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Introduction to Amusement Parks Industry

Question:

Discuss about the Analyzing Forces on Amusement Park.

The Amusement Parks offers leisure facilities like shows, water rides, themed exhibits, mechanical rides, refreshment stands along with other attractions. They represent a major portion of the business in the United States and helps in generation of revenue of around $15.4 dollars. However, the Amusement Park Industry in recent times faced decline in revenue and attendance in the period of economic recession (McC1ung, 2012). This industry also heavily relies on declining demographic. The essay thus focuses on corporate strategy, business strategy and operational tactical strategy of Six Flags that is a major operator of theme park. There is also a SWOT analysis done on the Six Flags Entertainment Corporation. The essay also provides an example of Ferrari World Abu Dhabi that is an amusement park located on Yas Island in Abu Dhabi, United Arab Emirates 

The entertainment industry is gradually gaining a prominence and thereby investments in entertainment projects have been undertaken. Ferrari World in Abu Dhabi is one such amusement park built for the purpose of entertainment. The emergence of Six Flags has also been reason for a similar purpose. Six Flags also known as an amusement park corporation is a part of the entertainment industry and takes up measures for ensuring maximum entertainment to the visitors. The company however maintains thrill parks, water parks, family entertainment centre and theme parks for the purpose of entertaining maximum number of people.

Six Flags also known as Six Flags Entertainment Corporation is responsible for the operation of major theme park. In addition, the organization also takes initiative in operating water and safari parks. The organization thus maintains six major regional parks around United States and one park in Canada and Mexico respectively (Sixflags.com, 2017). This is quite similar to Ferrari World in Abu Dhabi, an amusement part in the United Arab Emirates. The parks offered by Six Flags are a combination of state of the art children ride, thrill ride, concessions and choreographed shows. The company has recently emerged from the state if bankruptcy through implementation of new management followed by a retrenchment strategy.

The mission statement of the company represents the reason for its existence. The mission of the company thus focuses on surrounding the finest ride of the world with entertainment from field of theatre, sports, music, television and film (About Six Flags Over Texas | Six Flags Over Texas, 2017). Thus, it is an operator of amusement park whose focus is primarily on thrilling and new rides mostly surrounded by characters, activities and shows.

Overview of Six Flags Entertainment Corporation

The company has adopted various short term and long-term objectives that it plans to accomplish over the coming two years. The short term goals include of Six Flag included development of the sports bars, opening of cafes, ensuring new attractions at every park.  Six Flags aims to open bars not only equipped with drinks and food but also make twenty-two flat screen television available for playing a variety of sports around the world (Six Flags' New CEO Outlines Strategy, 2017). The organization also undertakes opening of cafes that contained healthier options. To be in a position like to Ferrari World Abu Dhabi, Six Flags have undertaken major renovations and have made certain expansions for enhancing its portfolio.  The long-term goals of the company are also worth a mention. The company has applied for a licensing deal with Meraas Leisure and Entertainment of Emirates for creation of a park in Dubai that would carry the name of Six Flag. The company also went into agreement with Riverside Investment Group that will enable the trademark of the company licensed in six of the parks in China slated for opening.

Six Flags in order to move forward with its mission focuses in four major areas (Marketrealist.com. 2017). This includes, undertaking investment in the process of innovation, ensuring transition to a brand that is regional and change in the pricing of tickets.

Six flag have its operations in markets that are geographically diverse. Thus, to ensure flexibility for responding to local conditions, the park considered as a separate entity controlled by a general manager. A locally appointed management team consists of senior personnel responsible for maintenance and operations, human resource, marketing and promotion, finance and merchandizing. The management team of the individual park also takes up the task of ticket sales, community relations, local advertising and training and hiring of personnel. The general manager of each park reports to the regional executive vice president of the company who then directly reports to the CEO of the company. The company also has an Executive Vice President who holds the responsibility of in-park and retail spending in all the parks. However, the Six Flag parks remain open daily including memorial as well as Labor Day. The parks also remain in operation not only during weekends but also during peak season while keeping pace with themed events.

Six Flag faces limited direct competition that proves to be beneficial for the park. Higher capital investment, longer developed lead timing and the restrictions of the zone gave the degree of protection against the newly emerged competitive theme park. The management however estimates the cost to be around $200 million with a minimum period of two years for constructing a new regional theme park similar to Six Flags. This business strategy adopted by the company has not only helped it in regaining its position but also ensure having a competitive advantage.

