A Strategic Analysis of Ocean Park of Hong Kong

(FIT) the purpose is to discover the environmental forces and the resources that need being

developed to address them in order for the Park to perform better than its competitors.

TABLE OF CONTENTS

Page

A. Executive Summary 4

B. Introduction 4

C. Strategic Position

- Market Segmentation & Life Cycle of Ocean Park 5-6

- Strategic Capabilities & Resources 6-7

- Expectation & Purpose 7-8

D. Strategic Choices 8

- Corporate Level 9-10

- Business Level 10-12

E. Strategy In Action

- Structure 13

- Process 14

- Relationship 15-16

F. Conclusion 17

Appendices 1 – 7 18-28

References 29-30

A. EXECUTIVE SUMMARY

This paper attempts to analyze the business environment that Ocean Park (OP) operates and

employs the FIT approach to discover the environmental forces that drive changes in this

theme park. It has to build on the existing resources through the design lenses to formulate

strategies at both the corporate and business levels. It already possesses the strategic

capabilities of having a convenient location, high service standard and good quality staff. The

main change is to adopt the strategy of product diversification, i.e. to develop the spa and

resort facilities. We also recommend it to penetrate the current market by strengthening

its supremacy in leading wildlife and marine education tour to complement the service

rendered to its the family clientele. It is important for the park to focus in PLOY, by

maneuvering the existing resources to maximize the business results. We also review the

configuration employed by OP which adopts the multidivisional structure to align the

process and relationship together. All in all, the Park should then position itself as the

complementary experience to that of the soon-to-be opened Disneyland rather than

engaging in a direct competition.

B. INTRODUCTION

OP, the first theme park in Hong Kong, was established in 1977 as a non-profitable public

organization, 100 percent wholly owned by the Hong Kong SAR government. With its long

history and unique image, it becomes one of the icons in Hong Kong. It is also

the possession of Hong Kong people and part of the community heritage. Its mission is to

firstly provide local and overseas visitors with experiences that combine entertainment

and education, secondly, to assist in the understanding and practice of wild

life conservation.

Given the dynamic of global business environment, fierce competition and many other

influences, OP has encountered a few years of deficit. To improve its financial performance,

OP continuously expands and improves the entertainment facilities and service standards,

seeks and introduces new educational programs and opportunities to promote

lifelong learning, strives to deliver the highest standard of quality service and customer care.

With the opening of Hong Kong Disneyland this year and to sustain its competitive

advantage, OP must re-develop its strategy to cope with the challenges in the external and

internal environment.

C. STRATEGIC POSITION

To understand the business environment that OP is operating, we will examine it by means

of the PESTEL Framework, Porter’s Five Forces and the SWOT analysis (Appendix 1).

Market Segmentation and Life Cycle of OP

In view of the current market segmentation of OP (Appendix 2), the main market segment is

overseas visitors of which Mainland visitors are the main target. Looking into the life cycle of

OP, it is estimated the local visitors has reached the declining stage while the Mainland

visitors is at the growth stage. The performance of each strategic business unit would be

analyzed by the BCG matrix(Appendix 3). The theme-event, like the Halloween Blash is in the

“STAR” box which was proven to increase the admission rate. The rides, collection of marine

and animals are in the “CASH COW” that maintains their business in OP.

Looking into business of theme-events and rides, the potential for growth is in doubt. To

reinforce the park’s role in the Hong Kong community and outperform their competitors, OP

has to re-position itself, look for new local market, such as, the young married with and

without children and develop new products, like resort and spa and wedding facilities.

Strategic Capabilities and Resources

Management and Human Resources

OP has a strong management team with 27 years of experience in managing theme

park. The board is rejuvenated under the leadership of the new Chief Executive whose

strength, diversity and commitment have been invaluable to OP. They had made a

remarkable turnaround in 2003-2004 with the support of the experienced and

well-trained human resources. Their standards of service and product knowledge are credits

to the Hong Kong’s image. They had received the Hong Kong Award of Services in 2000 by

Hong Kong Tourist Association. OP employees work stoically through the difficult SARS

months, and shared significantly in the restructuring costs. They not only manage the

difficult period, but also play an invaluable and creative role in ensuring the success of the

recovery plan, such as, theme-events.

Marine Collection and Animal Care

In the theme park industry, OP matches the world’s best in terms of the range of marine

collection, quality and breadth of animal care that arises out of their commitment

to education and conservation of the natural world and marine environment.

Location

The location of OP is supreme which has a stimulating setting, visual containment and

interesting outlook. Also, it is easy to access and well served by road.

