Identity: Su Han
Software: M2 Luxurious Management Food&Wine
Title of the case: Samsung korea and theme park industry in Korea
1) “Is a global theme theme parks industry an interesting industry being in? a) Rivalry among existing competitors
Is the industry developing rapidly?
Yes, because of the increasingly intense competition and the maturity from the market.
Concentration
The actual 4 biggest players have together much more than 80% of market share? Certainly, because 4 biggest players which are The Walt Disney Organization, Time Warner’s Six Flags Corporation, Extremely important, Anheuser Busch and Cedar Fair have together more than 80% of market share.
Diversity of competitors
Are competitors all of around the same size?
No, because it depends upon what land size and different regions
Are the opponents diversified alternatively specialized?
Yes. Topic parks generally have a global theme to propose. Variety of rivals were getting more intense.
Product differentiation
Are there significant product distinctions and manufacturer identities between competitors? Certainly, there was a number of parks and attractions, every with a distinct approach to pulling crowds and showing them a good time.
That are Ethnic and Education Parks; Outdoor Amusement Park; Theme Recreational areas were generally family-oriented entertainment complexes that were built in regards to theme; Drinking water Theme Recreational areas. That means idea is corresponding to brand.
Are products complex and do they require a detailed understanding on the part of customers? No, the rides and attraction are not require details.
Would consumers incur significant costs in switching to a competitor? Not any, ticket rates for buyers is very cheap.
Excess capacity and leave barriers
Is the sector with no spotty over potential?
Number Important over capacity more staff during spring and summer
Can it be hard to get out this business since there are specialized expertise and services or long term contract obligations? Yes, it really is.
Economies of scale as well as the ratio of fixed to varying costs
Are there economies of scale in this sector?
Yes, the economies of scale and scope had been significant on the market. Increasingly, Theme parks got bigger and much longer to generate even more operating earnings. Also, firms had multiple parks to take advantage of the learning curve effects in the management of theme leisure areas and the elevated economies of scope. Almost all of the operating bills for idea parks (about 75 per cent) were for employees.
Are the set costs in the business a comparatively low portion of total costs? No, because land expansion costs about 50% of investments and advertising campaigns around 10%.
b) Threat of new entrants
Capital requirements
Is a lot of capital required to enter the market?
Certainly, because the theme park business essential a large-scale initial expenditure, typically including $50 , 000, 000 to $3 billion.
Is definitely equipment pricey to acquire as well as to serve?
Yes, because terrain development costs, Amusement machinery costs, Seed money and Amusement equipment are expensive to get.
Economies of scale
Do significant firms include a cost or perhaps performance advantage in the industry? Yes, they have. A large number of parks periodically added new attractions or perhaps renovated existing ones to draw do it again customers. The parks commonly reinvested much of their income for growth or improving purposes.
Total cost advantages (“first valerse advantage)
Does encounter help to consistently lower costs?
Yes, mainly because large firm such as Walt Disney Organization, its economical profile was generally accustomed to assess the return on investment within the industry. The revenues for the theme recreational areas segment in the Walt Disney Company had been at US$2. 042 billion dollars in 1988 and grew to US$3. 4 billion in 1993. Working income was pegged by US$565 mil in 1988 and US$747 , 000, 000 in 1993. With this clarification, significant firms features enough knowledge to help to continuously cut costs, most of revenue to be reinvest for development purposes.
Does a newcomer possess any challenges in getting the necessary skilled people, supplies or suppliers? Yes, they have. In some countries, where terrain was hard to find, governments limited the area of the land the fact that developers can take up for motif parks. Area administration was dependent on the us government for programs such as electrical power, gas and water. A normal period necessary for arranging government approval for the theme park could possibly be as high as two to five years, with regards to the country.
Product differentiation
Are there any exclusive product variations in the market? Yes, as the theme park market had three classes of inputs: house and structure services that provided landscape designs and executive support; the hardware companies that offered amusement equipment; and the software providers that supplied administration know-how.
What are the established brand identities?
Yes, because the park manager should work together with tour operators and government holiday promotion planks to attract the visitor crowds to their parks. Topic parks spent about twelve per cent of their annual earnings for advertising.
The airwaves, newspaper, discolored page (telephone book) advertisements, family and group discounts, and direct mail had been the most common marketing methods.
Do customers bear any significant costs in switching suppliers? No, as the customers don’t care about the price.
Access to programs of circulation
Will do a newcomer towards the industry encounter difficulty in interacting with distribution programs? Yes, since theme theme parks spent regarding 10 percent of their total annual revenues for advertising. Radio, newspapers, yellow site (telephone book) advertisements, along with group special discounts, and direct mail were the most common promotional strategies.
Governmental and legal limitations
Are there any license, insurance of diploma which are hard to obtain? Certainly, because the driving licence and insurance of certification are all hard to obtain, since government rules were quite strict because of the extensive property use and security. Certification requirements and methods of ascertaining operational expertise to ensure visitors’ safety diverse from region to country.
