Team 3 - CBS Case Competition

Sprint Like A Gazelle Beat the Elite, CBS Case Compe88on, Feb 2014 Copenhagen Zoo should focus on becoming a holis4c experience by combining innova4on, business and science Situa4on: Complica4on: §  Copenhagen Zoo (CPH Zoo) has Recommenda4on: §  CPH Zoo suﬀers from numerous been through a turnaround phase internal and external and is ready to take the next step complica8ons §  CPH Zoo is recognized as one of §  Internal the top European zoos, however §  BoMleneck of opera8ons s8ll not a main aMrac8on for §  Limited customer base tourists §  Low share of wallet §  Due to a very unilateral customer §  External base, CPH Zoo is struggling to §  Seasonality & weather aMract customers outside the condi8ons capital region §  Reduc8on in subsidies §  Limited public transporta8on §  CPH Zoo needs to deliver on a threefold strategy § 
AMract new customers and increase share of wallet § 
Adjust price structure to align with industry average § 
Create a link between the educa8onal & scien8ﬁc perspec8ve and business perspec8ve How does CPH Zoo meet its opera4onal targets by 2020 while at the same 4me strengthening the educa4onal &scien4ﬁc perspec4ve? 1
CPH Zoo should increase its interna8onal proﬁle both scien8ﬁcally and commercially 2
CPH Zoo’s growth rate in visitors should be a minimum of 5% ann., using 1.1m visitors in 2012 as baseline and reaching a sustainable level of 1.6m visitors in 2020 3
CPH Zoo should operate independently from government subsidies by 2020 4
CPH Zoo’s proﬁt margin should be higher than 8% and remain so, even when government subsidies are phased out, while maintaining high service levels -‐0,7% 147
151
143
143
142
2008 2009 2010 2011 2012 We recommend CPH Zoo to leverage exis4ng customers, tap into the tourist customer segment, op4mize the prizing structure as well as strengthen brand value through increased focus on the scien4ﬁc perspec4ve, thereby enabling CPH Zoo to meet its 2020 targets A"er a turnaround following the ﬁnancial crisis, CPH Zoo must develop a new strategy to come back on a sustainable growth path with a scien@ﬁc perspec@ve Sources: Annual Reports, Case Material, Case Team Analysis Introduc4on Situa4on Complica4on Recommenda4on Implementa4on 2 Increased compe44on for consumer spending makes it diﬃcult for CPH Zoo to deliver on its high ﬁnancial targets ... however the leisure market is very ﬁerce due to low consumer spending as well as numerous leisure alterna4ves in the capital region CPH Zoo made it through the ﬁnancial crisis and are, aOer several years of stagna4ng growth, now showing a promising number of visitors ... DKKm # of ann. visitors (RS) and ann. revenue (LS) 300
1,5
% of Danish popula4on yearly visi4ng Global market forecast theme park entertainment aZrac4ons (2012) industry, DKKbn (2012) 1,0
Theme parks 250
200
150
98
100
106
117
147
151
143
143
142
N/A 0,5
50
0
0,0
PM Zoos Entertainment Centers 2007 2008 2009 2010 2011 2012 2013 Aquaria 17
2,5% 1,0% -‐1,9% 3,3% -‐0,6% -‐0,5% 9.9% 3.3% N/A Circus 17
-‐  Approx. 5-‐10% of Copenhagen Zoo’s visitors are tourists, where the low level is uncertain for the current management 174
23
2006 -‐  CPH Zoo has a unilateral customer base, where 90% of all visitors travel less than 100 km to visit the zoo and of all visitors approx. 75% of the visitors visit the zoo with only their family 161
42
2005 -‐  CPH Zoo has been able to succeed during and a_er the ﬁnancial crisis due to opening of the new Elephant House and the Arc8c Circle, as well as due to signiﬁcant events, where 2013 was a record year with the highest historic number of visitors in one year and in one day -‐  Copenhagen Zoo is among the top 12 most-‐visited zoos in Europe and one of the leading zoos in the Nordics, with a strong and recognized na8onal brand (top 10), however is s8ll not considered a main aMrac8on +3,8% 55
