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Table Content

1. Executive summary

2. Introduction and background

3. Market analysis

3.1Results from part one of the questionnaire and

analysis (Promotional activities of Ocean Park)

3.2Results from part two of the questionnaire and

analysis (Customers’ satisfaction)

3.3Site Investigation and observation

3.4Personal Interview

4. Marketing strategies

4.1 Products

4.2 Services

4.3 Place

4.4 Promotion

4.5 Price

4.6 Comparison between the Guangzhou Chimelong

Group and the Ocean Park

5. Financial analysis (Ratio)

5.1 Profitability

5.2 Management efficiency

5.3 Liquidity

5.4 Capital structure

6. Non-financial analysis– Corporate governance and CSR

7. Conclusions and Recommendations

7.1 Financial

7.2 Ocean Theater

7.3 Hotel

7.4 Extend opening hour

7.5 Safety

7.6 Promotion in Hong Kong

7.7Implementation of promotion plan for next three years

7.8 Projected operating results for the next three years

Appendix

Bibliography

References

P.2

P.3

P.3-4

P.4

P.4-5

P.5

P.5

P.5-6

P.6

P.6

P.7

P.7

P.7-8

P.9

P.10

P.10

P.11

P.12

P.13

P.13

P.13

P.13

P.13-14

P.14

P.15

P.16

P.17-19

P.20

P.20

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1. Executive Summary

Every company has to establish competitive advantages in order to survive. Ocean

Park (OP) had been a monopoly theme park in Hong Kong but in the past decade, it

faced serious competition. Its major competitors are Hong Kong Disneyland, the

Guangzhou Chimelong Paradise Park and the Universal Studios Singapore. In this

report, we have performed market survey to analyze OP’s competiveness, including

questionnaire and personal interview which focused on the awareness of the newly

developed facilities in OP and customers’ satisfaction towards OP’s facilities and

events. Also, we have performed a site investigation in order to observe what has been

changed and consider what should be improved in OP.

From the survey results, it was found that promotion related to the new facilities and

events of OP is apparently not enough in Hong Kong. But overall the customers are

satisfied with their OP visit and their comments are positive.

A 4Ps marketing analysis has been done that aims to determining the marketing

strategy of OP. We have made a comparison between the Hong Kong Disneyland,

Chimelong and OP, and identified the strengths and weaknesses of the OP.

Further, we have performed financial analysis of OP and it was revealed that the

company’s financial condition is sound. OP should be able to finance our proposed

plans. Our major recommendations for OP include adding new shows for Ocean Theater,

constructing a new hotel, extending the opening hour and inventing mobile apps to

increase promotion in Hong Kong. We are confident that our recommendations will be

very helpful in the sustainability and profitability of OP.

In the last section of this report, a three-year implementation promotion schedule

and a forecast for next three years’ operating results have been presented.

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2. Introduction and background

Ocean Park (OP) is a famous and popular theme park in Asia. In terms of annual

attendance, it ranked the seventh most visited park in Asia(Themed Entertainment

Association, 2010).In Hong Kong, OP has a long history and its brand name is already in

everybody’s mind in Hong Kong.

In this report, we have conducted marketing research and survey to analyze Ocean

Park’s competitiveness. We have also performed financial analysis to review the

financial performance of Ocean Park in the past three years. Based on these analytical

results, we have made projections of the company’s operating surplus for the next three

years. In the final section of this report, recommendations are provided to Ocean Park to

improve its performance and competitive advantages.

3. Market Analysis

We have designed a questionnaire (Appendix 2) to collect information for our

marketing analysis .The first part of the questionnaire aims at collecting information in

relation to Ocean Park’s promotional activities and to be completed by residents who did

not visit the Ocean Park in the year of 2011. And the second part targets those residents

who visited the Ocean Park in 2011 and asked for their views and satisfaction towards

the Ocean Park’s products and services.

