The Situation Of Hong Kong’s Ocean Park
Introduction
In contemporary international business with an increasingly open market, many local enterprises are facing severe competition from large scale international company. In the case of disparities in overall strengths, it is quite essential and necessary for local business to explore new development ideas as well as new space for development.
With its continuing effort on re-engineering these years, Hong Kong Ocean Park has turned a profit of 95.7 HK$ millions in 2004. However, with the coming opening of Hong Kong Disneyland, Hong Kong Ocean Park should be well prepared for the challenge from its main competitor by starting from its own characteristics, repositioning, identifying its absolute advantages, carrying out redevelopment plan with the support from its partners and local government.
This report is mainly focused on the statement of the current situation of Hong Kong Ocean Park and discussion about its future development. To begin with, there will be some basic introduction of Hong Kong Ocean Park like its mission, vision and so on. Next goes the analysis of external and internal environment. After that, strategic choices will be discussed. And finally, suggestion and recommendation are proposed to the CEO and Board of Ocean Park.
1. Strategy concepts and vocabulary
Mission: “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” (Ocean Park Hong Kong, 2010).
Goals and objectives:
-boost the number of annual visitors from four million in 2004 to five million by 2010;
-to make a 0.5 per cent contribution to Hong Kong’s gross domestic product (GDP) in 2010.
Vision:
“Ocean Park aspires to be a world leader in providing excellent guest experiences in a theme park environment connecting people with nature” (Ocean Park Hong Kong, 2010). And, more specified, its vision is to become number one marine-based park for each family not only from Hong-Kong but also from mainland China.
The main performance measures to determine the success of Ocean Park are the following:
Firstly, it has high reputation in both Hong Kong and mainland China. As it has been operated for more than 28 years, it become a long-time favorite of several generations, many local people were sympathetic to Ocean Park. Thus, people who had visited the park as children were now bringing their own children to it. Secondly, it had become a fixture of Hong Kong’s cultural heritage. Thirdly, the number of visitors in 2004 is 4 m of people (with daily maximum capacity 35 000 people); total revenue in 2004 was 536.2 HK$ m comparing to 428.3 HK$ m in 2003, surplus for 2004 year was 95.7 HK$ m comparing to deficit 4.1 HK$ m in 2003. And finally, its new brand (Whiskers) is recognizable at every house in China and plays a major role in the success of Hong Kong Ocean Park.
On one hand, we have stakeholders, who help to achieve park’s purpose and mission, such as Hong Kong government, Home Affairs Bureau and the Tourism Board, employees of Ocean Park corporation and park’s visitors (customers). On other hand, we have those, who interfere with achieving park’s purpose and mission, such as activist groups (certain environmental groups and animal rights activists), who insist on forbidding of buying and transportation exotic animals to park, trade associations and unions (bus companies and taxi drivers), who are against building a mass transit railway (MTR), and competitors, who want to regain the market share.
2. External Environment
Key driving forces and their ranking
Raise and spend HK$5.55 billion from private and government loans to revamp park’s well-worn product line (approval of development plan)
Global changing in tourism for Hong-Kong and Asia-Pacific region (development of tourism in region)
Disneyland’s arrival – worldwide success of main competitor-Disneyland, coming to Hong Kong (Disney’s success or failure)
PESTEL ANALYSIS
FIVE FORCES ANALYSIS for amusement park industry
1) Threat of new entry
As entertainment and theme park industry requires a lot of money (for park equipment, human resources maintenance), the entry barrier is high. Also lots of time is required for park’s planning, construction, development and launching, a lot of licenses and legalization is needed (safety, sanitary, security etc). Besides this, a large space of land is essential to the development of the amusement park, especially in Hong Kong, where the land price in real estate market is high.
2) Threat of rivalry
With low differentiation of products visitors’ choice will be based on price and service only. As a result, there is an additional pressure on the price and service competition.
Ocean Park needs to carry out different plans and activities such as redevelopment and introduction of new attractions. There are no rivals with exactly the same range of products. Disney’s arrival is only expected.
