Table of contents
1. Company Overview
1.1. The Walt Disney Company
1.2. The amusem*nt park industry
2. Marketing Environment Analysis
2.1. Microenvironment
2.2. Macroenvironment
3. Competitive Analysis
4. Market Analysis
5. Basis for Sustainable Competitive Advantage
6. Marketing Strategy
6.1. Product Line Strategy
6.2. Branding & Positioning
6.3. Pricing Strategy
6.4. Marketing Communication Strategy
6.5. Customer Service
7. Overall Assessment of Marketing Strategy
8. References
1. Company Overview
1.1 The Walt Disney Company
The Walt Disney Company is one of the biggest media and entertainment corporations worldwide. It was founded by Walt Disney in October 1923 starting with the production of a series of Alice Comedies. The first Mickey Mouse cartoon was then released in 1928 (The Walt Disney Company, 2013a).
Today the company operates in five business segments: media networks, studio entertainment, consumer products, interactive media and parks and resorts (The Walt Disney Company, 2013b): the Media Networks comprise broadcast, cable, radio, publishing and digital businesses across two divisions – the Disney/ABC Television Group and ESPN Inc. Disney Studios include Walt Disney Animation Studios and Pixar Animation Studios, Disneynature, Marvel Studios, Lucasfilm and Touchstone Pictures. They also own two music labels and theatrical groups producing Broadway shows like ‘The Lion King’ or ‘Disney on Ice’. Disney Consumer Products is the world largest licensor and delivers toys, apparel and books. They operate 350 Disney retail stores worldwide. The business segment Interactive Media creates entertainment for digital media platforms like games. Finally, the segment parks and resorts comprises five vacation destinations with 11 theme parks and 44 resorts in North America, Europe and Asia, with a sixth destination currently under construction in Shanghai. They also have four Disney Cruise Line ships; 12 Disney Vacation Clubs approaching a total of 200,000 member families; and Adventures by Disney, which provides guided family vacation experiences to global destinations.
In 2013, Disney earned revenues of $45,041 million which represents an increase of 7% compared to 2012. The net income gained 8% to $6,136 million and the earnings per share for the year 2013 increased 8% to $3.38 (The Walt Disney Company, 2013c, p.1). Its profits amount to $5.6 billion and the market cap is $103.96 billion which makes the company very valuable. At the moment Disney has approximately 166,000 employees around the world (Forbes, 2013). The parks and resorts segment was one of the main growth drivers in 2013: they contributed more than 31% ($14.1 billion) to the overall company revenues and 21% to the segment operating income. The revenues represent an increase of 9% compared to the previous year and make up the second largest income source of the firm after the business segment Media Networks (The Walt Disney Company, 2013c, p.2). Therefore, the parks and resorts play a very important role in the company's brand portfolio. The paper will therefore focus on this business segment.
1.2 The amusem*nt park industry
The amusem*nt park industry represents a multi-billion dollar sub-category of the travel and tourism industry. Major amusem*nt park companies in the U.S. include Walt Disney Parks & Resorts, Six Flags Inc., Universal Studios Recreation Group, SeaWorld Parks & Entertainment and the Cedar Fair Entertainment Company. All of them are among the top 7 largest amusem*nt park corporations in terms of annual attendance but only Disney and Universal Parks have parks around the globe (TEA, 2013). All of these parks are destinations parks (except Six Flags). Smaller, more regional parks supplement the market but often just focus on niche markets by offering special rides (Mintel, 2013).
Worldwide, amusem*nt parks he U.S. parks generated $15 billion of revenues and contributed approximately $57 million to the U.S. economy. The average annual growth rate of the industry between 2008 and 2013 was 2.1% but is expected to grow faster in the next five years as the economy recovers from the recession (IBISWorld, 2013). Currently there are more than 450 amusem*nt parks and attractions in the U.S. and approximately 300 amusem*nt parks in Europe. Nevertheless, the industry in the U.S. is highly concentrated as the 50 largest companies generate about 85% of the total industry revenue. Disney alone had a market share in terms of revenues of 51.23% in 2012 (Hoover’s, 2013). In 2012, 205.9 million people visited the top 25 amusem*nt parks worldwide which represents a growth of 5.2% compared to 2011
In general, about 55% of the overall park revenues are earned through admission fees and about 30% through food and merchandise sale. Parking fees, commission income from third-party exhibitors, advertising and fees for hosting events make up the he remaining 15% Hoover’s, 2013).