A total of 114 questionnaires were done in Tsuen Wan, Shatin and Tsim Sha Tsui of

which 47 respondents had visited Ocean Park in the year 2011 and the rest of the 67

respondents had not visited the park in 2011 (Appendix 1 - Figure 2).

In our survey, the 114 questionnaires were done with local residents in Hong Kong.

We had chosen local residents because we had considered that the promotions and

advertisement about Ocean Park in the Mainland China have already been very

successful and sufficient. Although the consumption power from Mainland travelers is

huge, we cannot underestimate the local consumption power. The major difference of

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local and Mainland customers is the continuity, travelers from the Mainland may visit the

park once in lifetime, but local resident may visit the park many times. In our opinion, the

Ocean Park should continue their promotional activities in the Mainland and maintain a

long term relationship with the local residents, it is the most possible way to maximize

the profitability of Ocean Park.

3.1 Results from part one of the questionnaire and analysis (Promotional activities

of Ocean Park)

First of all, the awareness of the newly developed facilities is really poor. The

Ocean Park is the most historical theme park in Hong Kong but around half of the

respondents do not know about Ocean Park has made a huge investment to develop

new facilities. When compare with the perception of Chinese tourists, almost all of them

know about all the new facilities of the Ocean Park. It was seen that the promotion or

advertisement of Ocean Park in Hong Kong are totally inadequate.

Concerning about the promotional events, the figures 3 and 4 in Appendix1 show

that the most awareness event is the celebration of Halloween Festival and the second

is the Summer Splash. Other events are not so aware by our respondents.

Referring to figure 6 in Appendix 1, 43% of the respondents said that they will visit

the Ocean Park after they learnt about the new facilities, events and promotions. Here is

a great motivation that the Ocean Park should pay more effort in the field of promotion.

3.2 Results from part two of the questionnaire and analysis (Customers’

satisfaction)

Regarding the data generated in figures 7 and 8 in Appendix 1, majority of the

respondents think that the most representative matters of Ocean Park are animal

pavilion, thrill rides, cable car and animal performance. However, only 3 respondents

think the natural environment is representational. It seems that the park has not done

enough in making its natural environment as a memorable part of the visit.

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For the facilities and events, figures 7 in Appendix 1showed that the score of overall

customers’ satisfaction towards the park’s facilities and events is 3.4 and 3.5

respectively by which 5 is the highest mark. (figure 8 in Appendix 1). The respondents

were asked about the reasons of dissatisfaction. It was found that they were dissatisfied

with the long queuing time. Other major reasons are the behavior of Mainland travelers

and the short opening hour of Ocean Park.

In relation to the feeling and feedback from the visitors, almost all of them feel good

with positive comments (Figure 11 in Appendix 1). The new investment has been really

successful. The park should put more effort in the promotion field to let more local

residents to know about the newness of the park.

3.3 Site Investigation and observation

Our group visited the Ocean Park in December 2011. When compared to our

survey respondents, our own experience and satisfaction of the park is actually similar.

We also think that the opening hour of Ocean Park is a little bit short which is until 18:00.

With reference to one of the competitors, the Disneyland, the opening hour is until 20:00.

The time is not sufficient. We have only visited around 6-70% of the facilities in the park

for around 8 hours. If the park could extend the opening hour, it will be more attractive.

3.4 Personal Interview

Also, we have interviewed 10 visitors who come from Mainland China to investigate

about their awareness related to the facilities of Ocean Park. It was found that they know

almost all of the new facilities and promotion of Ocean Park.

4. Analysis of Marketing Strategy

4.1Products

Disneyland has lots of classic stories and characters which are very famous. And

these elements are used to produce different kinds of collections or souvenirs which

all are really attractive among customers. Chimelong’s theme park focuses on their

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facilities but not products. Their products are always in form of print t-shirt or key

chain, etc., which are not attractive. Ocean Park’s mascots are the sea lion and

panda. However, in our survey, majority of the respondents do not give high scores

to the souvenirs because they are not good-looking.

