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Lahore School of Economics

MerryLand Amusement Park- 2009

Strategic Management

Presented by: Nayab Maqsood & M. Hayat Khan10-23-2013

ABSTRACT

This report emphasizes on the entrepreneurial abilities of Tony Kenworthy and his desire to

convert an un-operational amusement park; Merryland Amusement Park into a successful and

thriving site for the people of Kansas as well as an entertainment hub for disable children. Tony

Kenworhty wishes to take over Merryland but due to lack of funds he is limited to three

preferable options; buying the park using loans, using another corporation for finance and finally

taking assistance from a consortium of entrepreneurs to attain more control but less cash. The

report uses strategic analysis tools such as IFE, EFE and CPM Matrixes to define the operations

of Merryland and further uses SWOT analysis techniques to define the strengths and weaknesses

of the individual strategies finally using a QSPM analysis to identify the best strategy; divulge

with consortium of investors of Merryland.

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INTRODUCTION

Merryland Amusement Park opened its gates in 1955 and was managed successfully by Stanley

Merry. After his dead the park was left to his daughter-in-law; Samantha Steinberg. Miss

Steinberg lacked the entrepreneurial abilities to operate an amusement park and soon increased

costs and mismanagement led to Merryland’s shutdown. Samantha Steingberg now wants to sell

the park and asks for a minimum of $2 million for it.

Tony, a graduate from the University of Richmond is talented in entrepreneurial abilities and

through time has shown his flair for helping failing operations and turning them into successful

ventures. Although Tony worked in many successful ventures his personal desire was to help

children with disabilities and see them thrive by identifying their unique talents. This desire as

well as seeing Merryland Amusement Park as a prospective success sparked the need in Tony to

invest his entrepreneurial abilities in the park to benefit not only the children but the entire area

of Kansas. Tony has always had an interest in controlling and management therefore having

independence in his decisions but up till now hasn’t had the chance to do so.

To control Merryland and make it a successful venture in Kansas Tony has three basic options to

decide from. The first is to merge resources with Altria who would pay for all the finances and

invest $25 million in the park. Altria Group, formerly known as Phillip Morris, the cigarette

giant wanted to diversify as well as improve its reputation in USA, leading to its decision in

investing in the park. The second option is to divulge with a group of local business

entrepreneurs who will give Tony complete control of the park but require large share of the

profits. Finally the last option to Tony is to get a loan and both finance and control Merryland

himself.

The strategic analysis done in this report will define which strategy should be chosen by Tony

for attaining Merryland to fulfill his lifelong dream.

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STRATEGIC ANALYSIS

Before a strategic analysis can be conducted for Tony, it is important to answer a few questions

that would assist in identifying the best strategy. To identify, it is necessary to know the

customers of Merryland Amusement Park. Merryland Amusement Park is destined to be a hub

for children as well as adults and elderly people. According to the demographics Merryland

Amusement park has a population of 90.6% and these include customers from the age of 5 to 74

and they have the potential to be consumers of Merryland. Moreover Merryland, since its

opening has been majorly a family park where families came to enjoy and have rides. According

to 2009 demographic statistics it has been scene that Merryland has approximately 65.3% family

households from which 32.5% have children under the age of 18 years therefore are potential

customers for Merryland amusement park. Apart from that there are around 11.1% households

with a female householder without a husband and children under 19 years. Furthermore

households with individuals under 18 years of age are around 37.5% therefore making 81.1%

households the potential consumers for Merryland amusement park. It has also been seen that

there are around 47.6% grandparents responsible for their grandchildren who are under 18 years

of age therefore giving them an edge as a consumer as they will be the ones responsible for

generating sales for Merryland.

