and experiences to retain those visitors. Bargaining Power of Buyers The power of buyers refers to the ability of the customers to be able to negotiate the prices from the seller. Consumers have little influence over the manufacturers and service providers in negotiating prices. The Ocean Parks is a theme park that combines with the thrill rides that providing the visitors an exciting experience while the other hand to provide with the connection of natural through conservation and breeding programs undertaken for its unique collection of insects, fishes, birds and marine mammals. These unique experiences could only be founded in the Ocean Park and thus the bargaining power of buyers in considered low. Bargaining Power of Suppliers The Ocean Park named the worlds 15th-ranked theme park base on the annual attendance by the Themed Entertainment Association and Economics Research Associates, the huge number of the visitors that enable the park a strong negotiation power with its suppliers, especially the food suppliers for the Bayview Restaurant, Terrace Cafà ©, Headland Rides, Panda Cafà © and the Middle Kingdom Restaurant located inside the park. Refers to the Fig. 1.2 at the appendix, the income by the catering service was increased from more than three million Hong Kong Dollars from 2008 to 2009. Although, the sales of goods had a slightly decrease, however, there were additional income from the commission of franchised retails store. This would show the attraction of doing business in Ocean Park could reflect to a significant revenue to the franchised store. For instance, the suppliers or the manufacturers of those foods and souvenir are also considered has low bargaining power to the Ocean Park. These fact ors were comprised because of the huge numbers of the visitor attendance. 2.2 PESTEL Analysis There are many factors that could affect the decision of the organization in the macro-environment. The PESTEL analysis comprises five major elements including Political, Economic, and Environmental, Social, Technological and Legal factors. These factors describe a framework of macro-environment and used to identify the changes and possible barriers in the macro-environment all around the organization. (Oxford University Press, PESTEL analysis of the macro-environment. URL: http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm ) Political The huge numbers of annual attendance enable the Ocean Park named the worlds 15th-ranked theme park among those related associations. Moreover, this annual attendance is mainly domain by the political changes in Hong Kong and China. In the recent years, the Hong Kong and China Government launches the self-tour-guided program which allows the residence in the approved province to visits Hong Kong freely, and the approved numbers of China province that put into the this program was expanded from time to time. Hence, the visitors from China were increasing over the years. Refers to the Figure 1.3 in the appendix, it shows the number of visitor arrivals by country / territory of residence (Census and Statistics Department, 2010) from 2008 to 2009. This indicated the visitors from the Mainland China were the largest numbers accounted among those countries. Economic With reference to the Figure 1.5 and 1.6, this indicated the financial statement of the Ocean Park in year 2008 to 2009. (Ocean Park, Annual Report, 2009) The overall operation expenditure is keeping risen up in the years, such as employees benefits, maintenance and other advertising and promotion cost is raised up to maintain the normal operation of the Park. Unfortunately, the admission income and other revenue are oppositely reducing. These unfavorable factors bring the threat to the Park in operation. Social In the recent years, the tourism industry in Hong Kong is major from the visitors from the Mainland China since the population growth rate is decreasing and the ageing population rate is oppositely increasing. Figure 1.4 on the appendix shows the approach of population growth rate, it is very obvious that the age group from 5 to 14 is decreasing and that would possibly leads the Park loses the attendance from this group. Moreover, the Ocean Park had launched various programs to encounter this threat to become opportunity. Technological The technological improvement enhances the Ocean Park continue to breed the rare marine mammals, panda and other insect. The living area for those rare creatures require a stable room temperature, humidity or other special requirements since they are migrated from the other environment which may different from Hong Kong. The improvement in technological development enhances the stability to let them adapt in new environment. Environmental Environmental issues have been an important topic over the world. Motor vehicles are the main cause of high concentrations of respirable suspended particulates and nitrogen oxides at street level in Hong Kong. The Government introduced a comprehensive program in 2000 to tackle this problem with targets to reduce these two emissions from motor vehicle by 80% and 30% respectively by the end of 2005. (Environmental Protection Department, 2010) Being the environmental