SWOT Analysis of Six Flags Entertainment Corporation

However, for ensuring successful implementation of business strategy there should be an abundance cash flow and access to finance otherwise it will not be possible for Six Flags to undertake necessary expansion by implementing high tech attractions for quenching the visitors craving. Six Flags must ensure that the rides of the parks develop the concept of intellectual property or IP which is able to touch the riders not only at physical level but also at the emotional level. Attractions based on IP are part of ever flowing cycle. The success of the business strategy of Six Flag also depends on the help it receives from its international partners in strengthening its bottom line which implies that the theme park does not invest money on exchange of the any licensing deal with a local developer. The local develop on the other hand operates and builds a theme park based on the specifications put forward by the company representing theme park by paying a licensing fee that might be a flat fee or a revenue percentage or both. These deals not only ensure a risk free cash flow to Six Flags but also enable the company to expand its brand to the newer markets. There is no point closing the parks for several months during certain periods. Six Flags as a part of its business strategy thus ensures that the theme parks have locations where the mild weather allows operations round the world. However, in this regard the company can ensure building facilities that are weather proof and which have the capability of staying open in conditions which are less ideal. Moreover, to implement a business strategy successfully and generate huge revenue the theme park must compete as a vacation destination with facilities of transport, hotels, dining facilities, entertainment and shopping. Thus, the more facilities a theme park is able to provide in addition to the quality time at the park for meeting the needs of the visitors, the more money Six Flags will make. However, parks that are unable to offer such amenities losses the money to other businesses. This leads to lesser cash flow for company operating the theme park for engaging in activities related to capital expansion. Thus, successful implementation of business strategy ensures necessary undertaking of certain initiatives by Six Flags. 

 The focus on innovation investment is the research and development strategy. According to this strategy, since it emergence from bankruptcy, the company has heavily made investments in the development of new products and rides. According to specific figures, the company devoted 6 percent of its capital to modernization (Blake Jones, 2017). These figures represented about 9 percent of its revenue. The company undertook sixteen major innovations added to eighteen parks of Six Flag. The innovations of the company however categorized into innovative show technologies, world record-breaking rides, and historic theme park transformations. 

Business Strategy of Six Flags Entertainment Corporation

The expenses of Six Flags have dropped to 61% after its emergence from bankruptcy. The actual figures of the drop in expenses were around $81,628,000 from $84, 219,000 within a gap of a year from 2013 to 2014. Similar to other amusement parks like Ferrari World in Abu Dhabi, Six Flags have also initiated fixed set of expenses (Bandopadhyaya, Callahan, & Shin, 2012). The company has also saved considerably on the variable cost for products sold outside tickets that includes souvenirs, drink and food. The expenses on these products reduced to $ 1.7 million within a year’s gap that is between the early parts of 2013 to 2014.

Six Flag focused on transitioning from a national brand to regional brand. Most of visitors of Six Flag parks originate within a range of 150 miles. Therefore, the company implemented an operations strategy that helped in targeting the local guests to the local parks (Moore, 2016). This approach was different from the approach initially adopted by the company prior to its bankruptcy. The replacement marketing campaign of Six Flags inspired the regional and local residents to pay a visit to the park by promoting through local television, cinema, radio and digital media. Six Flags emphasized on social media campaigns through first person video posts. There has also been development of the local twitter and face book pages. There were also new contest and competitions in the park. The shift in marketing has therefore coincided with local marketing acquisition and social media platform for promotion of the park.


To capture market position similar to Ferrari World, Six Flags plans to provide massive discounts on the admission fees. Coupons often found on the sides of cola cans that show directly in the kiosks of the park that helps them in getting major discounts (Bandopadhyaya, Callahan, & Shin, 2012). The recent investor report of the company has highlighted that the local promotional coupons that had offerings on buying one and getting one free reduced. This had led to an increase in admissions per capita. The company also pushed the seasonal passes with the prediction that it will not only help in the generation of more revenue annually but will also increase the flow of cash compared to the number of visitors on a single day, help in building recurring revenue and help in utilizing excess capacity even during the periods of off-peak. Thus, incentives on the seasonal passes have resulted in increasing the season pass proliferation by 18%.

Operational Strategy of Six Flags Entertainment Corporation

The Board of Directors at Six Flag consists of seven members. Of them, Jim Reid Anderson and Usman Nabi are employees at Six Flags while the rest of the directors ensure board experience related to investment consulting, foodservice, entertainment, private equity, casinos and tobacco industry (Levitt, 2014).