Merrylands potential consumers have one basic need; to have an amusement park that can fulfill

their needs and is also a good representative for Kansas. Merryland Amusement Park has been a

good experience for all those who grew up during the 1955’s when Merryland opened its doors

to Kansas residents therefore they have the fond memories of Merryland. These consumers want

the same exciting roller coasters and enjoyment for their children and grandchildren therefore

desiring for fun. Moreover all the other theme parks or amusement parks were quite far away and

locals had to make long drives to enjoy family vacation. As there was no amusement park in

Kansas, the consumers wanted a full-fledged park near their houses and in their town so they

could enjoy easy family time without having to worry about long drives or spending days in

another city.

When focusing on marketing and advertising, the best method would be to use local media as the

park is positioned for the consumers of Merryland. Using local billboards, shops, radios,

newspaper adverts would open up the consumers to the idea of Merryland. Moreover a huge

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advantage of Merryland is that not a lot of advertisement is required considering Merryland was

an operational amusement park and shut down recently therefore consumers know about the park

and its rides therefore the advertisement would just be a reminder and motivation to come to the

amusement park.

It is important for Tony as an entrepreneur to control the operations of Merryland considering he

plans to invest his efforts in it and see it succeed. Tony has always wished for independent

control and Merryland gives him a vision of his dreams therefore it is highly important for him to

maintain control. Also, Tony has always wished to help disabled children and by having

complete control on Merryland he could do this successfully.

For each purchase decision there is control but also risk associated as well which will be defined

later. Tony’s core values are to help disabled children but also assist failing operations, turning

them into successful ventures. As defined, Tony’s good core values are the basic reason for his

success in all the ventures he has chosen through time ranging from camps to Showbizz therefore

assisting him in making the correct decision for Merryland. Tony’s desire to help disabled kids is

not overshadowing his ability to bring corporate life back to Merryland but assisting him in this

venture. His desire to help children as well as recover Merryland and restore it back to its glory

is the basic reason behind his interest in Merryland and this can be amalgamated with strategic

decisions to create a success for Merryland.

To define the correct strategy for Merryland a strategic analysis will be done which will have

three basic stages; input, matching and output stage. Each decision will incorporate serious tools

for strategy analysis leaving behind the most successful venture for Tony to invest it. When

focusing on the strategies they have been ranked according to the level of applicability as shown

below;

4. Take assistance from local consortium of investors

2. Take assistance from Altria

1. Take personal loan to assist Merryland

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INPUT STAGE

External Factor Evaluation Matrix

Key External Factors Weight Rating Weighted

Score

Opportunities

Kansas is experiencing increased household

demographics

Creation of theme parks

Indoor parks for all ages

Diversified games

Family parks

0.10

0.21

0.02

0.04

0.02

1

1

1

3

4

0.1

0.21

0.02

0.12

0.08

Threats

Family vacations dominant to major theme parks;

Disney World, Universal Studios

Shift from basic amusement parks to food and hotel

experience

Full-time employed families; less time for

amusement parks

0.25

0.28

0.08

1

1

1

0.25

0.28

0.08

Total 1.0 13 1.14

Seeing that the score of Merryland is 1.22, which is not very significant as it is lesser than the

midpoint of 2.5 therefore it can be seen that it is not avoiding its threats and neither is it adopting

its opportunities.

Competitive Profile Matrix

Six Flags St. Louis Worlds of Fun Merryland

Critical Success Factors Weight Rating Score Rating Score Rating Score

5

Theme Park

Diversified Games

Food Courts

Water Parks

Advertising

Managerial Effectiveness

Location Nearness

Change in Consumer

Demographics

0.15

0.12

0.08

0.10

0.13

0.20

0.10

0.12

4

4

3

3

3

3

1

4

0.8

0.6

0.6

0.36

0.45

0.54

0.10

0.48

4

2

2

4

2

3

1

4

0.8

0.3

0.4

0.48

0.3

0.54

0.10

0.48

1

2

1

1

1

1

4

1

0.2

0.3

0.2

0.12

0.15

0.18

0.40

0.12

Total 1.0 3.93 3.4 1.67

Looking at the CPM Matrix results it can be seen that both Six Flags and Worlds of Fun are quite

competitive and utilizing their strengths and opportunities whereas Merryland is lagging far

behind.

