Harvard Case - Siam Park City: Can Affordable Pricing be Profitable?
"Siam Park City: Can Affordable Pricing be Profitable?" Harvard business case study is written by Philip Zerrillo, Pannapachr Itthiopassagul, Havovi Joshi. It deals with the challenges in the field of Strategy. The case study is 12 page(s) long and it was first published on : Oct 27, 2015
At Fern Fort University, we recommend that Siam Park City pursue a multi-pronged strategy to enhance its profitability while maintaining its affordable pricing. This strategy involves a combination of business model innovation, strategic alliances, and digital transformation to achieve a sustainable competitive advantage.
2. Background
Siam Park City, a leading amusement park in Thailand, faces the challenge of balancing affordability with profitability. While its low admission prices attract a large customer base, they also limit revenue potential. The case study explores the park's current situation, its competitive landscape, and the potential for growth.
The main protagonists are the park's management team, who are tasked with finding a way to increase profitability without alienating its price-sensitive customer base.
3. Analysis of the Case Study
Competitive Analysis:
- Porter's Five Forces: The amusement park industry in Thailand is characterized by moderate competition, with several players vying for market share. However, Siam Park City holds a strong position due to its size, brand recognition, and diverse offerings. The threat of new entrants is relatively low, but the bargaining power of suppliers and buyers is moderate. The threat of substitutes is present, with other leisure activities competing for customers' time and money.
- SWOT Analysis:
- Strengths: Strong brand recognition, diverse attractions, large customer base, affordable pricing, prime location.
- Weaknesses: Limited revenue potential due to low pricing, potential for overcrowding, reliance on seasonal demand.
- Opportunities: Expansion into new markets, development of unique experiences, leveraging technology for enhanced customer experience, strategic partnerships.
- Threats: Economic downturn, competition from other entertainment options, changing consumer preferences.
Value Chain Analysis:
Siam Park City's value chain consists of:
- Inbound Logistics: Sourcing of materials for rides, attractions, and maintenance.
- Operations: Park operation, maintenance, and safety management.
- Outbound Logistics: Ticket sales, customer service, and guest experience management.
- Marketing & Sales: Advertising, promotions, and partnerships.
- Service: Guest experience, entertainment, and food & beverage services.
Business Model Innovation:
- Value Proposition: Siam Park City's value proposition is based on providing affordable family entertainment with a wide range of attractions.
- Customer Segments: The park targets families, young adults, and tourists.
- Channels: Direct sales, online booking, travel agencies, and partnerships.
- Customer Relationships: Emphasis on customer service, loyalty programs, and social media engagement.
- Revenue Streams: Admission fees, food & beverage sales, merchandise, and special events.
- Key Resources: Park infrastructure, staff, and intellectual property.
- Key Activities: Park operation, maintenance, marketing, and customer service.
- Key Partnerships: Strategic alliances with travel agencies, hotels, and other businesses.
- Cost Structure: Fixed costs associated with park infrastructure and staff, variable costs related to operations and maintenance.
Strategic Planning:
Siam Park City needs to develop a comprehensive strategic plan that addresses its key challenges and opportunities. This plan should focus on:
- Growth Strategy: Expanding into new markets, developing new attractions, and leveraging technology for increased efficiency and revenue.
- Marketing Strategy: Targeting specific customer segments, enhancing brand awareness, and utilizing digital marketing channels.
- Pricing Strategy: Exploring alternative pricing models, such as tiered pricing, season passes, and special promotions.
- Operational Strategy: Optimizing park operations, improving customer service, and enhancing safety measures.
4. Recommendations
1. Business Model Innovation:
- Tiered Pricing Model: Implement a tiered pricing system based on age, seasonality, and day of the week. This allows for increased revenue from higher-paying customers while maintaining affordability for the price-sensitive segment.
- Value-Added Packages: Offer bundled packages that include admission, food & beverage, merchandise, and special experiences, providing greater value to customers and increasing revenue.
- Season Passes: Introduce season passes with attractive discounts for frequent visitors, increasing customer loyalty and revenue.
2. Strategic Alliances:
- Partnerships with Travel Agencies: Collaborate with travel agencies to offer bundled packages that include park admission, hotel accommodation, and other activities, attracting a larger tourist market.
