Tourism Sector in Hong Kong Strategic Management Essay Example

A competitive positioning is a key aspect of contemporary business that is related to the place in the market, profitability and ability of the company to deal with the possible challenges. To become more developed and successful, the organization should be able to show its competitive advantage. Hong Kong Disneyland and Ocean Park Hong Kong are the main competitors when it comes to the entertainment and tourism areas. The peak of the growth of Ocean Park was in 2004. However, they did not intend to stop as the emergence of Disneyland has become a driving force for the development of the competitive advantage. This report intends to present a competitive positioning of Hong Kong Disneyland and Ocean Park Hong Kong showing their strengths, weaknesses, and future opportunities.

A Review of the External Environment for the Entertainment/Tourism Sector in Hong Kong

The entertainment and tourism sector is a major driving force of Hong Kong economy. The external environment for the entertainment/tourism sector in Hong Kong is favorable. The emergence of such successful entertainment centers as Hong Kong Disneyland and Ocean Park Hong Kong proves this. To describe the current environment in Hong Kong, one should apply SWOT, PEST, and Porter’s 5 Forces analyses (Scott 2011).

PEST Analysis

PEST analysis presupposes the political, economic, sociocultural, and technological factors that influence the entertainment/tourism sector in Hong Kong (Cameron & Green 2012). Political factors are the most crucial ones as they include the governmental regulations, laws, tax obligations, and health and safety regulations. It means that the companies of the entertainment and tourism sector are obliged to follow them to avoid possible issues and harmful impact on the reputation (Barney 1991). Economic factors of the Hong Kong external environment include the consumer buying power that is defined by the national and world economic situation. One should say that economic crisis decreases the consumer buying power and leads to decrease in profits of entertainment and tourism sector. Moreover, the state of affairs in the market determines profits and sales of the companies in Hong Kong (Hong Kong: the facts 2014).

Sociocultural factors can also influence the external environment. First of all, they include the concerns of customers about the quality of services. It means that the entertainment and tourism companies should care about their image and reputation. Hong Kong Disneyland and Ocean Park Hong Kong are the entertainment centers. Consequently, their target audience includes mostly young people. The demographic issues can negatively influence the profits of the entertainment centers (Schermerhorn et al. 2013). Aging of the population and other demographic issues are popular in Hong Kong. Technological factors are the driving forces of progress. Consequently, it is necessary for the entertainment and tourism sector to use the most innovative technologies and devices to keep abreast of changes.

Porter’s 5 Forces Analysis

5 Forces analysis includes such components as the threat of substitutes, power of buyers, competitive rivalry, supplier power, and threat of new entrants. Competitive Rivalry. The Hong Kong environment creates a high competitive rivalry. The number of competitors is growing and rivals have diverse strategies for providing their services. Hong Kong Disneyland and Ocean Park Hong Kong are key rivals. Service and price strategies will be the most crucial for the customer. For example, Ocean Park offers different activities and plans the introduction of new attractions and redevelopment to become more competitive. One can say that in Hong Kong other entertainment companies cannot even try to resist Hong Kong Disneyland and Ocean Park Hong Kong (Hong Kong: the facts 2014).

Power of Buyers. One can say that the entertainment and tourism sector in Hong Kong depends on the power of buyers as they define the profits and sales. For example, in 2014 visitor arrivals have increased in 12% (Hong Kong Disneyland 2015). It means that Hong Kong Disneyland and Ocean Park Hong Kong attract tourists from all over the world. Ocean Park has no problems with visitors as it has become a must see place for them. The unique attractions of Ocean Park increase its image in the world and provoke customers’ interest. One can say that local customers have higher buying power comparing with the foreign ones. For example, in Hong Kong they can go to Wetland Park for nature and wildlife experience (Hong Kong: the facts 2014).

The Threat of Substitutes

The threat of substitutes is an alarming factor as Hong Kong environment is a competitive one. For example, Ocean Park Hong Kong is afraid of Disneyland Hong Kong because it is its direct competitor. Disneyland Hong Kong emerged later, but it provides the most innovative ways of entertainment. Moreover, Ocean Park Hong Kong is the world-class marine theme park. One should say that Ocean Park presents a family leisure activity segment (Ocean Park Hong Kong 2015). Consequently, one can refer botanic gardens, zoos, and cultural centers to those which try to substitute the marine theme park. Moreover, Hong Kong as a metropolis has a variety of museums, cinemas, concert halls, karaoke clubs, and family cafes. However, these places cannot offer such a variety of services like Ocean Park Hong Kong or Hong Kong Disneyland (Hong Kong: the facts 2014).

