P.2 P.3 P.3-4 P.4 P.4-5 P.5 P.5 P.5-6 P.6 P.6 P.7 P.7 P.7-8 P.9 P.10 P.10 P.11 P.12 P.13 P.13 P.13 P.13 P P.14 P.15 P.16 P P.20 P.

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2 Table Content 1. Executive summary 2. Introduction and background 3. Market analysis 3.1Results from part one of the questionnaire and analysis (Promotional activities of Ocean Park) 3.2Results from part two of the questionnaire and analysis (Customers satisfaction) 3.3Site Investigation and observation 3.4Personal Interview 4. Marketing strategies 4.1 Products 4.2 Services 4.3 Place 4.4 Promotion 4.5 Price 4.6 Comparison between the Guangzhou Chimelong Group and the Ocean Park 5. Financial analysis (Ratio) 5.1 Profitability 5.2 Management efficiency 5.3 Liquidity 5.4 Capital structure 6. Non-financial analysis Corporate governance and CSR 7. Conclusions and Recommendations 7.1 Financial 7.2 Ocean Theater 7.3 Hotel 7.4 Extend opening hour 7.5 Safety 7.6 Promotion in Hong Kong 7.7Implementation of promotion plan for next three years 7.8 Projected operating results for the next three years Appendix Bibliography References P.2 P.3 P.3-4 P.4 P.4-5 P.5 P.5 P.5-6 P.6 P.6 P.7 P.7 P.7-8 P.9 P.10 P.10 P.11 P.12 P.13 P.13 P.13 P.13 P P.14 P.15 P.16 P P.20 P.20 Page 2

3 1. Executive Summary Every company has to establish competitive advantages in order to survive. Ocean Park (OP) had been a monopoly theme park in Hong Kong but in the past decade, it faced serious competition. Its major competitors are Hong Kong Disneyland, the Guangzhou Chimelong Paradise Park and the Universal Studios Singapore. In this report, we have performed market survey to analyze OP s competiveness, including questionnaire and personal interview which focused on the awareness of the newly developed facilities in OP and customers satisfaction towards OP s facilities and events. Also, we have performed a site investigation in order to observe what has been changed and consider what should be improved in OP. From the survey results, it was found that promotion related to the new facilities and events of OP is apparently not enough in Hong Kong. But overall the customers are satisfied with their OP visit and their comments are positive. A 4Ps marketing analysis has been done that aims to determining the marketing strategy of OP. We have made a comparison between the Hong Kong Disneyland, Chimelong and OP, and identified the strengths and weaknesses of the OP. Further, we have performed financial analysis of OP and it was revealed that the company s financial condition is sound. OP should be able to finance our proposed plans. Our major recommendations for OP include adding new shows for Ocean Theater, constructing a new hotel, extending the opening hour and inventing mobile apps to increase promotion in Hong Kong. We are confident that our recommendations will be very helpful in the sustainability and profitability of OP. In the last section of this report, a three-year implementation promotion schedule and a forecast for next three years operating results have been presented. Page 3

4 2. Introduction and background Ocean Park (OP) is a famous and popular theme park in Asia. In terms of annual attendance, it ranked the seventh most visited park in Asia(Themed Entertainment Association, 2010).In Hong Kong, OP has a long history and its brand name is already in everybody s mind in Hong Kong. In this report, we have conducted marketing research and survey to analyze Ocean Park s competitiveness. We have also performed financial analysis to review the financial performance of Ocean Park in the past three years. Based on these analytical results, we have made projections of the company s operating surplus for the next three years. In the final section of this report, recommendations are provided to Ocean Park to improve its performance and competitive advantages. 3. Market Analysis We have designed a questionnaire (Appendix 2) to collect information for our marketing analysis.the first part of the questionnaire aims at collecting information in relation to Ocean Park s promotional activities and to be completed by residents who did not visit the Ocean Park in the year of And the second part targets those residents who visited the Ocean Park in 2011 and asked for their views and satisfaction towards the Ocean Park s products and services. A total of 114 questionnaires were done in Tsuen Wan, Shatin and Tsim Sha Tsui of which 47 respondents had visited Ocean Park in the year 2011 and the rest of the 67 respondents had not visited the park in 2011 (Appendix 1 - Figure 2). In our survey, the 114 questionnaires were done with local residents in Hong Kong. We had chosen local residents because we had considered that the promotions and advertisement about Ocean Park in the Mainland China have already been very successful and sufficient. Although the consumption power from Mainland travelers is huge, we cannot underestimate the local consumption power. The major difference of Page 4

