The Closure of Six Flags Entertainment Corporation Theme Parks - Assignment Example

?Theme Park – Six Flags Entertainment Table of Contents EXECUTIVE SUMMARY 2 2 INTRODUCTION 2 3 METHODOLOGY 3 4 CURRENT ORGANIZATION STRUCTURE 4 5 CRITICAL ANALYSIS OF THE CURRENT STRUCTURE 6 6 MAJOR PROBLEMS AND POSSIBLE SOLUTIONS 7 7 CONCLUSIONS 10 8 RECOMMENDATIONS 11 9 REFERENCES 12 Executive Summary The paper analyses the closure of Six Flags Entertainment Corporation theme parks. It starts with a macro level view of the industry and the company followed by a discussion about its organization structure. A critical analysis of its structure helps in understanding the pros and cons of the current organization setup. This is followed by an analysis of the visible reasons of closure of the park. Major reasons identified in the research are – world economic crisis, stiff local competition, low level of differentiation of services and negative image of the company regarding safety standards and bankruptcy filing. A discussion of possible solutions followed by recommendations concludes the paper. The major recommendation is to restructure the organization to enable a flatter structure for faster decision making and more employee empowerment. Introduction Theme park industry has evolved immensely over time. With a handful of theme parks concentrated within US during the beginning of the 19th century, the industry has grown tremendously. US itself has 600 entertainment parks and attractions as per recent studies while Europe houses 300 of them (Woodside and Martin 2007). The industry is cyclical and is heavily dependent on weather conditions. For example, in US, 46% of the people prefer going to theme parks during summers, 21% prefer spring while 18% prefer autumn season (Woodside and Martin 2007). The success of a theme park depends on factors like a clear definition of the theme you want to promote, an organization structure that supports the required activities to work on that theme, a prudent choice of location and technological innovation to name a few (Clave 2007). Six Flags Entertainment Corporation is the largest regional theme park in the world. The company operates theme, water and zoological parks across US, Mexico and Canada. On the whole, it owns 19 parks, 17 of which are located in the United States alone. The company also holds licenses for theme park usage of Warner Brothers and DC comic characters across its various parks. The company has exclusive rights to sell products bearing these characters as well as use them for advertising and promoting the “Six Flags” brand (Six Flags Annual report 2010). The theme park has been through turbulent times and had to file for bankruptcy because of the decline in visitors across its various sites. Three main reasons for this situation are as follows: Deterioration of the US and European economies (yahoo.brand.edgar-online) Excessive competition from other entertainment avenues during financial crisis years Lack of differentiation from other competitor in entertainment experience provided to the customers The company needs to formulate a strategy that can help it overcome all the above difficulties. A reduction in entry fee or overall cost of entertainment, focusing on tie ups with other entertainers to reduce competition and encouraging innovation in services within the organization culture can be some of the solutions. We will discuss each of these issues and their solutions in greater detail in our ensuing sections. Methodology A research paper is incomplete without a mention of the methods employed to analyze and conclude a paper. Research involves data collection, its analysis and finally reaching a conclusion. Methodology helps in defining the research design, the way data is collected, the validity of the data and the limitations of the research. Two types of data have been used in the research – primary and secondary. Data directly gathered from the company is the primary data. Secondary data is the one used from other researcher’s analyses. Most of the data used in the ensuing paper is the secondary data from books and journals and other credible internet sources. It is not possible to get data directly from the company; hence articles written by eminent analysts as well as views mentioned by employees of the company have also been used. The primary data used is the company’s annual report. It has also not been possible to visit the actual locations to talk to the employees and visitors and understand their views through surveys. Current Organization structure The company’s organization structure is hierarchical. It has the board of directors at the top followed by the Chairman, President and CEO of Six Flags Entertainment Corporation, Mr. Jim Reid-Anderson (Six Flags Annual report 2010).Further down are the department heads (Sr. Vice Presidents). The various departments, each with their heads reporting to the CEO are – Park Operations, Alliances, General Counsel, In-Park Services, Investor relations and corporate communications, Administration and Marketing. Other than these seven departmental heads there is CFO (Chief Financial Officer) to take care of finance, COO (Chief Operations Officer) and CIO (Chief Information Officer). Further down the structure is built around geographical locations. Each location has a Senior Vice President (Sr. VP) who is responsible for the operations and administration of the location. S/he has a team to carry out all the activities. All the local advertising, hiring and staff training are the responsibilities of the local management which reports to the Sr. VP (Six Flags Annual report 2010). These functions are further supported by the corporate team which works with a macro level perspective of the company strategy. For example, the human resource department decides on