3) Threat of substitution
In the family’s leisure activities segment, where Ocean Park is operated, many organizations provide different kind of services. These include Cultural Center, Zoo and Botanic gardens. Thus, Hong Kong, as a metropolis, has a variety of cinemas, karaoke clubs, family cafes, concert halls and museums. Such services can’t offer full range of activities, which Ocean Park provides, but they have an impact on number of customers, especially during the days of unique events, such as blockbuster’s premieres or festivals.
4) Bargaining power of buyers (visitors)
As Ocean Park successfully established and positioned its image with unique attractions, it has become a “must see” place for foreign visitors. The tourist bargaining power is low due to it is hard for visitors to get the same experience at any other place as they have had in Ocean Park.
Local residents have a high buying power as they have many other choices for leisure. For instance, they can go to Wetland Park for ecotourism and nature and wildlife experience, they can also go to movies or fitness club for entertainment purpose. Moreover, the switching cost is relatively low for them.
5) The power of suppliers
Suppliers have quite high power. Thus, construction elements of amusement rides are huge and complicated, that’s why park is highly tied with supplier. Additionally, supplier is responsible for maintenance of objects he has developed for park. This caused in higher dependence of selected constructor. Otherwise, this market is developed and the choice of suppliers is become greater now. While constructing buildings (hotels, etc) with particular contractor park can’t easily change to another contractor because of high switching cost). The situation with the exotic animals is such as Ocean Park can buy in particular country only.
The underlying dynamics, which are driving five forces
1) Aftermath of economic crises and increasing in number of suppliers will decrease supplier power.
2) Disney’s arrival decrease entry threat in entertainment park industry and increase competitors’ rivalry.
3) Developing of new technologies will affect rising of substitutes. Also competitors with new technologies will win (in this aspect Disney has an advantage)
4) Disney’s arrival increase demands in diversification of Ocean Park’s products.
5) Ticket price advantages (185 HK$ for adult ticket at Ocean Park compared to 295HK$ for the same ticket at Disney).
6) The main rival (Disney) is also same market oriented (families with children), therefore, this could rise buyer’s power.
Based on the five forces analysis, the main dominant force of industry is substitutes. Less importance has suppliers and further – buyers.
Looking forward, the five forces will change in this way:
-Rivalry will increase with Disney’s arrival;
-Buyer power will increase slightly;
-Substitute threat will also increase;
-Entry threat decrease dramatically;
-Supplier power will also decrease.
Five forces much more affect Wetland Park – Ocean Park’s key competitor, located at the northern part of Tin Shui Wai, in Yuen Long, than Ocean Park itself, because Wetland park’s products are less differentiated. It has “a 10,000m2 visitor centre, Wetland Interactive World, and a 60-hectare Wetland Reserve” (Hong Kong Wetland Park, 2010). Arrival of other competitor – Disney and its substitutes – doesn’t affect much Ocean Park because it has its own niche.
More differentiation of new products, directed mainly to Chinese native culture will affect rivalry, substitutes and buyers. Unique high-quality products and services also will influence buyers. For seeking suppliers big impact will have Internet and special web-sites with best quality of service, characteristics, recommendations and prices.
Strategic group/space analysis for Ocean Park
There are 2 key competitors for Ocean Park:
1) Hong Kong Wetland Park, mentioned above. It is a conservation, education and tourism facility, consisted of large visitor centre, Wetland Interactive World and a Wetland Reserve. This park provided visitors with opportunities to observe wildlife, awareness and understanding the values of wetlands throughout the East Asian Region and beyond, wetlands conservation. So, it’s mainly about wetlands. The Hong Kong Wetland Park is also going to “be a world-class ecotourism facility to serve both local residents and overseas tourists” (Hong Kong Wetland Park, 2010).
Compare to Disneyland and Ocean Park, Hong Kong Wetland Park has different facilities and product range (such as themed exhibition galleries, a theatre, a souvenir shop, an indoor play area), provide different services and thus, like Disney and Ocean Park, has its own niche. The range of facilities provided is the narrowest among 3 parks. Therefore, Wetland Park can’t meet demand of those visitors, who are looking for excitements and extreme pleasure, which can be found on a rides at 2 other parks.
2) Hong Kong Disneyland, arriving in a nearest future.
