Sydney Opera House: Case Study

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The recent decades have been characterized by an industrial increment in the experience economy sector. The Opera concert theatre in Sydney is the third largest entertainment center in the world, but it has an expressionist architecture. Demand has been high throughout the operation of the theatre as well as supply, despite it having been operating in a highly competitive environment. Supply side of experience at Sydney Opera Theatre (SOH) greatly depends on the professionals, artists and four organizations which run all operations of SOH. Demand and supply both found out to be highly price and income elastic due to the nature of experience as luxury and entertaining. Major drivers of demand are identified as price, income, personal interest, and economic conditions of the country.

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Pine and Gilmore (1999) argue that the experience economy sector operators must enhance theatre performances since they become their products for sale to their customers. The experience framework has been analyzed for SOH with the considerations of education, entertainment, and aesthetics, suitable for the nature of consumers’ experience at SOH. Nevertheless, future success will be facilitated by implementation of new strategies that are aimed at enhancing sustainability, productivity, as well as performance in the economic experiences sector.

The main challenge faced by SOH is the close control exercised by the government on the economic experiences sector; however, although government intervention and control may be beneficial in the long run especially when it facilitates fare competition, it may erode the powers from the players, thus leading to problems of strategy implementation.

Introduction

Twenty first century is characterized by an industrial increment in the experience economy sector. This sector comprises of organizations/ institutions in the fields of art, sports, or tourism, mainly meant to suffice human entertainment, refreshment and adventurous endowments. The beginning of new economic era is ‘Experience Economy’ which deals with businesses that design and present memorable experiences for their customers along with offered products and/or services in a customized manner (Bruyn et. al., 1999). Firms that operate in the experience economy sector often generate high profits, owing to the high demand that increases as technological advancements are more frequently witnessed. In addition, the dotcom era is more interested in entertainment, as well as fun places (Cooper 1987). Number of firms operating in this sector worldwide, some of which have become famous due to the services they provide to customers. A perfect example that is chosen for study is Sydney Opera House in Australia, the third largest entertainment center of the world. Opera, Symphony, Drama, cultural shows, and other performances in this theater are directly related to the experience economy. On the other hand, demand conditions in the experience economy are highly dependent on the types of services or products that are offered.

Moreover, today’s business environment is characterized by a state of fatal competition; every organization has to develop unique strategies to survive in this environment (Keleman 1974). It is also evident that many firms offering experience economy by providing a complete experience of products or service. Most of the time, experience economy of organizations is regulated by the government, regardless of their ownership and management. Such control and regulation with other factors pose a major challenge to these organizations. However, overcoming challenges has been a goal for all institutions that operate in the experience economy (Prahalad and Ramaswamy 2004).

Company Profile

Sydney Opera House is considered as amongst top iconic architectural marvels of Australia and gain huge recognition globally since its inception. New South Wales government is the major stake holder of this organization which started this project with an international building design competition. Jorn Utzon, famous Danish architect has achieved the pride of designing this versatile project. The building construction started in 1959 and ended up after 14 fourteen years after spending of 102 million Australian dollars (Murray 2004).

Opera house is comprised of approximately 1000 rooms inclusive of five major auditoria. The length of the building is about 185m with its breadth 120m. Building top most point is about 67m from sea surface (Jahn 1997). Though, the building designed and constructed nearly half century back still designs and construction methods are revolutionary (Murray 2004). The building gives the viewer an experience of pleasure, amazement, and marvel when seen first time. Sydney Opera House (SOH), listed as a World Heritage in 2006, is amongst most famous art theatre which showcases performances of more than 1600 artists from all areas of performing arts (UNESCO). Around seven million people estimated to visit annually to experience artistic performances at SOH.

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Management Structure

The definitive stake holder of Sydney Opera house is government of New South Wales (NSW), contains both normative and utilitarian power of the organization. Other stake holders include management, employees, SOH executive committee, and common public. According to Australian law, NSW has legitimate powers to run the operations of this opera house. Nowadays, CEO of SOH is running the opera house and works under the supervision of Communities Director General and Board of Trustees (SOHT).

Since 1994, four companies have been running the SOH in partnership after the establishment of Opera Conference (Jahn 1997: 123). These companies are State Opera of South Australia (SOSA), West Australian Opera (WAO), Opera Queensland (OQ), and Opera Australia (OA). All new productions are commissioned jointly by these companies with the assistance of cultural troupes and outsourced foreign artists. The value of productions and caliber of artists in these companies are recognized internationally.

