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Ocean Park

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Alejandro Portugal Martin Pretorius Iona Ramió Mateu OCEAN PARK CASE STUDY INTRODUCTION
Ocean Park Hong Kong is a marine animal theme park located in the Southern District of
Hong Kong. It was inaugurated in 1977 by the Government with the intention to bring somewhere where Hong Kong citizens could feel some sense of space as a large part of the population lived in a crowded locality. So it was inaugurated as a nonprofit organization that aimed to provide visitors a unique experience in entertainment, education, and conservation.
Firstly, in the absence of competition, Ocean Park became really popular but existed without direction and focus. When Hong Kong's officials signed an agreement to bring Disneyland to
Hong Kong in 1999, the Ocean Park's viability started to be questioned. By 2005, when
Disneyland Hong Kong was inaugurated, Ocean Park was unprofitable and widely expected to lose out. Nevertheless, the Park responded with a development plan and showed their abilities for adaptation and turn threats into opportunities. It expanded the number of attractions and rides, raising the number of visitors, becoming the world's 13th most visited theme park and the largest theme park in Asia in 2014. Since 2012 Ocean Park's is in a similar situation, however, not just regarding one competitor but many. So how can the park face and deal with this new critical setting? 0. INDUSTRY DEFINITION


What are OP operating industries?



What are the strategic groups in the industry?



Which are the direct and indirect competitors of OP?

The industry and strategic groups within the Ocean Park:

Ocean Park forms part in global terms of the tourism industry and concretely of the modern theme park industry. These kinds of parks are characterized for trying to create a fantasy atmosphere of another place and even time. Theming is reflected through architecture, landscape, costumed personnel, rides, shows, food service, merchandise and other services that contribute to the guest's experience. Ocean park Hong Kong not only includes amusement providing facilities for educational, recreational and conservation activities to the public but also rides, an assortment of aquariums, animal exhibitions, observatories and educational laboratories. Strategic Groups in the Theme Park Industry:


Entertainment



Hospitality



Adventure



Tourism



Education



Conservation

Direct Competitors:


Hong Kong Disneyland



Snoopy’s World



Noah’s Ark



Hong Kong Wetland Park

Indirect Competitors:



Theatres (Shows and Events)



Shopping Centres



Hotels



Adventure Tours



City Markets



Nature Reserves



Zoo



Aquariums

Harbour Tours

Timeline of the company:
1957: The first idea of a marine theme park was suggested in Hong Kong by J.D. Bromhall.
1977: Ocean Park was officially opened.
1977: The park was proclaimed as education, entertainment and conservation provider.
1987: Ocean Park separated from the Hong Kong Jockey club and all it’s assets.
1992: The parks Chairman stated, “Financial viability has not been the park’s sole objective, but merely a means to achieve its broader corporate goals… To supply these outstanding facilities at affordable prices.”
1993: The park had a reduction in their fees.
1993: The Ocean Park Conservation Foundation was found with the objective of improving the attitude and practise towards wildlife conservation.
1995: The first loyalty program was started for local visitors.
1997: Avian Influenza epidemic hits the park.
1998: The start of the Asian financial crisis.
2000: Ocean Park changed their icon that has served them from 1977.
2001: The park launched their Halloween Bash that has turned into a popular festival.
2003: SARS breakout ends.
2003: Allan Zeman was appointed as Ocean Parks’s Chairman.
2004: Tom Merhmann was recruited and named CEO.
2005: Tom Merhmann created a Master Redevelopment Plan for Ocean Park.
2005: Master Redevelopment Plan was formally approved.
2006: Construction started and was separated in eight phases.
2007: The “Sky Fair Celebration” helium ride was introduced.
2008: The Executive council of Hong Kong has given the green light for the new rail line that was to be built.
2009: The world's first indoor­outdoor multi­Asian species exhibition, “Amazing Asian
Animals” was unveiled.
2011: Aqua City was launched with over 5000 marine animals was launched.
2012: The final phase of the new attraction the, “Polar Adventure” was completed.
2015: The South Island Line is due to be completed that was started in 2008. 1. PROBLEM DEFINITION


What are Ocean Park´s problems as of 2012 onwards?



What are the main challenges now?