5 local and Mainland customers is the continuity, travelers from the Mainland may visit the park once in lifetime, but local resident may visit the park many times. In our opinion, the Ocean Park should continue their promotional activities in the Mainland and maintain a long term relationship with the local residents, it is the most possible way to maximize the profitability of Ocean Park. 3.1 Results from part one of the questionnaire and analysis (Promotional activities of Ocean Park) First of all, the awareness of the newly developed facilities is really poor. The Ocean Park is the most historical theme park in Hong Kong but around half of the respondents do not know about Ocean Park has made a huge investment to develop new facilities. When compare with the perception of Chinese tourists, almost all of them know about all the new facilities of the Ocean Park. It was seen that the promotion or advertisement of Ocean Park in Hong Kong are totally inadequate. Concerning about the promotional events, the figures 3 and 4 in Appendix1 show that the most awareness event is the celebration of Halloween Festival and the second is the Summer Splash. Other events are not so aware by our respondents. Referring to figure 6 in Appendix 1, 43% of the respondents said that they will visit the Ocean Park after they learnt about the new facilities, events and promotions. Here is a great motivation that the Ocean Park should pay more effort in the field of promotion. 3.2 Results from part two of the questionnaire and analysis (Customers satisfaction) Regarding the data generated in figures 7 and 8 in Appendix 1, majority of the respondents think that the most representative matters of Ocean Park are animal pavilion, thrill rides, cable car and animal performance. However, only 3 respondents think the natural environment is representational. It seems that the park has not done enough in making its natural environment as a memorable part of the visit. Page 5

6 For the facilities and events, figures 7 in Appendix 1showed that the score of overall customers satisfaction towards the park s facilities and events is 3.4 and 3.5 respectively by which 5 is the highest mark. (figure 8 in Appendix 1). The respondents were asked about the reasons of dissatisfaction. It was found that they were dissatisfied with the long queuing time. Other major reasons are the behavior of Mainland travelers and the short opening hour of Ocean Park. In relation to the feeling and feedback from the visitors, almost all of them feel good with positive comments (Figure 11 in Appendix 1). The new investment has been really successful. The park should put more effort in the promotion field to let more local residents to know about the newness of the park. 3.3 Site Investigation and observation Our group visited the Ocean Park in December When compared to our survey respondents, our own experience and satisfaction of the park is actually similar. We also think that the opening hour of Ocean Park is a little bit short which is until 18:00. With reference to one of the competitors, the Disneyland, the opening hour is until 20:00. The time is not sufficient. We have only visited around 6-70% of the facilities in the park for around 8 hours. If the park could extend the opening hour, it will be more attractive. 3.4 Personal Interview Also, we have interviewed 10 visitors who come from Mainland China to investigate about their awareness related to the facilities of Ocean Park. It was found that they know almost all of the new facilities and promotion of Ocean Park. 4. Analysis of Marketing Strategy 4.1Products Disneyland has lots of classic stories and characters which are very famous. And these elements are used to produce different kinds of collections or souvenirs which all are really attractive among customers. Chimelong s theme park focuses on their Page 6

7 facilities but not products. Their products are always in form of print t-shirt or key chain, etc., which are not attractive. Ocean Park s mascots are the sea lion and panda. However, in our survey, majority of the respondents do not give high scores to the souvenirs because they are not good-looking. 4.2 Services Disneyland focuses on the theme facilities and musical shows, create a fantasy place. However, there is lack of thrill rides. The staffs of the Disneyland are high quality, almost all of the visitors mentioned that they are nice and helpful. As a kind of service industry, quality service is important. Chimelong s theme park has lots of existing facilities and international acrobatics shows to attract tourists to visit, such as thrill rides and circus. Chimelong always perform maintenance to those facilities in order to ensure the issue of safety. The main weaknesses of this theme park are that customers have to pay more than one entry fees and spend more days if they want to enjoy different facilities. Ocean Park is using the combination of the above two parks, such as animals, performance and thrill rides which are similar to the Chimelong. The park has created some famous animal stars in recent years, and the park is also reconstructed, it becomes more beautiful and makes customers feel that they are situating in a dream place. These features are important and necessary to compete with the Disneyland. The major advantage is that it can satisfy different customer demand. 4.3 Place The Disneyland is located at Tung Chung. It is far away from the urban area. Customers normally spend lots of time in travelling. However, it has a special MTR station for its own. For Chimelong s park, it is located in Panyu which is the farthest location. The location of the Ocean Park is the most convenience and easy access for customer. Page 7

