Samsung and theme park in Korea

Topics: Amusement park, Walt Disney, Variable cost Pages: 11 (2795 words) Published: October 5, 2013
Name: Su Han
Program: M2 Luxury Management Food&Wine
Title of the case: Samsung and theme park industry in Korea

1) “Is the Global theme parks industry an interesting industry to be in?” a) Rivalry among existing competitors

Is the industry growing rapidly?
Yes,because of the increasingly fierce competition and the maturity of the market.

Concentration
Do the 4 biggest players have together more than 80% of market share? Yes, because 4 biggest players which are The Walt Disney Company,Time Warner’s Six Flags Corporation, Paramount, Anheuser Busch and Cedar Fair have together more than 80% of market share.

Diversity of competitors
Are competitors all of approximately the same size?
No,because it depends on the land size and different regions

Are the competitors diversified rather specialized?
Yes. Theme parks generally have a global theme to propose. Diversity of competitors were getting more intense.

Product differentiation
Are there significant product differences and brand identities between the competitors? Yes,there was a variety of parks and attractions, each with a different approach to drawing crowds and showing them a good time. That are Cultural and Education Parks; Outdoor Amusement Park; Theme Parks were generally family-oriented entertainment complexes that were built around a theme;Water Theme Parks. That means theme is equal 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 information.

Would customers incur significant costs in switching to a competitor? No,ticket prices for consumers is very cheap.

Excess capacity and exit barriers
Is the industry with no intermittent over capacity?
No. Important over capacity of extra staff during spring and summer

Is it hard to get out this business because there are specialized skills and facilities or long term contract commitments? Yes, it is.

Economies of scale and the ratio of fixed to variable costs
Are there economies of scale in this industry?
Yes, the economies of scale and scope were significant in the industry. Increasingly, Parks got larger and longer to generate more operating revenue. Also, companies had multiple parks to take advantage of the learning curve effects in the management of theme parks and the increased economies of scope. Most of the operating expenses for theme parks (about 75 per cent) were for personnel.

Are the fixed costs of the business a relatively low portion of total costs? No, because land development costs around 50% of investments and advertising campaigns around 10%.

b) Threat of new entrants

Capital requirements
Is a lot of capital needed to enter the industry?
Yes, because the theme park business required a large-scale initial investment, typically ranging from $50 million to $3 billion.

Is equipment expensive to acquire / to serve?
Yes, because land development costs, Amusement machinery costs, Working capital and Amusement equipment are all expensive to acquire.

Economies of scale
Do large firms have a cost or performance advantage in the industry? Yes, they have. Many parks periodically added new attractions or renovated existing ones to draw repeat customers. The parks typically reinvested much of their revenue for expansion or upgrading purposes.

Absolute cost advantages (“first mover advantage”)
Does experience help to continuously lower costs?
Yes, because large firm such as Walt Disney Company, its financial profile was generally used to assess the return on investment within the industry. The revenues for the theme parks segment of the Walt Disney Company were at US$2.042 billion in 1988 and grew to US$3.4 billion in 1993. Operating income was pegged at US$565 million in 1988 and US$747 million in 1993. With this clarification,large firms has enough experience to help to continuously lower costs,most of revenue to be reinvest for expansion purposes....
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