Slide1: The Disney Company


Cast Members: Cast Members Jon Vandercook: Introduction & Conclusion Sunila Sundar: History & Profit Analysis Deidre Howell: Competitive Reaction & Macroeconomic Assessment Michele Johnson: Competitive Response & Macroeconomic Assessment


The Disney Company: The Disney Company Three Distinct Industries Creative Content Broadcasting Theme parks and Resorts


History of The Disney Company : History of The Disney Company Two Brothers Walter Elias Disney, Animator - “Mickey” Roy Oliver Disney, Financial Officer Company established in 1923 Company employs 108,000 people Disney is recognized for its animation, live-action features and nature documentaries Unique brand Entertainment giant


Slide5: Company - Retlaw Enterprises3 to control Walt Disney Productions Merchandising rights Real Estate and Epcot Production Animation for children Movies for families Entertainment for adults


Divisions of Disney: Divisions of Disney Media and Entertainment Giant Media Network Studio entertainment Theme Parks and Resorts Consumer Products Internet and Direct Marketing


Theme Parks: Theme Parks Four Theme Parks: Disneyland - 1955 Walt Disney World - 1991 Tokyo Disneyland - 1989 Disneyland Paris - 1991 The Original Park Disneyland, Anaheim CA, 1955 Occupies 185 acres, 100 acres used for Parking


Slide8: Resort specials Florida residents specials Ticket Specials at Walt Disney World Disney Cruise Specials Annual Pass Holder Specials Deals for teachers, nurses, and government employees Deals for everyone including all international visitors Eat well for less -- choose from over 100 eateries and restaurants at Walt Disney World


Competition: Competition Disney’s Competitors: Busch Gardens Magic Mountain Knott’s Berry Farm Cultural events and festivals, plays, movie theaters, museums, casinos, cruises State and national parks, and much more…


Transactions and Distribution : Transactions and Distribution Transactions Buyer and seller of variety products Family attraction, vacation packages specialty shops, restaurants, hotels accommodations and much more…………. Distribution Channels Promotions - ticket sales corporations, credit unions, travel agencies, gift certificates and … Sales and marketing, Ticket-Master, etc……


Events That Affect The Demand: Events That Affect The Demand Factors in the Economy - 12 months Fallout from September 11th terrorist attacks Decrease in tourism and job layoffs Possible recession Adverse weather - Hurricanes, El Nino would negatively affect attendance These factors will effect demand for the service


Affordable Vacation Plans: Affordable Vacation Plans Pay only for what you want - at the lowest price Features: Hotels on and off Disney property Admission tickets to Walt Disney World Admission tickets to other Florida attractions & restaurants Forget those expensive vacation packages!


Affordable Vacation Plans(continued): Affordable Vacation Plans (continued) Downtown Disney Hotels Stay on Disney property without paying Disney prices! "Official Walt Disney World Hotels“- located on Disney property, but Disney doesn't own them: Hotel Royal Plaza Hilton Best Western Lake Buena Vista Wyndham Palace Doubletree Guest Suites Grosvenor Courtyard by Marriott


Affordable Vacation Plans(continued): Affordable Vacation Plans (continued) Good news for you! They're much less expensive than many Disney resorts and you can enjoy these parks: Free shuttle to the parks On-site ticket sales to both Disney and non-Disney attractions!


Walt Disney World Honeymoons: Walt Disney World Honeymoons Six themed honeymoon vacations that include: Seven nights at a Disney Resort and unlimited admission to: all four Theme Parks Water Parks Wide World of Sports Pleasure Island Disney Quest


Walt Disney World Honeymoons(Continued): Walt Disney World Honeymoons (Continued) Starting at $1,232 (incl. tax) per couple! Add a 3 or 4-day cruise aboard the Disney Magic or the Disney Wonder to your honeymoon vacation. A 3-day cruise, including all meals, programs, and entertainment aboard ship starts at $439 per person.


Walt Disney World Honeymoons(Continued): Walt Disney World Honeymoons (Continued) A Romantic Touring Plan Magic Kingdom, Epcot, and MGM with an emphasis on romance, our Romantic Touring Plan reveals: romantic spots entertainment attractions rides activities That will make your honeymoon at Walt Disney World special and memorable.


Slide18: Enjoy extremely affordable accommodations on Disney property. Special deals are reserved for military members: Active military Retired military Military Reservists Members of the National Guard Employees of the Department of Defense Vacation Plans for Military Personnel


Market Structure: Market Structure The Disney theme parks division is a monopoly. A monopoly market structure is the market in which a firm is the only seller. The firm is one in which the seller sells a good or service that has no close substitutes. Lieberman and Hall


Market Structure(continued): Market Structure (continued) The Disney Company (as a whole) is an oligopoly. An oligopoly is a market structure that contains a small number of firms who are strategically interdependent. The seller’s output may be either more or less identical or differentiated. Hall and Lieberman, 2000.


Competitive Reaction to Price Reduction: Competitive Reaction to Price Reduction Competitors would use aggressive advertising. Competitors would offer price reductions, ticket giveaways, promotions, new attractions, and park expansion.


