The background study of the project has been facilitated and supported by available literature in the form of journal/ research articles and essays and other publications. The focus of the literature review has been on: · · · · · Licensing Brand Extensions and Diversifications Expansion into new geographies Brand Culture Brand Symbols The aim was to study how a brand can incorporate each of these into its branding strategy. This thus formed a basis for furthering our project of developing a case-study of the strategies that helped build the iconic brand that is Disney.
Licensing ‘Licensing’, or ‘Franchising’, allows the brand name and trade mark to be used by someone else, often in categories and industries far removed from that of the brand. This, when used successfully, translates to increased brand equity in previously uncaptured markets and brand benefits at several levels, in addition to generating more volumes in terms of sales and revenues. In 1928, a cash-strapped Disney licensed Mickey for the cover of a Pencil Tablet after the release of ‘Steamboat Willie’. This was the first of several such licensing agreements.
Later the company took care to license its name only to the best companies, lest its brand equity be diluted. Today, Disney Studios licenses its name, image and catalog of characters and titles to hundreds of companies world-wide for reproduction on shirts, shoes, sleepwear, bedding, toys, tapes, records, CD’s, books, jewelry, furniture, school supplies and much more. For instance, Disney as issuing 140 licenses to sell approximately 10,000 items bearing the 101 Dalmatians “endorsement. “This is in accordance to the comment, “The movie itself could have been a dog at the box office, but it 4 as sure to generate millions of dollars in licensing fees from T-shirts, plush animals, juice mugs, toy vet kits and more. ” Benefits to Disney from licensing of its brand-name, iconic characters and trademark can be summed up as follows: · Revenue generation without any capital investment Disney’s smart licensing policy allows it to earn revenues for use of its brandname and characters on products or ventures in which Disney itself has little or no manufacturing role of capital investment.
The revenue earned from licensing today surpasses Disney’s revenues from its primary business (movies, TV programs, theme parks/ hotels). Greater brand visibility without any direct or marketing costs Disney’s name and characters appear on a host of unrelated merchandise, indirectly advertising the brand name, sometimes creating greater awareness about the brand itself in less media-open markets or markets where Disney has yet to make a mark through television or theme-parks or even, movies. This allows Disney to utilize the marketing bucks of others to extend or enhance the value of its own brand. Negative Effects of Licensing Licensing can have certain negative impact also. Disney had licensed its rand to several confectionaries and fast food outlets in US. With the obesity epidemic among children creating panic among the parents, the Disney brand was also beginning to be associated with the unhealthy eating habits of children. This was later resolved by its entry into the health food market and by revamping the eating options available at the theme parks. 5 Brand Extensions and Diversifications ‘Line Extension’ or ‘Brand Extension’ in the form of new offshoot products of the original brand, was also an area explored for preliminary research work as part of this project.
Insight #1—A brand extension strategy for launching a new product only works if your existing brand has high enough parent brand penetration. Insight #2—Brand extensions that are not connected with the meaning of the base brand are destructive even though they might hit sales targets. 6 Insight #3—Emphasize brand-building (e. g. advertising, social media) to build the master brand, and utilize shopper marketing and couponing to sell the brand extension. The key point is that line extensions are bought out of preference for the brand and acceptability for the line extension, not preference for the line extension.
Spillover Effects of Brand Extensions: Researchers (Deborah Roedder John, Barbara Loken, & Christopher Joiner) have investigated the extent that consumer perceptions and reactions to brand extensions spill over to the parent company. And, if there is a spillover effect, they asked what are the potential risks or benefits to the parent company? ( Loken & John, 1993) has focused on whether spillover exists for perceptions of the brand name vis-a-vis consumer perceptions or beliefs or financial effect toward the brand name.
In contrast, the paper by Roedder et al examined whether spillover exists for perceptions of individual products marketed under the brand name. The findings indicate that positive spillover effects are negligible, but that negative spillover effects are evident for some types of established products. Diversification: Successful Examples Near one end of the spectrum, Dell has maintained a focused link between its brand and its core product line: personal computers. At the other end is Disney. In the 1950s, that company too had a focused brand, which signified world-class animation, mainly for children.
