Expansion into the Philippines
The decision for Ocean Park to expand into the Philippines market hinges on several points of consideration. First, the prospects of the company expanding its domestic operations in Hong Kong are poor because the cost of land is high and stringent regulations are too stifling. For example, the average price per square meter of property in Hong Kong is $28570, while in the Philippines it is $3952. Land prices are good indicators of the cost of doing business, which means it will be cheaper and more profitable for Ocean Park to do business in the Philippines. Besides, the economy is projected to continue growing for the next six years.
Second, the Philippines has been enjoying double-digit growth in its tourism sector recently. In 2017, tourism grew from 5.967 million to 6.62 million visitors, underscoring a growth rate of 11 percent. Despite the fact that the number of visitors to Hong Kong (58.5 million in 2017) outweighs that of the Philippines by close to ten times, the majority of visitors to the latter are on vacation and, thus, are looking for recreational services, with the bulk of such visitors coming from China. Additionally, the Philippines has a population of 100 million people, which means that Ocean Park could also serve locals in various locations around the country. Finally, Filipinos rank as some of the most confident spenders in the world and offer a ready market for Ocean Park.
Third, the available amusement parks in the Philippines are widely scattered, and are focused on single themes – water parks, rides, shows, and zoos. However, Ocean Park has extensive experience in this area, and has incorporated all these activities, as well as having diversified into other forms of entertainment such as nightlife and animal exhibitions. These diverse services could result in disruption to the local industry. However, the company could also form joint ventures with local firms for easy market penetration.
CAGE Analysis
Cultural Distance
The majority of Filipinos can communicate in English, which is also considered one of the national languages in Hong Kong, so interacting with the local community will not be a challenge. However, while the dominant religion in Hong Kong is Buddhism and Taoism, Christianity is popular among Filipinos. Nevertheless, Filipinos are hospitable and lively people and the religion issue is not expected to play a significant role in the success of Ocean Park in the country.
Administrative Distance
The Philippines has strong ties with the United States, which might cause a potential conflict with China. Additionally, the country has a complicated relationship with China due to tension in the South China Sea. However, the current administration is trying to strengthen its business ties with China. Overall, the conflict between American and Chinese interests in the country might affect foreign direct investment (FDI). Nevertheless, the Philippines relationship with Hong Kong is healthy, and Ocean Park could take advantage of the situation. However, the locals are generally hostile to foreign businesses being established in the local market, and this issue has to be dealt with. Additionally, political changes, war on drugs, and corruption pose a threat to FDI.
Geographic Distance
The Philippines is an archipelago, and thus it has one of the longest coastlines (36,289 kilometers) in the world, including plenty of idle land. Therefore, Ocean Park could establish amusement parks in different locations near beaches with thriller rides, animal exhibits, and water attractions. Additionally, Hong Kong is the nearest international business hub to Manila. With only 1,330 kilometers between the two locations, a flight takes only 150 minutes.
Economic Distance
The median household income in Hong Kong is $35443, while that of the Philippines is $5100. However, the cost of doing business in the latter is low and it is easy to enter the market. Additionally, the two countries enjoy a strong business relationship, with the Philippines being Hong Kong’s 12th largest trading partner. With the signing of the Memorandum of Intent in Manila in 2015, the two are expected to continue enjoying close business ties in the future.