After 28 years of operating as a near monopoly, Ocean Park would soon have to compete with one of the biggest names in the entertainment and theme park industry. Moreover, Disneyland targets the same group of park’s customers – families with children.
It has well-known brand and reputation. It’s the world leader in terms of entertainment. Several of Disney’s characters (Mickey Mouse, Donald Duck and Winnie the Pooh) were household names all over the world, including in Hong Kong. Image, which Disney company holds almost for a century (The Walt Disney Company was founded in 1923) and Disneyland itself (first park was opened in 1955) for half a century (compared to 28 years of Ocean park) helps to attract visitors not only from Hong Kong and midland China, but also from different part of the globe, especially those who are from the USA and Europe (The Walt Disney Company, 2010).
But, despite of distinguish of Chinese culture, Disney characters may be not as popular in Hong Kong as Ocean Park’s mascot, Whiskeys.
Among other advantages of Disneyland are:
– location (it could be reached in just 10 minutes from Hong Kong’s airport and less than 30 minutes from downtown Hong Kong);
– the price claimed to be the least expensive among the five Disney amusement parks throughout the world;
– the area of Disneyland is 310 acres compared to 215 acres of Ocean Park;
– 5 times greater investment than for Ocean Park;
– world-renowned innovation;
– high customer service standards.
Strategic groups within the entertainment and theme park industry in Hong Kong
Broad
Ocean
Park
Disneyland
Product range
Narrow
Wetland Park
Global
Local
Geographical Scope
On one hand, Ocean Park is a part of entertainment and theme industry. Its market is families with children. On other hand, Disneyland, its future competitor, applies to the same market. Despite of this, Ocean Park has its own niche with visitors from mainland China and products range, combining entertainment and leisure as well as education.
3. Internal Environment
Ocean Park’s resources
1) Tangible:
– financial – private and government loans; expected HK$5.55 billion investment; HK$145 billion economic effectiveness; surplus from operations in 2004 was HK$182.2 million on revenues of HK$536.2 million; net current assets – HK$283.2.
– physical – Sea World, marine life and real animals: 35 rides and attractions; favorable and convenient location on the southern side of Hong Kong Island; wide range of new activities, such as the Abyss Turbo Drop thrill ride, seasonal and special events (Chinese New Year, Easter Holiday, Summer Holiday, Halloween and Christmas), popular water-related activities, interactive activities with animals, “edutainment” programs, successful Sea Jelly Spectacular and so on.
2) Intangible:
– long-time reputation of park with government, customers;
– new brand – sea lion named Whiskers;
– cultural heritage of Hong Kong;
– great number of repeated visitors.
3) Human:
– 37 100 employees, their skills and knowledge;
– Thomas Mehrmann, new CEO of Ocean Park, and his previous experience at US-based Six Flags Corporation.
Main capabilities of Ocean Park
1) New products, facilities and services development capability – continually adding new features and attractions. Therefore, in a nearest future Ocean Park will become one of the best marine-based theme park with strong connection with nature.
2) Research and development, marketing and sales capabilities: plan to refurbish and rename Ocean Park’s 2 major areas (the Lowland and the Highland), new hotels to be developed, including a five-star boutique, spa-type hotel, plan to open offices in the major urban areas of Guangzhou, Beijing and Shanghai to enhance promotional activities in Hong Kong and attract more mainland visitors.
3) New incentive compensation that linked employee compensation to the financial performance of park.
The competences of Ocean Park
– local market loyalty, customer’s trust and love
– long-term reputation, distinct Chinese characteristics
– recognizable brand
– education in combination with recreation
– cost and differentiation of product, encouraged visitors to return to the park
– distinctive work culture, with its own norms and practices
Competitive Advantages of Ocean Park over Disneyland
– cultural heritage of Hong Kong, orientation mostly on visitors from midland China
– first-mover advantages
– primary focus of Ocean Park on real nature and wildlife in contrast to Disney’s strengths in cartoon characters, castles, virtual reality and fantasy
– no need to engage in high-profile advertising and publicity, rely more on word-of-mouth
– more diverse and wide range of products
– price advantage: the admission price for Disneyland is expected more than twice higher for child and one and a half higher for adult than price of Ocean park. And visitors from mainland China are very price sensitive. SmartFun Annual Pass program with unlimited admission to the park for its holders within a year, and discounted prices for food, souvenirs
– orientation not only on entertainment, but also on education of visitors
– special events for traditional Chinese holidays (Chinese New Year) besides events for western holidays (Halloween)
Despite Ocean Park build its strategy on its resources, capabilities and competences, it can’t relay only on them – they need to be developed, innovated and refreshed, because they may begin to look dated and shabby for their visitors. For example, it can import more species, construct water/sea-related facilities and hotels. Overall, Ocean Park resources are sustainable, with some exception such as, the impact on these resources from environmental groups’ opposition.