Today, Disney’s businesses include films, television, publishing, software, theme parks, hotels, cruises, and even an entire town -Celebration, Florida (Court, Leiter, & Loch 1999). The company’s name now represents the broader concept of “wholesome entertainment and living at any age. ” Dell has decided to remain focused for now, while Disney elected – and managed – to diversify. The crucial question for CEOs is which camp they want to be in. As these examples show, a strong company can do well in either. But when we broke down the figures showing that strong brands earn total returns to shareholders 1. percent above 7 the industry average, we found that focused brands (such as Dell, Levi’s, Sprint, and Gillette) earn 0. 9 percent more than the average, while diversified brands (such as Disney, GE, and American Express) earn no less than 5 percent more! Negative effects of Brand Extension: Damaging effects from extensions/ diversification come from the following factors: failure of the extension product lack of fit between the original and extension product categories (Keller and Aaker 1992;Loken and John 1993; Park, et al. 992; Romeo 1991) · failure to capture new market opportunities, when the brand, in an attempt to cover both the new opportunities as well as its core business, ends up being generic and therefore right for neither When a brand’s offerings or customer targets have become so diverse that the only thing tying them together is a set of broad, undifferentiated elements like “quality” and “superior value,” the brand is at significant risk of losing what made it distinctive. By keeping the brand proposition constant across markets, companies can limit the customized-for-the-market risks that might dilute or damage the core brand.
Failure to capture potential market value is an important brand risk as well as a business risk, as brands can become stale and irrelevant if their promise remains unchanged in the new market. In addition, brand-loyalty driven inflexibility leaves a company vulnerable to competitor brands that customize their value proposition for individual markets. The most successful brand extensions are characterized by a strong fit between a brand’s equity — specifically, those intangible emotional elements that endear customers — and the unmet or underserved needs of customers in a particular market.
To that end, it is 8 critical to know how the brand is currently perceived in that new market and whether those perceptions translate into customer relevance and competitive distinction. Successful Expansions into new Geographies Avon’s Turn-around: A Case Study Ten years ago, outsiders — and some insiders — felt the Avon brand had seen its best days, particularly when research revealed that Avon was perceived as “your grandmother’s company. ” Today, Avon is known as “The Company for Women,” with a worldwide sales force of over 4 million that is growing more than 10% a year.
The repositioning and brand extension was achieved through a comprehensive strategy to unleash three powerful opportunities in (1) beauty, (2) direct selling, and (3) women’s services. The key was to find Avon’s unique “sweet spot,” building on its 100-year heritage, but adding new capabilities to create new markets. Through significant reengineering, Avon freed up the necessary financial resources to transform its beauty business — which is now growing at twice the industry rate — through R&D and product development.
In addition, the company has introduced new businesses and new brands targeting different consumer segments, such as its health and wellness line and its new young women’s brand, “Mark,” for the “daughters of Avon. ” Geographic expansion is also a key element of Avon’s strategy. Over the next 5 years, the company anticipates that Central and Eastern Europe alone will yield an additional $1 billion in revenues, and the company is just beginning to see the next generation of opportunity in China.
Literature Review Disney – A Case Study
The Walt Disney Company is the largest media and entertainment conglomerate in the world.
Founded on October 16, 1923, by brothers Walt Disney and Roy Disney as an animation studio, it has become one of the biggest Hollywood studios, and owner and licensor of eleven theme parks and several television networks, including ABC and ESPN. Mickey Mouse serves as the official mascot of The Walt Disney Company. The company, which started as a studio animated company, has over time grown to become a mega-entertainment empire comprising four diversified business segments: Studio Entertainment, Parks and Resorts, Consumer Products, and Media Networks.
Each segment consists of integrated, well-connected businesses that operate in concert to maximise exposure and growth worldwide. Less than 70% of firm revenues come from a single business. Different businesses share only a few links and common attributes or different links and common attributes. Brand Culture: The real magic of Disney is the underlying philosophy of – ‘Dream, Believe, Dare and Do’. Disney as a company has seen several changes since its inception and is still evolving, but the guiding principles are still based on the founding values and beliefs.
