Hong Kong Disneyland (HKDL), as being the fifth Disney Resort in the world under Walt Disney Company (DIS), is currently in the Growth stage of Industrial Life Cycle. In this report, comprehensive analysis of HKDL will be presented begins with a detailed background information of the company, followed by its external and internal environment, findings included increasing inbound tourist in Hong Kong, low exchange rate of HK Dollars, global economic downturn, new development of Lantau Island, expansion and suspension of Individual Visit Scheme, increasing accessibility, etc.

For internal analysis, current and near-future product, competitive advantages with distinctive features and company performance and capabilities were being analyzed accordingly. In addition, analysis of the effectiveness of current Business and Functional Level Strategies of HKDL were presented, major findings were discussed such as high product quality, excellent customer services, cost leadership by Loyalty Program for Business level; current market and operational strategies, economies of scales for functional level.

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Table of SOWT analysis was presented at the end of analyses in order to summarize all findings, followed by major issue and problems identification including increasing competitiveness, inefficiency as a result of employee dissatisfaction, and homogenous types of attractions in HKDL. Last but not least, recommendations were given such as maintaining the brand loyalty, retaining employees, provide high diversity types of rides as well as cooperation with Lantau Island. Conclusions were then drawn to sum up all the findings. 1. Introduction

The Walt Disney Company (DIS) owned 5 world-class vacation destinations with 11 theme parks and 43 resorts around the world, together with its subsidiaries and affiliates are sharing with the DIS’s property and information (Walt Disney Company, 2012). Hong Kong Disneyland (HKDL), as being the fifth Disney Resort in the world, is an international tourism business which currently operating under the growth stage of the product life cycle. In 2013, HKDL had a 10% growth of total number of visitor to the park and in 2011, Hong Kong Disneyland ranked No.

Among the amusement theme parks in Asia. In this report, a detailed background of Hong Kong Disneyland would be firstly presented including its historical background, vision and mission, business definition, company structure, key stakeholders, etc. Then a comprehensive analysis of both external and internal environment would be conducted respectively, followed by a three-level strategies (business and functional-level) analysis on the effectiveness of the current growth stage.

Afterwards, SWOT analysis would be reviewed with the identification of the major issue and problems and base of all the above mentioned analysis, recommendations would be given in order to form a better strategic model for the development of Hong Kong Disneyland. Last but not least, a conclusion would be drawn to summarize our findings and suggestions and the overall view on the strategic planning of Hong Kong Disneyland. 2. Methodology Materials used for research, analysis and suggestions in this report are conducted by both secondary and primary data.

For secondary data collection, information are obtained from websites, newspaper clips, organizations statistic and data as well as journals and articles in order to obtain creditability and a comprehensive analysis of the business environment. Apart from secondary data, primary data are also used and obtained by a focus group interview of 3 part time staff who are currently working in Hong Kong Disneyland. Semi-formal interview was conducted and guided by a set of questions in order to ensure its reliability and consistency.

Open-ended questions will be asked to identify their perception towards HKDL, current performance as well as recommendations to improve its operations in HKDL. Convenience sampling method were used for interview and depended upon interviewees who agreed to participate in the study. Transcript of interview can be found in Appendix A. 3. Background of Hong Kong Disneyland (HKDL) 3. 1 History of Hong Kong Disneyland Disneyland was firstly established by Walt Disney in California in 1955.

The idea was originally come up to provide a place where parents and children could have fun together. Hong Kong is the fifth home to the Disneyland Resort in the world. It was firstly announced to the public in 1997. Later in 2000, the development project began on reclaiming land in Penny’s Bay, Lantau Island. It was estimated to cost about 14 billion dollars investment from the Walt Disney Company and the Hong Kong International Theme Parks Limited who later owns the park.

The Hong Kong Government in return holds 57% shares of the company and The Walt Disney Company holds 43% (HKDL, 2012). The construction was completed in four years later and the Hong Kong Disneyland was officially opened in 12th September 2005 with the beautiful backdrop of the South China Sea. Up to date, it has welcomed over 31 million of local and international guests. The theme park is now consisted of seven themed areas such as the Main Street U. S. A. , the Fantasyland, the Adventure Land, the Tomorrow Land, the Grizzly Gulch, the Toy Story Land and the Mystic Point.