NSW government and the above four partner companies are working jointly in running the operations of SOH. Economically, it is very crucial for government to exercise control of Opera concert hall. Generally, maintenance of the structure and business sustainability is enhanced because of government control; this is despite the various arguments that are against the intervention of government in the world of business. Moreover, competitive advantage can easily be promoted because of government involvement in funding the entity, especially considering that the business conducted by the entity is likely to serve the interests of the whole economy.

Pine and Gilmore Experiences Framework Analysis

The visit to SOH provides the audiences with all four realms of Pine and Gilmore (1999) experience economy framework. This realm extends from passive to active on horizontal grid and immersion and absorption on the two extremes of vertical grid. The combination of these four makes experiences of education, entertainment, escape, and aestheticism (Boswijk et. al., 2007).

Firstly, entertainment is the main type of audience experiences at SOH when they act as passive actors who completely absorb in artists performances on the stage. The audiences see drama performances, enjoy symphony, and absorb opera. The complete experience of theatre makes audience laugh, cry, amuse, and smile at various occasions during the performances on stage. The first class artists and orchestra of production companies are regularly present quality performances in realms of drama, symphony, cultural shows, and other performing arts. SOH has great fun for audiences of all ages and interest groups.

Secondly, the education experience is the combination of active participants with the stage of absorption in activities. The experience of theatre, beauty of images, and charisma of words and glory of actions can change the life of a close spectator. At SOH, Sydney Theatre Company provides the opportunities to young audiences of schools through workshops, outreach programs, and resources. Another program is STC Ed Schools Day, which invites students to attend productions and meet with program teams. Also, at SOH, mentor programs for the kids at risk have also been designed and implemented (SOH website). Latest addition is online education programs for art lovers and students. These activities have created a complete absorption experience for active audiences.

Thirdly, the experience of escapism involves active audience immerse in the situations presented at the theatre. The audience with escapist experience participates more intensely as compared to the education and entertainment. The real life examples of an escapist experience are of video games, chat rooms, car racing, casino activities, and many others. In SOH, a charismatic opera performance of a classical artist can give this experience to the audiences. Also, the variety of topics and ingenuity of productions in drama, exclusive musical combination of symphony can create this experience. The indulged audience escape from their life realities and completely immersed in the performances. The dance and musical competitions arranged online and onsite by the SOH management also generate this experience in participants.

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Finally, in aesthetic experience, the audience in SOH immerse themselves in amazing performances of drama and opera artists. In this experience viewers see everything and enjoy every performance intensely but do not participate in any activity. The consumers visit theatre s of SOH to satisfy their aesthetic sense from the beautiful and elegant exterior and interior of this global heritage and iconic structure of Australia.

Detailed Analysis of conditions of Demand

The experiences of arts on individual levels are directly linked with demand of performing and classical arts in the public (Laing 2007). The organizations or individuals who constituted the demand side of arts experiences are students of arts, teachers and mentors of arts, critics and writers of arts and related fields. The main actors of demands side of economic experience of SOH are K-12 students, school teachers and private art instructors, critics and journalists, friends and families of artists, and professional mentors, artist’s agents, and NSW government policy makers.

The Pine and Gilmore (1999) framework suggested that the demand side of experience economy depends on the consumers’ perceptions, market conditions, and the particular factors of demand. The more the opportunities and resources available to customers, they are more inclined to satisfy their aesthetic needs included arts. The positive and enduring affects of arts experiences also playing a vital part in increasing demand of performing and visual arts (Dewey 1938). Therefore, it is needed to cultivate the ability of audiences to gain more experiences in visual arts.

Key Drivers of Demand

Price

SOH is a not-for-profit organization which is basically run by individual donations and corporate partnerships (SOH website); therefore ticket prices are not the only revenue generator of the theatre. Ticket price are kept low by huge subsidization from donations and heavy discounts are offered to schools and youth. However, a common person is still cannot afford the regular visits due to recent recession. Ticket price is one of the main factors in declining demand of classical art.

Income

Due to the recent economic crisis, high levels of unemployment generated and income of customers goes down due to lack of opportunities in job and business sector. As majority travelers come from Europe and USA which were badly affected from economic crisis, therefore, travelers’ frequency also decreases to Australia in recent years.

Level of Disposable Income

The high inflation rates and decreased income of households created decrease in disposable income of a family. As normally people use disposable income in buying luxuries and on entertainment, thus, demand of arts experience decline due to decrease in savings of households.

Length of Stay

Length of stay at the theatre and number of visits per year are dependent on type of customer, social class, disposable income, and persona l interests. The more the personal interest in opera and other classical arts increases effect other factors subsided for a visitor.

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Opportunity Cost

Opportunity cost is the cost of that item which is not selected in buying process. Opera and Theatre experience is part of entertainment and quite expensive therefore its opportunity cost is also very high.