Ocean Park was enjoying 20 years of operational stability and prosperity. From 1997 to 2003 many external factors like for instance the Asian financial crisis of 1998 and the avian influenza epidemic directly affected the performance of OP. In order to survive through that crisis, current administration decided abandon expensive attractions and decided to concentrate more on less on less costly and creative projects. After the crisis, in 2003 the Chinese government implemented a “Individual Visit Scheme” to allow mainland citizens to travel more freely to Hong Kong, this measure helped a lot in the recovery face of OP. At the same time the government of China announced that a new
Disney Park was going to be built and that they will own 57% of the shares creating a state of nervousness within OP because they did not know if OP was going to be able to survive against Disney. With this giant competitor, trying to maintain a high quality theme park at low entrance fees was very challenging and difficult. This is the reason why in 2002 a task force was created to plan OP´s future. Allan Zeman was hired by the Chinese government to be the new chairmen of OP. Since he did not have much experience in the theme park industry, he hired a new CEO named Tom
Mehrmann. He had to create a Master Redevelopment Plan (MRP) to rejuvenate the whole park. In December 2005 the new MRP was approved by the legislative council. The MRP was very successful, in 2011­12 the attendance grew 20.3% compared to previous years and they achieved their own attendance projection 10 years earlier. Ocean Park is facing a similar problem nowadays, during the last few years the number of theme parks in Asia has tripled. Disneyland is building a new park in Shanghai 4.7 times the size of the one located in Hong Kong. Also the problem is that tourism is not growing at the same pace as theme parks are doing, so basically they will have to fight for the limited amount of tourist available in a very competitive market. 2. ATTACKING THE PROBLEM We are going to focus the models for problem solving on 2012 onwards, since the problems they had before were solved partially by the Master Redevelopment Plan (MRP) implemented by the new CEO and his team.

Questions for Class Discussion:


Which were the political, economical, social, technological, environmental and legal factors that had an impact on HK Ocean Park?



How well does the company carry its primary and secondary operations?



How was the amount of competition Ocean Park faced from 2012?



Where would you classify the different core products in a GCB Matrix? What information does this classification gives us?



What strengths, weaknesses, threats and opportunities would you point out about this theme park after all the analysis we have gone through?

PESTEL ANALYSIS To break down the whole spectrum of influences and key pressures, we can establish the kind of strategy that was set into motion by all parties involved through a PESTEL analysis.
Ocean Park is believed to be influenced by politics, economics, social and the environment from China, still more influences were present and latent at the moment. Thus, we take a look at each and one of them. It is imperative that to take into account the Political,
Economical, Social and Environmental aspect of the analysis now that carries a heavy burden within the model: Political


J.D. Bromhall.Dreamt of a park for the local people and the Government provided him with the needed ground.



Master Redevelopment Plan was formally approved by the Government.



The Government helped to fund the Master Redevelopment Plan.



The Executive council of Hong Kong has given the green light for the new rail line that was to be built.

Economical


Ocean Park separated from the Hong Kong Jockey club and all it’s assets.



Avian Influenza epidemic hits the park in 1997 which had a economical effect on the park and was the start of the dark ages for Ocean Park.



In 1998 is the start of the Asian financial crisis.



SARS breakout affect the park financially.



Master Redevelopment Plan was funded between the Government and Commercial
Loans.

Social


The park was proclaimed as education, entertainment and conservation provider.



1993: The park had a reduction in their fees.



The park launched a Halloween Bash that has turned into a popular festival.



A loyalty program was started for local visitors in 1995

Technological


In 2007 the “Sky Fair Celebration” helium ride was introduced.



The South Island Line is was due completion in 2008.



The “Ocean Express” a funicular train was opened in 2011 that connected the
Headland and the Lowland.



With the completion of Macao Bridge and China’s high speed rail system would reduce the travelling time.

Environment


The Ocean Park Conservation Foundation was founded in 1993 with the objective of improving the attitude and practise towards wildlife conservation.



The Park inspire to connect people with nature.



The world's first indoor and outdoor multi­Asian species exhibition, “Amazing Asian
Animals” was unveiled.



Aqua City was launched with over 5000 marine animals was launched.



The final phase of the new attraction the, “Polar Adventure” was completed in 2012.

Legal


With the backing from the Chinese Government, legal issues were not a factor as it would have been if Ocean Park was created by a Private company. The government supplied land for the park to be built upon, granted a loan to the park for their Master
Redevelopment Plan, in exchange to boost the tourism in the area. Both parties benefited out of the transaction.