8 4.4 Promotion In relation to promotion in Hong Kong, the Chimelong s park only has a few promotion or advertisement in Hong Kong, but Disneyland is really aggressive in making promotion or advertisement in Hong Kong, for example, every time they have new facilities established, they will use a variety of promotion method, such as the news, TV advertisement and the internet etc. The advertisement of Ocean Park in Hong Kong is really not enough if compare with the Disneyland. 4.5 Price Finally, for the price, the Ocean Park has the most competitive and attractive ticket price, only HKD280 for an adult. The most expensive is the Chimelong, because there is different ticket fees charged on different theme park. The Disneyland s ticket price is HKD Comparison between the Guangzhou Chimelong Group and the Ocean Park Ocean Park tends to establish a totally different theme park image against the Disneyland, such as having animals shows and natural surroundings etc. But on the other side, Ocean Park has similar features to the competitor Guangzhou Chimelong Group. In the following section, we focus on comparing the Chimelong Group and Ocean Park Entry fees The Guangzhou Chimelong Tourist Resort was awarded as one of China s 5A National Tourist Areas. The Chimelong Group owns various theme parks such as Xiangjiang Safari Park, Chimelong Paradise, WaterPark and Guangzhou Crocodile Park. These theme parks offer different types of tickets fees to satisfy different types of customers. It is not very economical if customers want to enjoy visiting more than one theme park. The advantage of Ocean Park is that one entry ticket can enjoy all its diversified facilities and the aquarium in a shorter period. Ocean Park is able to create a Page 8

9 small theme park with diversified facilities with an attractive entry price as their strategy Promotional package Chimelong group is a large tourist resort including theme park, hotel, restaurant and international circus. They are self-sufficient which can provide different promotional package to the tourist, for example, a discounted package of visiting theme park and hotel accommodation within the Chimelong tourist resort. As for the Ocean Park, it has promoted the Ocean Park s World Attraction Fun Deal program to customers who will get the special offer when they have visited other local and overseas scenic spots and different theme park. Ocean Park can advertise at other tourist areas through this special offer promotion. It can see that Ocean Park have a really creative mind in establishing different promotion for different segmentations Facilities Chimelong tourist resort is a well structured theme park. The Chimelong Group includes hotels and restaurants by their own. Since the theme park is too huge, these facilities can keep their customers staying in the park for a longer period. This can increase the Group s income effectively. Also, they satisfy most people s needs in the area such the hotel resort and restaurants for the tourist to spend their holidays overnight. On the other hand, although Ocean Park is smaller than the parks of Chimelong, it is not possible that customers can visit all the facilities in one day. It is not likely that a person will buy the ticket twice in order to visit the whole park again. To conclude, the hotel of Ocean Park which are constructing should finish as soon as possible to make the park more convenient and provide package to attract more customers. Page 9

10 5. Financial Analysis (Ratio) 5.1Profitability Ratio Formula 2010/ / /09 Operating Margin Operating Profit Sales Revenue 27.16% 23.90% 21.78% Net Margin Profit Profit Before Interest and Tax Sales revenue 13.33% 11.74% 11.96% Basic Power Earning Profit Before Interest and Tax Total Assets 2.23% 1.83% 2.14% Return Capital Employed on Profit Before Interest and Tax Equity Capital + Debt Capital 2.41% 1.95% 2.39% The net profit margin in 2011 rebounded against that in the previous year after the introduced development plan, proving this is a profitable decision. The control of expenses incurred has been improved in Basic Earning Power is around 2% among three years and this demonstrates that it is quite inefficient to generate the profit through utilizing the Park s assets. Return on assets is largely determined by the net profit margin. This shows that the Park is in a relatively strong position and may not be subject to high level of sale volatility. Return on capital employed reached the bottom in 2010 and the peak in Nonetheless, it is quite low that the Park would result in a net loss if there were a down turn of its business. Page 10

