Download doc - Case Study Samsung Theme Park V1

BA 540 Multinational Marketing Case Study

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International Master of Business Administration

Case Study “Samsung and the theme park industry in Korea''

Module : BA 540 Multinational Marketing

Assigned Professor : Adj. Professor, Mr Frankie [email protected]

Name of Students : ::::

Case Study on “Samsung and the theme park industry in Korea''

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Executive Summary

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Problem Analysis

In the case of Samsung; several areas of issues can be extracted from the case study:-

1. Financial Issues

The price of the theme park land is relatively expensive, ranging from $50mil - $3bill. The

cost of the land value can be really high what more when the location of this theme park is

smack in the middle of the city.

Secondly, the cost of maintenance for the theme park is huge. This expenses is

unavoidable as the nature of the business require regular maintenance works and

upgrading tasks.

2. Seasonal Fluctuations

In marketing the theme park, the management used about 10% of their total income for

below and above the line promotions. These includes advertising, radio and print

advertisement, mailers and partnership programs with tour operators.

However, the number of visitors for the center varies from time to time. Peak seasons, i.e:

spring, summer and school holidays recorded high number of visitors to the theme park.

However, this number often drop when bad weather hit the area.

In managing high demand during peak season, the management of theme park often

struggle with lack of staff to manage the demand. This led to staffing and housing issues

during this sudden urge.

3. Competitors

In South of Korea, there are many competitors that are in the same nature of business.

They are Lotte World, Seoul Land, Dream Land, Children’s Grand Park and Seoul Grand Page 2 of 14


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Park. Lotte World had the competitive advantage due to its location in the heart of the city

and its an indoor theme park. Although Yongin Farmland ranked no 11 out of 50

amusement parks in the world (1994), Lotte World is catching with up being no 14 in the

same rank.

4. Transportation and Location

Accessibility to the park is an issue especially with high traffic conditions, eg: peak hours.

People spent more time traveling everyday, they don't have enough time to do their daily

chores. Instead of entertaining themselves over the weekend, they chose to do their

chores. In an average, people spent about two hours from Seoul to Farmland due to traffic

jam. As mentioned above, a sudden urge of demand will arise during peak seasons, i.e:

spring, summer and school holidays. This will lead to issues with parking spaces. On a

normal operation basis, parking space for about 8,000 cars are sufficient, however this

might be otherwise during peak seasons.

Referring to table 8 “Leisure Patterns of South Korean Customers (1994)”, 38% of

respondents replied they will have about 4-5 people accompany them when they go to the

theme park. 68% of respondent replied they will choose to drive to the theme park.

5. Customer Satisfaction

The Management of Farmland realized that Lotte World provided better customer

satisfaction and they scored pretty high during the customer satisfaction survey. Farmland

recognizes the fact that its difficult to achieve similar service standard as in the

Disneyland. Farmland need to look into their current hiring process, academically vs

people-oriented inclination towards the job.

Evaluate the theme parks industry using Porter’s Five Forces Model.

Michael Porter’s 5 Forces Model1

Discuss the nature of the competition

Who are the competitors?

1) To the local customers:

1 Source: Harvard Business Review: Forces Affecting Competitive Intensity from “How Competitive Forces Shape Strategy by M.E. Porter, March - April 1979.

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The competitors are 1)Lotte world, 2)Seoul Land and 3)cheaper entertainment such as

camping , beach and home movies.

2) To international customers

The competitors are theme parks in the region such as Tokyo Disneyland, Hong Kong

Ocean Park , Jakarta Jaya Ancol Dreamland and Beijing Amusement Park. In South Korea

, there are also five other theme parks that compete with Farmland.

