KidZania: Spreading Fun around the World Case Solution

Introduction:

In 1997, KidZania was founded in the city of Mexico which has known to show constant development and evolution with leading facilities of 24 hours. The idea of introducing a new concept in the domain of children’s entertainment was by the Vice President of GE Capital Private Equity group – Lopez Ancona and his partner. A project was initiated by them with learning spaces and multiple entertainment through providing children with opportunity to grow their capacity and creative potential for playing and imagination.

The creation of parks tend to be most essential for businesses made with entrance that consisted of KidZania airport. In these parks, children’s were provided with about ninety different professions and trades to perform with respect to their interest in booth sponsored by some of the leading brands and corporations in that particular sector.This was the place with their own economy where children after performing their respective activity were provided with the rewards as the park’s currency.

The concept of building KidZania’s park city was quite a hit concept which gained mammoth success. Since its establishment, all the estimated figures had exceeded with the increase by approximate of 50 percent.

Problem Statement:

The concept of education entertainment had gained wide acceptance throughout the world and known as edu-entertainment with emergence of new competitors in the market. The concern initiated with change in the pace of indirect competition and its growth mainly LEGOLAND and Disney. Therefore, the key issue was the need to keep their concept fresh as a long-term strategy and be known as the global brand.

 Situational Analysis:

SWOT Analysis:

Strength:

  • KidZania holds a reputed position which is primarily supported by various brand such as Coca-Cola, Unilever, Honda and many more that strengthen the position and image of the organization as a strong firm.
  • The creation of educational theme parks for children was the main concept branding and authorization of stakeholders through an effective association.
  • The concept of fun learning seems tempting to the adult individuals.
  • Variation in the number of activities for participation in grown-up or adult themed activities offers about 90 professions meeting advance standards.

Weakness:

  • KidZania has no services for children with special needs.
  • Persistence of migration of mass media to my media through generation of a highly-fragmented public and a great challenge for advertisers.
  • Devaluation of currency tend to be a barrier in increased growth of the revenues.

Opportunities:

  • In forthcoming period, the venture of KidZania in new mediums like mobile phones and foothold in the market of social media.
  • Increase in the reach and frequency of using brand name assists the corporation and favour of audience.
  • Providing stakeholders with reasons to stay with KidZania for continuous and long-term investment.
  • Integration of new approaches for marketing provides KidZania with opportunity to create lasting statements of the brands in order to gain increased favour of public.

Threats:

  • However, target public tend to be captivated through the unique concept of KidZania, loyalty is required to be created for sustaining repetition or frequency of patronage.
  • There is a possibility of incidents at the time of handling kids.
  • Rejection of audience by bringing change in the concept of providing its consumers with entertainment services.

VRIO Analysis:

It is primarily considered important to conduct a VRIO analysis of KidZania to deeply understand the competitive advantage to take into account the basic capabilities and resources. Therefore, the brief analysis concluded that the corporation hold significant internal analysis due to the availability of competitive advantages such as international experience, non-specific target market, creativity and innovation and services differentiation.Innovation in the concept of play-roles is difficult for imitation as it requires experience. Similarly, the activities providing joy and pleasure can be performed not only by kids but also adults. The other advantage is its ability to engage with sponsors serving as the organization’s main factor in its success.

Porter’s Five Forces Analysis:

Bargaining Power of Supplier:

The bargaining power of supplier is relatively high due to the reason that in construction of theme parks, material required is of high cost. This also involves sponsor which are great source for the organizational success. Whereas, due to the high product cost, the organization experience decrease in the rate of profit.

Bargaining Power of Buyer:

As the consumers of KidZania are not sensitive to the price indicating the bargaining power to medium. KidZania is the only corporation in Mexico providing these types of services. There are substitutes available with still opportunity to increase profits at a significant rate.

Threat of New Entrant:

The entrance threat of new entrants is low as the market requires high production and manufacturing investment to enter.To understand the needs and meet the standards of the consumers, experience is mandatory factor to consider.

Rivalry:

Although, KidZania uses an entirely different and unique concept rather it has been experiencing emergence of some indirect competitors in the international market. Due to the indirect competitors, the rivalry for KidZania is considered medium with significant growth in profit.

Threat of New Substitute:

Due to the availability of various substitutes for children and adults such as cinema, amusement parks, concerts, malls, zoos and other place, the probability of substitute threat is high. Variation in the activities and services are great source of attraction for consumers affecting the profit of KidZania.

Quantitative Analysis

A quantitative analysis in form of DCF valuation by calculating the projected cash flows for all of the 4 strategic alternatives could be conducted to analyse that which alternative have the highest value for the firm. On the basis of the given information in the case with certain assumptions, projected cash flows for a period of 5 years for each alternative are calculated and are provided in the Exhibit 1. A summary of the valuation of the alternatives is given in the table 1 below.

Table-1

Quantitative Analysis
  Alt. 1 Alt. 2 Alt. 3 Alt. 4
Investment 210 53 45 35
PV of Cash Flows 715 175 607 371
NPV 505 123 562 336
IRR 93% 92% 325% 275%

From the above Table 1, it could be seen that all of the four strategic alternatives have a positive NPV and a greater IRR with alternative 3 having the highest NPV and IRR. It implies that all of the strategic alternatives could lead to a high revenue growth with increase in the profit margins and the value of the company………….

 

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