4.2 Services

Disneyland focuses on the theme facilities and musical shows, create a fantasy

place. However, there is lack of thrill rides. The staffs of the Disneyland are high

quality, almost all of the visitors mentioned that they are nice and helpful. As a kind of

service industry, quality service is important. Chimelong’s theme park has lots of

existing facilities and international acrobatics shows to attract tourists to visit, such

as thrill rides and circus. Chimelong always perform maintenance to those facilities in

order to ensure the issue of safety. The main weaknesses of this theme park are that

customers have to pay more than one entry fees and spend more days if they want

to enjoy different facilities. Ocean Park is using the combination of the above two

parks, such as animals, performance and thrill rides which are similar to the

Chimelong. The park has created some famous animal stars in recent years, and the

park is also reconstructed, it becomes more beautiful and makes customers feel that

they are situating in a dream place. These features are important and necessary to

compete with the Disneyland. The major advantage is that it can satisfy different

customer demand.

4.3 Place

The Disneyland is located at Tung Chung. It is far away from the urban area.

Customers normally spend lots of time in travelling. However, it has a special MTR

station for its own. For Chimelong’s park, it is located in Panyu which is the farthest

location. The location of the Ocean Park is the most convenience and easy access

for customer.

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4.4 Promotion

In relation to promotion in Hong Kong, the Chimelong’s park only has a few

promotion or advertisement in Hong Kong, but Disneyland is really aggressive in

making promotion or advertisement in Hong Kong, for example, every time they

have new facilities established, they will use a variety of promotion method, such

as the news, TV advertisement and the internet etc. The advertisement of Ocean

Park in Hong Kong is really not enough if compare with the Disneyland.

4.5 Price

Finally, for the price, the Ocean Park has the most competitive and attractive ticket

price, only HKD280 for an adult. The most expensive is the Chimelong, because

there is different ticket fees charged on different theme park. The Disneyland’s

ticket price is HKD399.

4.6 Comparison between the Guangzhou Chimelong Group and the Ocean Park

Ocean Park tends to establish a totally different theme park image against the

Disneyland, such as having animals’ shows and natural surroundings etc. But on the

other side, Ocean Park has similar features to the competitor Guangzhou Chimelong

Group. In the following section, we focus on comparing the Chimelong Group and

Ocean Park.

4.6.1 Entry fees

The Guangzhou Chimelong Tourist Resort was awarded as one of China‘s 5A

National Tourist Areas. The Chimelong Group owns various theme parks such as

Xiangjiang Safari Park, Chimelong Paradise, WaterPark and Guangzhou Crocodile Park.

These theme parks offer different types of tickets fees to satisfy different types of

customers. It is not very economical if customers want to enjoy visiting more than one

theme park. The advantage of Ocean Park is that one entry ticket can enjoy all its

diversified facilities and the aquarium in a shorter period. Ocean Park is able to create a

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small theme park with diversified facilities with an attractive entry price as their strategy.

4.6.2 Promotional package

Chimelong group is a large tourist resort including theme park, hotel, restaurant and

international circus. They are self-sufficient which can provide different promotional

package to the tourist, for example, a discounted package of visiting theme park and

hotel accommodation within the Chimelong tourist resort.

As for the Ocean Park, it has promoted the ‘Ocean Park’s World Attraction Fun Deal’

program to customers who will get the special offer when they have visited other local

and overseas scenic spots and different theme park. Ocean Park can advertise at other

tourist areas through this special offer promotion. It can see that Ocean Park have a

really creative mind in establishing different promotion for different segmentations.

4.6.3 Facilities

Chimelong tourist resort is a well structured theme park. The Chimelong Group

includes hotels and restaurants by their own. Since the theme park is too huge, these

facilities can keep their customers staying in the park for a longer period. This can

increase the Group’s income effectively. Also, they satisfy most people’s needs in the

area such the hotel resort and restaurants for the tourist to spend their holidays

overnight.

