[ANALYSIS OF CASE: WALT DINEY ] 2004 INTRODUCTION: I am appointed by Walt Disney Company as their marketing consultant to solve the case studygiven and make the case study analysis. In order to do so, I have conducted research and ind e p t h i n t e r v i e w s o f W a l t D i s n e y p r o f e s s i o n a l s . W h i l e c o n d u c t i n g t h e r e s e a r c h a n d g o i n g through the case I came up with some important findings and recommendations which have been discussed in the pages to come.W a l t D i s n e y i s a $ 2 7 b i l l i o n d o l l a r e n t e r t a i n m e n t g i a n t . I t w a s started by a person namedWalter Disney in collaboration with his brother c a l l e d R o y O D i s n e y i n 1 9 2 3 . S i n c e t h e n Disney has come a long way. Disney has been a leader in 4 consumer markets which are WaltDisney studios and motion pictures, Disney Theme parks and resorts, Disney T.V channelsand media networks and Disney consumer (merchandising) products. Likewise all companies,D i s n e y t o o h a s s o m e Strength and weaknesses and being a giant has some threats a n d opportunities as well which are also discussed in the following pages. I was asked to make theSWOT analysis and also discuss Disney’s strategic marketing Goals. I have made Disney’sc o n s u m e r b e h a v i o r s t r a t e g y r e l a t e d t o i t s f a m o u s c h a r a c t e r K i m p o s s i b l e . I h a v e m a d e i t s targeting strategy, positioning strategy, product strategy, pricing strategy, channel strategy and promotional strategy. I have also made some findings related to new consumer markets andsegmentation. In the end I have made some important recommendations so that Walt Disneyimproves on its weaknesses and also prepares for the threats to be faced in years to come.
HISTORY OF THE CASE: Walt Disney Company i s a $ 2 7 b i l l i o n a y e a r G l o b a l E n t e r t a i n m e n t g i a n t w h i c h i s a n Amer ican based company was started by Walter Disney in venture with his brother namedRoy O Disney in 1923. In 1928, Walt Disney created Mickey Mouse for which Walt wantedto call his character “Mortimer” but his wife convinced him to be called as “Mickey Mouse”and since then Mickey has been a classical hit for Walt Disney.
In 1937 Disney presented their first feature full length Musical animated movie called “Snow white and the seven dwarfs”which is still a huge hit and remained in the hearts of its consumers forever.Walt Disney recognizes what is customer value in Disney brand. They value a fun experienceand homespun entertainment based on old-fashioned family values. Disney responds to theseconsumer preferences by leveraging the brand across different consumer markets. Let’s saythat an American family goes to see a Disney movie together. They have a great time. Theyw a n t t o c o n t i n u e t h e e x p e r i e n c e . S o W a l t D i s n e y o f f e r s D i s n e y’ s c o n s u m e r p r o d u c t s w i t h multiple product lines aimed at specific age groups.W a l t D i s n e y h a s b e e n a g i a n t i n f o u r c o n s u m e r m a r k e t s n a m e l y, W a l t D i s n e y s t u d i o s a n d motion pictures, Disney Theme parks and resorts, Disney T.V channels and media networksand Disney consumer (merchandising) products. 4
SWOT ANALYSIS: STRENGTHS:
•Walt Disney is maintaining formidable position vis-à-vis their immediate competitors. •Company is maintaining good company relationship with the suppliers. •Company is maintaining healthy relationship with collective bargaining agent (CBR). •Walt Disney is financially strong. •The operational system is inclusive of procedures, processes & operations managementreflects the element of that the company is meeting the desired standards. •Walt Disney is capable of producing new Products and Services in a short span of time. WEAKNESSES: •Walt Disney needs more rigorous analysis in understanding the consumer behavior. •Walt Disney needs improvement in tracking the changes in cultural values.
•Walt Disney also does need strategic improvement in conducting the segmentation andapplying the more soft techniques namely psychographic and lifestyle. •The mission of the company strategic directions and long term objectives needsimprovement. •H.R needs improvement. Training and development programs should be done andhiring and selection criteria should also be taken into account of rectification. •Marketing management needs improvement.