Good Value Chain

OP has developed a strong good relationship with the Chinese Travel Agency and Hong Kong

Tourist Association. In 2003-2004, OP sales staff plays 15 separate sales visits to more than

240 Chinese travel agents in 30 Mainland cities, while the executive team met Mainland

media in Guangzhou, Shenzhen, Beijing and Shanghai. All these contribute to good

reputation and appeal of OP across the Mainland (2004).

Improving Financial Performance

OP has an improving financial performance with visitors up by 25 percent at 3.7 millions,

revenues up 25% at HK$536 million and a surplus of HK$96 million for the year, reversing

the deficit of HK$4 million in 2002-2003 and marking OP’s second most profitable year on

record. The reasons are due to not only the emergence of visitors from Mainland, account

over half of all the park’s visitors, but also, the carefully-focused development of special

events and intensive and carefully-targeted promotional activity. These have brought visitors

to the Park more often and encouraged them to stay longer every time they come (Annual

Report 2004).

Expectation and Purpose

Corporate Governance

OP has strong local roots and a wide range of home grown strengths nurtured over the 27

years of operation. Their core commitment to education and conservation remains solid.

They also have a strong Corporate Social Responsibility. 100,000 senior citizens visited the

park free of charge in 2003-04. They provide fee of charge of kindergarten tours and heavily

subsidize on-site educational tour programs.

In summary, the strengths and weaknesses of OP are as follows:

The strengths of OP are its unique image and reputation to Hong Kong community and the

tourists. It is situated in a supreme location with high accessibility. Besides, OP benefits most

from its intellectual capital, excellent value chain and organization knowledge. The drive of

management and the sponsorship of government lead to great potential for further

development.

However, OP also has a number of weaknesses. The operating cost is high and the growth of

local market is still declining. It takes a long period of time to develop new ride or other

facilities. The product feature is not innovative enough to enhance the attractiveness as a

major tourist destination to the local market.

Strategic Lenses As Design

In order to formulate a clear strategic direction, the top management uses the Design Lenses

to view the strategy development. They look at the forces and constraints imposed on OP

through a rational, analytical, structured and directive process so as to optimize the

limitations or constraints (2005).

To sum up the above analysis, the inbound tourism in Hong Kong is booming. With

government support on tourism, economy upturn, change of life style, demand of spa and

beauty facilities, flexible wedding arrangement, as well as strong capabilities, there are great

opportunities for OP to develop. As a result, it has to accelerate its innovation, and

reposition itself, capture the new markets and develop the new products to sustain its

competitive advantage.

D. STRATEGIC CHOICES

After numerous analysis made on OP’s external and internal factors, it is clear that OP needs

an innovative plan to reposition itself on the market to maintain its attractiveness and

differentiate itself among competitors. To begin with our strategic formulation, we will

adopt the staircase model (2005) to assist us in linking our different levels of strategies:

Corporate and Business, in a systematic way.

Corporate Level

To map the blue print of our total strategy, we need to set and identify new vision and

mission for OP. Being a “must-see” destination is the new vision for OP. How to translate

and implement this vision is through its new mission: create an image for OP where people

can celebrate and share the important moments of their life.

In order to realize this vision and mission, we need to draw out an action plan. Under the

current circumstances, we believe a FIT strategy approach is more appropriate since it is the

most effective in a known and stable environment where success is built on existing

competences.

As the study shows, OP has gone through several phases of changes with similar

result. Base on Porter’s theory, OP can design its strategy by using a differentiation (2003)

method to substantiate its new features in the market.

OP is unique of its own (1) having a spectacular view and close to the nature, (2) prestige

location in the south side of the HK Island, (3) isolated from major city activities yet easy

accessible, (4) famous in its expertise on nurturing animal, marine and wildlife, (5) a place

where entertainment and education are coherent and (6) ”ranked among the top 25 theme

parks with regard to attendance in the world” (People’s Daily Online).

To align with our FIT strategy approach, we will maximize its existing capabilities to diversify

its product/service focus (Appendix 4) to a new frontier. We believe our new strategy will

add value to our customer “over the long run by consistently meeting their needs better

than the competitor does” (5/19/05).

Based on our findings, we recommend OP to develop a new business unit of Spa & Resort

concept hotel to make full use of its resources with the nature and to capture the latest

living trend of HK. Since OP is lack of expertise in the hospitality industry, we suggest them

to bring in strategic alliance (2005) where the name can speak for itself. “Banyan Tree” is

our first choice to select as a strategic partner since it has extensive experience in managing

various Spa & Resort hotel worldwide. To name a few, they have existence in various Asian

countries such as Singapore, Malaysia, Indonesia, Thailand and China (Banyan Tree). With

this reference, we believe this partnership can bring benefits to both parties where expertise

and resources is shared to nurture the best outcome.