Retaliation
Can a newcomer anticipate strong retaliation on getting into the market? Certainly, because the insurance premiums were really high in a few parts of the world. Given the probability of accidents inside the amusement parks and the possibility of severe injury, 75 per cent insurance plan was a must in the industry.
c) Threat of substitutes
Provides the customer simply no real alternatives?
Simply no, there are Various alternatives for customers: various other modes of entertainment
Propensity/willingness of buyers to alternatives
Is the customer not likely to substitute?
Simply no, customers can certainly substitute, because they want to try something new, different things, cheaper, safer, better or more convenient.
Does the customer fees costs in switching to a substitute?
Yes, because they satisfy more complex requirements. Free entrance parks and beaches, camping trips, or maybe video-movies in the home were competing options for leisure time. This means if clients have enough leisure time while the cost is lower than amusement park or have a similar type of entertainment, they were likely change all their mind.
Price/performance characteristics of substitutes
Have substitutes performance constraints which do not entirely offset their lowest price ” or ” is the efficiency advantage of alternatives not validated by their bigger price? Yes, It was the availability of leisure time and a top discretionary income that went the industrial recreation sector. Like video-movies at home, buyers cost tiny even though they can’t go out to keep things interesting.
Is it challenging to perceive efficiency differences between industry companies substitutes? No, because Topic Parks sector do not in shape well with High tech image of Samsung.
d) Bargaining power of buyers
Buyers’price sensitivity
1) Importance of that as a percentage of their total expense Are buyers not remarkably sensitive to price?
Yes, since in a great economy, consumers do not have quite a lot of bargaining electricity within the theme park industry. Although the entertainment establishments as a amount of their total expense, customers merely focus on the rides themselves, it implies that buyers’price sensitivity are not very.
2) Level of differentiation
Is the item unique to some extent or has accepted branding? Yes, like
unique simulators intended for amusement reasons using amazing technology ended uphad been developed by technology-intensive companies.
Will the customer face any significant costs in switching suppliers? No, since the customers are generally not affected by suppliers
3) Level of competition between customers
Happen to be customers’ businesses/activities/finance profitable?
Certainly, because to manage the vestibule revenue a centralized ticketed system was generally preferred. An all-inclusive admission price entitled clients to as many rides and shows because they desired. This method led to longer stays at parks leading to increased foodstuff and beverage sales. 4) Importance of the sold product to the top quality of the shopper’s product/service Yes, successful area managers used extensive advertising research to know their customers and also spent a whole lot of effort in promoting the park. To succeed in the different groups, parks emphasized increased beautification and the range of entertainment and foodstuff services offered.
Relative negotiating power
1) Size and concentration of buyers in accordance with suppliers
Is there a many buyers relative to the number of companies in the business? Certainly, there are neighborhood families, little one’s groups, the evening market, corporate groups and tourists. Do they offer a large number of buyers, each with relatively tiny purchases? Yes, each buyer just buy one particular ticket.
2)Buyer’s information
Does the buyer need a lot of important information effectively buy? No, they avoid need details to buy a ticket.
3) Ability to enter the other party’ business through vertical the use Is there anything at all which inhibits the customer via taking supplier’s function under one building? No, there isn’t anything to stop the customer coming from taking supplier’s function in-house.
e) Negotiating power of suppliers
Sensitivity to suppliers’ selling price
1) Significance of the item as being a proportion of total cost
Have cost of purchases no significant influence about overall costs? No, significant for landscaping, machineries (hardware) and skills (software). The amusement gear required for the park was expensive, almost all of it going from $1 million to 50 dollars million. The program charged large licensing charges which were above 10 % of the profits.
2) Standard of differentiation
Are advices (materials, labor, supplies, services) standard, rather than unique and differentiated? Certainly, because these inputs provided by the supplier that the benefit constitute a greater proportion in the total cost of the product with the buyers, frankly bargaining benefits of suppliers is going to increases tremendously.
Is it possible to change between suppliers quickly and cheaply? Not any, the amusement machinery industry had expanded over the years. Mainly because most of the huge drives with a solid market position, they have many buyers so that not really controlled by the marketplace competition of firms.
3) Level of competition between suppliers
Will be suppliers’ businesses profitable?
Yes, mainly because admission costs constituted over 60 % of the total revenues of any theme park, while the rest came up primarily coming from food, refreshment, and items sales. 4) Importance of inputs to the top quality of product/service
Yes, because customers anticipate high level of quality along all areas of the theme park. Users also expect adventures and experiences in an artificial environment at a calculable risk.
Relative negotiating power
1) Size and concentration of suppliers
Are there a large number of potential suppliers?