It was cover a larger area up to 27. 5 hectares after the expansion to build up the seventh themed area, the Mystic Point. With new attractions added, the park is expected to handle 7. 92 to 8. 92 million visitors annually. 3. 2 Vision & Mission Over the decades, Disney has been doing well in the field of family entertainment. It aims to provide a place where parents and children could have fun. With the opening of HKDL, this philosophy and the spirit of imagination will continue to carry through extension.

It dedicates to create magical memories for guests, cast and the community as its vision, with the hope of being a realm of joy and inspiration to deliver unforgettable experience. To achieve the vision, HKDL establishes a mission statement of “inspiring happiness and delivers a world-class entertainment experience to people of all ages through creativity, great leadership and a passionate cast”. It puts a lot of effort in creating Magical Moments as well as building up a friendly and sincerely mood of Disney with the launching of Star Guest Program. 3. 3 Business Definition

Being the newest of all Disney theme parks and the first built in China, HKDL inspired from the original Disneyland in California and defines its business as an Asia’s premier resort destination where provides world class and quality entertainment for every family members, especially children, to make them happy. The attraction is designed for guests to leave the reality behind and relax in a magical place of fantasy and adventure, yesterday and tomorrow. It includes some of the classic and special attractions, entertainments and nightly firework similar to those at other Disneyland in the world.

Organizational Value In order to create a quality entertaining environment and respond to the mission of inspiring happiness and delivering a world-class experience to people of all ages, HKDL always emphasizes on four important values, they are “safety, courtesy, show and efficiency”. For “safety”, it is to ensure everyone at the park can work and enjoy under a secure environment by establishing safety systems and implementing safety practices. For “courtesy”, it dedicates to foster Cast Members to be initiated, passionate and friendly.

Every time when guests arrive the park, they are always greeted by the Cast with smiles. Moreover, their abilities to read and interact well with guests can also give a good impression to the guests as a whole. Regarding “show”, through focusing on attention to details, like simply picking up the rubbish can help to deliver a good show to the guests. Lastly – “efficiency”, it requires the Cast to respond to and solve the problem promptly to satisfy the guests. All of the above values guide managers and employees the way to conduct themselves in a business. 3. 5 Company Structure

Figure 1 – Company Structure of Hong Kong Disneyland (HKDL, 2012) The above figure showed the company structure of HKDL. It was divided into 11 major departments which are responsible for different fields. The department of entertainment and costuming has an eight-level structure which includes the parts of guest service and operations. Every sub-division is required to report to their senior subordinates. 3. 6 Key Stakeholders Different stakeholders are involved in HKDL. Firstly, board of Hong Kong International Theme Park Limited is the main stakeholder, which is a joint

venture of HKSAR government and the Walt Disney Company. Secondly, over 5,000 cast members including both part-time and full-time that committed to create magic for guests are also part of the stakeholders. Thirdly, the local community is considered as the stakeholders in terms of taxpayers, as well as customers, where their public funds were contributed in the development project of the theme park. Lastly, it would be the tourism sectors such as travel agencies who act as the distributors and provide channels for ticket sale. 3. 7 Core Product HKDL has a well-defined portfolio of family-oriented attraction.

It dedicates to create magical experience and inspire happiness for the young and the young at heart. When those well-known and lovely characters on TV come to a real 3D presentation in HKDL, guests may find that this magic can really make them happy. The characters appear throughout the day in the shows and parades. After that, their up-close meetings to greet guests and take photos create an unforgettable feeling that children and adults can only find at the Disney theme park. This kind of entertainment has become a major attraction in HKDL which can greatly inject a fantasy and happy feeling in guests’ mind.

Besides having entertainments, the theme park also includes some exciting rides such as Space Mountain and RC Racer as attractions to satisfy guests who would like to have more fun. Moreover, the park also provides friendly and sincere guests service to ensure an enjoyable and hassle-free visit for a complete magical moment. 3. 8 Industrial Life Cycle Walt Disneyland Company has become the global leader of the theme park industry and it enjoyed a steady growth of visitors and revenue over the decade (AECOM, 2011).

