Disney parks and resorts strategy

Title：Walt Disney Company Case Study

Author(s): Anna(方榆安)，Adrien(安磊恩), Jackie(楊欣樺), Judy(洪靖雯),

Zoe(范氏黃英)

Class: 1 s t

and 2 nd

year of Department of International Business

Student ID: M0566104, M0400975, M0419066, M0401183, M0570968

Course: Global Strategic Management

Instructor: Dr. Dr. Fang-Yi Lo

Department: Department of International Business

Academic Year: Semester 1, 2016-2017

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Abstract

In an ever-changing world, we researched how a company like Disney and more

particularly the Walt Disney Parks and Resorts division can become and stay a leader

in its industry.

We analyzed the different levels of strategy, created a strategic map, applied a

five forces analysis of the company, did a group analysis, did a VRIS and

Resource/Analysis, did a BCG matrix and Synergy analysis, a value chain analysis,

explained the diversification strategy.

These researches allowed us to define the key point that makes Disney the

reference in the amusement park industry: offer a unique, immersive and positive

experience to each visitor through a great storytelling that is constantly renewed. The

future success of the company depends on its ability to innovate and keep delivering

an outstanding user experience.

Keyword： Disney parks, amusement parks, strategy

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Table of Content

Chapter 1 The Walt Disney Company ........................................................................... 8

1.1 Introduction ...................................................................................................... 8

1.2 Choosing Disney .............................................................................................. 8

1.3 Facts and Statistics ........................................................................................... 8

1.3.1 Company ............................................................................................... 9

1.3.2 Divisions: .............................................................................................. 9

1.3.3 Subsidiaries ........................................................................................... 9

Chapter 2 Strategic Level ............................................................................................. 10

2.1 Disney’s Corporate Level Strategy ................................................................ 11

2.2 Disney’s Business Level Strategy .................................................................. 11

2.3 Disney’s Functional Level Strategies ............................................................. 12

2.3.1 Research and Development ................................................................. 12

2.3.2 Human Resource ................................................................................. 13

2.3.3 Finance ................................................................................................ 13

2.3.4 Marketing ............................................................................................ 14

2.3.5 Tokyo Disney Resort ........................................................................... 15

Chapter 3 Strategic Map .............................................................................................. 16

3.1 Guest Experience ........................................................................................... 16

3.2 Telling Stories ................................................................................................ 18

3.3 Family Entertainment ..................................................................................... 18

Chapter 4 Five Forces Analysis ................................................................................... 19

4.1 Industrial Rivalry ........................................................................................... 19

4.2 Threat of Substitutes ...................................................................................... 21

4.3 Potential Entrants ........................................................................................... 21

4.4 Bargaining Power of Supplier ........................................................................ 22

4.5 Bargaining Power of Buyers .......................................................................... 23

Chapter 5 Strategic Group Analysis ............................................................................. 27

5.1 Single Location Theme-based Parks .............................................................. 28

5.1.1 Internal competition of cluster: Medium ............................................ 28

5.1.2 Mobility barriers: Medium .................................................................. 28

5.2 Single Location Mainly Theme with Few Rides Parks Cluster ..................... 29

5.2.1 Cluster internal competition: High ...................................................... 29

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5.2.2 Cluster Mobility: Low-medium .......................................................... 30

5.3 Multiple Location, Mainly Theme with Few Rides Park............................... 30

5.3.1 International competition of cluster: Low ........................................... 30

5.3.2 Mobility barriers: Medium .................................................................. 30

5.4 Multiple Location Sensation-Based Cluster .................................................. 31

5.4.1 Cluster internal competition ................................................................ 31

5.4.2 Cluster Mobility .................................................................................. 31

5.5 Global Theme and Sensation Parks Cluster ................................................... 32

5.5.1 Cluster internal competition ................................................................ 32

5.5.2 Cluster Mobility .................................................................................. 33

Chapter 6 Resource and Capability Analysis ............................................................... 34

6.1 Resources ....................................................................................................... 35

6.1.1 Tangible resource ................................................................................ 36

6.1.2 Intangible resource .............................................................................. 37

6.1.3 Human Resources ............................................................................... 42

6.2 Capabilities .................................................................................................... 43

6.3 Resources and Capabilities Analysis ............................................................. 45

6.4 VRIS Analysis ................................................................................................ 47

6.4.1 Capability ............................................................................................ 47

6.4.2 Resources ............................................................................................ 48

Chapter 7 Value Chain ................................................................................................. 49