On the other hand, although Ocean Park is smaller than the parks of Chimelong, it

is not possible that customers can visit all the facilities in one day. It is not likely that a

person will buy the ticket twice in order to visit the whole park again. To conclude, the

hotel of Ocean Park which are constructing should finish as soon as possible to make

the park more convenient and provide package to attract more customers.

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5. Financial Analysis (Ratio)

5.1Profitability

Ratio Formula 2010/11 2009/10 2008/09

Operating

Margin

Operating Profit

Sales Revenue 27.16% 23.90% 21.78%

Net Profit

Margin

Profit Before Interest and Tax

Sales revenue 13.33% 11.74% 11.96%

Basic Earning

Power

Profit Before Interest and Tax

Total Assets 2.23% 1.83% 2.14%

Return on

Capital

Employed

Profit Before Interest and Tax

Equity Capital + Debt Capital 2.41% 1.95% 2.39%

The net profit margin in 2011 rebounded against that in the previous year after the

introduced development plan, proving this is a profitable decision. The control of

expenses incurred has been improved in 2011.

Basic Earning Power is around 2% among three years and this demonstrates that it

is quite inefficient to generate the profit through utilizing the Park’s assets.

Return on assets is largely determined by the net profit margin. This shows that the

Park is in a relatively strong position and may not be subject to high level of sale volatility.

Return on capital employed reached the bottom in 2010 and the peak in 2011.

Nonetheless, it is quite low that the Park would result in a net loss if there were a down

turn of its business.

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5.2 Management Efficiency

Ratio Formula 2010/11 2009/10 2008/09

Asset Turnover

(Times)

Sales revenue

Total Assets less Current

Liabilities

0.18 0.17 0.20

Inventory

Turnover

(Times)

Cost of Sales

Average Inventory 2.14 2.06 2.28

The asset and inventory turnover are around 0.2 times and 2 times a year

respectively. It seems that the Park’s has not taken any action to enhance its sales

performance. Such turnover, however, is quite efficient since the company can remain

its turnover while encountering adverse legislations and the downturn of economy. In

short, the company has efficient management of its assets to generate profits.

5.3 Liquidity

Ratio Formula 2010/11 2009/10 2008/09

Current Ratio Current Assets

Current Liabilities 4.02 4.89 3.32

Liquid Ratio Current Assets− Inventory

Current Liabilities 3.93 4.80 3.27

Regarding current and liquid ratio, liquid assets cover short-term liabilities at

satisfactory level. A majority of its current assets are contributed from cash equivalent

swhich can be used immediately. Thus, the Park is able adequate to repay its current

liabilities leading no any short-term liquidity problem to the company.

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5.4 Capital Structure

Ratio Formula 2010/11 2009/10 2008/09

Gearing Ratio Debt Capital

Equity Capital + Debt Capital 76.88% 73.90% 64.9%

Interest Cover

(Times)

Profit Before Interest and Tax

Interest Expense 2.7 3.4 12.9

Debt-to-equity

Ratio

Debt Capital

Equity Capital 332.5% 283.2% 185.3%

Debt Ratio Total Liabilities

Total Assets 78.6% 75.5% 68.6%

Asset-to-equity

Ratio

Total Assets less Current

Liabilities

Equity Capital

432.53% 383.17% 285.27%

As for long-term solvency, the aggregate liabilities are around 75% on average to

total assets revealing it has critically high financial leverage. Gearing ratio became

higher and higher in these three years implying the use of cheaper long-term finance or

higher financial risk of the Park. A certain degree of change occurred in the ratio among

the years. This reflects its instability of the capital structure

Interest cover dropped sharply from 12.9 to 3.4 in 2010 and had a slight drop in

2011. This is in line with the extent of increase in the gearing ratio. It indicates a smaller

coverage of trading profit to finance costs. Financial risk is thus imposed and the Park is

bearing a risk of being unable to cover its interest payments, especially during periods of

volatile profitability.