The Threat of New Entrants

Since entertainment and tourism business is very profitable, the threat of new entrants is very high. The market in Hong Kong is growing at an ever-increasing pace and barriers to entry are low. Buyer demand continues to increase as well encourage the emergence of new entrants. It is obvious that the theme park and entertainment industry demand the constant investments for human resources and park equipment. Consequently, the entry barrier is high. Moreover, one needs much time and efforts for legalization, launching, development, construction, and planning of the future theme park. Besides this, one should have a large space of land to build the amusement park. It should be mentioned that the land price in Hong Kong is high (Hong Kong: the facts 2014).
Power of Suppliers. Entertainment and tourism sector depends also on supplier power. Firstly, these are hotels and restaurants that collaborate with the entertainment and tourism centers. Secondly, these are touristic agencies that provide Hong Kong Disneyland and Ocean Park Hong Kong with visitors. In Hong Kong, suppliers have a high power. Theme parks are tied with suppliers since the constructions of amusement rides are complicated and huge. Moreover, suppliers are responsible for the objects developed for the parks. Additionally, the theme parks are dependent on the selected constructor. However, the choice of supplier is also rather wide. The problem is that theme parks cannot easily change a constructor (Hong Kong: the facts 2014).

SWOT Analysis

Strengths of Hong Kong Market

• Developed economy.
• Developed tourism and entertainment sector.
• Market share and strong financial background.
• Favorable business location.
• Loyal audience.

Weaknesses

• Poor distribution network.
• High prices.
• Lack of information on tourism websites.
• Imperfect system of online booking.
• High competition.

Opportunities

• Ineffective competitors and possibility to win more markets.
• International market.
• Innovation and creative approach to tourism and entertainment.
• Strong alliances.
• Franchises opportunity.

Threats

• Possible lawsuits because of quality.
• Complaints of customers.
• New competitors.
• Legal limitations.
• Taxation.

From the external analysis, it is evident that the Hong Kong external market is favorable for entertainment and tourism sector. Moreover, it is a highly competitive market that attracts tourists from all over the world. It can be stated that Ocean Park Hong Kong and Hong Kong Disneyland are the key players in entertainment and tourism sector. They refer to the cultural heritage of Hong Kong.

The interviewed visitors state that Ocean Park Hong Kong and Hong Kong Disneyland are world miracle. Moreover, the managers of both theme parks are ready for the interview releases as a way of their companies promotion. The websites of Ocean Park Hong Kong and Hong Kong Disneyland are the sources of the primary information for analysis. The interviewed managers of both companies believe that they are the direct competitors. For example, Ocean Park Hong Kong mangers speak on the problem of those who are driving forces for the theme park and those who restrain its development. From the interview, it becomes evident that customers, employees, the Tourism Board, Home Affairs Bureau and Hong Kong government are the driving forces of Ocean Park Hong Kong. The activist groups (animal rights activists and environmental groups), trade associations and unions, and competitors are the restraining forces of the park (Press releases 2015).

An Internal Audit of Ocean Park Hong Kong

To conduct an internal audit, one should use VRIO-framework. VRIO-framework helps to analyze the valuable, rare, inimitable, and organization resources of the company (Barney 1991). The valuable resources of Ocean Park Hong Kong include the support of the local government and partners, well-composed redevelopment plan repositioning, and competitive advantage. Consequently, using of these valuable resources helped to gain 95, 7 HK$ millions in profits. The value of Ocean Park Hong Kong is that it does not only provide entertainment but features wildlife and nature with many animals and animal related activities. The resources of Ocean Park Hong Kong enables the company to exploit an environmental opportunities.

The rare resources of Ocean Park Hong Kong are their leadership and human resources as they have developed the unique mission of the company that refers not only to the entertainment but also to memorable experience, education, lifelong learning, and animal care. The resources of the company are rare because it is a marine park.