It is this passion for people, product and service that has translated into immeasurable success for the company. (B. Capodagli & L. Jackson 2007) We identify with brands as we relate to their values, behaviors and symbols. A culture is the system of shared beliefs, values, customs, behaviors, and artifacts that the members of society use to cope with their world and with one another, and that are transmitted from generation to generation through learning. (Bates & Plog 1990) The Walt Disney Company considers the following values as an integral part of its brand culture: 10 Innovation
Honor, trust in the US people, ability to laugh at its own experiences and itself High Quality across all product categories Brand Culture Optimistic Entertainmentabout hope, positivity, aspiration Every product tells a timeless, inspiring, delightful story Community- can be shared by the whole families and across generations Disney’s business can be really thought of as keeping alive the magic of childhood. childhood New relationships are created across the world, crossing geographical borders, political differences and goes beyond the limits of the old communications methods This is methods. orcing marketers to see the world in a new perspective, not bound by geographical borders, but truly global. Target groups may be local one day, and spread across the spread world the other, depending on the offer. This is due to the fact that people from diverse countries may share the same traits, and they talk to each other (M. Rukstad & D. Collis, September 2005) While designing marketing campaigns, rather than tapping into narrow subsets, Disney than expands perception of the general market to include them. Disney’s success is due to its 11 ommitment to diversity in both its creative content as well as its work force. The campaigns are designed in such a way as to engage the specific niches. For instance, in 2006, Disney launched the Ebony Perspectives Community, a branded online community to improve its cultural relevancy to the African American guests. But Disney was unable to draw quality insights from this due to the low participation rates. Generating trust between this cultural group and the Disney brand was identified as a prerequisite for gaining insights into their needs, wants and lifestyle.
The company identified the engagement barriers to create a brand centric frame of reference, thus reengaging them with a greater degree of transparency and authenticity. Brand Symbols There is no disagreement that effective branding through ‘use of a name, term, symbol or design, or a combination of these’ (Quester et al, 2001) can create brand awareness and recognition in the quickest manner. Companies use different kinds of ‘Brand Name’, that is, a word, letter or a group of words such as AOL, Intel Pentium III etc to project their companies.
Sometimes such words, symbols or marks are legally registered and copy righted to a single company known as trademarks (product oriented companies) and service marks (service oriented companies) (Perreault & McCarthy, 2000).
Benefits from Brand Symbols
Brand familiarity among consumers in terms of brand recognition and brand preference (Papers4you. com, 2006). The advantage of using branding effectively is both for consumers as well as marketers. For instance it becomes easy for a customer to choose preferred brand among 1000s of other items just because of famous well recognized symbol, word or trade mark that an not be possible with out effective branding (Quester et al, 2001). For the symbol ‘M’ with red 12 background and yellow font clearly indicates a Mc Donald’s nearby.
Similarly, the consumer is not bothered about checking the background of the company, when they see a very well-known logo, for instance, the conspicuous IBM signature. This saves huge promotion costs compared to a lesser known company. In some cases, iconic brand symbols or ambassadors carry fond memories and can hence even capture some degree of loyalty/ preference from the customer.
The Amul girl has become synonymous with Amul Butter, and hence remains an endearing and unchanged fixture in its campaigns and packages. Sometimes, long-term or well-‘fitting’ powerful association with ambassadors also results in bringing the ambassador at par with brand symbols. Mickey Mouse is Disney’s most enduring and most endearing brand symbol/ ambassador. He has been ‘saluted’ at three of the Disney theme parks by having “lands” created in his honor – Mickey’s Birthdayland (now Mickey’s Starland) opened on November 18, 1988, in the Magic Kingdom in Walt Disney World to honor him on his 60th birthday.
Mickey’s Toontown opened in 1993 in Disneyland. Mickey’s Toontown opened in 1996 at Tokyo Disneyland The Walt Disney Company is the largest media and entertainment conglomerate in the world. Founded on October 16, 1923, by brothers Walt Disney and Roy Disney as an animation studio, it has become one of the biggest Hollywood studios, and owner and licensor of eleven theme parks and several television networks, including ABC and ESPN. Mickey Mouse serves as the official mascot of The Walt Disney Company.
