Strategic Management

Case Analysis:
Samsung and the theme park industry in Korea

Friday, 02 September 2011

Submitted by: Group V

PGP/14/260 NITESH KUMAR GUPTA PGP/14/280 MAHTAAB KAJLA PGP/14/287 PRACHI CHAWLA
PGP/14/290 RAHUL MITTAL PGP/14/313 VINNY ARYA PGP/14/315 VISHAD DUBEY
Case facts

 “Yongin Farmland” an amusement complex,

• Mission: To provide a better quality of life through healthy open-air
leisure activities
 Theme park industry all over the world on a high growth trajectory
 Industry revenue break up
• Admission/Ride fees – 60%
• Food, Beverages, Merchandize – 40%
 Changing demographics leading to broader market segments
 Seasonal and Intermittent nature of the business
 Less number of vacation days restricts the growth of theme parks
 Subway coming up facilitating transport to Yongin
 Parking will be a bottleneck in case expansion happens
 Customer satisfaction level lagging behind Lotte world
 Name to be changed to a more appropriate one in line with the new
facilities to be provided

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Environment Analysis

 General Environment
 Demographics:
• Changing demographics were causing theme parks to broaden
their target market segment
Categorization of population
Teens, Preteens and young adults <20
Working class 21-50
Old age group >50

• Primary resident market expected increase by 5.2% by 2000 AD

 Economic
• Economic growth rate expected to be 8-9%
• Major driving force in theme park industry growth
• Per capital GNP increase from $4210 in 1989 to $7513 in 1993
 Global
• Global theme park industry growing at a very high rate
• Yongin farmland has 25% customers who are foreigners

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Environment Analysis

 Technology
• For developing heavy and quality machinery only 10 suppliers
were catering to amusement machinery industry.
• The park management expertise i.e. software was not easily
available – leading companies charge hefty licensing fees (over
10% of revenues
 Political/Legal
• Government Approval takes around 2-5 years
• 100% insurance coverage – high insurance premiums
• Park administration was dependent on government for utilities
• Licensing requirements and methods of ascertaining operational
expertise to ensure visitors’ safety was there

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The Investment Decision

Samsung should invest in the amusement industry, following are the criteria
in support of statement

 Industry growth is pushed by overall economic growth

• Rise in per capita GNP from US$ 4210 in 1989 to US$ 7513 in 1993
• Growth rate expected in 2nd half of 90s was 8-9%
• Urbanization rate - 74.4%
 Seoul Land, was a major competitor to Farmland not Lotte World, as they
focus on segment different from Farmland
 Even the industry had competition, still Farmland had the highest growth
rate with in industry.
 Highest monthly attendance in Farmland(1993) as compared to Lotte
World and Seoul Land

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Profitability Analysis

All these general environment factors affect the porter’s 5 forces affecting the
viability/profitability of firms in the industry

 Threat of New Entrants

• Due to the high initial investment required, its really very difficult for
new entrants to enter the industry
• Government regulations for licenses/approval acts as a big hindrance
as well
• Economies of scale/scope is a huge advantage for the incumbent firms
• Heavy marketing and advertising budgets
• Large insurance premiums often drove small players away
 Bargaining Power of Suppliers
• Only 10 suppliers are capable of developing quality machinery
• This brings a lot of power in the hand of suppliers to bargain in terms
of price of machinery
• Expertise in park management is not easily available

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Profitability Analysis

 Bargaining power of Buyers

• Visitors in Groups are charged less
• People come with a mind set of relaxing from the chaos of day to day
life and are willing to pay the price
 Threat of Substitutes
• Virtual reality theme parks
• Because of 5.5 days of work people usually go for other means of
entertainment
 Rivalry among competitors
• Seasonal factor affects all competitors
• Total of 5 competitors
• Lotte World – indoor theme park
• Seoul Land – 23rd in top 50 amusement parks worldwide(Table 1)

Looking at the forces explained above, it can be realized that it will be

conducive for Samsung to go ahead with the expansion plans

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Opportunities/Threats

Opportunities Threats

Theme park industry is bound to grow in the

future owing to the economic growth and
favorable customer preferences
With new Subway coming up to Yongin, the
number of customers visiting the park should
increase
Scope to increase Merchandize sales
Management expertise required takes a long
time to develop
Seasonal fluctuations effect the profitability
of business
Theme parks does not fit well with the High
Tech and Global image of Samsung company

Scope of market expansion Less stay time because of traffic congestion

With the new CEO, Mr. Her Tae-Hak, having

Issues from farmers
worked in Hospitality sector will be a great
strength when it comes to focusing on
Customer Satisfaction

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Recommendations

We recommend going ahead with the Expansion plans based on the

following criteria:

 Owing to the industry growth rate and the prospects of Subway

coming to Yongin, the expected number of visitors are bound to
increase
 Due to changing demographics, most of the theme parks are trying to
target broader market segments and farmland will lose market share if
we don’t keep up with the trend
 The old theme of healthy open-air leisure activities do not appeal to
the young generation and a revamp of the image is required
 The underlying forces affecting the profitability in this segment look
promising with high barriers to entry (Samsung with its financial
muscle should be OK in this aspect), low bargaining power of
consumers etc

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Other Recommendations

 Organizational change is required to make it more consumer oriented

which the new CEO is more than capable of handling
 Parking revamp should be done to be able to handle the extra load
during peak hours

New mission has already formulated: To create a zeal for long lasting life that is
combined with the harmony of nature
And if further investment is done they should excel in access based positioning
which is possible when subway is created, thus becoming prototype destination
resort town.

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Q&A

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