2015 2017 -‐  Low disposable income, limited leisure 8me and strong compe88on for spending money on leisure ac8vi8es are factors that aﬀect the overall entertainment industry -‐  The market for theme parks is projected to grow by CAGR 3.8% un8l 2017, where the growth factors, in addi8on to general improvements in the global economy, include rising consumer spending on leisure ac8vi8es, a tendency to spend free 8me in outdoor theme parks, and the growing popularity of mass entertainment -‐  Copenhagen Zoo is challenged in how to posi8on itself in the interna8onal as well as local market and how to grow in the market Highly Diﬀeren4ated & Compe44ve Landscape Sources: Annual Reports, Case Material, Danskernes Kulturvaner 2012 (Epinion), PRWeb 2012, Case Team Analysis Introduc4on Situa4on Complica4on Recommenda4on Implementa4on 3 CPH Zoo is opera4ng in an environment posing many complica4ons that must be taken into account when formula4ng a new strategy External Complica4ons Internal Complica4ons 2006 2007 2008 2009 2010 2011 2012 Jan 2005 CPH Zoo is suﬀering from a boMleneck, as it is not possible to extend the loca8on outside the current premises and have limited parked space, which means that CPH Zoo needs to op8mize it’s current opera8ons 195 160 140 141 184 140 124 97 51 39 Dec 45 120 Oct ‘000 Nov Seasonality and weather condi4ons 150 100 Sep 142
Aug 143
Jul 143
Jun 151
May 147
Apr 117
Mar 98
Rev DKKm 106
Feb BoZleneck in opera4ons Ø 120 Seasonality and Danish weather condi8ons greatly impact the number of visitors per month, which has had an unfortunate eﬀect as visitors do not receive sa8sfactory service during oﬀ-‐seasons or during peak-‐days Limited customer base Visitor Demographics 2012 Willingness to Travel to a Zoo (42 min max) 90% by car 60% Low share of wallet Ave. Sale per visitor 10
Souvenir shop DKKm 18,6
18,3
18,7
18,1
18,2
17,6
16,8
% of Rev 2007 2008 2009 2010 2011 2012 2013 16% 13% 12% 13% 13% 12% N/A by public transporta4on The current customer base can be limited to within a 40min drive from CPH Zoo, which means that the main customer area is the capital region, limi8ng the poten8al of further growth and stresses the importance of share of wallet per visitor 100
Reduc4on in government subsidies Subsidies allocated to CPH Zoo is expected to drop to zero in 2020 from DKK 16.8m in 2013, which implies that CPH Zoo needs to create an independent revenue base to replace to funding gap Limited public transporta4on opportuni4es U8liza8on of the annual card holders and the venue is low and the average consump8on per visitor in Zoo Food and Shop was only DKK 100, also very low 19 min walk CPH Zoo is limited by public transporta8on, which is a major hassle for the tourists as well as for aMrac8ng and retaining visitors travelling by public transporta8on ZFS Sources: Annual Reports, Case Material, Rambøll Management Consul@ng, Case Team analysis Introduc4on Situa4on Complica4on Recommenda4on Implementa4on 4 Copenhagen Zoo can develop a plagorm for growth by focusing on three levers Customers Pricing Exis4ng customers •  CPH Zoo has signiﬁcant poten8al for increasing share of customer wallet •  Seasonal balance can be improved with only a few altera8ons New customers •  CPH Zoo can tap into a lucra8ve tourist market •  Increase customer trac8on by easing access to CPH Zoo Science •  Benchmarking with compe8tors shows that CHP Zoo signiﬁcantly under-‐price its rela8ve value of annual card compared to single 8ckets •  Es8mated price elas8city is less than one thus allowing CPH Zoo a signiﬁcant revenue poten8al that can be realized by minimizing consumer surplus by op8mizing pricing strategy •  Collabora8ve Masters degree in Sustainable Wildlife with University of Copenhagen •  Create a regional preserva8on hub for Nordic animals •  Oﬀer expert experience in animals’ natural environment •  Strong focus on science creates posi8ve publicity and thus led to more private funding together with an increased percep8on among public and tourists •  