PORTER'S 5 FORCES This model will help us understand the industry better and the amount of competition Ocean
Park faced from 2012.
Threat to New Entry:
The threat of new entrants refers the possibility that the profits of established firms in the respective industry may be in danger because of new competitors. In terms of the amusement park industry, the entry barrier is very high. First and foremost there is a need to invest large amount of financial resources which can range from $50 million to $3 billion, depending on market. To build an amusement park it also requires large territory, over 50 acres of land for a full scale development and since land is not cheap in the Hong Kong area that is a key factor. There are others that can use a smaller area but those wouldn't be competing with Ocean Park anyway. In Hong Kong it is also extremely important the location of the park as the accessibility for customers will depend on it totally.
Threat of Rivalry:
Rivalry among the existing competitors takes the form of process of fighting for the position and it is done by implementing different tactics like price competition, advertising, offering new experiences, new services and so on. This can be observe in the amusement park industry of the country, due to high threat of rivalry, different players are implementing different plans and activities such as renovation and introduction of new attractions in order to catch the attention of the customers. In this kind of industry there cannot be much differentiation between the parks that is why the price fee at the entrance is the main factor that defines their final decisions.
Threat of Substitution:
In the industry this kind of threat is very low because the main substitute for the product is other aspects of leisure of the tourism industry including cinemas, theatres and many others but cannot be compared with amusement parks.
Threat of Suppliers:
A high bargaining power of suppliers over participants in any industry could mean a great facility for them to raise prices and thus be a threat for the industry. This is not the case of this industry because the suppliers do not have much power as is easy to exchange between local and international players in terms of technology. The primary supplier of

visitors in this case would be the airline industry which is also in the Park's favor as demand for cheap travel packages is growing.
Buyer Power:
The buyer or the visitors and tourists have a medium influence over the industry because the products and the services offered are important for them, plus the fact we have already mentioned that can not be replaced by any substitute. Amusement parks are really popular around China. VALUE CHAIN ANALYSIS

This model serves as a tool to analyse what a company does capturing the fact that it does a series of functions and evaluates how these functions are done. In a way it helps to identify the ways in which you create value for customers and how to maximize it.
PRIMARY ACTIVITIES


OPERATIONS:



Build and create an atmosphere




hire people to entertain customers arrangement of special service for disabled customers

MARKETING AND SALES





advertising on magazines, TV, newspaper special events

SERVICE


family­oriented

SUPPORT ACTIVITIES


INFRASTRUCTURE





new hotel restaurants HUMAN RESOURCES MANAGEMENT




hire local employees

TECHNOLOGY DEVELOPMENT


keep expansions going on in the park



rides innovations



new trail line

THE BCG MATRIX



The theme events generate large amounts of cash because of their strong relative market share but also consume large amounts of the cash because of their high growth rate; therefore cash in each direction approximately nets out. If the theme

events could maintain their large market share and decrease in growth rate it would become a cash cow.


The rides together with the animals and ocean are what is known as cash cow meaning receive a return on assets which is greater than the market growth rate and thus generate more cash than they consume. So both activities should be “milked” extracting the profits and investing as small amounts as possible.

CULTURAL WEB

In conclusion:
After the cultural web analysis post 2012, we found that Ocean Park has stuck to their core values created back in 1977 while all 6 factors pertaining to the core values has been developed to favorable fashion through CEO, Tom Mehrmann Although this model requires another segment to compare possible changes, the current set model created have been working for Ocean Park and is believed to serve them well currently and in the future to come, although this was only realized after the completion of the cultural web diagram.
Ocean Park should maintain these values building forward.

SWOT ANALYSIS STRENGTHS:

WEAKNESSES:




Hybrid Offering of activities




decision making


Long history on relationships with



Creation of loyal generations of



China)



transportation
Situated in natural landscape



No good transportation from downtown Hong Kong to the Park

Competitive entrance fees



Visitors spend less time at the park due to the lack of accommodation

Easy accessibility by public



Lack of financial support and backup from the government

customers (local and mainland


The hotel project is slow to complete travel agencies


Because OP is supported by the government could lead to slower

Oldest Amusement Park in the country (Hong Kong)



Limitation on land development
(expensive and rare land)

Connecting people with the wildlife and nature



Critics of environmental entities for capturing wild animals

(animals, fun and education)


Slow adaptation to change



OP is currently financially strong





Brand Awareness

OP are focused on education

OPPORTUNITIES


THREATS


Epidemics

areas and amusements


Implementation of new themed



Increasing number of direct

Continue to improve relationships with mainland Chinese Government





Diversifying the business entering other strategic groups



competitors
Differences between citizens of mainland China and Hong Kong


Global financial crisis that can affect

Creating alliances with local

the visiting behavior and buying

universities, high schools and

behavior of the tourists.

corporations in order to attract more



visitors


Individual Traveling Scheme was implemented in 2003 and it's currently the biggest source of visitors ●

Strong purchase power by Mainland
China.