The company, which started as a studio animated company, has over time grown to become a mega-entertainment empire comprising four diversified business segments: Studio Entertainment, Parks and Resorts, Consumer Products, and Media Networks. Each 13 segment consists of integrated, well-connected businesses that operate in concert to maximise exposure and growth worldwide. Less than 70% of firm revenues come from a single business. Different businesses share only a few links and common attributes or different links and common attributes.
Business Diversification as a strategy for growth Disney distinguishes itself by the fundamental understanding and usage of the concept of synergy between its different business units to create value. Disney had not prospered much during the World War II in comparison to its studio competitors and has invested a lot in producing films for the US government. Part of the reason was the labour intensive nature of work involved in producing animation. After the war, Walt Disney was poised to expand his enterprises.
After the war when Disney looked at expanding its enterprises, it set it sights beyond the film industry taking the route of diversification. The diversification strategy followed by Disney is driven mostly by financial goals. For instance Disney’s decision to diversify into France (Disney 2006) with the theme park may, among other reasons, have been prompted by economies of scale. Economies of scale should result from the new theme park, because much of the costs associated with planning a theme park have already been incurred.
Also, the sales of Disney toys will increase, allowing for additional economies of scale in production. Through such Distant-Related Business Diversification, Disney is able to achieve operational efficiency for its four main business units by sharing technological and marketing resources. The main strengths of Disney’s internal resources refer to human resources and financial stability. The recent acquisition of Pixar(2006) is a move to extend its competitive advantage in the animation market by taking advantage of Pixar’s core technologies which include animation and production software systems.
Diversification also allows the company to control costs, and still sustain positive performance of its theme parks, media network, and studio entertainment and consumer products businesses. Financial risks have been minimized by sharing initial investment costs with a maximum number of outside participants. Disney, together with its subsidiaries and affiliates is a leading diversified international family entertainment and media enterprise with 4 business segments
- Media Networks
- Parks and Resorts
- Consumer Products
- Studio Entertainment
DISNEY Media Networks
The objective of the project is to study and analyze the strategies and factors that helped build the iconic Disney brand. The project focuses on studying Disney’s success strategies around these 4 major areas: Brand extensions Brand expansion into new geographies Brand culture Brand symbols Research Objectives: The project has the following research objectives: To study and analyze the brand Disney. To study the different brand extension of Disney and understand the strategies and factors that worked for them. To study how Disney successfully expanded their brand offering in several geographies.
To study and analyze the brand culture of Disney and understand how the company has maintained their corporate culture across geographies. To study the symbols of Disney and understand how these symbols have added value to the overall Disney brand.
Research Methodology: For the purpose of this project we will be conducting both Secondary and Primary research. However, a major part of our study will be based on data gathered from secondary sources. Secondary Research Study and analyze data gathered from books, case studies, journals, trade magazines, industry reports, corporate websites, etc.
Primary Research Qualitative Research: In depth interview of Mr. Samik Bhowal, employee at Disney Research Tools: Content Analysis: Qualitative content analysis of the data gathered from the in-depth interview and secondary sources will be done. Semiotic Analysis: A semiotic reading of the Disney brand culture and symbols will be done. 19 Expected Outcome: The study is expected to throw up some of the following insights: · Help one understand how a company can successfully use various branding activities and strategies at different stages of its life-cycle. The comparative impact of different strategies in one particular stage vis-a-vis awareness generation, attitude to product, trial, repurchase and hence the return on investment of the branding exercise. · How the reach of a brand can be extended successfully to different geographies and cultures and how choosing to alter and also not to alter can impact the brand’s standing in the new market as compared to the original market · Understand how a brand can invest in symbols and how the value associated with them can be leveraged to add value to the overall brand.