SWOT ANALYSIS
Positive impact
Negative impact
Internal environment
Strengths
-diversified and wide range of amusements (thrills, animals, seasonal and special events)
-product line revamp
-highly linked with culture of mainland Chinese visitors, knows their demands and behavior
-the main, oldest and most famous amusement park in the country, hometown favorite
-28 years of operating as a near monopoly
-no need to engage in high-profile advertising and publicity, rely more on word-of-mouth
-strong business connection to the local government (support from the government of Hong Kong and mainland China)
-previous experience of Thomas Mehrmann (new CEO of Ocean Park) in theme park industry (at US-based Six Flags Corporation)
-local market loyalty
-positive image of park
Weaknesses
-located on a hills-hard to get to some riders-that’s why visitors experienced rides only once
-different facilities are old and un-attractive and need renovation
-a lot of activities depend on weather
-no substantial capital investment
External environment
Opportunities
-focusing on delivering mainland China’s visitors as well as foreign visitors
-plan to build a mass transit railway (MTR) station to connect Ocean Park to the subway grid
-the development and improvement of the amusement machinery, which can impact the services and features of the organization and its relationship to their foreign visitors
-raise the standards of park with Disneyland arrival
– fostering sponsorships
-plan for building new hotels (boutique and spa-type) – orientation on new luxury tourism market segment
Threats
-economical instability (such as the Asian financial crisis of 1999-2001, lasted for 3 difficult years for Ocean Park), outbreak of different diseases, such as Severe Acute Respiratory Syndrome (SARS) in 2003 (Both these factors can affect number of visitors and their buying behavior, worsening the park financial situation)
-arrival of Disneyland Hong Kong
-location on valuable real estate: it could be shut down and its land could be sold off for other recreational or commercial purposes.
4. Strategic Choices
Business-level strategy
Hong Kong Ocean Park uses hybrid strategy, which “seeks simultaneously to achieve differentiation and low price relative to competitors” (Johnson, Scholes, Whittington, 2008). Most activities were carried out based on this Strategy.
1) Hong Kong Ocean Park’s admission fee is Adult HK$185, Child HK$95 which is lower that of Disney’s: Adult HK$295(weekdays) HK$350(holidays); Child HK$210(weekdays), HK$250(holidays).
2) Hong Kong Ocean Park did not spend too much on new fixed-asset attractions due to short life circles of them and difficulty in coming up with an encore.
3) It keeps part attractions fresh, novel and exciting while minimize costs. Instead of buying in new attractions, Hong Kong Ocean Park focused on culture innovation. Some relative low-cost ideas proved successful: Seasonal and special events attracted repeat visits every year.
4) Hong Kong Ocean Park did not take part in highly cost advertising campaign. Compared to its competitors, Hong Kong Ocean Park tended to rely more on word-of-mouth to generate additional business. Since Hong Kong Ocean Park was the local residents’ favorite theme park and had high reputation in Hong Kong even in Asia. Hong Kong Ocean Park had profound influence on several generations in Hong Kong, people who had visited the park as children were now bringing their own children to visit the park. Actually, Hong Kong Ocean Park was locally born and bred and had become a fixture of Hong Kong’s cultural heritage.
5) Hong Kong Ocean Park had a clear organizational structure, no too much redundancy. It can save labor cost.