According to the AECOM (2011) report, the world’s top 5 ranking theme park all are belonging to Walt Disneyland (See table 1). Hence, Walt Disneyland is in the mature stage, except for the HKDL. Since HKDL is opened in 2005 and it still has the construction work on expansion in order to attract more visitors. HKDL is ranked at top 15 among the world. It was believed that HKDL is keeping growing. RankTheme parkAttendance 1Magic Kingdom at Walt Disney World, FL, USA17 millions 2Disneyland, CA, USA 16 millions 3Tokyo Disneyland, Tokyo, Japan 14. 5 millions

Tokyo Disneyland Sea, Tokyo, Japan12. 6 millions 5Disneyland Park at Disneyland Paris, France 10. 5 millions 15Hong Kong Disneyland 5. 2 millions Table 1: the world’s top ranking of theme park in 2011 (AECOM, 2011) HKDL is in the growth stage. It failed to acquire the target attendances in the first year and it was only reaching 5. 2 million guests (Lau, 2007). Therefore, HKDL is trying to promote their products by advertising and creating the new features in the park to satisfy the guest, such as the new attractions in the Toy Story Land, the Grizzly Gulch and the Mystic Point.

After implementing the embryonic strategy, HKDL starts to satisfy the visitors and turns to the growth stage. Figure 2 shows the growth rate of HKDL from opening to 2013. It found that the market of HKDL is expanding and growing. According to the HKSAR (2001) forecasted the HKDL will attract 10 million visitors in 2020 and turn in the mature stage. Thus, HKDL need to focus on the strategies of the growth stage. Figure 2 – The number of visitors to HKDL from 2005 to 2010 ((AECOM, 2011) 4. External Environment Analysis 4. 1 Global Trends and Forces 4. 1. 1 Increasing Inbound Tourist in Hong Kong

According to the statistic data of HKTB the total number of the inbound tourists was increased 33% compared with 2012. For the short-haul market regions, Mainland China was one the major target market and the numbers of arrival tourists was raise 47%. Besides, the Southeast Asia market regions also have positive growth, especially Korea was increased 27% and anticipate the number of tourists will increase rapidly in the future. Also, “A visit to a theme park is one of the main activities that in Hong Kong, particularly those who come from mainland China” (Vincent, Nelson and Mavis, 2009).

The simplified immigration process can attract more travelers visiting Hong Kong frequently and increase the number of inbound tourists rapidly from worldwide. Besides, Hong Kong government allowed the Mainland frequent visitors to enjoy the e-channel that means immigration process being simplified and reduced their waiting time. It is useful for attract more mainland travelers to visit Hong Kong frequently and increase the number of inbound tourists rapidly from worldwide (GOVHK, 2012). 4. 1. 2 Low Exchange Rate of Hong Kong Dollars

Movement in currency exchange rates has a direct impact on the competitiveness of a company’s products in the global market (Jones & Hill, 2012). After the Beijing Olympic 2008, the exchange rate of RMB is continuously raising and becoming higher than Hong Kong Dollar. Nowadays, RMB exchange rate “The USD-RMB touched 6. 07, is another record high for the RMB. It shows that their spending power is not affected by the global economic crisis, and thus low exchange rate of Hong Kong dollar can attract more tourists from Mainland China. 4. 1. 3 Global Economic Downturn

According to the Policy Address 2008, the global economic downturn is a worldwide crisis. The tourism and Hospitality industry is challenged by the current finance slump. According to the Henderson (2007), the economy is one of the important factors that affect the demand for tourism, and the economic crisis may negative affect outbound tourism (Henderson, 2007). It was found that the demand is affected by the economic and it would directly affect the theme park industry also. Therefore, HKDL is facing the challenge and it would affect their profit. 4. 2 Macro-environments 4. 2. 1 New Development of Lantau Island

Lantau Island, where HKDL located is the biggest island in Hong Kong and had one of the world-class business airport and several first-class attractions and convention facilities nearby. However, it is a suburban district and attractions are interspersed among the hold island so the development for this island was slowly. Recently, there is rapid increase number of the MICE visitors arrival that join the MICE in AsiaWorld-Expo in 2012, so government and tourism professionals would like to reposition the Lantau Island as an a “new metropolis” and “inspirational MICE hub” with easy access to the airport, convention center, man-made attractions and outdoor excursions (South China Morning Post, 2012).

