Case Study Disney 1. EXECUTIVE SUMMARY Disney Company – one of the world leaders in media entertainment, company branded consumer goods, and theme parks and resorts – signed the agreement with Hong Kong concerning the opening of a Disneyland amusement park in Hong Kong in the year 2005. This case study only concentrates one of the business fields explored by the Disney Company – theme parks and resorts. The Disney Company occupies a strong position developed in the international business world over the years. Their outstanding success is based on several internal principles.
One of them is Disney culture, whereby the company relies heavily on its heritage and traditions, ensures the company’s quality standards, demonstrates the former two in their behavior. Another one of the principles is the so-called performance excellence as regards the company’s responsibilities towards its clients, its employees, and its shareholders and other businesses. Yet another important factor contributing to the company’s success is their marketing policy. The Disney company has a wide range of products and services of an exceptionally high quality, which allows them to employ premium pricing and promotion strategies. These factors, as well as the fact of having had several experiences on the international market, allows the Disney company to be confident of their intention to go abroad again.
Hong Kong, which has become a part of China after 150 years of British ruling, is monitored to be one of the largest and most active economies in Asia and in the world. The analysis on Hong Kong’s economy show convincing figures of stable growth and development. These facts make Hong Kong a highly attractive market for Disney’s expansion with the aim of bringing the vision of happiness to the whole world. Furthermore, Hong Kong is considered to be a major international trading, financial center in the world, and the most famous tourist destination in Asia. A highly favorable taxation system that exists in the country, and the absence of direct competitors for a theme park like Disney’s, add to the factors that are important for the Disney company in order to achieve their objectives. The set-backs of the Hong Kong market exploration are mainly of political nature and are concerned with the relationship between China and the USA.
However, the people’s perception of western ideology is said to be strongly positive. This is advised to be used as a theme for the promotion campaign conducted by Disney on the Hong Kong target market. The latter is to be the people who are young or young in heart, where the western tendencies are in particularly affective. Thus, the company is advised to adopt its promotion policy to suit the new market better in order to achieve better results and avoid confusions. The media to be used in the promotion activities are recommended to act in consensus with the company’s overall image, thus being highly perceived TV channels, local and international magazines and newspapers. The marketing costs are therefore budgeted to be quite high and are expected to be covered while employing the objective-and-task promotion budgeting method, which is viewed to be affordable for the Disney company.
Other aspects of the marketing strategy do not need to be changed/adopted, since considered to be internationally successful, as well as control systems, which include certain standard procedures that the company employs all over the world. 2. INTRODUCTION I1. INTRODUCTION In 1928, Walt Disney started as an animator drawing short black-and-white cartoons. Today, Disney’s main businesses are television, cinema entertainment, and theme parks. Disney owns national TV channels and radio stations that broadcast all around the USA.
Since 1991 Disney cooperates with Pixar, a company specialized in computer animation, and together they produce and publish exclusively animated movies (e.g. Toy Story). In 1945 its first theme park Disneyland was opened in Anaheim, California, USA, followed by Walt Disney World in Orlando, Florida, USA, in 1971. In 1983, the first international Disneyland opened to the public in Tokyo, Japan, and in 1992, the corporation expanded its business to Paris, Europe. Furthermore, Disney operates a theme Cruise Ship since 1998. The company has been very successful with its theme park business.
However, Disney was confronted with a major crisis in its past when first operating its EuroDisney park near Paris. Insufficient knowledge of the European culture and the buying behavior of potential visitors of the theme park led to an overestimation of the number of visitors and their spending in the park. In addition, operating costs turned out to be higher than expected. The company was able to overcome this crisis. The park now operates under the name Disneyland Paris and its operating income contributes to the high success of the theme park business. In November 1999 the Walt Disney Corporation and Hong Kong signed the first agreements concerning the opening of a Disneyland amusement park in Hong Kong in the year 2005.
The undertaking will be a joint venture between the Walt Disney Company and the Hong Kong Special Administrative Region Government. Disney will own 43% of the shares and Hong Kong 57%. Both parties are optimistic that this co-operation will result in a win-win situation. Hong Kong is going to invest a high amount of money in the venture both directly and indirectly. Directly by investing in the construction of the park itself, and indirectly by renewing the infrastructure of the city to the park and investing in a new tourism strategy, that enhances the city’s attractiveness as an international tourist destination.
In return, Disney will market the new effectively. Hong Kong expects this East-meets-West attraction to bring the tourism to a new boom. Especially visitors from the mainland of China are predicted to visit Hong Kong and the park. Disney claims to have enough experience to open another theme park outside the United States. Failures and successes while expanding their amusement park business to Tokyo and Paris helped them to make more accurate predictions on the new project. This win-win situation has led to an agreement about Disneyland Phase I (which will include a Disney theme park, a Disney theme resort hotel complex, and a retail, dining and entertainment centre).
3. INTERNAL ANALYSIS 3.1. MISSION STATEMENT We will deliver magical and memorable entertainment experiences which create a sense of joy and wonderment for our Guests and consistently exceed their expectations. We will continue to be recognized globally as the premier entertainment and hospitality organization by mobilizing our team spirit to perfect our talents and abilities, and to perpetuate our rich Disney legacy. This will be evident to our Guests, fellow Employees, shareholders, and community and business partners through our words and deeds. It is the company’s mission to provide a reasonable return to their shareholders, and to increase the value of their investment.