In the meantime, we are counting on this new business unit to bring in revenue and new

opportunities to OP’s current product mix. With the potential of this Spa & Resort unit, we

categorize it as a STAR in a BCG matrix (Appendix 5), we expect this business unit will stay

and enjoy its growth for a long period of time. Our confidence comes from the study of the

3 critical success factors, being (1) acceptability, (2) suitability and (3) feasibility of this

concept project. (Appendix 6)

Business Level

At this level, strategies are formulated in a more operational manner. To maintain its

competitive edge, we need to constantly ask ourselves the questions: Who are our target

segment? Where do we want to go? How to achieve the expected result?

We will use the ‘PLOY’ features in strategic formulation to lead us towards our goal

(Appendix 7).

To answer the question of “Who are our target segment”, we tend to expand our clientele to

those segments that have high disposable income, educated and treasure the quality of life

as well as to get close and preserve the nature.

“Where do we want to go” is relatively easy to understand by making OP as the must- see

attraction for people to share their important moments together. As for the question of

“How to achieve the expected result”, we will organize and conduct various programs to

cater for different customer segments. Categorization of the customers is as below:

Family

Provide a relaxed environment for adult while a safe environment to children. Parents can

encourage their children to join various educational tours that offered by OP on wildlife and

marine animals. This frees parents to have their private moment.

Children

Cater for family segment, educational tours to the marine and wildlife sections of the park

can divert their attention from their parents to other areas. In turn, it provides a more

delicate type of babysitting service. With years of experience, OP has earned the trust from

general public to be a safe and educational place for children where they can find an

ongoing excitement.

Young Couple

Since the Government has relaxed on the rules and regulations in organizing wedding

ceremony, this Spa & Resort Hotel can offer special arrangement for wedding, such as

wedding banquet and special theme wedding ceremony for the newly weds. Under the

management of Banyan Tree where it is famous for its “blend of romance, rejuvenation &

exotic sensuality”, the hotel can offer special honeymoon package to encourage the newly

weds to spend their sweet moments in the resort.

Corporate

Nowadays, many corporations are in favor of organizing off-site conferences and

seminars. We can offer similar facilities and package to cater for the needs of this target

segment at an affordable rate. These corporate customers are expected to generate new

income on a more regular and stable fashion.

Furthermore, we can introduce the idea of club membership or loyalty programs to those

repeat customers. Special package to the management of the corporate clients is a very

power and useful tool to establish a client base.

Outdoor Sports Activities

This new business unit is situated in a beautiful water front where it is near to the nature,

the Spa & Resort Hotel can organize a variety of outdoor activities for in-house customers,

such as water sports, sports, beach activities, hiking, cycling etc… to promote and portrait a

healthy environment to build a positive image.

E. STRATEGY IN ACTION

The New Configuration of OP

Employees who are the most important resource of an organization play the key roles in the

implementation of the strategy. The interactions and relationships among people can lead

to the success or failure of the strategy. After the right strategy is formulated, the next step

is to configure OP so that the structures, processes and relationships are aligned and

coherent to the new strategy.

Structure

With the implementation of the new strategy, the structure of OP should be changed to

multidivisional structure, which consists of separate divisions on the basis of products and

services (2005). Each division responds to the specifications of its product or market

strategy with its own functional department. For instance, the strategic alliance with

Banyan Tree will require a new division set up to focus mainly on the market of resort and

the new services provided. This allows each division to develop a specific competence on a

particular customer group. The divisional structure is also flexible for OP to add, dissolve or

combine divisions in response to the changes in circumstances. The head office of OP is

able to control its divisions by setting performance standards and targets. The divisional

managers are accountable for their own divisional strategies. As divisions are so specialized

and self-sufficient, it is crucial to establish cross-communication and co-operations among

divisions to enhance collaboration and knowledge sharing within OP. For instance, the

Resort Division can work closely with the OP Academy division to explore new education

tours or events for the kids of the resort customer. The central service such as finance,

human resources, and legal should be well trained to understand the specific needs of each

division so as to provide the necessary support.

One way to make change more effective is through fair, open and honest communication

( 1987). Before setting up the new structure in OP, it is recommended to ensure the

managers and the employees are clear about the purpose of the new structure. Training

should be offered to each level in OP so that managers and employees have the competence

to meet with the new requirements of the new structure (2000). Clear roles and

responsibility can shape the behaviour of employees and can achieve the expected

outcomes. Flexibility among division should be encouraged to allow divisional managers to

explore and follow new opportunities as market needs change (Whittington 2005). New

and complex collaborations among divisions may need particular skills so proper trainings

are required to ensure successful collaborations (1999).