The inimitable resources of Ocean Park Hong Kong refer to their contribution to the economy. This tourism and entertainment center attracts four to five million visitors annually. Moreover, Ocean Park Hong Kong makes a 0,5% contribution to Hong Kong’s gross domestic product (Ocean Park Hong Kong 2015). It is difficult to imitate such result as the company really has a powerful potential.

The organization resources of this business refer to its uniqueness. Ocean Park Hong Kong is a marine theme park of the world-class that connects people with nature and oriented on the different visitors. The policies and procedures of Ocean Park Hong Kong make the company more reputable and successful. Consequently, this business has operated more than 28 years. One can say that HRM, strategic management, organizational culture, and creative approach to business have made Ocean Park Hong Kong a cultural heritage (Ocean Park Hong Kong 2015).

The interviewed managers of Ocean Park Hong Kong state that their value is in the ability to resist such strong competitors as Hong Kong Disneyland. Moreover, global changing in tourism for Asia-Pacific region and Hong Kong benefits the future growth.

An Internal Audit of Hong Kong Disneyland

The valuable resources of Hong Kong Disneyland are related to the cost leadership and differentiation strategies. Moreover, the competitive advantage refers to the broad target audience. Hong Kong Disneyland is valuable because it provides not only theme park but also a resort experience. Moreover, the financial support from the government proves the value and importance of Hong Kong Disneyland. Government regulations are supportive and stable. Government provides 57% of financial support, and Disneyland makes 43% of financial support (Hong Kong Disneyland 2015).

The rare resources of Hong Kong Disneyland are related to the economic power. The company creates more than 18, 000 workplaces. Moreover, a strong brand image only reinforces rarity of Disneyland. A new adventure experience provided by a theme park makes it unique and unforgettable. One can say that Hong Kong Disneyland is rarer than Ocean Park Hong Kong in the promotional activities done via the Apps, Weixin, and Facebook (Hong Kong Disneyland 2015).

Hong Kong Disneyland offers the adventures interesting for teenagers as well as adults. Moreover, Hong Kong Disneyland contributes to Hong Kong tourism as a half of Disneyland’s visitors are potential visitors of Hong Kong. Moreover, it is difficult to imitate such Disneyland’s commitment to their native Asian culture and unwillingness to copy American experience. One should say that technology advancements of Hong Kong Disneyland is up-to-date. It is evident that the function of Disneyland is to be a gateway to China Mainland (Press releases 2015).
The organization resources of Hong Kong Disneyland correspond to the governmental demands. The policy of health and safety is the priority of management. Moreover, the company has the opportunities to expand its facilities and areas to attract more customers. Change management process is continuous in Disneyland and preconditioned the desire to be not less competitive than Ocean Park Hong Kong (Press releases 2015).

A Competitive Positioning Analysis

Speaking about the competition between Hong Kong Disneyland and Ocean Park Hong Kong, one should say that they are both powerful rivals who have their target audience and know the way of being successful. The PEST analysis has showed that Hong Kong Disneyland has more favorable position related to the political factors as it is financed and supported by the government. As to Ocean Park Hong Kong, it is more successful in sociocultural aspects. The environmental image of Ocean Park attracts all lovers of wildlife and nature. Analyzing these factors, it is hard to determine who is more competitive. Consequently, Hong Kong Disneyland should also promote the environmental protection using other services. As to Ocean Park, it should collaborate with the government suggesting different programs for children to receive the public investment.

Both theme parks have their target audience. Consequently, they do not deal with the problem of the low power of buyers as their visitors are from all over the world. Varying needs of customers motivate Hong Kong Disneyland and Ocean Park Hong Kong to implement the most unusual services. It is recommended to offer the system of reductions to attract new customers (Nickols 2010). It is evident that other entertainment companies cannot resist Hong Kong Disneyland and Ocean Park Hong Kong as they do not make only business but contribute to culture, environmental activities, and leisure time-spending.

Speaking about the ticket price, one should say that Ocean Park is cheaper than Disneyland (See Table 1). Consequently, Disneyland should offer more services for one price or suggest the discounts to the constant clients. The economic crisis influenced both theme parks. However, their profitability and economic resistance helped them to stand it. Additionally, Disneyland has increased competitors’ rivalry in entertainment park industry. Moreover, it has an advantage in the application of the innovative technologies as opposed to Ocean Park. One should mention that Disneyland has driven Ocean Park to diversification. The emergence of Disneyland has changed the situation in the Hong Kong market since Disneyland has increased rivalry and buyer power. However, it has increased the substitute threat. With the emergence of Disneyland, supplier power and entry threat have decreased (Hong Kong Disneyland 2015).