OPPORTUNITIES: •Economic conditions prevalent in USA reflect moderate position. •Walt Disney is reasonably equipped to internalize the social shift. •Walt Disney is implementing all the related laws concerning entertainment industry. •USA is maintaining favorable strategic directions towards entertainment industry. •The company is reasonably proactive in both sensing & implementing the newtechnology. •International components for Walt Disney apparently seem favorable. Therefore newmarkets should be searched and taken into consideration in foreign developedcountries like Malaysia, Singapore, and Thailand etc. THREATS: •The entertainment is experiencing social shift whereby members of the society areseeking out value, more leisure activities and have become savvy also. •Entertainment industry is subject to various legislations which a pass at reasonable pace. •The formal policies of USA are not based on objective analysis and judgment. •Technologies advancement shift is quite significant resulting in impact onentertainment industry. strengths 1. 2. 3. 4.
Strong product portfolio Brand reputation Competency in acquisitions Diversified businesses
Weaknesses 1. Heavy dependence on income from North America 2. Few opportunities for significant growth
5. Localization of products
Opportunities 1. Growth of entertainment industries in emerging markets 2. Expansion of movie production to new countries
through acquisitions
Threats 1. Intense competition 2. Increasing piracy 3. Strong growth of online TV and online movie rental
1. strong product portfolio. Walt Disney’s products include broadcast television network ABC and cable networks such as Disney Channel or ESPN, which is one of the most watched cable networks in the world. Combining the significant audience reach of these cable networks, (ESPN has nearly 300 million and Disney Channel 240 million subscribers) and the solid growth of cable television, Disney’s product portfolio provides a competitive advantage for the company over its competitors. 2. Brand reputation. Walt Disney brand has been known for more than 90 years in US and has been widely recognized worldwide, especially due to its Disney Channel, Disney Park resorts and movies from Walt Disney studios. The company is perceived as the primary family entertainment provider and was the 13th most valuable brand (valued at $27.4 billion) in the world in 2012. 3. Competency in acquisitions. One of the strongest sides the company has is its competency in acquisitions. The Walt Disney Company has acquired Pixar Animation Studios in 2006, Marvel Entertainment in 2009 and Lucasfilm in 2012. The former 2 acquisitions have already proved to be very successful in terms of revenue and profit growth. The third acquisition is expected to be just as successful because Disney has acquired rights to all of the Lucasfilm previous works including Star Wars. Few other Disney competitors have had such record of successful acquisitions. 4. Diversified businesses. The business operates five different business segments: media networks, parks and resorts, studio environment, consumer products and interactive media. These company’s segments are operated online and offline, in many different economies and are generating their income using different business models. Due to such diverse operations, Disney is less affected by changes in external environment than its competitors are. 5. Localization of products. Recently, Disney has started adapting its products to suit local tastes. Besides the parks and resorts, company’s movies and consumer products are adapted for Chinese market to attract more visitors. This is rarely initiated by the movie studio itself and is something that few other studios are doing.
Weaknesses 1. Heavy dependence on income from North America. Although, Disney operates in more than 200 countries, it heavily depends on US and Canada markets for its income. More than 70% of the business the revenues come from US alone, while the major Disney’s competitor News Corporation receives less than 50% of revenues from US, making it less vulnerable to changes in US market. 2. Few opportunities for significant growth through acquisitions. The Walt Disney Company is the largest entertainment provider in the world and has become so due to acquisition of competitors. The last Disney’s acquisition had to be approved by Federal Trade Commission so that the company wouldn’t have to deal with antitrust problems. This means that the size of the Disney’s business has become a concern for the government due to significant market concentration and that the company has very few opportunities to acquire competitors. Otherwise, Disney may become a subject to antitrust laws. Opportunities 1. Growth of paid TV industries in emerging economies. The Asia Pacific region accounted for more than 50% market share of the world pay TV subscribers (394 million) in 2011. It was expected to grow to more than 55% by the end of 2016, where China would account for more than 27% of the market. The similar growth is expected in India as well. Disney Company has already entered these markets and should continue to strengthen its position there to benefit from such high industry growth. 2. Expansion of movie production to new countries. Disney has an opportunity to expand its movie production to such countries as India or China, where movie production industries have developed good quality infrastructure. This would result in lower movie production costs and more localized movies for India and China’s markets. Threats 1. Intense competition. Disney operates in very competitive industries such as media, tourism, parks and resorts, interactive entertainment and others. The competitive landscape changes quite drastically in the media industry, where news and TV go online and new competitors with new business models compete more successfully than incumbent media companies. Disney’s parks and resorts business segment also receives strong competition from local competitors who can offer better-adapted product. This results in growing competitive pressure for Walt Disney Company. 2. Increasing piracy. The advancements in technology allow copying, transmitting and distributing copyrighted material much easier. With an increasing number of internet users and the speed of internet, this poses a great risk to Disney’s income, as fewer people would go to watch movies in a cinema or buy its DVD, when it’s freely available online.