leader, the Park launched a Clean Air by Ocean Park project including the first hybrid vehicle operates in Hong Kong. After that, nominated by the HKSAR government in 2000, Ocean Park received funding of HK$10 million by The Hong Kong Jockey Club Charities Trust to replace 22 aged diesel vehicles and gasoline carts with environmental-friendly vehicles, to promote clean-air environment and support global conservation. Legal The Ocean Park Corporation is a statutory body incorporated under the Ocean Park Corporation under the Ocean Park Ordinance (Chapter 388). The Corporations principal activity is to manage and control the Ocean Park as a public recreational and educational park to the public. (Ocean Park, Code of Corporate Governance Practices, 2009) Since the Ocean Park Corporation became statutory body, its internal operation and the establishment of the management team is appointed by the Government of the HKSAR. This legal factor makes the operation of the Park bonded by the Government and loses its independence. The above analysis pointed out the opportunity, threat, strength and weaknesses of the Ocean Park in the macro-environment. The technological changes, social and the environmental factors would be the most favorable factors to the Park for future development. However, there would be threats from the political and economic issues to the Park since it will depend on the governments decision and also not controllable factors. 2.3 Internal Analysis Resource-based View The resource-based view is a business management tool used to determine the strategic resources available to a company. The fundamental principle of the resource-based view is that the basis for a competitive advantage of a firm lies primarily in the application of the bundle of valuable resources at the firms disposal. (Wernerfelt B, 1984:172) On the other hand, strategic capability is also another element to determine the success of the organization. Strategic Capability is the ability to perform at the level required for success. It is underpinned by the resources and competences of the organization. (Johnson Gerry Scholes Kevin, 2008:23) Throughout the analysis in both competitive forces and the macro-environment in the related industry, the capabilities of the Ocean Park have been identified in its business strategy. Core Competence A core competency can take various forms, including technical/subject matter know-how, a reliable process and/or close relationships with customers and suppliers. (Hamel, G. Prahalad, C.K., 1990) It may also include product development or culture, such as employee dedication. On the other hand, the core competences are those activities that underpin competitive advantage and are difficult from competitors to imitate or to obtain. Several shows theatre in the Ocean Park is unique and it is difficult and impossible to obtain by its competitors, such as the shows by birds, sea lion and other marine mammals. Unique Resources Unique resources are resources that create competitive advantage and are difficult to imitate, they critically underpin competitive advantage. (Johnson Gerry Scholes Kevin, 2008:24) The unique resources of the Ocean Park enable its competitive advantages to the competitors. The most valuable physical assets of the Ocean Park are those rare marine mammals and the panda given by the Mainland China. These national treasures are value inestimable and they elaborate their attraction to the visitors. These treasures could only be found in the Ocean Park and other theme park does not have the same resources in Hong Kong. Furthermore, the Ocean Park has been opened for more than 30 years in Hong Kong; it has already built up goodwill to the local peoples. The education, conservation and natural scenic environment are the intangible resources of the Park and these resources enhance the Park to develop its brand and goodwill over the years. Chapter 3 TOWS Analysis The TOWS Matrix is an analytical tool to matching the environmental threats and opportunities with the companys weakness and its strengths. (Heinz Weihrich, 1982) Throughout the PESTEL and internal analysis of the Ocean Park, some areas have been identified as the threats and opportunities for the future development of the Park. As analyzed in the PESTEL analysis, the political and economic factors would be the threats to the Ocean Park in future development. Since the attendances are mostly likely by the visitors from the Mainland China, however, this would depends on the policy changes by both Government and it would not be possibly controlled by the Ocean Park. Furthermore, the risen up of employees benefits, the maintenance and other advertising and promotion cost would also be the threats to the Park. On one hand, the reducing admission also leads to the revenue drop in the recent years. Such huge expenditure and uncontrollable factors would be the major weakness to the operation of the Park. As stated above the unique resources and the core competences would be the strength of the Ocean Park while compare with its major competitors. Moreover, to overcome the threats that the Park is encountering, the Corporation had launches some special