The magic of Disney is in fact the seamless synergy between its diverse businesses. The following section explores Brand Disney using some of the basic tenets of branding. Brand Image Brand Image is consumer perceptions of a brand as reflected by the brand associations held in consumer memory. Below is an associative network for the Disney brand that has been built on the basis of an analysis of an ongoing debate on Brandchannel. com. Retail Family Kids Entertainment Theme Park Brand Disney Mickey Mouse Movies Animation Figure 6: Disney Brand Associations
Brand Personality
Physique: Mickey Mouse, Snow White, Fun rides Personality: Interesting, Entertaining, Caring, Perfect Relationship: Friendly, Caring Disney Culture: American Reflection: Fun loving, Entertainment seeking Self image: Loves fun with family, Eager, modern, American Figure 7: Kapferer Brand Identity Prism for Disney Brand Extension at Disney A Brand Extension occurs when a firm uses an established brand name to introduce a new product. When a new brand is combined with an existing brand, the brand extension can also be a sub-brand.
An existing brand that gives birth to a brand extension is the parent brand. If the parent brand is already associated with multiple products through brand extensions, then it may also be called a family brand. (Kevin Lane Keller, Strategic Brand Management, 2008). Brand Extensions fall into two general Categories. The extensions of brand Disney can be categorized under both of these groups. Line Extension: When the parent brand is applied to a new product that targets a new market segment with a product category that the parent brand currently serves.
It may include anew flavour or variety. The opening of Tokyo Disneyland can be considered to a line extension of brand Disney. Category Extension: When the parent brand is applied to an entirely different product category from the one it currently serves. The entry into the theme park business when Disney was only a production house can be considered a category expansion by Disney. Majority of the brand extensions are typically line extensions. According to a well known branding expert, Edward Tauber, there are seven general strategies for brand extension exists.
Following table cites some examples from Walt Disney for each of these seven strategies. Introduce the same product in different forms Introduce products that contain the brand’s distinctive taste, flavour, and characteristic Introduce companion products for the brand Introduce products relevant to the customer franchise of the brand Introduce products that capitalize on the firm’s perceived expertise Introduce products that reflect the brand’s distinctive benefit, attribute or feature Introduce products that capitalize on the distinctive image or prestige of the brand
The re-releases of the animated film Snow White and the Seven Dwarfs, and the home video version of the same movie Latest Social Media foray. Forum for family to discuss kids problems tapping on the ‘Family’ concept The Disney owned Travel agencies, hotels and restaurants that cater to the theme park crowd The introduction of a kids channel and radio programming for kids From cartoons to animation to real life movies to film distribution to home distribution Comic Strips, Educational Software and Video Games Licensing, apparels, sports retail Figure 8: Edward Tauber’s Brand Extension Strategies
Porter proposes three tests to evaluate a diversification in terms of share holder value. The evaluation ascertains that Disney theme park passes all the three tests. Porter’s Test for Evaluation of Diversification for Disney Theme Parks The Attractiveness Test Entry Barriers are high due to high fixed costs. Suppliers have very little power being desperate for business after recent decline in amusement park crowd. Buyers are unorganized but there is no other form of entertainment that matches the theme The Cost of Entry Test It had very high fixed costs and rested on quelling public skepticism.
But Disney approached it with the expectation of fixed costs being lower than the expected profits The Better-Off Test Disney’s diversification efforts, more than anything else propagated the magic of Disney. Television advertised the movies, which advertised the hard goods which in turn advertised the television shows. Disneyland provided the ideal platform to capitalize on the advertising potential of these kinds of media Recent Brand Extensions of Walt Disney The most recent extensions are targeted at tapping all age groups rather than sticking to the core segment of kids.
Despite its presence in various segments, Disney’s business suffered due to the 2008 economic recession. However, the company has decided to stretch its brand further by entering into high-end consumer products through its “noncharacter” products. These products of Disney, unlike its earlier consumer products do not have the cartoon characters of Disney printed on them. They can be identified as a product of Disney only from the label. By extending into high-end consumer products, Disney has to face the threat from other well-established players such as Zara, Louis Vuitton (LVMH), IKEA, etc. in those product categories. Some of the recent extensions include: Disney Netbook for kids, Branded child care market in India, Children health food in European Supermarkets, Disney Mobile Phones etc
The Disney Foray into Social Media
Disney Xtreme Digital: a Social Networking for Pre teens Disney Family Community: a customizable online destination where moms and dads can connect and interact with other parents, share common interests including hobbies, age of children, family setup, parenting tips, geographic location and many more etc.