Leadership also represents corporate governance.  At Six Flags, leadership represents the various posts held by the different leaders. Lance Balk is a member of the general counsel whereas Marshall Barber is the chief financial officer (Investors.sixflags.com, 2017). Kathy Aslin is the senior vice president human resource whereas Danielle Bernthal holds the position of senior vice president, assistant general counsel and corporate strategist. Tom Iven and David McKillips hold the post of senior vice president along with looking after the United States park operations and in park service respectively. However, the international park operations looked upon by John Odum while Brett Petit looks after the sales and marketing. Stephen R. Purtell holds the position of investor relation and treasurer while Leonard Russ is responsible for strategic planning and analysis (Investors.sixflags.com, 2017).

Operational tactical planning refers to the process of creation of linkage between strategic objective and goals to the tactical goals and objectives (Vieyra & Vieyra, 2014). The strategy is undertaken by a company for describing success, success conditions and helps in explaining what portion of strategic plan needs to be put to operation during  given period of operation.

The Six Flag introduced the concept of Halloween Town for which there has been substantial change undertaken. This strategy was a huge success with over 9600 attendants. Six flag thus ensured the following steps to make the event a successful one:

The new concept introduced especially targeted the families as they have tendency to spend 25% more on food and entertainment.

Instead of concentrating on the tallest, scariest and the fastest rides the company now focused more on entertainment factors that are family friendly and includes mainly water rides and costumed characters. In addition, the company also focused on the play area for the toddlers.

Six flags tried to give its audience a mini Disney experience through the new concept of Halloween Town and a price much cheaper compared to the other Halloween attractions.

Six Flags discarded the concept of Mr. Six and he is not to be found in any of the advertisements related to the Halloween town.

The company also tried to introduce the concept of ‘Don’t burn mom’. Through this strategy, the company focuses on introduction of not only family friendly ride but also street entertainment. The company also introduced more tweety birds thereby enabling children to take picture with them. This strategy enabled the company to earn accolades from most of the sectors. This tactical strategy has helped the company to revive its position which was to some extent lost due to bankruptcy.

Success of Six Flags Entertainment Corporation

The retrenchment strategy adopted by Six Flag involved preparing the amusement parks for getting a thematic makeover (Investors.sixflags.com, 2017). Six Flags aims at an extensive process of changing the names of the parks and at the same time ensure a makeover that is thematic after its emergence from bankruptcy.

As a part of the turnaround plan, the chief executive of Six Flags adopted objectives for increasing the corporate sponsorships, improving customer services and make the amusement park more appealing for the families (Macarthur, 2017). Thus, to bounce back and be in a position similar to Ferrari World, the focus was on turning Six Flags in to a business that focused on brining more people and getting them spend some quality time at the park. Moreover, the plans were on for setting up the marketing of parks.

The theme park industry has a capital-intensive nature therefore companies responsible for aggressively financing growth with debt will necessarily possess a higher ratio to debt to equity. During the year, 2014, the debt to equity ratio was 4.0. This reflected that the company is financing the operations quite aggressively with the debt capital (marketrealist.com, 2015). However, the debt ratio for a capital-intensive industry standing at two is quite normal.

The determination of situation analysis of Six Flag is through identification of strengths, weakness opportunities and threats. Similar to the Ferrari World, the strength of Six Flag lay in:

  1. The parks placement
  2. The introduction of innovative rides

Generation of the theme aspect along with maintenance of rides with higher technology (Levitt, 2014).

  1. Cost advantage
  2. Leverage of assets
  3. Effectiveness in communication

Presence of strong management team

  1. Presence of brand equity that is Strong
  2. Presence of a strong financial position
  3. Ensures reputation Management

The weakness factors represents:

  1. The parks dependency on good weather
  2. Existence of seasonality in various parks

Ensuring gauging of price.

  1. The theme parks lacked appeal towards the older generation
  2. Indulged in a process where hiring of employees took place in every season.
  3. Presence of a competitive market

Opportunities of Six Flags represent:

  1. Entrance into the newer growing markets
  2. Enhanced growth on the internet and mobile media.

The increased presence in the global markets

  1. The company’s presence in the growing economy

Threats to these theme parks represent:

  1. Race amongst rival operators.
  2. Government restrictions and policies that pose hindrance in operation of the park.


Threat in the labor market due to the seasonal employees.