program likes wedding ceremonies to tackle the low birth rate and changed the target customers to another age range. The Ocean Park Halloween Bash launches to attract more local visitors to stave off from the policy changes by the self-tour-guided visitors of the Mainland China. Chapter 4 Conclusion for Strategy Recommendations After conducted several analysis of different environments to the Ocean Park, the result from those analysis comes to the end and some business strategies of the Ocean Park were identified. First of all, in coping with the five competitive forces, (Porter E. Michael, 2008) there are three potentially successful generic strategic approaches to outperforming other firms in an industry. The cost leadership, differentiation and the focus strategy. (Porter E Michael, 1980) In view of the Ocean Park performing, the differentiation strategy is employed. A differentiation strategy is appropriate to adopted where the target customer segment is not price-sensitive, the market is competitive or saturated, customers have very specific needs which are possibly under-served, and the firm has unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy. The Ocean Park differentiates itself through the unique iconic attractions by rare animals and natural scenic environment which other theme park in Hong Kong could not be easily provided. On one hand, the brand Ocean Park had already embedded to most of the local residents and foreign visitors, the advertising and branding enhances value propositions and sustainable differentiation is concisely develop with a range of activities uniquely that impact on the customer purchase decision. Furthermore, the overall environment enhances to provide education and conservation to all the attendances. Although new competitors had already entered into the market, however, with the aims of the Ansoffs Matrix (Ansoff. I, 1957), the Ocean Park is recommended to taking action by market penetration and product development to obtain stable and sustainable development. Market penetration occurs when a company enters/penetrates a market with current products. The best way to achieve this is by gaining competitors customers which means the part of the market share. Other ways include attracting non-users of your product or convincing current clients to use more of your product or service, with advertising or other promotions. Market penetration is the least risky way for a company to grow. The Ocean Park should differentiate itself by existing services to gain the market share from its competitors, just likes the rare animals that enable continuous penetration to the existing market. On the other hand, the product development is also another strategy that the Park could employs. A firm with a market for its current products might embark on a strategy of developing other products catering to the same market. The continuous re-development project enable new thrill rides that the competitors may not delivers in short period of time and it would not be p ossible to making the same thrill rides as the Ocean Park. Frequently, when a firm creates or to usher in with new products, it can gain new customers for these products or services. Hence, new product development can be a crucial business development strategy for firms to stay competitive. In addition, strategic alliance of subcontracting may also be considered in the development of the Park. Strategic alliance is where two or more organizations share resources and activities to pursue a strategy. In the case of Ocean Park, the highest maintenance, advertising, promotion and growth of employees benefits would be a high risk to the Corporation to stay competitive in the market. In view of these critical issues, subcontracting alliances method can be considered to tackle this issue and to meet with the stakeholders expectation. To be keeping a health financial status of the Corporation, some of the operational function could be subcontracted out to lower the operation cost from direct labor generated. Last but not least, the Ocean Park has continuously makes the improvement through different strategies. Throughout this study, understood that the Park has retained its best to meet with its stakeholders expectation and cope with its mission statement, Ocean Park provides all guests with memorable experiences that combine entertainment and education, while inspiring lifelong learning and conservation advocacy. Our aim is to maintain a healthy financial status, while striving to deliver the highest standards of safety, animal care, products and guest service Appendix Fig. 1.1 Porter 5 Forces Model Source: Harvard Business Review, 2008 Fig. 1.2 Note to Financial Statement Source: Ocean Park, Annual Report 2008 2009 Fig. 1.3 Visitors Arrivals by Country / Territory of Residence Source: Census and Statistics Department URL: www.censtatd.gov.hkFileManagerENContent_807transport.pdf Fig. 1.4 Resident Population Approach Source: Census and Statistics Department URL: www.censtatd.gov.hk_showtablecust.jsp Fig. 1.5 Notes to the Financial Statement Source: Ocean Park, Annual Report 2008 2009 Fig. 1.6 Revenue Statement Source: Ocean Park, Annual Report 2008 2009