The key characters of Disneyland are Mickey Mouse, Donald Duck, and Winnie Pooh. However, they are more loved by European and American visitors. As to the Asian ones, they are crazy about Ocean’s Whiskeys. Consequently, Ocean Park has the advantage here. However, Disneyland has bigger area, five times greater investment, and more innovations. Ocean Park mostly orients towards the Chinese visitors. Moreover, Ocean Park focuses its attention on a real nature in contrast to Disneyland’s focus on fantasy, virtual reality, castles, and cartoon characters. Disneyland spends much money on high-profile advertising while Ocean Park relies on word-of-mouth. Additionally, Ocean Park has more diverse products. Moreover, Ocean Park is more devoted to the traditional Chinese holidays. As to Disneyland, it is committed to western holidays like Halloween.

Recommendations

Ocean Park Hong Kong and Hong Kong Disneyland should carry out various surveys to determine the level of customer satisfaction and reveal the ways of fulfilling their demand. They should be interested in high quality of its services as well as customer satisfaction. Additionally, they should orient to the global market development. However, it does not mean that Ocean Park Hong Kong and Hong Kong Disneyland should lose their Asian cultural identity and focus only on the American or European markets. It is recommended to follow a global strategy that is aimed at offering services interesting for customers from all over the world (Hughes 2010).

Customers should be the first priority for both theme parks and therefore, their personal desires concerning entertainment should be satisfied (Ferrel & Hartline 2011). As to Ocean Park Hong Kong, it has a valuable opportunity to develop the services that will be advantageous and innovative as it loses in this aspect comparing with Disneyland. Implementation of new attractions, services, and ways of entertainment is also recommended. Both theme parks should have a competition-based pricing. As a result, offering a flexible system of reductions to increase the number of customers will be beneficial. Hong Kong Disneyland should be more sensitive to competitors’ prices and offer better services with similar prices to competitors in order to attract more customers. Moreover, many consumers complain about Disneyland’s expensiveness. The pricing strategy of these theme parks has to reflect the value of services.

The theme parks should look for new suppliers because new supply chains will benefit the provision of higher quality services. Integration in the global market is a new way to develop Ocean Park. The managers should communicate with the clients to know their tastes and collaborate with competitors in order to reveal their marketing strategies. Consequently, there should be the collaboration between two theme parks. Such aspect is aimed at satisfying different customers’ needs and attracting customers from other countries. Both theme parks should build its strategies on its competencies, capabilities, and resources. They should be constantly refreshed, innovated, and developed to satisfy visitors’ demands. For example, Ocean Park Hong Kong should import more species while Hong Kong Disneyland should implement new attractions. It is also recommended to take into consideration cultural profile of customers offering them something from their background. However, they should not lose their cultural identity. All facilities should be renovated as health and safety of customers are key priorities. Moreover, a substantial capital investment, especially in Ocean Park as its facilities are unattractive and old, should be made.

Expected Trends in the Future

One can distinguish the following marketing objectives of theme parks for 2015:

• Becoming more competitive in the world.
• Providing available prices.
• Implementation of new services.
• Development of new technologies.
• Attraction of more customers via promotion strategy.

Conclusion

There is no severe competition between Ocean Park Hong Kong and Hong Kong Disneyland. Both theme parks have its strengths and weaknesses. Moreover, one can refer them to the Hong Kong cultural heritage. It is evident that these theme parks drive each other to growth and innovations, and it is a positive tendency. Hong Kong market benefits Hong Kong Ocean Park and Hong Kong Disneyland as this megalopolis attracts the tourists from all over the world. It is evident that both theme parks have sufficient financial and physical resources. SWOT analysis shows that the theme parks have the opportunities for further development. The strengths of Hong Kong Ocean Park and Hong Kong Disneyland are that they have chosen different priorities. Consequently, one should not compare a real nature with the fantasy and entertainment with education. Every theme park is competitive in its own way and has its target audience. However, diversification is a necessity for them. They should implement wide range of amusements adapting them to the real life. Ocean Park Hong Kong and Hong Kong Disneyland should focus their attention not only on Chinese visitors but on foreign ones.