Expansion and Suspension of Individual Visit Scheme The Individual Visit Scheme allowed travelers from Mainland China to visit Hong Kong and Macau on an individual basis, now extended over 49 Mainland cities (Hong Kong Tourism Commission, 2013). According to the statistic, Mainland China visitors were 3,890,000 in 2013 that was rose 11. 8% compared with last year. Also, more than half (66.1%) of the visitors who are travelling under the Individual Visit Scheme. It is nearly 10. 3 million and rose 25. 6% in the same period of 2011 (HKTB, 2012). Visitors from Mainland China increased obviously in these few years and therefore became a potential target market for Hong Kong. Meanwhile, on 7th September, 2012, Hong Kong Special Administrative Region (SAR) Government has the announcement that temporary suspension the introduction of the multiple–entry Individual Visit Scheme (IVS) endorsement for the non-permanent Shenzhen residents to visit Hong Kong.

Increasing Accessibility The construction of Hong Kong-Zhuhai-Macau Bridge & Guangzhou-Shenzhen-Hong Kong Express Rail Link in order to intensify and promote regional economic integrity and rooster Hong Kong’s position as financing and shipping center. These roads and railways are useful to boost links between Hong Kong and Mainland China (Michelle, 2012). Also, direct arrival to Lantau Island of Hong Kong will reduce travelling time between the two cities from 4. 5 hours to around 30 minutes.

Base on this situation, Lantau Island has the potential benefit and aims to become a commercial-tourism hub in the Pearl River Delta and developed an alliance to control and promotion of the islands. 4. 3 Industry Competitiveness and Rivalry The theme park industry in Hong Kong is a consolidated one where oligopoly structure is found. HKDL and Ocean Park Hong Kong are the two major theme parks and top ten Hong Kong tourist attractions where dominating the industry. Also, HKDL and Ocean Park Hong Kong are rise ranking from 5th to 4th and 7th to 5th respectively in 2011 (Hong Kong Visitor Profile Report, 2011).

It can reflect that theme park is one of the important attractions in Hong Kong and have the largest cover in Hong Kong tourist market. 4. 4 Markets, Customers and Suppliers According to Porter’s Five Forces Model, risk of entry by potential competitors, bargaining power of both buyers and suppliers are factors that contributed to external environment analysis. The following shows the market situation, customers and suppliers profile of HKDL. Regarding the entry barrier of the market, HKDL has a strong brand loyalty, it has focused of market diversification and covers a wide array of products and services.

The attractions and entertainment facilities are come from the Disney stories and new innovations where Mickey and his friends are using continuously as the icon of HKDL. Besides, the logo of HKDL would also be printed on the products and souvenirs that can help to promote the brand name when the buyer using the products and recall their memory of HKDL. Finally, it showed that HKDL has brand recognition and product differentiation to create the greatest reputation in the world and focus on long term customer relationships and customer life values, therefore the new organizers are difficult to entry the market (Walt Disney Company, 2012).

Besides, successful industries are consistently exploring different ideas, techniques, and processes to make or keep their organizations moving forward in the competitive environment (Appelbaum and Fewster, 2002 & Kramer, 2006), so Walt Disney Company through acquisition to keep their business moving forward, like acquisition Marvel Entertainment Company and Pixar Animation Studios to increase the numbers of characters and film productions in order to using their superior production operation and processes to gain the mass-produce of standardized outputs with good quality and lower cost thus increasing the barrier for others to entry into its market.

For major customers of HKDL, about one-third of its guests are locals, one-third come from Mainland China, and the remaining third are overseas visitors (PATA, 2009). Hong Kong Disneyland’s target market consists mainly of family-oriented Asian tourists, primarily those from mainland China, Taiwan, and Southeast Asia (Tsai, 2010). In addition, HKDL try to broadened the age range of guests to visit to the Park e. g. teenager via build up a new attractions like the Toy Story Land added of last year 2011, the Grizzly Gulch added in 2012 and the Mystic Point added in 2013, to allowing HKDL to attract more young, fun-seeking guests (Kam, 2012). Hong Kong Disneyland recognizes that the satisfaction levels of the guests would be increased, with targeting different market segments to attract more guests to become loyal customers. Therefore the demand of customers is growing.

