The Disney Company

1

• The Disney Company

2
Cast Members

• Jon Vandercook Introduction Conclusion
• Sunila Sundar History Profit Analysis
• Deidre Howell Competitive Reaction
• Macroeconomic
  Assessment
• Michele Johnson Competitive Response
• Macroeconomic
  Assessment

3
The Disney Company

• Three Distinct Industries
• Creative Content
• Broadcasting
• Theme parks and Resorts

4
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

5
Diversification

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

6
Divisions of Disney

• Media and Entertainment Giant
• Media Network
• Studio entertainment
• Theme Parks and Resorts
• Consumer Products
• Internet and Direct Marketing

7
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

8
Fantastic Deals

• 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

9
Competition

• Disneys Competitors
• Busch Gardens
• Magic Mountain
• Knotts Berry Farm
• Cultural events and festivals, plays, movie
  theaters, museums, casinos, cruises
• State and national parks, and much more

10
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

11
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

12
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!

13
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

14
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!

15
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

16
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.

17
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.

18

Vacation Plans for Military Personnel

• 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

19
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

20
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 sellers output may be either
  more or less identical or differentiated.
• Hall and Lieberman, 2000.

21
Competitive Reaction to Price Reduction

• Competitors would use aggressive advertising.
• Competitors would offer price reductions, ticket
  giveaways, promotions, new attractions, and park
  expansion.

22
Revenue

• Disneys Revenue
• June 30, 2001, Revenue rose 1 to 19.46 billion
  for 9 months.
• Net income before accounting costs, fell 91 to
  67M
• Disneys 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.

23
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

24
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

25
Long-term Consequences

• Reduction in corporate acquisitions
• Revenue loss from expansion investments
• Possible sale of major league sports teams

26
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.

27
Current Capacity

• Capacity identifies the number of people needed
  to operate Disneys 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.

28
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.

29
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 Disneys 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.

30
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.
• Disneys decision to cut ticket prices is based
  on the total revenue the firm wants to make.

31
Alternative Pricing and Non-Pricing Strategies

• Disney would target specialty groups
• Firefighters
• Teachers
• Military personnel
• Government employees
• Local residents (southern California Orlando,
  Florida)

32
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.

33
Economic Forecasts (continued)

• 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 raisedoverall, as in the current year.
• Greater possibility for more disposable income.

34
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.

35
Consequences

• Each of the forecasted events would hinder
  expansion at Disneys 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.

36
More Consequences

• If the demand for Disneys 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.

37
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