6) Hong Kong Ocean Park had identified its strategic customers clearly; those are Local tourists and Mainland Tourists. So, it carried out several plans to attract its key customers.
a) It hosts several festival events and activities to complement its park offerings with distinct features, like Chinese New Year. It had distinct Chinese characteristics that reflected its roots in Hong Kong, a quintessentially Chinese city.
b) Retained its unique SmartFun Annual Pass Program and tactically reviewed and developed value-added benefits to build sales and local customers’ loyalty. This program encouraged annual pass holders to visit the park repeatedly. Visitors to the park would spend money in other areas to boost revenue beyond the admission fees.
7) Hong Kong Ocean Park’s had clear and definite position; that was to become “the best marine-based theme park in the world” – need a source here!!, to provide customers with a place for recreation and education about marine life and environmental conservation. This unique strategic position is differentiated Hong Kong Ocean Park from its competitors and ensure its advantages over the main competitors.
Competitive strategies of Hong Kong Ocean Park’s competitor
Disneyland was regarded as Hong Kong Ocean Park’s main competitor and it adopted a differentiation strategy. With a differentiation strategy, a company provides products or services that offer more benefits than those of its competitors which are widely valued by buyers. The aim is to make a company advantageous over its competitors by offering better products or services at the same price or increasing profits by a slightly higher price (Johnson, Scholes, Whittington, 2008).
More specifically, Disneyland took below action plans in line with its differentiation strategy:
1) The selling points of Disneyland were Disney cartoon characters, fantasy world and famous Americans brands, 23 rides and attractions.
2) Disney has strong abilities to create fantasy and virtual situations, and it was going to leverage the benefits of animation into its amusement parks.
3) There would be two hotels in Hong Kong Disneyland which could provide guests with better recreation facilities.
4) There was going to be a subway station linking Disneyland to other parts of Hong Kong which enable Disneyland to has convenient transportation advantage over its competitors.
5) Unique Disney World-styled wedding ceremony was offered to guests in Disneyland.
Strategic direction
In 2005 Ocean Park had good business characteristics – it became profitable, with significant market share, effective management team and successful recognizable brand.
Otherwise, arriving of Disneyland could negatively impact on success of a company. To avoid this, Ocean Park must define a right strategic direction. Most preferable direction is product development. This means that Ocean Park need to improve its products range and number of additional services. Thus, by offering new wide set of entertainment and educational products for all target groups, the company can gain advantages to harden its brand, attract new consumers and retrieve lost customers, who not engaged with old facilities and services any more.
Despite the international tourists is a minor group in customers totals, company could start to develop a new markets. This development includes marketing campaign directed to tourists from selected countries and making contracts with tour agents. Realization of these methods helps to increase tourists share when local citizens’ share will decline after Disneyland coming.
International Strategy
International Strategy for Ocean Park is limited to marketing policy for preferable countries. The main reason of this limitation is that Ocean Park can’t be expanded to other countries like Disneyland does, for example. It’s based on local flora and fauna and strongly attached to Chinese culture. Also other countries may not have such resources. Ocean Park is a unique, not common product. Not every country even needs it. Thus, expansion is considered in case of marketing development only, such as connection with potential tourists, opening of offices, TV advertising and so on, which helps to enhance promotional activities in Hong Kong and attract visitors.
CAGE FRAMEWORK for Ocean Park
Cultural distance: With increasing popularity of the Ocean Park, the CEO and Broad of Ocean Park need to think about it attractiveness to tourists in case of the whole world. Indeed, Ocean Park activities are affected by cultural heritage, but it only helps park to attract tourists not only from Asia, but also from all over the world. High priorities should be given to those countries, from where the number of tourist is significant.
Administrative and political distance: It’s important to consider at first countries with good and stable relationships with China and Hong Kong.
Geographic distance: High priority should be given to those countries, from which the number of tourist is significant, then to neighbor countries. Therefore, Ocean Park need to make agreements with tour agents in these countries, organize different sales and advertising, so, expand its marketing presence in these countries.
Economic distance: The economic circumstances of a country is an important factor when carrying out international strategy. Therefore, the amusement theme park can’t be developed well in the countries with bad economic circumstances. Thus, the main orientation of Ocean Park will be on countries with high income per capita or high level of consumer wealth.