For suppliers of HKDL, since HKDL highly require differentiated and unique products, so there are several requirements for the suppliers in term of size, productivity and quality. However, Disney is a unique and vital customer of variety of the suppliers therefore most of the suppliers willing provide a bulk discount to gain the business instead of give up this vital partner, so bargaining power of suppliers is moderate. According to the interview with existing employees, HKDL should purchase all the materials from suppliers designated by headquarters of Walt Disney Group. HKDL do not have the power to decide which supplier is the best in terms of quality and price. 4. 5 Competitors and its Products

The main competitor of HKDL is Ocean Park Hong Kong, who shares the same primary market segment – family. The core product of Ocean Park is combining entertainment with education with the theme of marine lives. Furthermore, Ocean Park Hong Kong is also under expansion and redevelopment now. On 12th July, 2012, its Polar Adventure was opened and it is the first polar-themed attraction in Hong Kong. As climate change is important topic in the world nowadays, so Ocean park through this area to create the education programs like classroom activities and site visit to introduce the concept of climate change (Ocean Park, 2012 & Joy, 2012). In 2013,

Ocean Park welcomed 7.7 million visitors and become the most visited theme park in Mainland China and fifth in Asia in 2012. For HKDL, it served 7. 4 million visitors that is increase 10% in annual attendance in 2013. Regarding admission fee, the latest entrance fee for Ocean Park is going up from HK$280 to HK$320, where for HKDL, it charged from HK$100 to HK$585 which can satisfy different targets between hotel and day guests. It charged HK$450 and HK$585 for day and two days adult pass, HK$320 and HK$415 for day and two days child between the ages of 3 to 11 while the senior pass charged from HK$100 to HK$170. 5. Internal Environment Analysis 5. 1 Current and Near-future Product

HKDL consists of six theme lands; they are the Grizzly Gulch, the Toy Story Land, the Fantasyland, the Tomorrowland, the Adventureland and the Main Street, USA in order to bring the different entertainment experience to the tourists. For example, rides in Fantasyland are aimed at story-telling while rides in Tomorrowland are thrill rides. In the Toy Story Land, there are three rides which include the Slinky Dog Spin, Parachute Drop and RC Racer. It is found that they are of different excitement levels which can satisfy different target groups. Moreover, there are catering outlets selling different countries’ cuisine and merchandise shops to satisfy different needs of guests of the park. Additionally, there are parades and fireworks in every day.

These shows are unique from Disneyland in other countries and the unique shows can enhance attractiveness towards the guests. HKDL also launched special yearly events in different seasons from time to time. For example, Chinese New Year, Summer Holidays, Halloween and Christmas. Especially HKDL held its Halloween events have a night parade and the scary characters would dance in front of the guests. The expansion project is working continuously in Hong Kong Disneyland, such as ‘Mystic Point’ will be opened in the coming year. It is believe that the expansion project can attract new and also repeated guests. 5. 2 Competitive Advantage with Distinctive Features HKDL is managed by the joint venture of Hong Kong SAR government and the Walt Disney Company.

Hence, Hong Kong Disneyland is distinctively with other Disneyland as it combines the Hong Kong local culture and the US western culture in the park. There are Chinese festival celebrations and the local cuisines within the park, such as Dim Sum in the restaurant. Apart from this, Fantasy Garden is found in Hong Kong Disneyland. It is an Asia-exclusive attraction to satisfy customized needs for Asian market, as Asian people love photo-taking when go travelling. Another example regarding Chinese New Year celebration, HKDL will use the traditional red and gold such as gongs, red envelopes, lanterns, and drums to decorate every corner of the park.

Also, it will have the traditional Dragon Parade and Chinese Lions Dancing that are very attractively and is the most famous show for the guests. Disney characters will be wear traditional Chinese New Year costumes and guest can take photo with them that can bring in the good luck for the coming year, which cannot be found in other theme parks in Hong Kong. In addition, the company consulted FengShui experts for the date of its opening and the proper positioning and location of Disney (Ball, Horner and Nield, 2007). For example, the walkway between the train station and gate are bent in order to avoid the positive energy slipping past the entrance and out to the China Sea (Holson, 2005).

Those fusion cultures of Hong Kong Disneyland create uniqueness which can attract the tourists and distinct from the others. Uniqueness can create differentiation of product with the competitor, and constitute competitive advantage. Moreover, Hong Kong Disneyland Resort was the smallest among the Disney theme parks in the world. The company aware of Chinese tourists’ strong liking for taking pictures, Disney introduced a distinctive product “Fantasy Garden”, the first in any Disney theme park for visitors to take pictures with Disney characters (Yim, 2007). Besides, Hong Kong Disneyland provides different magic experience to their guests. For example, the cast members would invite one family to hold on the opening ceremony every morning before the park open.