Increasing price will most likely led to a decrease in customer sa8sfac8on, however this is mi8gated by a beMer product oﬀering within the Zoo (i.e. more restaurants) Recommended strategy will result in 1.67m customer and 8.5% proﬁt margin in 2020 Sources: Annual Reports, Case Material, Case team analysis Introduc4on Situa4on Complica4on Recommenda4on Implementa4on 5 Exis4ng and new customers provides signiﬁcant poten4al for both topline and boZom line Exis4ng customers New customers # of monthly visitors (’000) 160 120 184 140 •  Tourists oﬀer an interes8ng opportunity as they have high willingness to spend and the number of tourists in Copenhagen is growing with approx. 8% annually 195 141 140 124 39 Dec Oct Sep Aug Jul Jun May Apr Mar Feb Nov 51 45 Jan Current reserved: 110k 97 Non-‐
Families: 4,250k Families: 750k Poten8al new customers
: 640k By capturing approx. 30% of the poten8al market, Zoo will gain approx. 210k new customers •  High seasonality is correlated with the weather condi8ons and implies that oﬀerings consistent with Danish weather condi8ons must be created •  To aMract tourists a complementary shuMle service should be oﬀered, as the current infrastructure is insuﬃcient •  Busses will be operated in a partnership with Arriva Mainly indoor Mainly outdoor •  Number of catering alterna8ves can be increased to industry average of 8 from the current number of 2 •  Approx. 50% of the zoo is outdoor hence more indoor alterna8ves must be developed (Old Elephant House) •  Develop backup events that can be rolled out in case of bad weather and oﬀer free single-‐use rain coats •  By oﬀering a free shuMle bus Zoo can gain trac8on with tourists and in general increase the number of customers following the convenience of direct transporta8on Focus on tourists will allow CPH Zoo to tap into a poten8al market of 640k customers Sources: Annual Reports, Case Material, MasterCard, UNWTO, European Ci@es Marke@ng, Markussen et al. (2007) Introduc4on Situa4on Complica4on Recommenda4on Implementa4on 6 Opera4ons can be adjusted to harvest low-‐hanging fruits from pricing and improve the link between science and business Focus on Pricing Contribute to science •  Mapping the rela8ve price of a single 8cket to an annual pass illuminates that CPH Zoo is pricing signiﬁcantly lower than average for the ten best performing European Zoo’s1 4
3
4
4
4
5
5
5
Master’s degree in collabora4on CPH Zoo should engage in oﬀering a Master’s degree in collabora8on with University of Copenhagen in Sustainable Wildlife for poten8al recrui8ng 5
Ø4
3
Direct link between academia and business Zurich
Hamborg
Köln
Berlin
Basel
Leipzig
Munchen
Stuttgart
Copenhagen
Vienna
Nordic Animal Preserva4on Hub Create a regional preserva8on hub for Nordic animals in collabora8on with Skåne Djurpark •  Raising the rela8ve price of an annual pass to industry average will result in a price of DKK 750 for an annual pass •  Increasing price will lead to a loss of customers, however, we expect that this will be outweighed by the price increase (running a scenario shows that CPH Zoo can aﬀord to loose slightly more than 50% of their customers assuming annual card holders will instead visit the Zoo once every year) Gain interna4onal recogni4on, leveraged towards an interna4onal brand proﬁle Protect and promote wildlife •  This will further allow for new customers during peak hours where the Zoo is currently facing boMlenecks CPH Zoo should proac8vely seek to help protect and promote wildlife in its natural habitat e.g. oﬀer to supply experts for endangered geographical loca8ons Gain stronger scien4ﬁc proﬁle and greater knowledge gathering 1Dutch zoo’s are not included as they do not oﬀer an annual pass Sources: Annual Reports, Case Material, MasterCard, UNWTO, European Ci@es Marke@ng, Markussen et al. (2007) Introduc4on Situa4on Complica4on Recommenda4on Implementa4on 7 The strategy oﬀers a lucra4ve ﬁnancial outlook and limited risk Development in visitors (‘000) Development in revenue (DKKm) Number of visitors New customers Development in net income margin (%) Pricing ini8a8ve Base case Net income margin +5,2% 1.435 1.490 1.455 1.443 1.488 1.665 1.557 1.610 1.110 195 238 227 232 5 8 3