Brief description of each of the theme park :

1) Tokyo Disneyland

Comprising of 7 themes in the park ,1)World Bazaar, the 4 classics Disneyland 2)

Adventure land , 3)Disney Land 4)Tomorrow Land 5) Western Land and the

inclusion of two mini lands 7)Critter country and 8)Mickey Toon town.

a) World Bazaar

World Bazaar is the main entry corridor and primary shopping area of Tokyo

Disneyland. Despite the use of the word "World" in its name, the general look

and theme of World Bazaar is that of early 20th-century America, matching the

"Main Street, U.S.A." areas of other Magic Kingdom-style parks.

b) Western Land

Westernland is an "old west" themed area, the counterpart of Frontierland in

other Magic Kingdom-style parks

c) Critter Country

Critter Country is a small area of the park with two main attractions, Splash

Mountains and Beaver Brothers Explorer Canoe.

The other four attractions are the similar attractions are in Disney World in Florida.

2) Ocean Park in Hong Kong

The largest water park in Asia is a marine mammal park, oceanarium and animal

theme park. It boast of 35 attractions and rides such as : The dragon roller coaster,

Abyss turbo drop, Crazy Galleon, Ferris Wheel, Mine Train, Raging River and

Ocean Park Escalator are just some of the attractions.

3) North Jakarta Jaya Ancol Dreamland

One of the largest recreation complexes in SE Asia, it consist of a theme park

called, Dunia Fantasi , a water park complex, a oceanarium , a golf course , and

several hotels.

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4) China amusement Park

Comprises of roller coaster, fairy tale world, garden for families and the park is not

like the rest where there is a theme instead it is trying to copy Disneyland by putting

some figures of Walt Disney.

From the above there are two categories of customers , Farmland must attract :

1) Domestic customers which is the primary target segment of the customer base

as they represent in South Korea about 60% to 75% of the total customers

visiting theme parks.

2) International customers or Tourists where theme park is a large attraction to this

group which has a high growth potential.

Therefore in order to compete domestically and internationally, Yongin Farmland must

revamp their existing facilities and bring in new attractions and new theme to the existing

park as well as improve the hardware and software of the existing park.

To know the competition forces better , Porter’s 5 forces analysis model will be use.

Porter's 5 Forces in Yongin Farmland theme park

Porter 5 forces model (see appendix 1) focus on external environment that the company

has to be able to cope with. Porter’s five forces model identifies the 5 sources of

competitive pressures on theme park industry and helps to determine Yongin Farmland

theme park competitive intensity and profit potential. The five force of Porter’s analysis

model are as follows:

1) Rivalry

2) New entrants

3) Substitutes

4) Buyer bargaining power

5) Supplier bargaining power

Rivalry -

In Korea, around the Seoul area , there were six themes parks. The most notable player in

these region are : Lotte World , Seoul Land and Yongin Farmland.. Each of these

companies offers theme parks with varying experiences, always trying to debut the newest

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and best experiences in order to stay ahead of one another. A great example of this can

be seen by looking at these three major theme parks.

Lotte World , Seoul Land and Yongin Farmland each are in direct competition with one

another. This is evident in their competitive offerings in ticket prices: 7,279 Won at Lotte

World, 6,494 Won at Seoul Land and 6,667 Won at Farmland. These prices represent the

admission and free ride per person.

The rivalry between theme parks can also be observed by the debut of new attractions or

technology. Lotte World is located in the downtown and attract customers working or living

nearby. The theme park itself has hotel, departmental store, shopping mall , folk village

and sports center.

Seoul Land also located near Seoul, at Kyungkido, takes after Disneyland but in a much

smaller scale. Generally , Seoul Land is more of a entertainment place for short visit.

Farmland ,opened in 1976 originally meant to provide quality of living through healthy open

air leisure activities. It has the Wild Safari , the rose garden and to provide for Winter

theme , the Sled Slope and the Motor Park. Due to the intense rivalry from Lotte world and

Seoul Land , Farmland also planned to revamp its theme park with addition of the water

park, a global fair and the expansion of the existing zoo.