Key Factors affecting the change of Demand

Over the period of half century, the demand of SOH has been increased considerably due to the tourism development in Australia and iconic importance of this venue. Development of a strong tourism market, change in life style of native population, addition of new attractions in drama and opera, participation of foreign legendary artists, and shows of cultural troupes from all over the world are some important factors which have been changed the demand of SOH over time.

The other factors affecting the demand of SOH include the popularity of online organizations like face book, and gadgets like IPod and I pad and home theaters which have enhanced the visual entertainment experiences of the youth especially. 3D movie theatres have also started gaining more attention of the youth audiences due to technological advancements in movie technology

Elasticity of Demand

Elasticity of demand in terms of price, income as well as cross elasticity determines the success of the Opera house concert theatre. The price that is charged to the organizations clientele determines the level of demand for the experiences. The challenges in demand are also influenced by the incomes of the expected clients within business organizations. An increment in the customer income influences demand positively while the vice-versa is true. In addition, changes in cross elasticity affect demand as well as organizational productivity. There is also a tendency for demand to increase during the holidays and vacations due to an increased resting populations. Therefore, it would be professional if the management, the government, as well as the management organization were able to identify their peak periods. Furthermore, the demand for Opera concert theatre performances never goes below the minimum, owing to the beautiful scenery that is able to attract thousands of people worldwide. Tourism has become the order of the day to the Australian Opera concert theatre in an urge to be acquainted with the beautiful sceneries at the site by tourists. Thus, as tourism demand increases, Opera experiences get to feel the same move. It is true that demand has always been high most of the times in the year (Ramroth and William 2006: 204).

Price Elasticity

The experience at the concert theatre is highly yielding only when the demand factors are put into consideration in terms of prices as well as quality of services provided. Nevertheless, rampant reductions in demand have sometimes been experienced in the institution when the clients realize of cut-off entrance to the concert hall prices as well as when incomes are available to the working class. Therefore the demand of SOH is highly price elastic as increase in ticket prices will decrease the attendance drastically.

Income Elasticity

Income elasticity of demand is also very high for native visitors and tourists at SOH as more the income increase the rapid is the rise in demand of arts experience observed in audience of SOH.

Significant Trends

In spite of hard work and passion of high quality productions in classical and performing arts at Opera house, audiences’ demand is not keeping the pace with supply. The viewers of classical opera, musical theatre, and other visual arts are declined in recent decades after the rapid development of media industry and telecommunication technology (Csikszentmihalyi 1990). TV channels and internet attachments have drastically affected the ratio of audiences in opera houses. The attraction of classical opera and drama is largely affected in youth population of Australia.

These trends are encouraging the need of new public policy to cultivate the demand of arts. Special campaigns to attract and educate youth are required to regularly run by big theatres like SOH, more promotion of Opera concerts on television and the broadcast of major classical arts events will certainly increase the public interest.

Detailed Analysis of conditions of Supply

Supply in terms of the economic experiences has been vastly influenced by demand. The theatres have become multinational entities that attract even foreign clientele due to the supply design (Boswijk et al., 2005). First, the expressionist design has really acted as a good supply to market itself as a result of its autonomy among all other entertainment centers in Australia and in the world. The SOH is the third largest in the world, thus supplying the whole world with entertainment experiences (Snel 2005). Secondly, the concert hall is the largest with approximately 2700 seats that can accommodate a huge population, a factor that increases client anticipation. Thus, despite the competitive scope of operation as well as expensive prices, the Opera have good and efficient suppliers for economic experience services (Rifkin 2000).

Supply side of experiences at SOH consists of the huge infrastructure of four production companies discussed above. Artists, trainers, mentors, producers, and presenters are the main contributors of productions and arts performances in the theatre. Foreign cultural troupes, outsourced artists, and trained expertise of arts also assist the supply framework during high seasons of vacations and festivals in Australia (Thijssen, et. al 2006).

Key Drivers of Supply

The supply side of SOH experience economy is basically dependant on the services of people and organizations in the areas of creations, performances, display, recording and broadcast, and other functional suppliers of classic arts.

Price

The annual report (2009) of SOH shows that irrespective of economic recession in most part of the world, income of SOH increases by two percent and number of performances also increased. Also, the salaries and rates of professionals and artists involved in delivering performance also increased.

Market Structure

The entertainment market structure of Sydney is highly competitive as world renowned theaters and entertainment centres are operating here. Customer expectations are very high and they want exotic experiences during their stay in entertainment centres. The players of the market are theatres, movie complexes, casinos, Natural conservation sites and other venues. High quality performances at reasonable prices are the basic demand of the market. NSW government has a significant role in control and regulation of this market.