11 5.2 Management Efficiency Ratio Formula 2010/ / /09 Asset Turnover (Times) Inventory Turnover (Times) Sales revenue Total Assets less Current Liabilities Cost of Sales Average Inventory The asset and inventory turnover are around 0.2 times and 2 times a year respectively. It seems that the Park s has not taken any action to enhance its sales performance. Such turnover, however, is quite efficient since the company can remain its turnover while encountering adverse legislations and the downturn of economy. In short, the company has efficient management of its assets to generate profits. 5.3 Liquidity Ratio Formula 2010/ / /09 Current Ratio Liquid Ratio Current Assets Current Liabilities Current Assets Inventory Current Liabilities Regarding current and liquid ratio, liquid assets cover short-term liabilities at satisfactory level. A majority of its current assets are contributed from cash equivalent swhich can be used immediately. Thus, the Park is able adequate to repay its current liabilities leading no any short-term liquidity problem to the company. Page 11

12 5.4 Capital Structure Ratio Formula 2010/ / /09 Gearing Ratio Debt Capital Equity Capital + Debt Capital 76.88% 73.90% 64.9% Interest (Times) Cover Profit Before Interest and Tax Interest Expense Debt-to-equity Ratio Debt Ratio Asset-to-equity Ratio Debt Capital Equity Capital Total Liabilities Total Assets Total Assets less Current Liabilities Equity Capital 332.5% 283.2% 185.3% 78.6% 75.5% 68.6% % % % As for long-term solvency, the aggregate liabilities are around 75% on average to total assets revealing it has critically high financial leverage. Gearing ratio became higher and higher in these three years implying the use of cheaper long-term finance or higher financial risk of the Park. A certain degree of change occurred in the ratio among the years. This reflects its instability of the capital structure Interest cover dropped sharply from 12.9 to 3.4 in 2010 and had a slight drop in This is in line with the extent of increase in the gearing ratio. It indicates a smaller coverage of trading profit to finance costs. Financial risk is thus imposed and the Park is bearing a risk of being unable to cover its interest payments, especially during periods of volatile profitability. Page 12

13 6. Non-Financial Analysis The Park (OPC) has its Code On Corporate Governance Practices (CCGP) so we do not refer to Appendix 14 of Listing Rules. Among 19 directors in the board during 2010/11, there are 3 people retired and 2 female joined the Board of Directors after the period. It is evidenced by the most updated list of all the board members with their particulars which has been put on the Corporation s website. The number of members exceeds seven, the minimum requirement. Also, there are 2 different people as OPC s Chairman and the CEO. And this aligns with CCGP in which the roles of the Chairman and the CEO are separate. In OPC s annual reports, it states that Members of the Board received no emoluments and any material interest in the year under review. And there is no item called Directors emoluments in the expenses account. Also, the independent auditor s report has been clearly states Board members responsibility for the financial statements. In short, OPC generally meets the provisions of corporate governance. Following the CCGP, OPC has its substantial contribution to the society as a responsible corporate citizen. There are two aspects it takes action to contribute, environmental stewardship, and health & safety. OPC has made a significant effort in these areas and it received numerous accolades in recognition of the efforts. The activities are usually in terms of education programmes, training courses, exchanges, campaign, volunteering and so on. In addition, OPC donates or offers big discounts to the underprivileged by using its proceeds from activities and sale. Undoubtedly, OPC accomplishes corporate social responsibility throughout the years and make ongoing efforts in being the Hong Kong s Park. Page 13

14 7. Conclusions and Recommendations 7.1 Financial The financial condition of the Ocean Park is sound, to conclude, it is possible to implement our recommendations. 7.2 Ocean Theater One of the famous features of Ocean Park is the Ocean Theater. However, it did not have any changes or fresh elements added in this show in recent years. The Ocean Park should add in some new elements into the show or arrange other marine animals to perform the shows. Also some human performance will be great. In recent years, the Ocean Park has arranged different kind of functions in different places such as in the Chinese New Year, the Ocean Park had arranged a team of artists to perform a show in the Victoria Harbour. We believe that show performance is a main factor for customer consider whether they will visit the park, if the park has some new performances added, customer are willing to visit it. 7.3 Hotel It was known that the Ocean Park has a plan to build a hotel. However, the date of the construction is too late. Almost all of the theme parks in the world has its own hotel. With a hotel, the park can establish different type of promotion package, and more services can be provided in order to increase income. So, we suggest the park should put its strategic focus on the hotel first. 7.4 Extend opening hour With reference to the two competitors, the Ocean Park s opening hour is the shortest. And after considering the opinions of our survey respondents, this is one of the issues of customer dissatisfactions, thus, the Ocean Park should consider extending their opening hour. Page 14