Rivalry amongst companies in the theme park industry is what keeps them relevant in the

eyes of its customers. Every year new attractions, restaurants, entertainment, and hotel

offerings are announced in order to influence people to attend the various parks. This

rivalry also affects the profits of these theme parks as they typically see a good return on

their investment year over year. For example, not every family is going to take a vacation

to Farmland each holiday. Farmland realizes this and thus is constantly looking for ways to

improve its attractions to stay ahead of its rivals, so families can count on having a better

experience on their next visit. The more guests Farmland can get to return by staying

ahead of rivals Lotte world and Seoul Land, the more profit they will be able to bring home.

Other forms of competition comes from free admission parks, beaches, camping trips.

These are either free or cheaper than paying for a trip to the theme park.

The bargaining power of customers in the theme park industry -

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In a good economy and during the holiday seasons, the buyer bargaining power is low

where there are many patrons to the theme park. Since the Koreans do not have many

vacation leave and Korea is a temperate country , the only time for Koreans to go out with

their family will be during the mid –summer to mid autumn period. These will be the peak

period for most of the theme parks and it is term the high seasonality.

When the high seasonality period is over, the customer’s bargaining power will be high

and the theme parks must start their promotional activities or special events to attract

customers to visit the theme park.

Bargaining power of suppliers –

As I mentioned in my discussion surrounding rivalry in the theme park industry, every park

attempts to stay relevant and appealing to its customers by debuting new

attractions/offerings as often as possible. Operating under that impression, the suppliers to

the theme park industry have a lot of bargaining power. DOGO of Japan, HUSS of

Germany and ARROW of the United States are just a few of the major companies who

create the attractions found in most of the theme parks throughout the world. Every year,

the International Association of Amusement Parks and Attractions (IAAPA) hosts a

convention where the newest technology is put on display for the consumers (theme

parks). In an effort to keep customers excited year after year, theme parks have the

opportunity at this convention to see the newest technologies first hand and decide what to

bring to their theme parks in the future. This can negatively affect the profit level of theme

parks however, as they bid against one another as they vie for the best technology, driving

up the prices and reputation of the suppliers

Threat of new entrants –

The threat of new entrants of theme park in South Korea is not particularly high. Near

Seoul , there are six theme park of which Lotte World , Seoul Land and Yongin Farmland

are the most notable ones. Theme parks around the world require a large scale initial

investment ranging from $50 million to $3 billion. Land development cost ,amusement

machinery cost and working capital are the main component of the capital investment.

Since theme parks are very competitive in nature, continuous upgrades of new attractions

and renovate existing ones to attract repeat customers is a norm.

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The threat of new entrants outside South Korea appears to be high especially from world

class theme parks such as Tokyo Disneyland, Ocean Park in Hong Kong, Jaya Ancol

Dreamland in Jakarta and Beijing Amusement Park. Hong Kong Disneyland has opened

with success, a new Shanghai Disney recent has been announced, and several theme

park projects in Dubai, though long delayed, are now starting to get under way. Whether or

not these projects will succeed remains to be seen, but the entry barriers for the theme

park industry appear to be much lower outside of the South Korea. For these reasons I

have to conclude that the threat of new entrants into the theme park industry does not

seem to have too large an impact on current companies profits.

Threat of substitutes –

The threat of substitutes in the theme park industry is one of the biggest challenges theme

parks are forced to overcome. While theme parks such as Lotte World and Seoul Land ,

they cater to customers for one or two days travel. Farmland intends to develop a resort

town in Yongin with luxury hotels, golf courses and resort accommodations catering to

customers with families and spend longer time in Farmland. The challenge for Farmland is

finding ways to entice customers to spend their vacations with them as opposed to trips to

the beach, admission parks, camping trips or staying at home and watch video-movies.

The threat of substitutes will always exist as families decide where to spend their money

on vacations each year. However, if companies can find a way to remain relevant and offer

a wide range of activities for people to engage in like Farmland ,Lotte World , they will be

less susceptible to feel the effects of these substitutes and profit levels will continue to

grow.