the total level of full time hiring required at the corporate level (based on the projections from market research etc.). These figures are then communicated to the various locations based on the projected requirement at the regional level. The local team then starts the recruitment procedure based on the number of hires allowed to them (Six Flags Annual Report 2010). The management team under the Sr. VP of a location has a number of senior personnel in it. A Finance director is allocated to each park location and he reports to the corporate Vice President of the company. His job is to provide financial support to each location. Critical analysis of the current structure The current structure of Six flags looks hierarchical and bureaucratic. Departmentalization has been done on the basis of function as well as the location. Though the company has incorporated some level of decentralization by dividing the operations as per locations, the overall planning happens at the centralized head office level. Each location works as an independent unit with a Sr. Vice President responsible for the performance of the unit. However, as happens in a bureaucratic organization, departmentalization has been done based on the basis of the function alone rather than a combination of service and function as in a Matrix organization (Pride, Hughes and Kapoor 2009). This structure has a major drawback in terms of the degree of flexibility (Pride, Hughes and Kapoor 2009). A theme park is highly dependent on customer’s entertainment experience. It does not depend only on the actual means of entertainment available but on the overall experience of the customer. The rides might be good and technologically most advanced, but if the overall experience in terms of waiting time for buying tickets or staff curtsey is not pleasant, the customer may never come back. Thus, flexibility of taking certain decisions at ground level is an important factor for providing good customer service. Major Problems and possible solutions The entire world has been facing major financial crisis since 2008. This has resulted in reduced spending by consumers on entertainment. Major revenues of the company come from ticket sales (52%) followed by in-park sales (42%) and finally sponsorship and licensing (6%) (yahoo.brand.edgar-online).This shows that if ticket prices are reduced to attract customers, there can be a major revenue loss. However, without providing attractive and low priced entry packages to the customer, visits cannot be increased. The customers would prefer to go to low cost entertainment avenues. Thus, a good strategy for the company would be to focus on increasing in-park sales and earnings from sponsorships. In-park sales are heavily dependent on staff attitude and the way they can promote the various services. Better in-house service will attract more visitors. Another strategy would be to provide off season packages to families at low prices. This will help in recovering revenues during lean seasons. Increasing license revenues would require adequate advertising efforts to improve the brand name. The company should look at diversifying further to Eastern countries which have not yet been tapped by other brands like Disney. Better management of costs is also required to strengthen the bottom-line. Hence, cost reduction exercise should be resorted to. This would require reduction in wastage, for example operating only particular rides during lean periods, better staff utilization etc. For this ground staff should be sensitive enough to see the visits on a particular day and run only those rides which are in demand. The second problem that has led to the closure of the park is high competition. Looking at the company’s ranking in high population areas, it can be seen that it doesn’t rank too well. For example, the New England branch ranks from 30 to 110 in the center’s major markets (Six Flags annual report 2010). As six flags is a regional park, it is highly dependent on the local population for repeat visits. Its competitors are not just other theme or amusement parks. Other low cost entertainment outlets like movie theaters, eating joints, picnic spots and malls also give stiff competition, especially at a time when unemployment rate and salary cuts are so rampant. With low disposable incomes, people are either holding back entertainment expenses or reducing them by looking for cheaper alternatives. A solution to providing some relief from competition is to provide low cost entertainment within its parks. The company needs to come up with innovative packages which will be designed for short term entry into the premises and enjoying only certain aspects of the of the services. For example, by designing packages for a two hour entry slot would cost only one fourth of the cost of a full day package. As other low cost local entertainments are also available for short durations, this would be a better alternative. Providing free meal coupons with particular rides can also be an attractive offer. The company should also look at creating free entry areas where visitors can bring in their own eatables and enjoy the paid rides. Thus, they pay only for the rides and enjoy an outing without paying for the food. Each location head has to look at what works best for that particular location. This can only be done with the help of inputs and service support from line staff. Daily sales targets need to be set and planning needs to be done at the location or function level rather than corporate level. Lack of focus on innovation has also resulted in closure of the park. The theme parks mostly create a theme on which they are developed. A unique theme will help in arousing curiosity in the minds of the people and attract them not just for fun and entertainment but for experiencing the environment. For