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6. Non-Financial Analysis

The Park (OPC) has its Code On Corporate Governance Practices (CCGP) so we

do not refer to Appendix 14 of Listing Rules.

Among 19 directors in the board during 2010/11, there are 3 people retired and 2

female joined the Board of Directors after the period. It is evidenced by the most

updated list of all the board members with their particulars which has been put on the

Corporation’s website. The number of members exceeds seven, the minimum

requirement. Also, there are 2 different people as OPC’s Chairman and the CEO. And

this aligns with CCGP in which the roles of the Chairman and the CEO are separate.

In OPC’s annual reports, it states that Members of the Board received no

emoluments and any material interest in the year under review. And there is no item

called Directors’ emoluments in the expenses account. Also, the independent auditor’s

report has been clearly states Board members’ responsibility for the financial statements.

In short, OPC generally meets the provisions of corporate governance.

Following the CCGP, OPC has its substantial contribution to the society as a

responsible corporate citizen. There are two aspects it takes action to contribute,

environmental stewardship, and health & safety.

OPC has made a significant effort in these areas and it received numerous

accolades in recognition of the efforts. The activities are usually in terms of education

programmes, training courses, exchanges, campaign, volunteering and so on. In

addition, OPC donates or offers big discounts to the underprivileged by using its

proceeds from activities and sale.

Undoubtedly, OPC accomplishes corporate social responsibility throughout the

years and make ongoing efforts in being the Hong Kong’s Park.

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7. Conclusions and Recommendations

7.1 Financial

The financial condition of the Ocean Park is sound, to conclude, it is possible to

implement our recommendations.

7.2 Ocean Theater

One of the famous features of Ocean Park is the Ocean Theater. However, it did not

have any changes or fresh elements added in this show in recent years. The Ocean

Park should add in some new elements into the show or arrange other marine animals

to perform the shows. Also some human performance will be great. In recent years, the

Ocean Park has arranged different kind of functions in different places such as in the

Chinese New Year, the Ocean Park had arranged a team of artists to perform a show in

the Victoria Harbour. We believe that show performance is a main factor for customer

consider whether they will visit the park, if the park has some new performances added,

customer are willing to visit it.

7.3 Hotel

It was known that the Ocean Park has a plan to build a hotel. However, the date of

the construction is too late. Almost all of the theme parks in the world has its own hotel.

With a hotel, the park can establish different type of promotion package, and more

services can be provided in order to increase income. So, we suggest the park should

put its strategic focus on the hotel first.

7.4 Extend opening hour

With reference to the two competitors, the Ocean Park’s opening hour is the shortest.

And after considering the opinions of our survey respondents, this is one of the issues of

customer dissatisfactions, thus, the Ocean Park should consider extending their

opening hour.

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7.5 Safety

Safety is one of the most expectations of customers when visiting Ocean Park. It

was reported that the accidents happened in Ocean Park this year, mainly related to the

thrill rides. Given the recent malfunction of cable car of Ngong Ping 360 in February,

customer may lose their confidence on riding the cable car. The Ocean Park should

make a budget on the maintenance at least half a year and the result of maintenance

should be disclosed clearly as to increase customer’s confidence.

7.6 Promotion in Hong Kong

Finally, regarding the promotion, it was seen that the Ocean Park has already done

lots of the promotion in Mainland. Visitors from mainland comprise over 50% of the

park’s attendance. The Ocean Park should keep the promotion in Mainland at now, and

may focus on the promotion in Hong Kong. It is because more than half of our local

respondents do not aware of the new facilities of the Park.

7.6.1Establish mobile apps

Apps are very popular at now, many companies have created an app for update

information. This method is very effective in communication between a business and

customer. The Ocean Park may establish an app in order to update its information daily,

which is similar with the facebook. Therefore, we recommend the Ocean Park to employ

some programmer to design some apps and games related to the park, such as a game

related to the polar adventure which can be designed in order to create awareness.