The renovation plan of the
Disneyland Hong Kong that can help the organization to regain their past position in the market.



Ocean Park is the only animal facility outside of the Americas to earn important industry recognition and validation of superior animal care which could be developed more that could attract more “nature lovers” ●

Op are focused on being environmentally friendly



Internet marketing could broaden
OP visiting crowd

Fluctuating Chinese economy
(Economy are slowing down)



Land is owned by the government

COMPETITIVE ATMOSPHERE

STRATEGY DEVELOPMENT PROCESS

Intended Strategies:
The $5.55 billion Master Redevelopment Plan of the Ocean Park Corporation, featuring over
70 attractions, was endorsed by the Chief Executive, Tom Mehrmann, in Council in October
2005, and the funding arrangement was approved by the Legislative Council in December
2005. The redevelopment plan continues to emphasise the importance of community involvement and the park's role in supporting conservation and educational initiatives in
Hong Kong. The redevelopment plan was intended to place Ocean Park as one of the top

theme and entertainment park in the world while redeveloping their image and brand to the wider audience. Non­realized Strategies:
Within the master redevelopment plan, the only non­realized plan was the Hotel and Spa resort. This plan are currently re­addressed although it has not realized yet. Further development within the park’s animal conservation and development has earned most of the management team's attention leaving the Hotel and Spa resort as second priority. Deliberate Strategies:
The new CEO´s (Mehrmann) strategy was that instead of being just the employee's boss, he was going to be a confident and will adopt a coaching managing style. In order to change the aversion to risk from the staff members, Mehrmann advocated a caring corporate culture and assured the staff that anyone was going to be removed. He implemented the “Staff
Survey”, All Staff Communication Meeting” and the “Chief Executive Exchange Sessions” in order to get more feedback and fresh ideas from his staff. Emergent Strategies:
As a result of staff on the ground suggesting more innovative animal shows, Ocean Park has implemented new animal shows each fiscal year with animals from Australia and New
Zealand in the 2014/2015 fiscal year funded by the Banking Group Limited (ANZ). Although not single handedly, these shows has contributed to by attracting more visitors to the park and saw Ocean Park recorded 7.4 million guest throughout the 2014/2015 fiscal season.
This is their third highest number of guest recorded. Realized Strategy:
In 2005 the master redevelopment plan was approved and in 2006 Ocean Park started the building of new attractions while normal operations of the park were being runned. They implemented the “Sky Fair Celebration”, the world's largest integrated indoor and outdoor multi­Asian­species exhibition, a funicular train connecting the Headland and the Lowland and much more. By 2012 the number of attractions increased from 35 to 70.

3. GENERATING ALTERNATIVE ACTIVITIES
TOWS MATRIX

Strengths

Opportunities








Threats





Weaknesses

Strong financial situation would allow OP to consider entering into new strategic groups like the Hotel
& Spa industry
Use brand awareness to pull more customers through marketing campaigns Maintain customers with the different activities
Increase education and awareness to make research with private investors ●

Because of the creation of loyal generations for customers, the fluctuating economy would not have as much influence on the customers due to the discount system Use good relationship with travel agencies to fight the lower amount of visits due to the economic crisis









Because of the lack of support from the government, OP will possibly have to loan money in order to fulfill their plan of creating a hotel complex or fund the project themselves Completion of railroad in order to improve transportation Accept new private investments to expand, franchise rides
The number of direct competitor are increasing and OP has a slow adaptation to change since every decision has to be approved by the Legislative
Council.
Create alliances with direct competitors in order to increase the possible flow of clients

PROPOSED STRATEGY (1)

Following through with the development of a Hotels & Spa complex:



There was already a plan implemented with a research about building a complex with three hotels inside the Ocean Park location. This plan will not only increase the number of visitors but also the number of hours they will spend inside the park, by following through with the program they will enter a new strategic group diversifying their business.