2. Marketing Environment Analysis
Marketing is an important determinant of profitability in this industry. However, various factors can present either threats or opportunities which require to adapt the marketing accordingly.
2.1 Microenvironment
Factors in the microenvironment affect the company directly but are can be influenced by the firm to a certain degree. Those factors are the bargaining power of buyers and suppliers, the threat of new entrants and substitutes as well as the rivalry within the industry (Porter’s 5 Forces).
The bargaining power of buyers is relatively high mainly due to low switching costs. As consumers can easily visit other amusem*nt parks in their free-time if they are not satisfied with Disney’s attractions, admission fees etc., Disney has to strongly focus on customer satisfaction and offer superior value. If consumers do not get what they are looking for at the Disney Parks and Resorts, they are likely to switch to one of the competitor’s parks, which are especially in the U.S., located close to the Disneyland locations. Hence, Disney always has to communicate their value proposition very clearly in its marketing communication.
The bargaining power of suppliers is relatively low because companies which construct rollercoasters and other rides and those who deliver beverages or food for the parks like Pepsi and co*ke are also corporate partners with all the other amusem*nt park providers. Hence, the threat of a vertical integration is negligibly. Firms which construct rides are rather dependent on huge theme park providers like Disney.
The threat of new entrants is also very low as the entry barriers are very high due to immense capital requirements. Huge parks like Disneyland can also profit from economies of scale in operations and advertising. Nevertheless, it is crucial for Disney to focus the differentiation aspect in all their marketing activities as brand image and identification can also create strong entry barriers by forcing new entrants to spend heavily to overcome Disney’s huge brand equity and customer loyalty (James, 2013).
The threat of substitutes is rather high for the whole industry as there are a lot of other activities a family can do in their free-time like visiting museums, go hiking in National Parks, going to cinemas or making vacations abroad. As the offer of these indirect competitors is often less expensive than visiting an amusem*nt park, the parks need to have a strong brand image so to influence customers’ preferences. Walt Disney’s Parks and Resorts are positioned very well for that challenge because they not only have parks, but also the vacation resorts in North America, Europe and Asia, the Disney Cruise Line and the Adventures by Disney, which provide guided family vacation experiences. Hence, their marketing communication has to create awareness for these activities as well.
Finally, the rivalry within the industry is intense as customers have low switching costs. The major competitors of the industry (Disney, Universal Studios, Six Flags & SeaWorld) have huge marketing budgets to influence customer preferences. Therefore, it is again critical to emphasize the differentiating factors in the marketing communication. Even though all major parks offer entertainment for the whole family, they position themselves slightly different. Disney constantly needs to communicate its point-of-differences and its emotional benefits in order to keep up its strong brand image and so to contrast itself from competitors (see part III for a detailed competitive analysis).
2.2 Macroenvironment
There are mainly six factors (PESTLE) which determine the external marketing environment and over which marketers have little control:
- Political and legal factors
The amusem*nt park industry can be strongly affected by the political climate. Especially as Disney operates in China, it is very much dependent on government regulations and is constantly under governmental control (China Daily, 2011). Tax laws and laws affecting competition are also important determinants for the success of the company. Therefore, marketing strategies also have to consider governments in order to keep good cooperation relationships with them.
- Economic factors
The health of the economy is central for the whole tourism industry as demand depends very largely on consumers’ disposable income. Business cycles can influence the amount of available free-time people have and thus affect the attendance rates. Inflation rates, savings rates and consumer purchasing power further are critical determinants for amusem*nt park operators. Consumer confidence and spending and unemployment levels finally influence the profitability of the industry (IBISWorld, 2013).