3. Strong growth of online TV and online movie renting. Besides internet piracy, Disney’s media and movie production businesses may suffer from online TV and online movie rental growth. Subscription to online TV streaming and movie rental websites costs much less than to usual cable television providers. In addition, internet infrastructure is often managed by different companies, thus taking the power away from cable network providers. Media Synergy: Through the companies owned by Disney, it can both produce and distribute its products. Also, Disney creates media that extends beyond one product into multiple other tie-ins, such as online games that play off their feature films (Battikh). An important factor of its success is the integrated nature of its products with synergies between film, television, media, theme parks and resort operations (Laws). - Diversification: Walt Disney has focused on market diversification for years. The company covers a wide variety of products and services; its movies, shows, themes parks, music, TV, radio and merchandise offer a range for all tastes, cultures and ages. Competition Disney’s competitors differ in each segment of business. Walt Disney is classified as “Entertainment-Diversified” and over the years has created a unique portfolio and niche position that is not matched by a single company in all its areas (Battikh). However, in the Media An Analysis of The Walt Disney Company 7 Network segment, Disney competes directly with Time Warner, Inc. and News Corporation. Time Warner is a major competitor to Disney and is composed of three divisions: Cable, Filmed Entertainment Networks and Publishing. It owns Time Inc., Warner Brothers, and TBS Networks (Strategic Management). Like Time and Disney, News Corp is a diversified international media and entertainment company that operates in several segments: Filmed Entertainment, Television, Cable Network Programming, Direct Broadcast Satellite Television, Magazines and Inserts, Newspapers, Book Publishing, and others (Strategic Management).
The company also faces competition from NBC Universal (owned by Comcast) in TV and with their Universal studio entertainment, theme parks and resorts sector and Paramount Pictures. Though the Walt Disney Company is an entertainment leader, these other competitors pose definitive difficulties because they are all diversified conglomerates with a solid presence in the global market. In many cases, Disney has dealt with new competition my buying and integrating emerging competitors. Disney bought Pixar in 2006, as it emerged as a highly profitable animation giant. In July 2011, Disney’s ESPN acquired television rights to air the Wimbledon tennis tournament for 12 years, thus replacing NBC which previously showed the annual event. In 2011, for the first time ever, ESPN offered the NBA finals in 3-D (Cohesion Case). However, with the increasing success of ESPN, more stations are coming into the sports mix as competitors. ESPN now competes with NBC Sports and 21st Century Fox’s Fox Sports West cable channels. If this trend persists in the future, as expected, it may drive up programming costs (Hellman) Competition Disney’s competitors differ in each segment of business. Walt Disney is classified as “Entertainment-Diversified” and over the years has created a unique portfolio and niche position that is not matched by a single company in all its areas (Battikh). However, in the Media An Analysis of The Walt Disney Company 7 Network segment, Disney competes directly with Time Warner, Inc. and News Corporation. Time Warner is a major competitor to Disney and is composed of three divisions: Cable, Filmed Entertainment Networks and Publishing. It owns Time Inc., Warner Brothers, and TBS Networks (Strategic Management). Like Time and Disney, News Corp is a diversified international media
and entertainment company that operates in several segments: Filmed Entertainment, Television, Cable Network Programming, Direct Broadcast Satellite Television, Magazines and Inserts, Newspapers, Book Publishing, and others (Strategic Management). The company also faces competition from NBC Universal (owned by Comcast) in TV and with their Universal studio entertainment, theme parks and resorts sector and Paramount Pictures. Though the Walt Disney Company is an entertainment leader, these other competitors pose definitive difficulties because they are all diversified conglomerates with a solid presence in the global market. In many cases, Disney has dealt with new competition my buying and integrating emerging competitors. Disney bought Pixar in 2006, as it emerged as a highly profitable animation giant. In July 2011, Disney’s ESPN acquired television rights to air the Wimbledon tennis tournament for 12 years, thus replacing NBC which previously showed the annual event. In 2011, for the first time ever, ESPN offered the NBA finals in 3-D (Cohesion Case). However, with the increasing success of ESPN, more stations are coming into the sports mix as competitors. ESPN now competes with NBC Sports and 21st Century Fox’s Fox Sports West cable channels. If this trend persists in the future, as expected, it may drive up programming costs (Hellman)
RECOMMENDATIONS:
In the light of the above mentioned SWOT analysis of Walt Disney, Strategic MarketingGoals, Consumer Behavior strategy of Kim Possible, Its Targeting strategy, Product strategy,Positioning strategy, Pricing Strategy, Channel strategy and Promotion Strategy, I would liketo make the following recommendations by which Walt Disney would be benefited in terms of increased Market share, Higher Revenues and Profits and improved Goodwill.