(2)

Build on the reputation of being an accredited animal park and education centre:



Ocean Park has concentrated on upgrading the theme park combined with the animal park over the last decade. The park has grown it reputation in both criteria’s and competes with the direct competitors as far as the theme park is concerned.
Ocean Park’s animal park are the only one of its kind in the Asiatic region and need to be exploited by the strategic management. Further growth in the animal park’s reputation and expansion can be a possible. Ocean Park has got no competitors on their level and should maintain their market share within the Asiatic region. Although
Ocean Park has developed their park by adding more animals, constant upgrading and development need to be done.

4. THE SAFE CRITERIA AND TECHNIQUES EVALUATION Within the SAFe model, the first bullet point will address point (1) of the proposed strategy and the second bullet point will address point (2). Suitability

Does the proposed

● Yes, the strategy involves implementing the idea of

strategy address the key

building hotels to improve the possible visitors by

opportunities and threats

25%. Also the implementation of Spa would give the

the organisation faces?

hotels a competitive advantage over the competition.


Yes, the strategy involves building on an already established animal park which is the leader in the
Asiatic region. By implementing the strategy Ocean
Park would remain market leader and could possibly take over the whole market

Acceptability Does a proposed strategy

● The idea was already discussed but not yet rolled out

meet the expectations of

which question if the government is on board with the

stakeholders

idea and would help funding the project
● Yes, the park would become more valuable which would satisfy the stakeholders.

Is the level of risk



acceptable

High risk, since OP would have to loan the money from the government or finance the project themselves ● Because of the already established park and high market share in the animal park industry, risk would be low.

Is the likely return

● It will possibly increase the number of visitors and

acceptable

hours they spend in the park but would see a tremendous amount

of investment from the

government or commercial investment should be considered as an option (the same way of funding they collected funds for the redevelopment plan)
● Yes, although it might not be as high due to an already existing market leadership.

Will stakeholder reactions

● Maybe not since it requires a lot of funding, and OP

be positive

seems to be doing well right now
● Yes, unless the stakeholders feel it is unnecessary to widen the market leading gap.

Feasibility

Would the proposed

● The strategy has been implemented by other Theme

strategy work in practice

Parks and seems to work well although in OP’s case, the problem is with the funding which makes the project less likely.
● The strategy are already working in practise.

Can the strategy be financed ●

The Hotel and Spa was originally in the redevelopment plan and is currently in completion but not completed yet. Further investment has to be made either by the government or private loans, since OP has not considered private investment.



Yes, due to high funding from the Chinese government, this expansion would be possible.

Do people and their skills exist or can they be obtained ● They would have to be obtained although some of the skills are already obtained.
● The skill are already developed by the Ocean Park staff. 5. ACTION PLAN The proposed strategies are both strategies that have shown success with in the Asiatic region. As Ocean Park reached success with their theme park and animal park after the redevelopment plan, certain areas within the plan can be developed more and implemented.
The redevelopment plan of Ocean Park was developed in order to keep the park competitive in the growing market of theme parks within the region. A growing numbers of direct competitors has raised the level of which Ocean Park has to operate in. As the competition in the theme park industry are so strenuous, other strategic groups has to be explored.
Ocean Park has already set themselves apart from the direct competitors through rigorous investment in their animal park section and has been accredited for their achievements.
Their only focus now would be to keep their leading market share within the market by developing the animal park over years to come. One facility that was originally developed and planned but not fully developed, was the hotel and spa resorts. By reinstating these plans would generate a more rounded park which will cater for all required needs. The action plan would be to first concentrating on the development and completion of the hotels and spa’s before the expansion of the animal park. Longer visiting hours and a larger number of visitors would be a result of the completion of the hotels and spa’s. Although completion of the Hotel and Spa resort would be the most favourable solution, the recurring problem that occurs throughout the SAFE model, are the funding of each project.
The previous Redevelopment Plan has been completely funded by Government and commercial Loans while, private investment has not been considered yet since the Chinese
Government own the land. If the any further development is done within Ocean Park, funding would become the issue of debate. The best solution in funding any future development,

listing Ocean Park on the Chinese stock market would attract Private Investors and help the growth of the park, although this strategy has not been considered by the Government yet. If the strategy of listing Ocean Park on the Chinese stock market is not approved by the
Government, looking for other possible ways of getting funds should be considered.

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