7.1 Firm Infrastructure ......................................................................................... 49

7.2 Human Resources Management .................................................................... 52

7.3 Technology Development .............................................................................. 53

7.4 Procurement ................................................................................................... 54

7.5 Inbound Logistics ........................................................................................... 55

7.6 Operations ...................................................................................................... 56

7.7 Outbound Logistics ........................................................................................ 56

7.8 Marketing & Sales ......................................................................................... 56

7.9 Service ............................................................................................................ 60

Chapter 8 BCG Matrix and Synergies ......................................................................... 63

8.1 BCG Analysis ................................................................................................. 64

8.1.1 ESPN Inc. - Dog ................................................................................. 64

8.1.2 Lucasfilm - Star ................................................................................... 64

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8.1.3 Disney Channels Worldwide－Question Mark ................................... 65

8.1.4 Walt Disney Animation Studios - Star ................................................ 67

8.1.5 Pixar Animation Studios - Star ............................................................ 70

8.1.6 Disney Parks and Resorts - Cash Cows .............................................. 72

8.1.7 Disney Interactive – Question Mark ................................................... 77

8.1.8 Disney consumer product – Question Mark ....................................... 78

8.2 Synergy among SBUs .................................................................................... 80

Chapter 9 Vertical Integration, Outsourcing and Diversification Strategy .................. 81

Disney Integration Map ....................................................................................... 81

9.1 Disney Vertical Integration ............................................................................ 82

9.1.1 Park and Resorts ................................................................................. 82

9.1.2 Movie .................................................................................................. 82

9.1.3 Merchandise ........................................................................................ 83

9.1.4 ABC Networks Group ......................................................................... 85

9.2 SIC Code of Walt Disney Cooperation .......................................................... 86

9.3 Diversification of The Walt Disney Company ............................................... 86

Chapter10 Diamond Analysis ...................................................................................... 89

10.1 Factor endowments: Disney parks and resorts USA .................................... 89

10.1.1 Location ............................................................................................ 89

10.1.2 Infrastructure ..................................................................................... 90

10.1.3 Hospitality well-educated employees: .............................................. 90

10.2 Demand Conditions ..................................................................................... 91

10.2.1 Standard Operating Procedures ......................................................... 91

10.2.2 Economic scale ................................................................................. 91

10.2.3 Copy right ......................................................................................... 91

10.3 Related and Supporting Industries ............................................................... 92

10.3.1 Rides/Attraction Manufacturers ........................................................ 92

10.3.2 Transportation ................................................................................... 92

10.3.3 Food .................................................................................................. 92

10.3.4 Tourism Industry ............................................................................... 92

10.3.5 Consumer Merchandises ................................................................... 93

10.4 Firm strategy, structure, and rivalry ............................................................. 93

10.4.1 Firm strategy ..................................................................................... 93

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10.4.2 Firm structure .................................................................................... 93

10.4.3 Rivalry ............................................................................................... 94

10.5 Government .................................................................................................. 94

Chapter 11 Conclusion ................................................................................................. 95

References .................................................................................................................... 97

Appendix .................................................................................................................... 111

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List of Figures

Figure 1. Strategic Level .............................................................................................. 10

Figure 2. Strategic Map ................................................................................................ 16

Figure 3 Five Forces Analysis ...................................................................................... 19

Figure 4. Disney Industrial Rivalry ............................................................................. 20

Figure 5. Disneyland in Anaheim ................................................................................ 24

Figure 6. Queue time for major attractions and visitors .............................................. 25

Figure 7. Strategic Group cluster ................................................................................. 28

Figure 8. Value Chain................................................................................................... 49

Figure 9. Finding Nemo /Dory attraction/ride concept art .......................................... 57

Figure 10. Finding Nemo ............................................................................................. 57

Figure 11. Iron Man Experience .................................................................................. 58

Figure 12. Taylor Swift as Rapunzel ............................................................................ 59

Figure 13. Disney wedding .......................................................................................... 60

Figure 14. Strategic Level of Disney ........................................................................... 63

Figure 15. BCG Analysis ............................................................................................. 64

Figure 16. Cable Networks Segment Market Share ..................................................... 66

Figure 17. Walt Disney Animation Studios .................................................................. 67

Figure 18. Big Hero 6, Zootopia, and Moana .............................................................. 69

Figure 19. Pixar ............................................................................................................ 70

Figure 20. Disney Parks around the world ................................................................... 73

Figure 21. Internet Users in the World ......................................................................... 77

Figure 22. The Growth of Interactive Media Industry ................................................. 78