33
33
33
244 9 34
253 11 36
260 11 39
195 190 197 201 205 210 267 11 42
8.5% 8.5% 8.0% 8.3% 7.0% 6.0% 6.5% 7.0% 142 194 214 3.3% 142 2012 2013 2014 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016 2017 2018 2019 2020 Risks associated with recommenda4on Degree of risk 2012 2013 2014 2015 2016 2017 2018 2019 2020 How to mi4gate risk Zoo mi4ga4ng risk Economic risk Niche value proposi8on Macro economic factors Diversify customer base Capacity risk Create seasonal balance Impact of price increase Hire pricing experts (Simon-‐Kucher) Increased compe88on BeMer posi8oning Partnership risk (University of Copenhagen) Set up advisory board Implementa8on Risk Detailed implementa8on plan ü
ü
ü
û
û
û
ü
Sources: Annual Reports, Case Material, Case team analysis Introduc4on Situa4on Complica4on Recommenda4on Implementa4on 8 Execu4on risk can be reduced by a thorough implementa4on plan Strategy 2014 Customers 2015 2016 2017 •  Add four busses to pilot project •  Start pilot project with three busses •  Ini8ate indoor ini8a8ves in Copenhagen •  Open two more •  Convert old restaurants Elephant House to a restaurant •  Open two more restaurants •  Ini8ate marke8ng campaign for busses and indoor ac8vi8es •  Op8mize •  Open last of six opera8ons restaurants •  Con8nuous focus •  Evaluate bus service on marke8ng campaign •  Op8mize seasonal balance Pricing •  Increase average •  Increase average card holder price card holder price to DKK 518 to DKK 438 •  Inves8gate poten8al for addi8onal pricing methods •  Increase average card holder price to DKK 600 •  Hire Simon-‐
Kucher to evaluate pricing scheme •  Re-‐evaluate pricing benchmark to determine whether prices are s8ll compe88ve Science •  Ini8ate contact to relevant partnership organiza8ons in the Nordic •  Contact Skåne Djurspark •  Finalize Master’s degree and open up for applica8ons •  Focus on further partnerships for preserva8ons centre •  Send experts to •  U8lize knowledge foreign countries from foreign and ini8ate a countries to media campaign improve link based on their between science ﬁndings and business •  First Master’s batch gradua8ng •  Launch of Nordic preserva8on centre (e.g. polar bears) •  Ini8ate contact to University of Copenhagen 2018 •  Adjust prices if necessary Successful implementa8on of the strategy will enable CPH Zoo to realize its full poten8al Sources: Annual Reports, Case Material, Case team analysis Introduc4on Situa4on Complica4on Recommenda4on Implementa4on 9 By oﬀering an improved value proposi4on combining innova4on, business and science CPH Zoo will by 2020 be able to aZract 1.67m customers and yield a margin of 8.5% Introduc4on Situa4on Customers
Existing customers
• CPH Zoo has significant potential for increasing share of c ustomer wallet
• Seasonal balance c an be improved with few and focused alterations
New customers
• CPH Zoo c an tap into a lucrative tourist customer segment
Complica4on Pricing
• Benchmarking with competitors shows that CHP Zoo significantly underprices its relative value of annual card c ompared to single tickets
• Thus significant revenue potential c an be realized by minimizing consumer surplus by optimizing pricing strategy
Recommenda4on Implementa4on Science
• Collaborative Masters degree in Sustainable Wildlife with University of Copenhagen
• Create a r egional preservation hub for Nordic animals • Offer e xpert e xperience in animals’ natural environment
• Increase c ustomer traction by e asing access to CPH Zoo By conduc8ng the three recommended strategies, CPH Zoo will be able to survive in an increasingly ﬁerce market and enter a long-‐
run path on which it can sprint like a gazelle 10

Download Report