In 2005 the many operating the Tokyo Disneyland Park and the Tokyo Dispensed Park “Oriental Land” Ltd. (LO) has changed its top management because of the decrease in the number of guests, compared to the previous year. Oil’s top management asked the planning department to study the following -? rise prices by 5% in 2006, the number of visitors will scenarios: Case 1 decrease by 1% a year for five years; Case 2 – lower prices by 5% in 2006, the number of visitors would increase by 1% a year for five years.
After presenting the calculations for NP for such scenarios, the planning apartment received the next task from the top management – to conduct a sensitivity analysis for the following: Case 3 -? if rise prices by 5% in 2006 and additionally by 2% a year for 2007-2010, the number of visitors will increase by 1% a year for five years; Case 4 -? if lower the prices by 5% in 2006 and by 1% a year for five years. The results from the NP analysis were: So the findings by the planning department had key points for consideration: 1 .
The target of at least 1 % increase in the number of visitors per year needs o be maintained in the future. 2. The reason for the decline in visitors were: a. Decline because of new competitors of such services; b. Prolonged recession and growing inflation. 3. The total number of visitors could decline if no action was taken. 4. Risky to raise prices in bad macroeconomic conditions. 5. Reducing prices is difficult because of the high initial and maintenance investments. The final decision of the board of LO was to undertake case 1.
They raised prices by about 5% on average in September 2006. According to the case the Oil’s decision to increase prices by 5% in 2006 was a great SUCCeSS. The number of visitors did not decrease by 1% as the analysis assumed. Rather, the number increased 0. 72% on average for five years from 2006 to 2010, although it decreased by 1. 6% in 2006, by 1. 5% in 2008 and by 5. 2% in 2010. With the 5% price increase in 2006, sales increased 2. 62% on average for five years 2006-2010, although it decreased by 0. 3% in 2008 and by 4. 1% in 2010.
For the present perspective it makes much more sense to relate the demand tit the new attractions and intensive marketing activities and that the elasticity is not price sensitive. According to the data from the annual report of the company for 2013 – the highest numbers of visitors have been achieved in years, when there have been special openings, anniversaries and related marketing activities and promotions. As shown in the graph, the 2013 number of audience is not much higher than the one 4 years earlier – in 2009. Nevertheless, the sales, profit and free cash are drastically increasing.