5. General introduction and future of development Hong Kong Tourism
Since the reunification (except during the SARS outbreak in), the Hong Kong tourism industry has performed well. In 2004, Hong Kong tourism industry reached new heights, with 21810630 tourists, increasing by 40.4% compared to the figures of 15536839 in 2003 (subject to SARS impact), meanwhile, the revenue of tourism amounted to 91.8 billion Hong Kong dollars, up to 9.6% over 2003 (http://www.discoverhongkong.com).
Hong Kong government has always been thinking of a new positioning and development direction. In the Government’s “policy report”, it is identified that “Hong Kong to be Backed by the Mainland and towards the world, to be an international metropolis providing quality services”, and it is clearly stated the new policy as “Market Leads, Government Facilitates”. – need a source here!! Tourism is the most robust momentum in services industries, one of the pillar industries of Hong Kong and is paid high attention by Hong Kong government. In the new situation and new policy paradigm, the Government begins to make overall planning for the tourism industry, which means that the Government will take more proactive measures to promote the development of tourism (http://www.gov.hk).
In 2004 mainland visitors continued to be the majority of Hong Kong tourism with a number of 12245862 tourists, increasing by 44.6%. “Free exercise” program was the driving force to promote further expansion of mainland market. Moreover, from July 1, 2004, the “free exercise” extended to 32 cities in South China and East China, 100 million 58 million residents from these cities could apply for travel to Hong Kong with the name of “free exercise”. In 2004, there were 426 million “free exercise” visitors, accounting for 34.8% of the total number of tourists; which rose more than twice than 134 million tourists in 2003 (http://www.discoverhongkong.com).
With the support from the government as well as the increasing trend of visitors travelling to Hong Kong, it is predicted that there will be a bright future for Hong Kong tourism which will directly promote the development of them park industry in Hong Kong.
6. Suggestions to Hong Kong Ocean Park
Generally speaking, Hong Kong Ocean Park, with Disneyland’s arrival, should transform hybrid strategy to differentiation strategy. More specifically, it involves two main parts: marketing strategy as short term goals and infrastructure construction as long term objective. However, it should always stick to its mission and vision of “delivering the highest standards of safety, animal care, products and guest service, be a world leader in providing excellent guest experiences in a theme park environment connecting people with nature.” – put a source here!
Marketing strategy
Product:
– Keep on introducing a variety of interactive activities with animals. For example: the Ocean theatre that staged dolphin and sea lion shows every day.
– Keep focus on seasonal and special events like Chinese New Year and Halloween. For instance, during summer holiday, some water-related activities such as water-war of foam parties should be organized which target teenagers.
– Develop a niche products, e.g. Sea World-styled wedding ceremony.
– Provide more sophisticated products to its customers than Disney. For example, build boutique hotel and spa-style hotels for tourists with higher income, expectations and needs. Such, move to a new market segment, even luxury tourism.
Price:
– Concentrate on giving value for the money the customers have paid. It is quite essential to attract mainland visitors who are more sensitive on price. Provide guests with more amusement facilities at a lower price than Disneyland to attract more visits.
– As to the local residents, it is suggested to offer them the annual pass as it creates loyalty and a real sense of value by encouraging annual pass holders to visit the park repeatedly. Some special offer to different groups in the society is also recommended, for example, a discount for students during holidays.
– As a step of moving from hybrid to differentiation strategy after Disney’s arrival, at first, Ocean Park should keep its prices, but later, with differentiation of its products range, the prices could be increased.
Promotion:
– Make full use of word of mouth marketing and the advantage of being the localized theme park. Proceed the promotion through the unique feeling of “growing together with Hong Kong” (Yan Le, 2007).
– Advertising campaign in Hong Kong can be carried out through the interactive quiz of the knowledge about animals to inspire their interest in nature and wildlife.
– As there is a significantly increasing number of mainland visitors to Hong Kong, it is strongly suggested that Hong Kong Ocean Park should establish agencies in major cities in China to showcase its unique attractions and attract more mainland visitors.
– Expand the marketing campaign to international markets to attract foreign tourists.
– In case of Disney’s arrival, Ocean Park can start more aggressive marketing politic for attracting tourists from all over the wor