Process

The formal and informal organizational processes are the key drivers that make the

organizational structure works. The processes are the controls: inputs or outputs, direct

and indirect on the organization’s operations and can help and hinder the translation of

strategy into action. For OP, it is suggested to adopt the combination of processes in

planning and performance targeting. The former is the archetypal administrative control

focusing on the organization’s input, which can monitor the implementation of strategy. The

latter is the performance processes, which focus on the outputs of an organization such as

service standards, revenues and products. By adopting these two processes, it is intended

to strike the balance between the control mechanism over output and input.

i. Planning Processes

Such is focused on the standardization of work processes, which are essential for OP who is

committed to provide world-class service to its visitors. By introducing the e-commerce

operations, OP can enhance its global presence. Visitors from overseas can reserve the

resort room and admission tickets through the Internet. This allows OP to plan ahead for

the peak seasons and to design promotion packages during low seasons to maximize the

allocation of its resources. Also, the bottom-up planning from business units is a vital

process (2005). Divisions could have their own planning within the corporate guideline. As

they are the most directly involved in the operation, they have better understanding of what

resources and budgets are required for the coming fiscal year. Through careful planning,

the Head Office of OP can have a much clearer picture about the operations of the divisions

and can adopt proper control as circumstances change.

ii. Performance targeting processes

These are introduced to ensure alignment of the performance targets. Head Office of OP

sets performance target to control the divisions while allowing divisions sufficient autonomy

to manage their divisions ( 1979). The performance targets can help OP to evaluate its

outputs of it service quality and profits facilitated by a clear set of role and responsibilities.

Relationship

i. Internal relationship

According to , the multidivisional structure focuses on the structural relationship between

the headquarters and the divisions, between the strategic apex and the top of the middle

line (Mintzberg 1979). In order to make the structure, process and relationships coherent

to each other, strategic control, which concerns with shaping the behaviour in business units

and with shaping the context within the divisions will be the main strategy style of OP under

the new structure (2005). Under this style, divisions will have their business plans

formulated within the corporate guidelines, which are set by the Head Office. The

divisional managers have to understand the corporate logic and should have the

competence to think strategically.

ii. External Relationship

As strategic alliance with Banyan Tree will be constructed, the success of the strategy is

relied on the cohesiveness and compatibility of this “marriage”. It is important for OP to

balance between the best sources of specialist knowledge and the competence to integrate

the specialist knowledge to create a best-value service to customers (2005). Such

connection offers OP and Banyan Tree an option of opening new doors and unforeseen

opportunities by collaboration rather than mere exchange (2002). Commitment and trust

are the two key ingredients of forming the alliance, which is similar to the marriage of man

and woman. The expectations of two parties must be aligned to achieve the different

interests of two parties.

With the diversified business of OP, the one-stop shops, one of the network relationships

will be the other focus of OP. The one-stop shop network offers customers to have a

coherent and joined-up service, which is the ultimate goal of OP’s new strategy. Under this

network, OP offers a complete package of services: resort, spa, riders and educational

experiences- exciting, relaxation, wild adventure to its visitors.

F. CONCLUSION

OP has reacted to the diversified environment by capitalizing on its strength while exploring

product / services that would appeal to the new market segment, e,g. spa & resort visitors

and promotion of wedding reception and honeymoon packages. By adopting these changes

in the business and corporate level and supported by the right configuration as outlined

above, we are confident that it will continue to be one of the top theme parks in the world

and be able to do well in face of the opening of the Disneyland.

Appendix

Macro-Environmental Forces – PESTEL Framework

Political

In the past few years, both Hong Kong and China are living in a politically stable environment.

With the launch and progressive extension of the Individual Visit Scheme, there was 4.3

million Mainland visitor arrivals to Hong Kong under this scheme in 2004, accounting for

over one-third of overall visitor arrivals which renders an important invigorating force to

Hong Kong inbound tourism. In addition, Hong Kong government will continue to expand

tourism in the Southern District and link Aberdeen with OP. In 2005, the government has

launched a new policy on marriage registration. Marriage ceremony is no longer limited to

take place in the Marriage Registry. The marrying couple can choose different locations for

marriage ceremony with advance application for officiating minister. All these give

opportunities for OP the opportunities of other business development.