- Strategic Alliances with Local Businesses: Partner with local businesses, such as restaurants, hotels, and transportation providers, to offer discounts and promotions, increasing customer reach and revenue.
3. Digital Transformation:
- Online Booking Platform: Develop a user-friendly online booking platform for tickets, packages, and special events, improving convenience for customers and increasing revenue.
- Mobile App: Create a mobile app that provides park information, maps, real-time wait times, and interactive experiences, enhancing customer experience and engagement.
- Social Media Marketing: Leverage social media platforms to promote park events, engage with customers, and build brand awareness.
4. Operational Efficiency:
- Technology Integration: Implement technology solutions to automate processes, optimize resource allocation, and improve customer service.
- Staff Training: Provide comprehensive training to staff on customer service, safety protocols, and park operations, enhancing efficiency and guest satisfaction.
- Sustainability Initiatives: Implement environmentally sustainable practices to reduce operational costs and enhance brand image.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Mission: The recommendations align with Siam Park City's core competencies in entertainment and hospitality, while supporting its mission to provide affordable family fun.
- External Customers and Internal Clients: The recommendations address the needs of both external customers and internal clients, including park staff, investors, and local communities.
- Competitors: The recommendations provide a competitive edge by offering unique value propositions, leveraging technology, and fostering strategic partnerships.
- Attractiveness: The recommendations are expected to generate positive returns on investment, with potential for increased revenue, improved customer satisfaction, and enhanced brand image.
6. Conclusion
By implementing these recommendations, Siam Park City can achieve a sustainable competitive advantage, increase profitability, and maintain its position as a leading amusement park in Thailand. The combination of business model innovation, strategic alliances, and digital transformation will enable the park to adapt to changing market dynamics, attract new customers, and enhance the overall guest experience.
7. Discussion
Alternatives:
- Raising Admission Prices: While this option could generate immediate revenue, it might alienate price-sensitive customers and damage the park's brand image.
- Expanding Park Infrastructure: This option requires significant investment and may not be feasible in the short term.
Risks:
- Economic Downturn: A decline in the economy could negatively impact customer spending and park revenue.
- Competition: New entrants or existing competitors could offer similar or better value propositions, impacting Siam Park City's market share.
- Technology Adoption: The successful implementation of technology solutions requires significant investment and expertise.
Key Assumptions:
- The recommendations assume that the Thai amusement park industry will continue to grow, with increasing demand for entertainment and leisure activities.
- The recommendations also assume that Siam Park City has the necessary resources and capabilities to implement the proposed strategies.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline specific actions, timelines, and resource allocation for each recommendation.
- Secure funding: Identify and secure the necessary financial resources to support the implementation of the recommendations.
- Build a strong team: Assemble a team with the necessary expertise and experience to lead the implementation process.
- Monitor progress and make adjustments: Regularly monitor the progress of the implementation and make adjustments as needed to ensure success.
By taking these steps, Siam Park City can successfully navigate the challenges of balancing affordability with profitability, achieving sustainable growth and maintaining its position as a beloved entertainment destination.
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Case Description
The case is set in November 2013, when Siam Park City - one of Thailand's biggest Amusement Park and Water Park - was celebrating its 33rd anniversary. Siam Park City was born out of the vision of Chaiwat Luangamornlert, a successful businessman who wanted to build an amusement park and water park for the people of Thailand that was of international standard, but yet available to the average Thai at an affordable price. With affordability as the cornerstone of the business philosophy, the park's entry fee was pegged at 'a reasonable price', with heavy discounts offered to Thai residents. Visitors also spent very little inside the park. This pricing strategy proved unsustainable for a business that had high set-up and operating costs, and the park suffered financial losses for more than two decades, ultimately leading to its bankruptcy. The financial loss was further aggravated by reputation loss, following two accidents in the park. Understanding that the park required a leadership change, Chaiwat stepped down from the helm in 2008 and handed over the reins of the business to his children. The new management team revamped internal operations and worked to diversify the park's customer base. The changes ushered in a new era for the amusement park - business improved and the company even earned a modest profit in 2012. Looking ahead, the new management faces the challenge of making the business financially viable over the long term, keeping in mind his founder's principles to keep the park affordable and accessible to locals.
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