15 7.5 Safety Safety is one of the most expectations of customers when visiting Ocean Park. It was reported that the accidents happened in Ocean Park this year, mainly related to the thrill rides. Given the recent malfunction of cable car of Ngong Ping 360 in February, customer may lose their confidence on riding the cable car. The Ocean Park should make a budget on the maintenance at least half a year and the result of maintenance should be disclosed clearly as to increase customer s confidence. 7.6 Promotion in Hong Kong Finally, regarding the promotion, it was seen that the Ocean Park has already done lots of the promotion in Mainland. Visitors from mainland comprise over 50% of the park s attendance. The Ocean Park should keep the promotion in Mainland at now, and may focus on the promotion in Hong Kong. It is because more than half of our local respondents do not aware of the new facilities of the Park Establish mobile apps Apps are very popular at now, many companies have created an app for update information. This method is very effective in communication between a business and customer. The Ocean Park may establish an app in order to update its information daily, which is similar with the facebook. Therefore, we recommend the Ocean Park to employ some programmer to design some apps and games related to the park, such as a game related to the polar adventure which can be designed in order to create awareness Facebook and Transportations Advertisement The Ocean Park should make an advertisement on the facebook to acknowledge the users of facebook about the important information of Ocean Park and the user can click the hyperlink of the advertisement to reach the wall of the Ocean Park to obtain more future information. Because of the market segment, TV, radio or road show advertisements are not suitable. Advertisement on bus appearance or on the MTR Page 15

16 station is the most effective. 7.7 Implementation of promotion plan for next three years Events Duration Amount 2012 HK$ Million Apr Employ three program designers for apps $0.54 ( $20,000 per month ) June Bus Advertisement 3 months $5.18 ( $4320 per week for 1 bus ) 100 buses MTR Advertisement ( Big board ) 3 months $2.3 ( $4900 per week for 1 board ) 40 boards August Facebook Advertisement 5 months $0.15 December Total: $ Jan Bus Advertisement 2 months $3.5 MTR Advertisement ( Big board ) 100 buses 2 months 40 boards $1.6 Facebook Advertisement 1 year $0.36 December Wages of program designers $0.72 Evaluation and improve of promotion plan $0.1 Total: $ Jan Bus and MTR advertisement (same as 2013) $5.1 Facebook (same as 2013) $0.36 December Wages of program designers $0.72 Total: $6.18 Page 16

17 7.8 Projected operating results for the next three years 2011/ /13 HK$ million HK$ million 2013/14 HK$ million Revenue (1) Advertising and Promotion Operating Costs x (1+I%) Surplus from operations (EBITDA) Depreciation and loss on disposal (1) x / (955.0) (995.1) (1,031.9) (201.5) (221.7) (243.8) Finance costs * (61.5) (61.9) (62.2) Strategic review and redeveloped expenses Transfer from the Ocean Park Trust Fund (4.5) (3.7) (3.2) Net operating surplus Investment Income # Surplus for the year It is projected on the basis of 2009/10 figures, except operational costs x 49% assumed (mainland: over 50%) x 70/114 x 90% x (1+g=10%) in the following two financial years Operating costs (I = 5% inflation rate x 2011 figures, 4.2, 3.7) # Assumption, as it is fluctuated and affected by unexpected situations. * Estimated Page 17

18 Appendix 1

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20 9. Bibliography Michael C. Ehrhardt, Eugene F. Brigham, Corporate Finance: A Focused Approach, 2010, pp , Randolph W. Westerfield, Bradford D. Jordan, Stephen A. Ross, Corporate Finance Fundamentals 8 International Ed, 2007, Chap 3 Robert Hutchinson, Corporate finance: principles of investment, financing and valuation, 1995, pp Themed Entertainment Association, TEA/AECOM Global Attractions Report Retrieved 17 June Reference The Budget of Hong Kong JUDGE and GET Buspak The Hong Kong Institute of Accredited Accounting Technicians Easyapps Sillycube The Hong Kong Disneyland The Chimelong Groups Page 20