Economic

In 2004, Hong Kong economy entered into a full-fledged upturn which was broad-based,

marked by thriving exports and offshore trade, vibrant inbound tourism, strong pick-up in

consumer spending and visible bounce-back in investment. The gross domestic product (GDP)

grew by a remarkable 8.1% in real terms, distinctly faster than 3.2% growth in 2003. In 2005,

the GDP is expected to attain growth of 4.5%-5.5% in real terms. The adjusted

unemployment rate fell from a high of 8.6% in the second quarter of 2003 to a near

three-year low of 6.5% in the fourth quarter 2004. Hong Kong consumer spending

maintained notable growth throughout the year since they are optimistic of the economic

outlook and improving labour market conditions. The growth of Private Consumer

Expenditure as a whole is 6.7% in 2004. The prospect for the Hong Kong economy is bright

which reinforce its existing strengths and identify a new era for development.

Socio-cultural

In 2004, the birth rate was quite low in Hong Kong. There were 47,900 newborn babies

compared to 51300 in 1999. It is because Hong Kong people prefer to have late marriage

and fewer children. Also, the population is aging and there are more female than male. The

ratio is 51.8% to 48.2%. More working women in the business world create a potential

market for business opportunities. Nowadays, Hong Kong people are better educated. Their

life-style is changing. They seek for a balance of work and life and willing to spend more

resources and time on recreation, entertainment and the development of their children

Environmental

With increasing awareness and concerns on environmental protection, the Hong Kong

Government continues to streamline their effort in controlling the pollution and protecting

the natural resources by public education and organizing different activities and programs,

such as, Rechargeable Batteries Recycling program. Besides, they make an effort to improve

the street landscape by putting more green plants in order to give a pleasant pedestrian

environment. This coupled with the growing trend of eco-tourism provide opportunities for

tourist industry.

Competition in the Theme Park Industry – Five Forces Framework (Michael Porter)

The Threat of Entry

The barrier to entry in the theme park industry is very high due to high capital cost. The total

fixed asset is around HK$706 million for initial capital requirement. For instance, Abyss

Turbo Drop costs around HK$17M. Besides, potential site for development of theme park is

very limited due to scarce supply of land.

The Threat of Substitute

In 2005, the main threat of substitution will be Hong Kong Disneyland, a new international

theme park that expected to become another major tourist destination in Asia. Apart from

this, there are other forms of substitution. From the education side, Hong Kong people can

switch to go to Cultural Centre, Mai Po Wetland, Hong Kong Zoological and Botanical Garden.

For entertainment purpose, they can visit the Karaoke, Cinema, Game Centre, or have a day

trip to China.

The Power of Buyers

The buying power of consumer is high since they have many choices as mentioned above.

The switching cost is relatively low. Also, Hong Kong people like new experience and their

loyalty to the product is generally low.

Competitive Rivalry

The global competition is great in the industry. There are 342 parks with 500,000 visitors or

more per year all over the world in 2002. OP ranked at the top 25 in the world. With the

opening of HK Disneyland in 2005 as well as other existing small-scale parks in Hong Kong,

such as, Lai Chi Kok Park, Snoopy’s world, Teddy Bear Kingdom, Winter Carnival at

Hunghom/Hong Kong, Spring/Summer Carnival at Tamar Site, these competitive rivals

possess the challenges to OP.

Opportunities and Threats

The above environmental and competition influences provide OP the following

opportunities and threat:

Opportunities for New Product and New Market

With more and more working women as well as the need of better quality of life, the

demand for Spa and Beauty is increasing. There is a market for resort developments. Whilst

a spa would be a main element within the resort, it would have to have other attractions to

be viable, such as child caring service and eco education tour for children.

Owing to the fact of increasing importance of Chinese Medicine, the Spa offering traditional

Chinese Medicine, and medical/clinical based spas (comparable to Swiss’s health and beauty

treatments) are likely to be attractive to tourists not only in local market, but also overseas

market through the year.

Spa resorts have continued to develop through South East Asia, such as, Thailand, Indonesia

and Malaysia. The market is increasingly competitive. However the brand name of OP would

attract visitors and bring certainty to the products offered.

Due to the flexibility of holding marriage ceremony, OP can develop new business, like,

wedding and honeymoon facilities and arrangement to make use of its unique image and

supreme location.

Threat

The opening of Disneyland poses a strong threat to OP in addition to the other substitutes.

Also the war for talent and aging workforce can bring negative impact on its operation. To

survive in a more favourable environment and sustain its role in Hong Kong community,

there is strong need to rejuvenate its reputation by capturing the new market and develop

new products which can strengthen the strategic position of OP and cope with the

challenges externally.