No, like special simulators for amusement uses using private technology were being developed by technology-intensive companies including Sega Asia and Simex Canada. Can there be no significant dominant supplier(s)?
Yes, the amusement machines industry had grown over the years. Most of the significant drives, such as the Hurricane or maybe the Giant Tire, were produce in Japan, The european countries or the United States. 2)Information
Can it be easy to review suppliers’ provide?
Yes, because there had been fewer than 10 suppliers who had been capable of developing quality machinery, just like DOGO of Japan, HUSS of Australia, and ARROW of the United States. 3) Ability to enter the other party’ business through vertical incorporation Would it always be easy to your business of suppliers?
Simply no, because most of these suppliers proved helpful globally, plus the machinery had been custom designed to make to so that it will fit this market and environment circumstances. Summary ” Overall market rating
Favorable
Average
Bad
Depth of competition among rivals
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Threat of entry
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Threat of alternatives
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Negotiating power of buyers
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Bargaining power of suppliers
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2) “More specifically, will the idea of idea parks work in Korea?
Yes, because there is an increase of Theme Parks’ demand in Korea that is certainly creating a flourishing in amusement domains, leading to a potential very profitable in the event that running in this business. The theme park market was still in the early stages in Korea, together a history of less than twenty years. However , signs were the fact that industry was growing internationally, with more players entering. Competition between proven competitors
the Korean marketplace is becoming older with 33% of throughout the world Theme Theme parks are located in Asia. In Korea, around the Seoul region, there were six themes parks. The most notable person in these location are: Lotte World, Seoul Land and Yongin Cultivated fields. Each of these firms offers idea parks with varying activities, always planning to debut the most recent and finest experiences to be able to stay ahead of one another. A great example of this could be seen by looking at these three major theme theme parks. New fascination and technology can desirable customers.
Lotte World has a series of their own entertainment, Seoul Land much more of a entertainment place for short visit, Farmland planned to revamp its theme park with addition of the drinking water park, a worldwide fair as well as the expansion from the existing tierpark. Every year fresh attractions, eating places, entertainment, and hotel offerings are announced in order to influence people to go to the various parks. This rivalry also influences the profits of such theme recreational areas as they typically see a very good return on the investment year over season. Other forms of competition comes from free admission parks, seashores, camping excursions. These are either free or perhaps cheaper than paying for a trip to the amusement park. Threat of entry
The threat of recent entrants of theme park in Korea is very high. Topic parks around the world need a large scale initial purchase from $50million to $3 billion. Area development cost, amusement machines cost and working capital would be the main component of the capital purchase. Another reason is definitely land make use of, Seoul where land is definitely scare. The land requires for building or expanding a theme recreation area normally included considerable large land storyline. The government generally gives businesses long periods of approval. Motif parks will have a large economical of scale in order to appeal to much more consumers because of the tours and services which want satisfy customers’ demand. Threat of replacement
Farmland intend to develop a holiday resort town in Yongin with luxury hotels, the game of golf courses and resort places to stay catering to customers with families and spend longer time in Cultivated fields. The challenge intended for Farmland is usually finding approaches to entice buyers to spend all their vacations with them rather than trips for the beach, entry parks, camping trips or staying at home watching video-movies. Bargaining power of potential buyers
In a very good economy and during the holiday periods, the buyer negotiating power is usually low where there are many customers to the amusement park. Since the Koreans do not have many vacation leave and Korea is a temperate country, the sole time for Koreans to go out with the family will be during the mid “summer to mid fall months period. These kinds of will be the optimum period for some of the idea parks in fact it is term the high seasonality. When the excessive seasonality period is over, the customer’s bargaining power will be high plus the theme leisure areas must begin their promotional activities or special events to draw customers to visit the theme park. Bargaining benefits of suppliers
the suppliers towards the theme park sector have a lot of bargaining power. DOGO of Asia, HUSS of Germany and ARROW of the United States are just a some of the major companies who produce the sights found in almost all of the theme parks throughout the world. Every year, the IAAPA hosts a convention where newest technology is put on display for the buyers (theme parks). In an effort to retain customers thrilled year after year, idea parks have a chance at this conference to see the newest technologies quality and make a decision what to provide for their theme parks down the road. This can in a negative way affect the profit level of motif parks, however , as they wager against oneanother as they vie for the best technology, driving the prices and reputation of the suppliers. 3) ” Will need to Samsung invest in the proposed Grasp Plan ($300 million investment)? Certainly, but needs to be more mainly because theme park designers chose area sites within a central area which was fairly expensive in Korea as well as some important requirements are lacking in this decide to be complete and genuine. For example , the truth that Farmland is going to build new attraction and lengthen some others for making them more desirable is a level that required the whole advertising campaign to be reconsidered entirely, and in addition more affecting by focusing on all those novelties. This is an essential operation which will raise price range corresponding to more than 10% of the revenue in the group, plus other unexpected extra costs.
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