Revenue: Revenue Disney’s Revenue June 30, 2001, Revenue rose 1% to $19.46 billion for 9 months. Net income before accounting costs, fell 91% to $67M Disney’s distribution costs to operate the theme parks are estimated at $1.4 million and higher. For example, Disney uses 200,000 light bulb per year costing $100,000.


Profit Maximization Strategy: Profit Maximization Strategy Disney theme parks would offer reduced admission tickets Cut labor force; layoffs Reduce hours of operation at the parks Lower room rates at resort hotels Place expansion plans on hold


Short Term Consequences: Short Term Consequences Hiring freeze/employee transfers Cancellation of planned attractions Massive ½ billion dollar cut in production costs for 2001 Cutbacks in maintenance and food concessions departments


Long-term Consequences: Long-term Consequences Reduction in corporate acquisitions Revenue loss from expansion investments Possible sale of major league sports teams


Elasticity Calculations: Elasticity Calculations Analysis Assumptions The percentage of adult passes/tickets sold remained steady each year. Factors in the economy remained similar and did not impact attendance. An analysis of 14 years (historical) data shows no direct relationship between price and demand (attendance). Price elasticity coefficient was less than 1 in seven of the 14 yearly comparisons. Price elasticity coefficient was greater than 1 (between 1.25 and 4.98), 5 out of 14 years, making the demand: elastic. Overall analysis of historic data shows inelasticity of demand.


Current Capacity: Current Capacity Capacity identifies the number of people needed to operate Disney’s theme parks and resorts. Disney employs thousands of Cast Members, maintenance workers, security personnel, wardrobe and hospitality attendants, thrill ride operators, food concessions & specialty shop workers, administrative and management personnel to work at its various theme park locations. Company has several contractor companies that supply production inputs. Ex. A Basic Service company aids in the maintenance of the parks’ roller-coasters, merry-go-rounds, arcade games, and robotic displays.


Constraints: Constraints Disney faces 2 possible constraints: Higher production costs Lower revenue In order to maximize profits, Disney must cut the costs of operating its theme parks & resorts. Recent cutbacks involved labor costs and expansion.


Marginal Cost of Increased Market Share: Marginal Cost of Increased Market Share The cost of increasing market share (theme park attendance) is the additional costs of production inputs. 13.9 million guests visited Disney’s theme parks & resorts in 2000. Approx. 38,356 visitors per day. A decrease in the one-day ticket price would likely increase attendance by 15%; possibly increasing the number of visitors to 44,109.


Price Reduction Strategy: Price Reduction Strategy The Disney Company, being a monopoly, is a price setter. It can decide what price to set without consideration of how other sellers would react. Disney’s decision to cut ticket prices is based on the total revenue the firm wants to make.


Alternative Pricing and Non-Pricing Strategies: Alternative Pricing and Non-Pricing Strategies Disney would target specialty groups: Firefighters Teachers Military personnel Government employees Local residents (southern California & Orlando, Florida)


Economic Forecasts: Economic Forecasts Economic forecasts indicate a downturn in the economy will last well into 2002. Unemployment rate for 2001 is 4.8%. Forecasts predict the rate at 6.0% in 2002. The increase in loss jobs will mean fewer people with disposable income for entertainment activities.


Slide33: The inflation rate in 2001 is 3.1%. Economic forecast for inflation in 2002: 2.7% The decrease in inflation means prices are not being raised—overall, as in the current year. Greater possibility for more disposable income. Economic Forecasts (continued)


Economic Forecasts(continued): Economic Forecasts (continued) RealGDP is the total quantity of goods and services produced in a country over a year. Hall & Lieberman, 2000. The RealGDP for 2001 is forecasted to be 1.1%. For 2002, the RealGDP prediction is 0.9% (Foster, 2001). Conclusions: These figures indicate that economic growth is not steady and is contracting. The same forecast predicts two quarters (2001 Q3 and 2001 Q4) of negative growth, thus, a recession is likely.


Consequences: Consequences Each of the forecasted events would hinder expansion at Disney’s current theme parks & resorts and curtail plans for new parks in international cities: Hong Kong and Beijing A resort in Beijing would likely be slated during the 2008 Olympics.


More Consequences…: More Consequences… If the demand for Disney’s theme parks & resorts remains low, the company will anticipate the lowest revenue totals the company has seen since 1993. More company-wide employee layoffs and job transfers.


Recommendations: Recommendations Aggressive marketing and ad campaigns Further ticket and hotel price reductions Minimize operational costs Fewer employee perks Partner with other companies/corporations to host new ventures


New Economy: New Economy What is the New Economy? The Internet Fancy term for the infrastructure that lets consumers shop, work, communicate, and play via computers


The New Economy(continued): The New Economy (continued) Vast Web presence Disney.com Disney Vacations ESPN Store Online ABC Store and news agencies NASCAR Online Store Disney Commerce activities (includes Disney Auction: a partnership with Ebay.com)


Business Assessments: Business Assessments Disney’s performance in the New Economy Excellent Five Business Segment Involvements Media Network Studio Entertainment Theme parks & resorts Internet Group


Business Assessments(continued): Business Assessments (continued) Strategy Expand its use of the Internet to increase: International corporate partnerships Web presence for company’s divisions Tourism at Disney parks & resorts in other parts of the world Computer and Internet upgrades to so that company benefits from new technologies