Competition

Sydney Opera House has maintained its versatility and image of complete aesthetic experiences for past five decades. In Sydney, there is also a direct competition for the organization though it contains and showcases all varieties of opera, symphony, drama, and cultural shows.

The other venues in Sydney which offer entertainment experiences in theatre, dance, drama, and Ballet experiences are Sydney Entertainment Centre, Capitol Theatre, and Sydney Theatre. These places attract tourists, youth, and native population of Sydney in sharing same experiences as Sydney Opera House offers, therefore, more competitive and proactive strategies are required by SPH to attract more audience.

The indirect competition of SOH is with other tourists’ venues like Sydney Aquarium, Ocean world, Star City Casino, Sydney Harbor Bridge and other entertainment and tourist’s sites which gain attractions of travelers and native population.

Objectives of the Organization

Vision

The vision of SOH encompasses the heritage, values, and services of the organization. The commitment is made to create most acclaimed pieces of performing art in most imaginative manner which should be memorable for generations. The main goal of SOH is to inspire the audiences from all around the world with compelling art experiences. The transformation of experiences is committed from ordinary to extraordinary.

Corporate Goals

The three main goals of SOH are ‘artistic excellence, community engagement, and a vibrant and sustainable site’, to attract and maintain the art lovers from all around the world and to earn their own way in clutter of traditional experience organizations.

Impacts of Government Intervention

Organizational success is determined by a number of factors that are deemed crucial in every aspect. Among the most crucial is the governments control over firms as well as its influence on the management. The construction of the concert theatre was as a result of a proposal by the Director NSW at Wales in 1940. This automatically declares the entity as a government liability. Government control is often expressed in a variety of ways, including funding the entity, taxing as well as ensuring appropriate management within the organizational scope. In addition, being an international organ, a lot of influence must be felt to an extent of causing poor relationships between the management and the government, because of over-control (Rawlings-Way, 2010).

On the other hand, the government requires returns from the Opera international to ensure its economic continuity. Policy-implementation by the managing trust has as well been overseen by the state-authority, in an urge to ensure customer satisfaction as well as to prevent exploitation. The standards of the organization must also be regulated to ensure conformity with the country’s policies (Alexander 1979). Checking in and out of the visitors and tourists has been a routine by the government officers to enhance security and safety of both the visitors as well as the local people. Contract performances, in the case of those clients that are in need calls for maximum government involvement for conformity with contract laws and principles (Ruwanpura and Mohamed, 2010).

Given the nature of International markets, outsourcing strategies implementation requires government involvement, especially when involving outside countries (Davis, and Meyer 1998). The government is also the main player in enhancing organizational resource-based view, as well as corporate social responsibility; this is usually done through formulation of policies and facilitating logistical support. Funds collected by the government are crucial in the promotion of Sydney and the entire Australian economy. However, excessive government control is fatal to an organization since it may tend to shift the supply curve negatively, greatly affecting the demand curve in the same direction.

Key economic challenges to SOH

The firm has long survived in a challenging environment, owing to the rampant competition in the business environment. However, a number of challenges are anticipated to target the firm in the coming five years. First, competition seems to be an everlasting trouble to all organizations in the business environment. The fact that other organizations are upcoming daily in the economic experience sector will be major threat to the company, calling for extra-ordinary competition overwhelming strategies implementation. Secondly, with the recent technological advancements, the Opera concert theatre need be on the forefront to update their systems to enhance sustainability. Failure to accomplish such goals is a main threat to the company. Furthermore, the government of Sydney tends to over-control the economic experiences sector, a factor that may discourage the management in terms of new strategies implementation (Hobbs and Bjørn 2001).

As far as competition is concerned, SOH has to be proactive in the market and to prepare for the upcoming changes in demand. Training and development of youth and staff, new arrivals in drama and opera, incorporation of latest acoustics as sound is a serious problem in some auditorium due to design incompatibilities, involvement of community as the project was basically constructed by community along with NSW government, and above all enrichment of artistic abilities of performers by providing them above average remunerations and facilities. By adopting suggested measure, firm will become more competitive with rich experiences of entertainment, education, aesthetics, and escapism.

Also, the collaboration and cooptation with other companies in the same business like Sydney Theater and Sydney Entertainment centre will increase the market size of entertainment in Sydney. More joint ventures and mega events in vacations and on special events like Valentine day and Christmas will increase the total audiences. Also, the conflicts with SOH and other venues will make customers and artists more powerful and their bargaining powers will increase. Therefore, a collaborative strategy will be successful in this highly competitive market.

References

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