example, Efteling in Netherlands is built around a unique theme of fairy tales (Laws, Faulkner and Moscardo 1998). All children hear or read fairy tale stories and it is a unique experience to live with those characters in the same environment which they have imagined. Six Flags also needs to work on creating a unique theme. It needs to bring about more brand awareness. For example, Disney has started its own television channel, flight connections and even rail connections at locations which are far from the main city or town. Disney also has very sophisticated virtual simulation technology that helps to enhance customer excitement. Technical up gradation of Six Flags will help in changing its perception and attract more visitors. The company is also facing litigations from various customers who have suffered injuries while using the park facilities (Six Flags Annual report 2010). Such legal hassles create a negative image of the company and should be avoided. The company needs to assure adequate safety checks and inform the public of actions it has taken. This should be done through subtle advertising without making it obvious to the public that the company is having safety issues. This is all the more important because of the importance being attached to this aspect by public as seen by the support for the “amusement park safety bill” (consumerunion 2000). The company also felt a setback due to negative image created by bankruptcy filing (Six Flags Annual Report 2010). To help in implementing the above strategy it is important for the company to reorganize its organization structure. Theme park industry is a labor-intensive industry. It has been estimated that parks have on an average 75 personal contacts per day per employee (Clave 2007). This figure signifies the importance of work force for theme park visitor satisfaction. Thus, it is vital to ensure employee satisfaction to achieve the goals outlined. Hierarchical structures create more rigidity within the system. Manager decision making is slower in this type of organization structures. A flatter organization is capable of implementing change fast because of high degree of informality leading to better communication. As Six Flags is a middle level organization, it can easily move to a flatter structure as it will help the firm to respond better to the dynamic business environment of the theme park industry (Pizam 2005). Along with flatter organization, a matrix structure will further help in increasing communication and hence enhance the decision making speed at location level. A matrix of functional and departmental reporting will help align functions to the departments and enable departments to work according to the requirement of a particular service. For example, corporate human resource plans for training and staffing requirements. If each function is also involved in this planning for example, in-park function or entertainment function and so on, then the department would have a better estimate of actual requirements. Similarly advertising and facilities development can better be done by the location staff. Source: (Pride, Hughes and Kapoor 2009) Conclusion The major problems that have led to the closure of the park are the economic turmoil worldwide leading to reduced customer spending on entertainment, high competition from other entertainment avenues, lack of innovative technological up gradation and negative publicity on account of safety concerns and bankruptcy filing. The company has to focus on reducing entertainment cost by providing innovative packages. It also needs to look at improving the facilities by creating a unique theme for itself and using latest technology to enhance customer’s entertainment experience. Stricter safety checks and internal audits need to be conducted. Image rebuilding also needs to be done to ensure public knows about the company’s concern for their safety. The company also needs to focus on employee satisfaction through trainings and better involvement in decision making. Recommendations The company needs to restructure its organization to implement the changes required. It should first move from a hierarchical organization to a flat and decentralized one with matrix structure. Currently it has been organized based on departmental reporting. The matrix structure requires aligning it on functions as well. This will help in two way communication as well as employee empowerment where they can communicate with upper management easily. All locations should have flexibility of tailoring their own packages. They should be allocated sales/revenue targets, but achieving them should be left to them. Deciding on entry fees, fees for the rides etc. should be left to them. References Clave, SA 2007, The global theme park industry, CABI, London. consumerunion.org 2000, Consumer union supports amusement park safety bill, viewed on April 16, 2011 http://www.consumersunion.org/pub/productamusement_park/002857.html Laws, E, Faulkner, HW and Moscardo, G 1998, Embracing and managing change in tourism: international case studies, Routledge, London. Pizam, A 2005, International encyclopedia of hospitality management, Butterworth-Heinemann, New York. Pride, WM, Hughes, JH and Kapoor, JR 2009, Business, Cengage Learning, London. Six Flags Annual Report 2010, viewed on April 15, 2011 http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9ODcwMDN8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 Woodside, AG and Martin, D 2007, Tourism management: analysis, behaviour and strategy, CABI, London. yahoo.brand.edgar-online.com, Six Flags – confidential information memorandum for public-sider, viewed on April 15, 2011 http://yahoo.brand.edgar-online.com/EFX_dll/EDGARpro.dll?FetchFilingHtmlSection1?SectionID=6976086-7206-239002&SessionID=mN3HHSCK0tpmo47 Read More