How do the particularities of the South Korean environment alter your analysis? Do

you foresee any specific problems? What are the key factors of success?

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It is best to use the PEST analysis model to evaluate the particularities of the South

Korean environment. The analysis measures the market potential and situation,

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particularly indicating growth or decline, and thereby market attractiveness, business

potential and suitability of assess.

PEST is an acronym for Political, Economic, social and Technological factors, which are

used to assess the market for a business unit, like Farmland. Essentially, the factors are

external in nature.

The subject of the PEST analysis in this report is to evaluate if Samsung Headquarter

should support the business proposal by investing $300 million in revamping Farmland

Theme Park.

Political

Land Use

Getting authority approval in building a theme park in Korea could be a tedious process

and takes typically 2 – 5 years before any approval could be granted. This is especially so

within the vicinity of major cities such as Seoul where land is scare. The land requires for

building or expanding a theme park normally involved considerable large land plot.

Ecological/environmental Issue

Political issues involving ecological/environmental concerns could hinder a theme park

project. Citizens or environmental group affected by the project could raise issue such as

noise pollution, traffic congestion, deforestation etc.

Premium Insurance for Accidents

Legislation requires theme park operators to carry premium insurance for accidents

involving visitors as a result of the rides, water sports facilitated.

Economic

After the Korean War of 1950-1953, South Korea has progressively evolved into a

dynamic industrial society through the decades. By 1990s, educational and public health

standards were high so as the average annual income at purchasing power parity

(adjusting to the cost of living in the country) standing at USD 13,350 and was growing.

This gave indication of the spending power of the population benefitted from the economy

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growth that experienced real GDP expanded by an average of more than 8% per year

from USD 2.7B to USD 230B in 1989.

Tourism in South Korea has been growing over the years. Majority of the South Korean

tourist industry was supported by the domestic tourism. Most non-Korean tourists come

mainly from Japan, China, Taiwan and Hong Kong. Visitors from South East Asian

countries were also on the rise. The popularity of popular culture in these countries has

increased tourist arrivals. Seoul is the principle tourist destination for visitors.

For the theme park industry in South Korea, the business is one of seasonal and

intermittent in nature. The visitor attendance typically peaked during spring/summer and

school holiday. For those with outdoor facility, the parks would be affected by the bad

weathers such as torrential rains, severe winter condition. Likewise, during the peak

period, the industry faced challenges in upholding quality service standard in catering to

large influx of visitors. Challenges included manpower shortage, transportation, building

management etc.

Transportation means in getting in and out of the theme park is an important consideration

in attracting the visitors. That is, the location and the accessibility of the park played

important criteria in the success of the parks. In South Korea, pacing with economic

growth, the government has been developing transportation infrastructure linking major

cities and most parts of the developing regions with super-highways, trains, subway,

domestic air traffic etc to promote proximity and mobility of people in the country.

It was also an important business feature in the theme park industry to continue upgrading

its infrastructure through investment in creating more attractions such as rides, shows etc

to meet customer loyalties, expectation and repeat business.

Social

Rapid economic growth, industrialization and urbanization has shifted the mobility of the

population and migration of large number of people from the countryside .Most people now

live in urban areas, and a complex structure of social classes had emerged that resembled

the social structure of developed Western countries. However, there was continuity with

the past. Confucian and neoConfucion ideas and institution continued to have important

impact to the society in the 1990s.Confucian influence was most evident in the

tremendous value placed on education, a major factor in South Korea’s economic

progress. The population of South Korea, sharing a common language, ethnic identity, and

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culture, was one of the world’s most homogeneous. The attributes gave intense feelings of

nationalism to the people of South Korean.

South Korea was one of the world’s most densely populated countries. The extremely

crowding in South Korea, especially in cities like Seoul and Pusan, was a major factor not

only in economic development and in the standard of living but also in the development of

social attitudes and the human relationships. The competition for limited resources

including space itself is intense.

