Executive Summary: (DO LAST)
Samsung and the Theme Park Industry Korea
November 20, 2017
Identify and analyze – mission and stakeholders, core values, objectives
Analyze Organization and environment – SWOT ANALYSIS HERE + rivalry & industry attractiveness
Revise objectives and select new strategies – corporate, business and functional strategies
Implement strategies – Management systems and practice + strategic leadership
Key questions to ask:
Should Samsung invest in such an aggressive expansion plan for farmland?
Is this an attractive industry for investment?
Is the plan for expansion sound?
Samsung is one of the biggest technology companies across the world. Although they are succeeding in that market, Samsung also owns an amusement park in Korea. Farmland, the name of the park, was opened in Korea in 1976 by Joong-Ang development company. Joong-Anges mission was, “to provide a better quality of life through healthy open-air leisure time.” Farmland was first opened for agricultural purposes to demonstrate how mountainous land is capable of growing food products but slowly started adding entertainment elements which made it become as Korea’s first amusement park. In 1993, A new Chief Executive officer of the Joong-Ang stepped in place objectively to expand the park. Before Her took the position he worked as the CEO of a luxury hotel called, Cheju Shilla. Her point of view is that focusing on improving the customers satisfaction level is the first step in the right direction. Her has many obstacles such as competition, pricing, transportation, environmental, etc. that he must overcome to be successful in this industry.
Identify and Analyze: (RG)
5 Forces Model
The threat of new entrants is definitely a concern considering Sega wants to open a VR theme park in Japan. Sega is a Japanese video game developer and publisher based in Tokyo, Japan. Sega plans on opening 50 parks in Japan with projected revenues of $37 million. Although Sega is making many amusement parks, they’re expensive to the industry and rarely introduced. Any company with enough capital such as Sega, brings competition to the industry. However, expanding to Korea could bring immense competition to the industry. Sega is a concern because of Virtual Reality (VR) has become a rapidly growing mass-market that attracts everyone who sees it. On the other hand, you need a high initial investment because it would be hard for new companies to enter the industry. Another thing to keep in mind is that government regulations for things like licensing and approval also acts as a huge barrier when entering the market. Large insurance premiums is what drives small companies away, but the big companies who can pay it off bring competition. In contrast, Samsung knows the industry better as they’re based out of Korea.
Consumers could substitute a visit to the theme parks with other variations of entertainment. They could substitute somethings that’s cheaper, something new, safer or more convenient. Something such as admission parks, camping trips or even watching movies at home were competing options for leisure time. These substitutes could be lower in cost, or even more convenient as perhaps traffic to the theme park could be a hassle for consumers. Another thing to keep in mind is that people like to try new things and they want something that’s new to the industry which will attract more customers. Sega for example introduced Virtual Reality (VR) and has been a rapidly growing market. People want something new and cool to try, and VR is one of if not the biggest threat. The other problem is that people usually work during the week which makes it tough for a theme park to draw in customers when they’re working hours upon hours a day. Customers would way rather go watch a movie, or stop by and try VR instead of going to a theme park which could be out of there way. They could try a multi-domestic strategy which customizes products and advertising to best fit local needs. By doing so, they will always be drawing in customers and will dominate the industry.
Buying power refers to the pressure consumers force business’s to get them to provide higher quality products, lower prices and better customer service which is touched on below. In this case, buyer cost of transitioning to competing products are low. The main area of consumers would be local families, children groups (field trips), corporation groups and tourists. When you consider groups like local families and children groups, they are there for entertainment and fun. They need to be entertained, something needs to stand out in order to recoup them. Because families and children groups travel in packs, they should be charged less per person as they would be incentivized to keep coming back in groups rather than as an individual. Regarding corporations, they especially need to be given a discount, see the best rides, and ultimately have the most pleasurable experience because they’re the ones that could potentially help grow the theme park. They could help fund new rides, expansions, draw in customers etc. Lastly, tourists who will have one of the larger impacts on the industry. They come from all over the world and word of mouth is definitely a key part on making a company well-known, which ultimately leads to more profits. People typically want a thrill out of the theme park, something unique and definitely a bang for their buck. Customers typically come in with the mindset that the price they’re paying is something that will make it mandatory to come back.