7.6.2 Facebook and Transportations Advertisement

The Ocean Park should make an advertisement on the facebook to acknowledge

the users of facebook about the important information of Ocean Park and the user can

click the hyperlink of the advertisement to reach the wall of the Ocean Park to obtain

more future information. Because of the market segment, TV, radio or road show

advertisements are not suitable. Advertisement on bus appearance or on the MTR

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station is the most effective.

7.7 Implementation of promotion plan for next three years

Events Duration Amount

2012 HK$ Million

Apr Employ three program designers for apps

( $20,000 per month )

$0.54

June Bus Advertisement

( $4320 per week for 1 bus )

3 months

100 buses

$5.18

MTR Advertisement ( Big board )

( $4900 per week for 1 board )

3 months

40 boards

$2.3

August Facebook Advertisement 5 months $0.15

December Total: $8.17

2013

Jan Bus Advertisement 2 months

100 buses

$3.5

MTR Advertisement ( Big board ) 2 months

40 boards

$1.6

Facebook Advertisement 1 year $0.36

December Wages of program designers $0.72

Evaluation and improve of promotion plan $0.1

Total: $6.28

2014

Jan Bus and MTR advertisement (same as 2013) $5.1

Facebook (same as 2013) $0.36

December Wages of program designers $0.72

Total: $6.18

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7.8 Projected operating results for the next three years

2011/12

HK$ million

2012/13

HK$ million

2013/14

HK$ million

Revenue (1) 1444.81 1589.3 1748.2

Advertising and

Promotion 8.17 6.28 6.18

Operating Costs x

(1+I%) (955.0) (995.1) (1,031.9)

Surplus from

operations (EBITDA) 481.6 587.9 710.1

Depreciation and loss on

disposal

(1) x 137.6 / 986.6

(201.5) (221.7) (243.8)

Finance costs * (61.5) (61.9) (62.2)

Strategic review and

redeveloped expenses (4.5) (3.7) (3.2)

Transfer from the Ocean

Park Trust Fund 4.5 3.7 3.2

Net operating surplus 218.6 304.3 404.1

Investment Income # 15.0 13.2 14.0

Surplus for the year 233.6 317.5 418.1

It is projected on the basis of 2009/10 figures, except operational costs

1 724.1 x 49% assumed (mainland: over 50%) x 70/114 x 90% + 1248.7

x (1+g=10%) in the following two financial years

Operating costs (I = 5% inflation rate x 2011 figures, 4.2, 3.7)

# Assumption, as it is fluctuated and affected by unexpected situations.

* Estimated

Appendix 1

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9. Bibliography

Michael C. Ehrhardt, Eugene F. Brigham, Corporate Finance: A Focused Approach,

2010, pp. 471-495,759-761

Randolph W. Westerfield, Bradford D. Jordan, Stephen A. Ross, Corporate Finance

Fundamentals 8 International Ed, 2007, Chap 3

Robert Hutchinson, Corporate finance: principles of investment, financing and valuation,

1995, pp. 12-22

Themed Entertainment Association, TEA/AECOM Global Attractions Report 2010.

Retrieved 17 June 2011

10. Reference

The 2012-2013 Budget of Hong Kong

http://www.budget.gov.hk/2012/eng/budget04.html

JUDGE and GET

http://www.facebook.com/jaghk

Buspak

http://www.buspak.com.hk/web/our_services.aspx?section=2&part=1&charset=1

The Hong Kong Institute of Accredited Accounting Technicians

http://www.showreel.hk/onemedia/HKIAAT/2011_Competition/Tertiary/

Easyapps

http://easyapps.com.hk/tc/about.htm

Sillycube

http://www.sillycube.com/service/androidApps?language=tc

The Hong Kong Disneyland

http://park.hongkongdisneyland.com/hkdl/zh_HK/home/home?name=HomePage

The Chimelong Groups

http://www.chimelong.com/happy/index.aspx