Figure 23. Disney Integration Map .............................................................................. 81

Figure 24. Merchandise Outsourcing ........................................................................... 84

Figure 25. Consumer product revenue of the Walt Disney Company ......................... 84

Figure 26. Repartition of 2013 Global revenue ........................................................... 87

Figure 27. Diamond Analysis ...................................................................................... 89

Figure 28. The U.S. and Global populations by income in 2011 ................................. 91

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List of Tables

Table 1. The financial report for fiscal years 2015, 2014 and 2013............................. 12

Table 2. Numbers of Location and Sensation or/and Theme Park ............................... 27

Table 3. Resources ....................................................................................................... 35

Table 4. The World's Most Reputable Companies 2016 .............................................. 39

Table 5. The World's Most Valuable Brands, 2016 ...................................................... 40

Table 6. Capabilities ..................................................................................................... 43

Table 7. Departments within Disney Parks and Resorts .............................................. 44

Table 8. Resources and Capabilities Analysis .............................................................. 45

Table 9. VRIS Analysis - Capability ............................................................................ 47

Table 10. VRIS Analysis - Resources .......................................................................... 48

Table 11. The Total Consolidated Revenues of Disney Company ............................... 50

Table 12. Segment Operation Income .......................................................................... 50

Table 13. Investing Activities ...................................................................................... 51

Table 14. Social Media Platform and User Statistics ................................................... 58

Table 15. Revenue in Cable network ........................................................................... 65

Table 16. Network Viewers .......................................................................................... 66

Table 17. 2014-2016 Animated Films Total Lifetime Gross ....................................... 68

Table 18 Pixar Animation Studios ............................................................................... 71

Table 19. Worldwidw Ranking of Animation .............................................................. 72

Table 20. Disney Financial Report – the Fiscal 2016 .................................................. 74

Table 21. Operation Income ......................................................................................... 75

Table 22. Revenues ...................................................................................................... 76

Table 23. Market Share ................................................................................................ 76

Table 24. The Walt Disney Revenue and Segment Operation Income ........................ 79

Table 25. Disney Studios SIC Code ............................................................................. 83

Table 26. SIC Code of Walt Disney Cooperation ........................................................ 86

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Chapter 1 The Walt Disney Company

Disney, the kingdom of entertainment founded by Walt Disney and Roy O.

Disney in 1923, is hands down a benchmark in its industry. The Walt Disney

Company continues to bring joy and happiness to its consumers around the globe, and

would never stop surprising us with its visions.

1. 1 Introduction

Behind all the wonders that Disney has brought us, are the visionaries of

Disney’s leadership team who strive to generate creativity, foster innovation, and

utilize the latest technologies. Disney is a multinational, cross-platform conglomerate.

Their business flourish in many different domains, including parks and resorts,

consumer products, studio entertainment, media networks, and interactive media. The

company is currently operating in more than 40 countries, and they really have taken

issues such as labor, ethics, environment, philanthropy and etc., very seriously.

1.2 Choosing Disney

Upon deciding what case we want to explore in this class, we struggled quite a

bit trying to come up with something that is well-known but not cliché. Our eyes lit

up when spotting a group member’s t-shirt that has a cartoon character on it: it was

Dale, from “Chip n Dale” the Disney cartoon chipmunks. When we think of business

cases we often think of products and their brands, such as H&M in the fashion

industry, or Apple in the consumer electronics industry; rarely do we think of the

entertainment industry. We chose to look into Disney because it has been part of our,

if not everyone’s childhood. Those classic fairytales and adventures taught us about

love, about courage, and about faith. Furthermore, like we do, Disney matures

overtime, bringing more diversity and innovation into its works, connecting and

bringing happiness to people of different generations.

1.3 Facts and Statistics

The rich backstory of Disney could not be easily simplified into a few pages of

writing, therefore certain facts and statistics that we found important to illustrate this

company has been cherry-picked and listed below.

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1.3.1 Company

■ Founding Date: October 16, 1923 (93 years ago)

■ Products: Theme parks, cable television, films, publishing, broadcasting,

radio, web portals, music, video games

■ Number of employees: 180,000 (2014)

■ Net income: US$8.38 billion (2015)

■ Total assets: US$88.18 billion (2015)

1.3.2 Divisions:

■ Walt Disney Parks and Resorts

─ Featuring the company's theme parks, cruise line, and other

travel-related assets

■ Walt Disney Studios

─ Includes the company's film, music recording label, and theatrical

divisions.

■ Disney Media Networks

─ Includes the company's television properties.