My First Recommendation is to find new market segments for Kim Possible by doingmarket segmentation on the basis of Psychographic and Life style characteristic.
Then I would recommend expanding the Product line of Kim Possible as mentioned earlier in the Strategic Marketing Goal section of this report.
I would recommend Walt Disney to cater the needs of people belonging to differentSocial Classes, Sub-cultures and Age groups. Therefore following the consumer behavior and targeting strategy mentioned earlier in this report.
I would recommend Walt Disney to follow the product strategy mentioned in this report inorder to expand the product line of Kim Possible by the introduction of Products andservices mentioned in the Product strategy.
Then I would recommend Walt Disney to Position the expanded line of Products using theLife style positioning method by conducting research to know the Activities, Interest andopinions (AIO) of the targeted consumers and then by using the perceptual mappingsoftware, positioning the Products appropriately.
After Positioning, I would Recommend Walt Disney to Price the expanded line of Products correctly. Prices should be set in a way that caters the needs of all the Socialclasses that means that it is affordable for the Lower and Middle Americans as well as for the Upper Americans. In this regard my recommendation is to follow the Pricing strategymentioned earlier in the Pricing strategy section of this report.
Porter's Five Forces Model Threat of New Entrants Since the Walt Disney Company has been able to find a very unusual niche within the industry, the entrance barriers are high relatively. The company is able to grow over a long term period, and has to develop from the departments of Research and Development (R&D), marketing, and finance. By depending on past experience, the company officials know to a large extent what the target customer wants. (scribd.com, n.d.) Threat of Substitute The products or services are moderate to low. Other cartoon figures, theme parks, and movies can search the market in which the Walt Disney Company is operating in, but this is obviously representing a significant threat. The Walt Disney Company has placed price controls on many of its product lines already, and should be able to cope with other new competitors. However, by upgrading products and services, the threat alone of new entrants into the market requires the Walt Disney Company to hedge against such risk by simultaneously. (scribd.com, n.d.) Bargaining Power of Suppliers The suppliers are governed by a few companies as the Walt Disney Company is operating in a highly differentiated and unique industry with high switching costs associated with operations. Besides, they are most probably very concentrated. However, the Walt Disney Company is a unique company and important customer of many suppliers. Furthermore, the size of the company may be a great advantage certainly. The company will create a dependency relationship in the industry by being able to order large volumes of unique products from unique suppliers. (scribd.com, n.d.)
Bargaining Power of Buyers The bargaining power of buyers is high in the service and in the entertainment industry. The customers have powers certainly since a large number of customers are needed to make the Walt Disney Company’s operations run smoothly. For example, if the price on a particular home video is too high, customers may be averse to spending the money needed to purchase the products. Another example is the entrance fee charged at the Walt Disney Company’s theme parks. Furthermore, the entertainment industry does not take the buyer money, even if it is planned in a way that it will make the buyer spend more. A majority of the Walt Disney Company's product mix focuses on intangible returns of the buyer's money. However, some customers may not realize that they are getting such a return may increase the bargaining power of the customers. (s 4.5
Rivalry among Existing Firms
It does not play a very important role in the Walt Disney Company's external operational environment. Nevertheless, it is true that the company's exit barriers are extremely high. Furthermore, capacity is expanded in extremely large investments. However, there are no closer direct competitors to the Walt Disney Company's operations. Competitors such as "Lonely Tunes" retail stores do not appear to appoint themselves to expensive advertising campaigns in order to obtain market shares. Moreover, the Walt Disney Company's products are highly differentiated. The switching costs are therefore quite significant. A multinational corporation such as the Walt Disney Company faces internal weaknesses and strengths, which can to a certain extent be controlled. The external forces such as opportunity and threats are more difficult to control, and the Walt Disney Company has to adopt and take advantage to those forces. When it comes to delivering the produced products and services to the consumers,Channel and distribution strategy is very important. Therefore, I would recommend Disneyto have its own distribution channel by opening its own specialty stores of Kim Possible products and providing logistics to its end users for delivering of the goods. Thusfollowing the Channel Strategy mentioned earlier. Walt Disney should expand product line of Kim Possible and to promote them with a hugePromotional campaign. Therefore following the promotional campaign elementsmentioned in the Promotion strategy.