At the same time, Disney must be sure to protect the business and reputation of the company, so that it can meet the expectations of the shareholders, guests, customers, employees and employees. 3.2. OBJECTIVES Disney’s idea is to attract more than five million tourists to the park within the first year of business, which is expected to rise to 10 million per year after 15 years. The company intends to provide Hong Kong with a net economic benefit of up to $148 billion over 40 years. Additionally, the park will create thousands of jobs, enrich the quality of life, and enhance Hong Kong’s international image. 3.3. INTERNAL ORGANIZATION 3.3.1.
The Disney Culture The company has its own Disney Culture consisting of a rich heritage, traditions, quality standards, and values that create a unique environment. This specific culture is an important factor to its success. A Disney employee needs to commit himself to these characteristics when going to work every day, in order to make the experience of a magical vacation possible for the visitors. The company believes that the success in the family entertainment business is directly attributed to the individual contributions of the entire team of employees. Performance in this context stresses the entertainment, and Excellence the company wants to be synonymous for Disney.
3.3.2. Implementation of Disney’s mission & culture In order to provide a perfect show every day the employees have to realize that they are part of the entertainment. Disney places great emphasis on the personal commitment of each and every employee to the company’s mission. A person employed by Disney is not only supposed to identify himself with the company, he is also supposed to feel welcome and comfortable at his working area and important for the organization. Another significant aspect is the Disney look, which is a very strict guideline that the cast has to follow. In order to make a professional impression there are rules about the personal appearance when going on-stage. The policy include the prohibition of tattoos, certain hairstyles, and conspicuous jewelry, regulations about make up, deodorant, and the length of fingernails and skirts, and it is even mentioned that Employees are required to wear appropriate undergarments at all times.
Employees always wear name tags in order to personalize a conversation. Disney is well aware of the fact that a great success in the past does not guarantee a great success in the future, especially if a company is not open to changes. Therefore the company measures their guests’ satisfaction on a regular basis, and asks employees to come up with suggestions on how to make the business more efficient. Disney puts great emphasis on recognition for suggestions and high effort on the job. To facilitate the upward communication, every member within the organization may be addresses by his/her first name. Additionally, the company hands out evaluation forms regarding work, management and suggestions.
Furthermore, the Disney corporation is very open towards diversity and to show respect for the individual. In practice this means that Disney employs people freely not considering race, age, religion, sexual orientation or any other job-unrelated reason. Business partners are considered to be an essential part of the company’s team. Disney expects its employees to compete aggressively, but fairly, in each of the markets in which they operate. Very important for the company is to be active in the communities in which it operates.
It works with community leaders and members to improve the surrounding. It encourages its employees to participate in local activities that address the needs of the communities in which they reside and work. So does Disney for instance sponsor the Give Kids the World program, where wishes are fulfilled for terminally ill children, such as spending a week in Orlando with the entire family and to get free admission into all the parks. Part of Disney’s mission is to expand its market. When going abroad the Disney corporation promises to keep following in mind: As we expand our operations abroad, we encounter new challenges as a result of cultural differences and unfamiliar practices.
While we are bound by U.S. laws and regulations as well as Company policy, we must recognize that in many cases we are introducing our culture and methods of conducting business into different environments. When conducting business in other countries, it is imperative to be especially sensitive to foreign legal requirements and cultural differences, and make every effort to integrate Disney culture as smoothly as possible. 3.4. CURRENT MARKET POLICY The theme park business consists of both providing services and selling consumer goods, including food and beverages, and merchandise. In general, Disney uses the same marketing mix and strategy for both physical goods and services.
Marketing Mix: 1) Product Core Product: amusement, joy, fun, pleasure, prestige Basic product: roller coasters, attractions, shows, Disney characters, food, drinks, toys, clothes Expected product: safety, excellent service, very high quality Augmented product: exceeding guests expectations, e.g. by having the sections of the parks be consistent with certain themes (e.g. the Space Mountain-roller coaster- ride is in the Future Land), by providing immediate guest service recovery (if a customer receives a product that does not meet his expectations, he can exchange it without problems) or by promising a magical experience that the guest will never forget. This experience is supposed to last during the whole voyage to the park. For instance in Orlando Disney spends a lot of money on maintenance of the airport of Orlando and of the streets leading to the parks and resorts.
2) Price Premium pricing: Disney would like to stay being the quality leader in the amusement park business world-wide and therefore chooses for a high price that is perceived to go along with premium quality. In addition Disney’s general policy is not to cut prices. This means that the parks are not offering low-season discounts on the entrance tickets or offer merchandise on sale inside the park. However, Disney decided to make an exception with the park in Paris. Due to a lower-than-expected number of visitors during winter months, the company offers low-season prices and all-inclusive-packages for a less expensive entrance fee.
3) Promotion The company has a high budget to spend on advertisement, therefore Disney can use efficient media tools, such as television, high quality magazines, newspapers, adds and posters at popular locations (like buses, advertising columns and travel agencies) and they put a lot of emphasis on the quality of their advertising material. Furthermore the company wants to stay in touch with the communities that it operates in (by e.g. sponsoring competitions). 4) Place The Disney theme parks are located in Anaheim (California, USA), Orlando (Florida, USA), Tokyo (Japan) and Paris (France). Disney puts a lot of emphasis on easy accessibility to the theme parks. All theme parks can be reached by public transportation, private shuttles or taxis. The Disney parks have their own highway exits that lead the guest coming by car straight to the Disney owned parking area. On the Disney property there is a company-owned transportation system, which is free of charge, that brings hotel and resort guests to any location within the Disney property.
3.5. FINANCIAL POSITION AND DEVELOPMENT As can be concluded from the financial statements of Disney (see Appendix), the theme park and resort business counted …