Rapid economic growth, industrialization and urbanization have caused profound

transformation in the class structure of South Korea society. The most evidence is the

emergence of new middle class mainly residing in urban cities, consisting of civil servants,

salaried white-collar workers in large private companies and professionals with specialized

training. The number of factory workers has grown significantly as well.

Workers in South Korea have the longest work hours among the developed countries. The

typical workweek is 44 hours or longer, or five and a half days a week. Most people start

their day at 8am and end at around 10pm or later, often having dinner before returning

from work.

In general, people living in the urban cities like Seoul is under tremendous stress due to

the working pressure – long hours, crowded environment –traffic jam, space constraint –

small apartment. Naturally, when come to pastime, people will incline towards going to

places that offer space and less crowded area to relax. Survey in 1994 shows that south

Koreans scored high on visiting places like theme park, nature and historical place for a

short one-day holiday pastime.

Technology

The theme park industry has three classes of technology inputs (1) the building and

construction services that provided landscaping and architectural support (2) the hardware

providers that supplied amusement machinery (3) the software providers that supplied

management know how.

Building and Construction Services

South Korea has been a powerhouse in building and construction technology. Korean

conglomerate such as Samsung Corporation, Hyundai Corporation have been renowned

for their capability in taking on big and complicated building construction projects.

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Hardware Providers

Hardware Providers are supplier that specialized in supplying amusement machinery such

as roller coaster, simulators, Virtual reality etc. to the theme parks. As the popularity of the

theme park grows, there is demand in more high technological amusement machinery in

attracting crowds. Suppliers of such high quality machinery are few and concentrated in

Japan, Europe and United States. They are costly in acquiring and require considerable

operating cost in maintenance.

Software Providers

It is most difficult in developing the management know-how in theme park industry. Theme

park leader like Disney has developed successful management know how tools in

operating their theme parks and make available educational program to train personnel in

delivering world class quality service. However, it was costly and difficult to engage such

management software through licensing.

Specific Problems

- Develop quality service to meet customer satisfaction

- Land use to develop theme park

- Transportation

Key Success Factors in Theme Park Industry

Quality, Safety and Security

Customers expect high level of quality along all areas of the theme park. Users also

expect advertures and experiences in an artificial environment at a calculable risk.

Multivarious, range of options and attractions

Theme parks have to offer a wide range of attractions and possibilities which meet the

requirement and desire of new multi-optional customers.

Emotion

Theme parks need to tell a story and have to impart impressions and emotions as

persuasive as possible.

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Functionality and infrastructure

One stop solution taking into accounts of parking, accessibility to and from the park.

Branding

A corporate branding enables theme parks to create a good image, increase security, trust

and recognition to attract customers more efficiently.

Innovation

A continuing process of innovation and redesign hedges success against changing pattern

of customer behavior and fading customer loyalty.

Uniqueness

The offered product and set of experiences and attractions should be clearly defined to

keep uniqueness against competitors and focus on selected segment of customers

Weather independency

All weather operations ensure a continuous business and declutch service from

environmental factors

Involvement and interactivity

With an increasing involvement and interactivity of the customers the surplus (value

added) rise strongly for customers.

Escape and imagination

Visitors want to get away from everyday life and expect a temporary change by the

artificial and illusional stage.

Capacity and queue management

The management of the capacity during peak and off peak times and seasonal variations

in demand are a major factor for success and customer satisfaction

Continuity and theming

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The whole product including all activities and designs should be themed. Customers need

to find them clearly.

Environment integration

Theme parks have to be integrated well into the economical, social and ecological

environment of the hosting destination.

The failure of the theme parks

Falling customer expectation

Improper marketing and branding

Failed location and catchment

Inept pricing and hidden cost

Negative innovation and investment spital

Lacking entrepreneurship and know how.

Poor human resource management, bad service attitude.

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