- Social and cultural factors
The tourism industry as a whole is strongly affected by changes in consumer lifestyles. Especially the ‘Cocooning’ trend can affect the industry adversely as more and more people like to stay at home (“my home is my castle”) and to be entertained by their home entertainment systems. Furthermore, the rise of the social media influences the industry. The parks not only have to be present on social networking sites but also need to control the ‘buzz’ and track consumer reviews as those can be very harmful for a company. But social media also gives marketing the opportunity to directly interact with customers and to build stronger relationships with them.
Demographic factors are a further important determinant for the industry: as there is a demographic shift in most developed countries, the theme parks have to adjust their marketing strategies accordingly to target not only young customers or young families. As especially Disney’s’ parks require a whole vacation package due to their long distance from home for many customers, the mobility of the population and the income distribution are also decisive factors. The extreme urbanization trend represents another challenge: as urban consumers have more disposable income but also more opportunities to spend it and to entertain themselves, the parks and especially their marketing departments have to find ways to attract also those people.
- Technological factors
Parks always have to be aware of new technologies and to integrate them into their experience offer to stay up-to-date and be attractive to consumers (e.g. use digital displays in the parks or offer apps for smartphones etc.) But technological advances also affect the marketing of theme parks. Through the increasing adoption and use of digital technology marketers can use this as an opportunity to target customers more directly by customizing marketing messages. Furthermore, new marketing techniques result from new technologies such as search engine advertising or social media. Thus, parks need to adjust their marketing strategies for the new channels and use these opportunities to make them even more efficient.
- Environmental factors
The travel industry can also be affected by adverse weather conditions arising from short-term weather patterns or long-term change or by catastrophic events and natural disasters such as excessive heat or rain, hurricanes, tsunamis and earthquakes (The Walt Disney Company 2013d).
3. Competitive Analysis
The three main direct competitors of Walt Disney in terms of worldwide attendance are Universal Studios Theme Parks & Resorts, Six Flags Inc. and SeaWorld Parks & Entertainment. In 2012, Disney’s theme parks hosted almost 126.5 million guests (+4.9% compared to 2011), making it the world's most visited theme park. In comparison, 34.5 million people visited the Universal Parks (ranked number three globally) which are located in Florida, California, Japan and Singapore. It revenues amounted 2012 to $2,085 million (Comcast, 2013, p.60), which represents only 14.8% of Disney’s revenues from its parks. At the same time, Six Flags’ 18 regional theme parks in North-America were visited by 25.7 million guests and gained revenues of $1,070 million (Six Flags Entertainment Corporation, 2013). Moreover, SeaWorld was visited by 24.3 million guests in 2012 (TEA/AECOM, 2013, p.13).
All the parks offer an entertainment program, even though they position themselves differently. Disneyland and SeaWorld basically focus on kids and tweens, but who are dependent on its parents to take them there. Both parks are built to have a great time with the whole family, even though Disneyland focuses on creating a place “where dreams come true” (Disneyland Resorts, 2013) and SeaWorld Parks & Entertainment focuses more on the educational aspect of learning something about the sea life (SeaWorld Parks & Entertainment, 2013.) and so uses a differentiation strategy. But both parks target the young audience and their parents, so the rivalry between them with regard to the target audience is very high. Merely the branding of SeaWorld and its marketing activities are not as powerful as Disney’s. So despite having a relatively high awareness in terms of its brand name, SeaWorld is not that strong in creating an emotional relationship with its customers and thus has a lower brand equity than Disney. SeaWorld also frequently offers discounts and coupons to create interest and giving customers a ‘reason why’ to visit the park which also shows the rather low customer loyalty (as they are not able to charge a price premium). Furthermore, they have a very low breadth of product line compared to Disney as they do not offer anything besides their parks (only 3 parks in the whole U.S.) and as they do not have diverse kind of parks, they have no deepness in their product line and so cannot serve different customer preferences.
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