  1. Increase in the cost of the labor
  2. Presence of external business risk

The industry analysis is done with the help of Porter which portrays the key pressures that a particular firm faces in the industry where there is existence of competitive advantage.  The industry analysis done based on various factors that includes, bargaining power of suppliers, the threats faced from the new entrants, threat of the substitutes, bargaining power of the buyers and industry rivalry (Lillestol, Timothy, & Goodman, 2015). Thus, the bargaining power of suppliers is quite high in case of Six Flags. However, Six Flags faces lower threat from the new entrants. As far as substitutes are concerned, it is quite high although the buyers possess medium bargaining powers.  Further, Six Flags also faces higher industry rivalry.

Ferrari World Abu Dhabi

The organizational analysis is the PEST analysis that puts forward a framework for better understanding of the macroeconomic industry of the organization that is part of the amusement park industry. These however include political, economic, social and technological aspects. The political aspect implies that the regulation act of the government has negative influence on the net profits of the theme parks. The consideration of the economic factors of the amusement park industry shows a growth in revenue between 2.2 to 5.3 percent. The social factors represent the demographics on which a theme park is dependent (Strelets, 2012). This demographic represented by teenagers in the age group of ten to nineteen. Thus, any change in the demographics will directly affect the attendance in the park. However, as far as technology is concerned amusement parks focuses on utilization of technology based on three areas that are cost cutting, seasonal updates and overall guests experience (Köhler, 2013).

Conclusion

The essay ends with a note that Six Flags is the largest operator of theme park with a mission that aims at providing unique experience to its customers. After its emergence from bankruptcy, the company has not only embraced regional strategy but has also opted for new innovative rides. The company has also focused on social media marketing locally and enhanced the sale of seasonal pass tickets. Through the essay, one can also see that on the financial front, the company has witnessed substantial growth.

About Six Flags Over Texas | Six Flags Over Texas. (2017). Six Flags Over Texas. Retrieved 27 November 2017, from https://www.sixflags.com/overtexas/news-room/about

Bandopadhyaya, A., Callahan, K., & Shin, Y. C. (2012). Corporate financial strategy.

Blake Jones, b. (2017). Six Flags officials detail theme parks strategy. Glens Falls Post-Star. Retrieved 27 November 2017, from https://poststar.com/news/local/six-flags-officials-detail-theme-parks-strategy/article_2bd37a34-a981-11df-b12d-001cc4c03286.html

Company History. (2017). Investors.sixflags.com. Retrieved 27 November 2017, from https://investors.sixflags.com/investor-overview/company-history

Investors.sixflags.com (2017) Leadership. Retrieved 27 November 2017, from https://investors.sixflags.com/corporate-governance/leadership

Investors.sixflags.com. (2017). Board of Director. Retrieved 27 November 2017, from https://investors.sixflags.com/corporate-governance/board-of-directors

Köhler, I. (2013). Strategic marketing analysis of Walt Disney’s Parks and Resorts.

Levitt, J. (2014). Strategic Analysis–Six Flags Entertainment Corporation.

Levitt, J. (2014). Strategic Analysis–Six Flags Entertainment Corporation.

Lillestol, T., Timothy, D. J., & Goodman, R. (2015). Competitive strategies in the US theme park industry: a popular media perspective. International Journal of Culture, Tourism and Hospitality Research, 9(3), 225-240.

Macarthur, K. (2017). Six Flags CEO Outlines Turnaround Plan. Adage.com. Retrieved 27 November 2017, from https://adage.com/article/news/flags-ceo-outlines-turnaround-plan/47810/

Marketrealist.com. (2017) A brief overview of Six Flags' management - Market Realist. Retrieved 27 November 2017, from https://marketrealist.com/2015/01/brief-overview-six-flags-management/

Marketrealist.com. (2017) Must-know: A look into Six Flags' debt-to-equity ratio - Market Retrieved 27 November 2017, from https://marketrealist.com/2015/01/must-know-look-six-flags-debt-equity-ratio/

McC1ung, G. W. (2012). Theme park selection: factors in?uencing attendance. Tourism Management, 233.

Moore, M. (2016). Where to invade next. Aec.

 Six Flags' New CEO Outlines Strategy. (2017). latimes. Retrieved 27 November 2017, from https://articles.latimes.com/2005/dec/15/business/fi-sixflags15

Sixflags.com . (2017). Home. Sixflags.com. Retrieved 27 November 2017, from https://www.sixflags.com/

Strelets, I. V. (2012). The influence of socio-cultural factors on the strategy to promote tourism operator.

Vieyra, R. E., & Vieyra, C. (2014). Analyzing forces on amusement park rides with mobile devices. The Physics Teacher, 52(3), 149-151.

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