Supplier Power is key on making an industry successful. The theme park industry had three classes of inputs: the building and construction services that provided landscaping and architectural support; the hardware providers that supplied amusement machinery; and the software providers that supplied management know-how. All of the three components, if powerful, can exert influence on the producing industry such as selling raw materials at higher prices to generate higher profits. REVISE
Lastly, Rivalry amongst competitors is what sets the successful companies, from the others. Depending on what types of things you have to offer, especially something new to the industry, create rivalry. Worldwide, Asia holds the largest theme parks having about 33% of all theme parks and the Korean market is dominating. Korea’s most dominant theme parks are Farmland, Lotte World and Soeul World. All of these theme parks try to offer the best, new experiences for customers to try and be the most dominant. Technology especially, is what is drawing customers into the theme parks because people love the newest and best tech. Seoul land is more of entertainment for a short stay,
Organization & Environment Analysis: (KM)
Before Farmland makes an executive decision if they want to invest in the amusement park expansion they must consider their strengths, weaknesses, opportunities and threats. Farmland parks in Korea. Primarily, Farmland has the highest attendance amusement park in Korea. Farmland was leading in attendance for Korea with 6.071 million people visited in 1994 over Lotte World who had 4.433 million and Seoul Land who had 3.311. The second strength that Farmland possess is High food and beverages sales. Farmland led the other two competitors with 2,874 won average per capita expenditures on food and beverages in 1993. Lotte World following behind with 2,017 and Seoul Land in last with 1,804 won per capita. Her, the new chief executive officer has strong customer service which will help them have notable advantages in that area of service. Additionally, Farmland is the oldest amusement park in korea so they have experience and originality to keep customers coming. The industry itself has two main advantages that encourage the expansion to go through. One of these strengths being that it is a growing industry. Between all of the amusements parks in the Seoul area, attendance has gone up by almost 2.5 thousand people within four years. As well admissions have gone up from 24,829 million to 35,004 million from 1991 to 1993. The last influence that is a strength to the industry is the growing population in Korea. In 1991, South Korea had a population of 43.3 million in comparison to the 45.09 million they have in 1995.
Although Farmland has numerous strengths they also have some weaknesses. Like despite their high attendance numbers Farmland is in a poor location because of traffic. Many complaints have been addressed toward the commute to Farmland, many residence near the Yongin area said, it should only take them 15 minutes to drive to Farmland but since the traffic is so bad it take them close to a hour. People living in Korea are working five and a half day a week. Since travel time is long and going to amusement parks is not a priority for people, they find time is better spent doing things around the house and spending time having fun that doesn’t take a long time to get to. Another problem that has caused worries in the is if Samsung as a high technology company is going to fit well expanding into the amusement park industry. By investing in the amusement park Samsung will be carrying out growth through diversification which is a growth by acquisition of or investment in a new and different business area. Parking is another major issue that the park is facing. They have plenty of space but they can only fit about 8,000 cars and at four people per car about 32,000 people can be accommodated. This is a problem because in total 35% of people come in less than 4 people groups. This means that realistically much less than 32,00 people will have a spot to park because there won’t be four people in every single car. Since 68% of people travel to Farmland in a car it means that they need enough parking spots to accommodate all the cars. Recent profitabilities at Yougin Farmland have been on a decrease which is an issue. In 1991 they were at 721 million won and increased to 2,834 won the next year. Then in 1993 they expense shot up and they lost 18 million. It has been brought up that Farmlands customer service service has been a weakness to there amusement park. They had initiated customer satisfaction surveys recently and it was brought to the attention of the management that the customer satisfaction levels were lagging behind the key competitors, Lotte World. A turnaround would need to be put in place for them to be more successful in this area of operation.
Youngin Farmland have opportunities to fix some of the problems they are facing. The opportunities include the subway, selling merchandise, and increasing their revenue per capita. The government has plans extend the subway to bring it up to Yongin, in which case Farmland would have a subway terminal, which will provide a lot of convenience to many people trying to get to the amusement park. Farmland can aid there profits by selling merchandise to customers in the park. Lotte World strives on having a shopping mall within there complex which sets them ahead of their competitors. If Farmland was to also sell merchandise is would better even out the playing field and would help them make money. Merchandise also includes souvenirs that many children like buying to remember there time at amusement parks Talk about revenue per capita
Lastly threats must be considered to determine if investment is appropriate. One of the big threats that farmland faces in substitutes and competitors as discussed earlier. Substitutes like admission parks, beaches, camping and video movies can take away customers form the amusement park industry. As well competitors like Soul Land, Lotte World, the VR parks in Japan and the four other theme parks in the Seoul area. The expansion of farmland raised more concerns because of the extra land mass that would be needed. A farmer in the Youngin valley noted that cutting down tree and leveling trees will cause potential flooding in the surrounding region. This will damage all their crops and raise problems if not taken care of. On the topic on environment another threat is the weather in North Korea. Many substitutes will be used in months when the weather is not appropriate for an outside amusement park. Farmland in particular shows major decrease in attendance numbers in February, March, July, September, and November when conditions are not reasonable.
Revise Objective & Select Strategy:
Samsung has many options to ponder in their attempt at successfully expanding the amusement park. Their three most wise options to consider are partnering with Sega, Opening the water and save other land and money for a larger parking lot or do nothing and keep Farmland as is.
Samsung should consider partnering with Sega because virtual reality is the future. This would be known as something called a co-operation. A co-operation is when two competitors partner for mutual benefits. This is reasonable for both companies for two reason. One of the reasons this is reasonable is because Sega could benefit off of all the experience Farmland has is the market. Samsung could benefit off Sega because they are innovative and have been working with VR. The component that makes this partnership make the most sense is the fact that they are both successful technology companies. If they were to partner and bring together both of their ideas and wisdom, together they would dominate the industry. One of the major downsides to this is revenues would have to be divided, and the duration of expansion would be quite long.