■ Disney Consumer Products and Interactive Media

─ Produces toys, clothing, and other merchandising based upon

Disney-owned properties, as well as including Disney's Internet,

mobile, social media, virtual worlds, and computer games operations.

1.3.3 Subsidiaries

■ Walt Disney Studios

■ Walt Disney Animation Studios

■ Disney Theatrical Productions

■ The Walt Disney Company India

■ Pixar Animation Studios

■ Marvel Entertainment

■ Marvel Studios

■ Lucasfilm

■ The Muppets Studio

■ Disney–ABC Television Group

■ ESPN Inc. (80%)

■ A+E Networks (50%)

■ Radio Disney

■ Hulu (32%)

■ UTV Software Communications

■ Maker Studios

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Chapter 2 Strategic Level

For this week’s assignment, we are attempting to describe the strategies that The

Walt Disney Company took in different levels and segments of its business. However,

Disney operates in many aspects of entertainment, including amusement parks, TV

channels, consumer products, movies, and so on. We chose to study about Disney’s

parks and resorts in further detail, making this segment of the Disney entertainment

kingdom our focus in this course.

Figure 1. Strategic Level

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2.1 Disney’s Corporate Level Strategy

As we have introduced in previous passages, Disney’s businesses flourish in

different aspects of entertainment industries, its divisions include: Walt Disney Parks

and Resorts, Walt Disney Studios, Disney Media Networks, and Disney Consumer

Products and Interactive Media. Despite their differences in operation, the core of

these businesses are united, that is Disney’s mission statement.

DISNEY'S MISSION STATEMENT

"The mission of The Walt Disney Company is to be one of the world's leading

producers and providers of entertainment and information. Using our portfolio of

brands to differentiate our content, services and consumer products, we seek to

develop the most creative, innovative and profitable entertainment experiences and

related products in the world."

These words, carefully chosen, summed up the Disney’s vision as an

entertainment tycoon. Everything that its business units carry out aim to realize

Disney’s mission statement.

2.2 Disney’s Business Level Strategy

Walt Disney Parks and Resorts is one of Disney’s most profitable business units,

currently operating in six different locations around the world, including California,

Florida, Paris, Tokyo, Hong Kong, and Shanghai. When it came to expanding

overseas, entering international markets, Disney did more than just copy its success at

home. Instead, based on past experiences and conditions of the hosting country,

Disney went with one of two ways: licensing or joint venture. Disney licensed its

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brand to a Japanese company called Oriental Land Company, Disney had not been

involved in operation, only did they receive royalties and parts of Tokyo Disney

Resort’s (TDR) revenue in return. Whereas in Paris, Hong Kong, and Shanghai,

Disney chose to collaborate with local entities and run its business in the form of joint

venture. Due to these different strategies, different functional level strategies were

then sketched out and performed.

2.3 Disney’s Functional Level Strategies

2.3.1 Research and Development

Investing Activities

According to the financial report posted on Disney official website, people can

know that Disney Company had invested in park and resorts more and more for R&D

each year until now. As a result, it is obvious that they really put emphasis on

Research and Development this part to meet this changing world.

The financial report for fiscal years 2015, 2014 and 2013 are as follows:

Table 1. The financial report for fiscal years 2015, 2014 and 2013

The main capital expenditures for the Parks and Resorts are expansion, new

attractions, cruise ships, capital improvements and systems infrastructure. The

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increase capital expenditure in domestic parks and resorts was to construct new

attractions in Walt Disney World Resort. While the higher capital expenditures are in

international park and resorts are due to the construction of Shanghai Disney Resort.

2.3.2 Human Resource

The strategy of Human resource in Disney Park and Resorts is one of the factors

make them such success. They have standard operation procedure when hiring,

training, and encouraging their employees. When recruiting new employees, the first

priority is “attitude”, then their skills.

They like to talk about the worst situation at first. Before job seekers applied the

recruitment form, they were asked to see a video, which illustrate the company's

culture and practices. For example, they have to work on weekends, holidays and at

night. For another example, they have strict restrictions on clothing. They can’t even

unveil their tattoo when they are working.

Besides, Disney asks supervisors humble themselves. When the receptionist on

the front line are busy, those supervisors will assist them directly. They can do

everything from sell popcorns to even put the merchandise on the shelfs. From an

aspect of the company, there are three benefits when they doing so. Firstly, supervisor

share responsibility of workload with staff. Secondly, front line workers know that

company pay high attention on their works. Thirdly, supervisors could have chance to

interact with customers directly.