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Hong Kong theme park Analysis Essay

1. Introduction

Theme Park is an entertainment venue that includes rides, restaurants, activities, and attractions, woven around a theme such as celebrity or characters. Therefore, Hong Kong has a pair of theme parks which are Hong Kong Disneyland (an international famous theme park) and Ocean Park (a recreational, educational, home-growth theme park). Both of the theme parks have attracted about 10 million visitors in 2009/2010. In this paper, the Hong Kong theme park industry will be analyzed by using Porter’s 5-Forces Model in order to decide whether the industry is worth for investment.

2. Analysis of Porter’s 5-Forces Model

The analysis of Porter’s 5-Forces Model in Hong Kong theme park industry is shown below.
Threat of New Entry
Capital Requirements

In terms of the amusement park industry, the entry barrier is high due to the need to invest large amount of financial resources. In addition to the amusement park required land for a full scale development. This factor is important because Hong Kong has a high land price real estate market.

Brand Identity

Both of the theme parks have a good reputation in service and in safety. Moreover, Ocean Park is a Hong Kong’s home-grown theme park; Hong Kong Disneyland is an international famous theme park. Both of them have their own brand identity. Thus, the threat of new entry is low in Hong Kong.

Threat of Rivalry

Numerous Competitors

The theme park industry in Hong Kong is facing a high threat of rivalry as there are numerous theme parks nearby Hong Kong in Shenzhen, such as Windows of the World Park, Minsk World and Shenzhen Happy Valley.

Lack of Differentiation

It is important to consider with lack of differentiation, visitors’ choice will greatly over the price and service, thus causes pressure for the intense price and service competition. Due to high threat of rivalry, the theme park industry is implementing different plans and activities, such as the Master Redevelopment Plan (MRP) in Ocean Park and three different phase extensions in HK Disneyland, in order to catch the attention of the visitors and differentiate themselves from rivals. Furthermore, brand identification, on the other hand, tends to constrain rivalry.

Threat of Substitution

Wetland Park and Other Popular Tourist Areas in Hong Kong

The main threat of substitution is Wetland Park, a world-class conservation educational park. Other substitutions are the existing popular tourist areas (Victoria Harbor, The Peak, Ngong Ping 360 and Wong Tai Sin Temple etc.) and the heritage tourism. Therefore, those places will attract away certain amount of visitors.

Leisure and Retail Industry

Being a cosmopolitan city, Hong Kong offers different entertainment activities like shopping, visiting the Karaoke, Cinema, Game Centre, or having a day trip to China. From the education side, visitors can switch to go to Cultural Centre, Mai Po Wetland, Hong Kong Zoological and Botanical Garden. Therefore, the threat of substitution is high.

Bargaining Power of Visitors

Tourists

Tourists have a low bargaining power as long as a must-see, safe image successfully built-up and the theme park industry cannot be replaced by other substitutes. Therefore, the industry focuses to build up these images especially in Asia.

Local Residents

The buying power of local resident 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 are generally low. The theme parks, therefore, launched difference programs with different events each year to bring new excitement and experience to them. Besides, special discount in low season and year pass intent to attract them to visit the theme parks again.

Bargaining Power of Suppliers

Supplier Concentration

For the theme park industry, most of the major things bought, like the rides and buildings, are one-off purchases. The suppliers that affect daily operation are mechanical engineering technician, food and beverage and office equipment suppliers. All these are replaceable as these will not directly affect the business of the theme park. The industry will be able to bargain with the suppliers to keep prices low. The bargaining power of suppliers is low. 3.

Analysis of External Environment

The Legal Environment

Hong Kong is a society governed by the rule of law. Many restrictions and ordinances regulate the performance of business such as safety, quality of products/services. Thus, the HK theme park industry commits to those regulations like Amusement Rides (Safety) Ordinance (Cap.449) and Public Health and Municipal Services Ordinance (Cap. 132). The industry has also established its own Health and Safety Policy to ensure the health and safety of their guests and staff. Therefore, the reputation of safety in the theme park industry is high. Besides, for HK Disneyland, the Hong Kong Government provided the site in Penny Bay with a 50-years lease. HK Disneyland may be burdened with the lease contract over this lengthy time. So that it may become inflexible towards change.

The Economic Environment

Hong Kong is one of the leading finance centers in the world. According to Holmes, Feulner and Grady (2010), Hong Kong has ranked number one on the “The Global Financial Centers Index” for 16 consecutive years. Moreover, being a member of the World Trade Organization, Hong Kong has signed off a free trade agreement, the Closer Economic Partnership Arrangement, between main China and Hong Kong. Therefore, Hong Kong has a strong economic environment and can afford to support the theme park industry. In addition, the Mainland middle class is developing very fast. It would drive rapid growth of the region’s family entertainment and tourism economy. The theme park industry needs to devise further plans, like the MRP in Ocean Park and the extensions in HK Disneyland, in order to ensure Hong Kong would remain a favored family travel destination by the attracted theme park industry.

The Cultural Environment

Being the Pearl of the East, Hong Kong had attracted 16.9 million tourists in merely the first half of 2010. The multicultural, materialistic, friendly culture definitely has a positive impact to the theme park industry. In Hong Kong, hotel, resorts and amusement parks compete intensely for young, talented employees. The situation is exacerbated because of the gap in compensation between tourism and the financial industries. The industry had always experienced a shortage of service personnel. The quality of service would be affected and more complaints would be informed by dissatisfied employees.

4. Conclusion of the Analysis

The microenvironment analyzed by Porter’s 5-Forces Model has indicated that the HK theme park industry has a certain competitive environment although the threat of rivalry, substitution and the bargaining power of visitors are high. As the industry has implemented major plans (MRP and Extension) to increase their competitive power, the industry will be sustainably growing in the future. The analysis of the external environment has shown that the overall environment is favorable to the industry in different areas. Therefore, all in all, the industry is worth of investment with a better human recourse management and a better differentiation.

Reference:

Data a from annual report of Ocean Park and its corporate governance practice (http://www.oceanpark.com.hk) Data a from annual report of Disneyland (http://park.hongkongdisneyland.com/) Salvador Anton Clavé ,”The global theme park industry”, 2007 Data a from The Hong Kong Tourism Board (http://www.discoverhongkong.com/tc/)


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