Company Performance and Capabilities 5. 3. 1 Human Resources System There are around 5000 employees which are identified as a ‘cast member’ in the park (The Hong Kong Disneyland, 2008). Every new comers need to attend the training course which is called “Disney University” to ensure the service skills and knowledge of employees can attain Disney standards. In additional, the theme park has the annual performance appraisal or performance surveys held at the end of the year to evaluate the employees. The survey can measure the performance level of staff. Survey will be conducted each year to collect opinion of staff towards their working environment.

There is an Employees Union called Hong Kong Disneyland Cast members’ Union which was established in 2005 to collect voices from employees (Hong Kong Disneyland Cast Members’ Union, 2008) which acts as a bridge between the company and the employees. Therefore, it provides an opportunity to the employees to voice out their opinions and suggestions for improvement. Since staff is the important asset of the company, it is essential to listen to staff’s voice and make improvement accordingly. It is to encourage Cast members to think and initiate the new ways of surprising guests with their own ideas. This empowerment can help to showcase their imagination and give them more opportunities to interact with the guests. And at the same time, the Cast can also have fun in it. Eventually, this can attract guests to visit the park again. 5. 3.

Organizational Structure and Culture According to the interview conducted with existing employees in HKDL, the organizational structure is very complicated. Both respondent A and C noted that when they faced the complaints and problems, it was difficult to report the issue to their supervisor which in turn made the problem becoming more serious. The value obtained from customer will be diminished when staff in HKDL cannot create good and satisfied experience to them. The complex organization structure will create communication gap between management level and operational level. This problem will affect the service quality of staff to provide service to the guests.

Service quality will directly affect the guests’ satisfaction, which is very important for running the business as customer satisfaction is the most efficient and least expensive source of communication as a satisfied consumer will tell others of his satisfaction and recommend potential customers the product (Dubrovski, 2001). In order to maintain guests’ satisfaction towards the brand, organization structure has to be simplified and problem can be solved more easily. 5. 3. 3 Technological Advancement HKDL imported a self-service costumes borrow system (CostuMagic) for using radio frequency identification technology for saving time for lend costumes to employees, also the system will notice cast member if they choose wrong size of costumes from their actual size (RFID Blog, 2009) which could enhance the efficiency of performance.

Furthermore, Hong Kong Disneyland Resort also introduced Auto Magic Ticket Dispensing Machines (Online Ticket Collection Machines) to convince for the people who buying ticket online. 6. Effectiveness of the Three-level Strategies 6. 1 Business-level Strategies Business-level strategies are implemented to grow the company’s profit and profitability and contributed to competitive advantage by either using differentiation or cost leadership strategy. Differentiation strategy is implemented in HKDL to create the company’s uniqueness through enhancing and increasing value to their customers, which included unique features of the products and services. Differentiation strategy makes HKDL become one of the major theme parks in Hong Kong.

HKDL differentiates itself by providing high product quality and excellent customer service However, all the differentiation strategy bring high cost to the company. HKDL therefore adopted loyalty program to increase customer retention and to save cost for the company. 6. 1. 1 High Product Quality In order to provide the high quality services to meet the guest needs and expectation, HKDL collects a stunning amount of data on its guests from surveys, focus groups, opinion polls and other means. Result showed that guest’s top 3 expectations for the park to be clean friendly and fun. Therefore, it is every cast member’s responsibility to keep the parks clean, friendly and fun; even you are manager (Scott Madison Paton, 1997).

It ensures that the quality of product provided to customers remain high all the time. In addition, HKDL keep working closely with travel wholesalers from different countries to promote comprehensive tour packages to ensure guests from around the world to have access to a Hong Kong Disneyland vacation package (Roy Tan Hardy, 2005). HKDL has stepped up cooperative marketing and sales activities with travel operators and travel agents in Taiwan, Southeast Asia, India and key cities in mainland China while strengthening relationships with local ground operators (PATA, 2009). According to the interview with existing employees in HKDL, It devotes huge

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