Internal Factor Evaluation

Key Internal Factors Weight Rating Score

Strengths

No amusement park located near

Good reputation

Famous rides

Personal land; no rents

Vast land for development

0.17

0.04

0.08

0.10

0.08

4

3

3

3

3

0.68

0.12

0.24

0.30

0.24

Weaknesses

Limited rides

Underdeveloped infrastructure

Amusement park areas destroyed by graffiti,

theft

Managerial ineffectiveness

0.15

0.09

0.07

1

1

2

0.15

0.09

0.14

6

Lack of finance 0.10

0.12

1

1

0.10

0.12

Total 1.0 22 2.18

Considering that the IFE is below the average of 2.5 it can be seen that the organization is

currently weak internally and not utilizing its strengths to its fullest.

Financial Analysis

Current Ratio

2004 2005 2006 2007 2008

2.3 2.4 1.9 1.6 1.4

Asset Turnover Ratio

2004 2005 2006 2007 2008

1.5 1.7 1.3 1.1 0.9

Net Profit Margin

2004 2005 2006 2007 2008

0.089 0.071 0.026 0.053 0.052

The ratios have a similar pattern through time and they are all falling gradually and this is

mainly because of managerial ineffectiveness. The liabilities increase through time with

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current borrowings, account payable and other current liabilities increasing very quickly

and in large amounts. Moreover the current assets are falling and by 2009 getting to an

amount zero which is extremely dangerous for the organization. The assets again are

decreasing gradually with lesser buildings and rides but the sales are falling at a higher

rate which then causes a decrease in the ATR. Moreover net profit and sales both fall

increasingly therefore causing the net profit margin to fall as well.

MATCHING STAGE

SWOT Analysis

To identify the most effective strategy for Tony, it is important that a SWOT Analysis be

conducted to provide assistance as to what are the strengths and weaknesses for each strategy.

Strategy 1:

Altria’s Cash Offer to Purchase

Strengths Weaknesses

1. Quick cash for buying Merryland as

proposed by the owners.

2. Giving finance of $25mn for investment as

well as expansion in water-park.

3. Complete control to Tony

4. Green-dome for climate control

5. Easy advertisement done by Altria

1. Giving 10% of profits

2. Changing name from Merryland

to Altria Gardens and Water Park

3. Banning sales of competitor

products

Opportunities Threats

1. Increased households in Kansas.

2. Expansion to more games

3. Expansion to food courts, restaurants

4. Altria’s famous name would bring

consumers from areas other than Kansas

1. Altria holds the identity of Philip

Morris, a tobacco company which

could endanger the image of a family

amusement park.

2. Giving special treatment; discounts,

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to Altria’s consumers would make

other consumers feel left out from the

park’s offerings.

3. Associating with Philip Morris could

also create problems for Tony’s

dream of using park to help disabled

children.

Strategy 2:

Consortium of Local Business Entrepreneurs

Strengths Weaknesses

1. Complete control to Tony

2. Allow Tony to make new renovations

3. Easy and quick investment in the park

4. Good advertisement options by

investors as they own enterprises

5. Preserve Merryland’s name

6. Let Tony help disabled children by

giving autonomy of operations

1. Will require 40% of the profits

2. Will require 20 acres of land for

‘undisclosed reasons’

Opportunities Threats

1. Help disabled children

2. More advertising options

provided

3. Households increasing in

Kansas

1. Less finance to open theme park idea adopted

by other parks

2. All other amusement parks have water parks

which Merryland does not have.

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4. Only amusement park

located in Kansas

5. More options for expansion

and adding new rides and

games

Strategy 3:

Getting a Loan

Strengths Weaknesses

1. Personal control on finances

2. Personal control on operations

3. Have all the land required for

expansion

4. No need to pay profits to anyone

1. Interest payments

2. Not get the required amount to make

renovations to the park

3. No identification by bank on

‘profitable operations’

4. Personally pay for advertising

5. Hire personal management responsible

for operations

Opportunities Threats

1. Keep profits for further

expansion

2. Create special gaming area for

disabled children as land is

ample

1. No water park when Merryland

opens.

2. Increased operating costs; taxes and

interest costs can lead to Merryland

losing valuable profits for retaining

profits for future or even remaining

afloat.

When talking about the matching stage no other options can be used for Merryland because;

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1. Space matrix is applicable to choosing product or service strategies; market penetration,

development, divesting strategies. Considering we are already given three strategies

which are related to financing operations we cannot use SPACE matrix.

2. BCG matrix is applicable to a company with vast products or services divisions and

provides a means to improve multi-division products/services in the firm. Considering we

are talking about an amusement park we cannot apply this matrix strategy.

3. The IE and Grand Matrix are also strategies for products or services and their marketing

operations decisions. As we are focusing on financing opportunities and their strategies

therefore we are unable to apply these strategies as well.

DECISION STAGE

Quantitative Strategy Planning Matrix

Strategic EvaluationsOption 1:

Accept Altria’s

Cash Offer

Option 2:

Work with

Consortium of

Investors

Option 3:

Take Personal

Loan

Key Factors Weight AS TAS AS TAS AS TAS

Opportunities

1.Increased games

2. Good renovation

3. Assistance to disabled children

4. Creation of water parks

Threats

1. Merryland identity

2. Profits

3. Loss of land

0.16

0.14

0.17

0.16

0.15

0.10

0.12

1.0

4

4

1

4

1

3

*

0.64

0.56

0.17

0.64

0.15

0.3

4

4

3

1

4

1

1

0.64

0.56

0.51

0.16

0.6

0.3

0.12

3

2

4

1

4

4

*

0.48

0.28

0.68

0.16

0.6

0.4

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Strengths

1. Complete control

2. Advertising options

3. Quick cash availability

4. Increased revenue

5. Park retains image

6. Good management

Weaknesses

1. Interest payments

2. Profit sharing

3. Image association with other firm

0.18

0.05

0.10

0.12

0.10

0.12

0.08

0.20

0.05

1

4

3

3

1

4

*

1

1

0.18

0.20

0.3

0.36

0.10

0.48

0.20

0.05

4

4

4

2

4

3

*

1

*

0.72

0.2

0.4

0.24

0.4

0.36

0.20

*

4

1

2

2

4

3

1

*

*

0.72

0.05

0.20

0.24

0.40

0.36

0.08

Total 4.33 5.41 4.62

STRATEGY EVALUATION

After assessing the entire situation of the three strategies the QSPM analysis shows that from the

three strategy evaluated the most preferable will be the second one; having a consortium with

local business entrepreneurs. This has a score of 6.07 and is greater than both the given options.

As seen in the SWOT analysis as well, this is the most preferable option considering the

strengths and opportunities outcast the threats and weaknesses. Moreover with this opportunity

Tony will be able to have complete control on the operations. Although a large chunk of the net

profit will go away but profitability is not the reason behind Tony investing his abilities in the

operation but because he has always dreamt of having a successful venture as well as entire

autonomy and helping disabled children. By having complete control of operations he can invest

time in helping the disabled children. The only issue pertains of the water park as the loss of 20

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acres would create problems for building the water park but this might be the objective of the

entrepreneurs as they are using it for ‘undisclosed reason’. Moreover by investing in new games,

roller coasters and even arcades there might not be a need for a water park for Merryland to be

successful.

To use the second option Tony will have to create annual objectives which could be the

following;

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Long Term Objective:Experience an increase in sales of

25% in the first two years.

Marketing Division- Annual Objective

Implement marketing techniques to increase customer vistis in

Merryland by 35% in the first year

R&D-Annual ObjectiveDevelop one roller coaster, and two amusement park rides for

Merryland that customers prefer these days

Finance Division-Annual ObjectiveEffectively cut costs and create budgets after looking at R&D to

propose to Consortium for development of MAP.