DisFriends: a central meeting place for worldwide Disney fans that run on the themes of Meet, Mingle and Magic ? The Disney Park’s division has three social media ventures, Mom’s Panel, Dream CMO and Disney Dad’s Movie Club ANSOFF MATRIX Existing Markets The second theme park in US – Florida Market Penetration Product Development Heath food in US New Markets Market Development Expansion of theme parks into Europe, China, Japan Diversification Baby Care in India Existing Products New ProductsExpansion across Geographies
Introduction: The Walt Disney Company Disney, founded in 1923, became the world’s best-known entertainment company.
A turnaround in the mid-1980s engineered by Michael Eisner brought Disney back to financial health after a slump in the 1960s and laid the foundation for its future growth. Disney’s interests included films, broadcasting, live entertainment, theme parks and resorts and consumer projects. By the mid-1990s, Disney introduced new attractions at its theme parks and opened new parks in the USA and overseas. Disney’s film studios re-released classics like Snow White on video to raise money for Horizon 2 movies and consumer products. Disney’s films inspired a new live entertainment business with Beauty on the Beast on Broadway.
Disney: Geographic Expansion – History In 1983, the Walt Disney Company opened in Tokyo, Japan, their first theme park outside the United States. This theme park, Tokyo Disneyland became an instant success. Further, Disney started looking at Europe, where the Western European audience was already familiar with the Disney entertainment and merchandise through Disney films. France with its larger population and good transportation network was the choice for its fourth theme park Euro Disney Land: Learning’s The Walt Disney Company came in with a promise of new jobs and contracts to local suppliers which resulted in a warm welcome ion France.
Euro Disney planned on hiring 12,000 new employees and the economic benefits looked huge. This was hence their fourth theme park after California, Florida and Japan 29 Euro Disneyland’s revenue targets were not met and it reported a $ 905 million loss for the fiscal ending September 1993. A number of factors lead to the dismal performance of Euro Disney ranging from operational Errors, Labor Costs to Cultural Issues of using the American Corporate Brand in the European culture. Disney further designed a new approach in moving away from the American way and this resulted in greater acceptance.
Euro Disney has become a case in point for companies as sources of learning in possible foreign expansion. Any company entering into a foreign market should ensure it conducts and extensive, in-depth study based on exhaustive research into aspects of the economy, laws, culture, climate, interests, customs, life style habits, geographies, work habits etc Integration of Disney’s business model into new international markets and cultures Targeting Global Growth: Disney CEO Bob Iger, who has identified global growth as one of the company’s top priorities, says China and India represent “great opportunities. Yet, in both the countries “the near-term issues are great, and they are not for the faint of heart, whether it’s because of site issues, local regulation or piracy, or in some cases the sheer lack of infrastructure. ” Disney can’t buy media outlets outright in China, as it’s allowed to do in some other emerging markets. For example, in India in 2006, Disney was able to acquire a 24-hour Hindi-language channel for kids, which it hailed as an important step toward building its brand and business there. But in China, where foreign TV programming is closely regulated, Disney cartoons air at the pleasure of government-run TV stations.
As part of Disney’ Global Expansion plans, China’s entry strategy makes a very good case in point given the issues it faced in entering the not-so-friendly market and yet making it big. 30 Case in Point: Expansion into China: Background: It wasn’t until 2005 that Disney set up a wholly foreign-owned enterprise (WFOE), on the mainland. Before that, it ran its mainland operations out of Hong Kong, with only a representative office in Shanghai. Its decision to become a WFOE, was influenced by: The growing ranks of affluent Chinese consumers and A key rule change in December 2004 that allowed foreign etailers to operate without Chinese partners Disney can trace its history in China back some 70 years, to when it released the film “Snow White” in 1938. A long hiatus followed the Communist takeover. Then, in 1986, the company was allowed to start showing Mickey Mouse cartoons on state-run China Central Television, or CCTV. Retail goods got going in a small way a dozen years ago, about the same time that Disney’s “Dragon Club” cartoon show went on the air. Today “Dragon Club” is broadcast by 41 TV stations around the country. The Chinese Market:
One reason for the heavy influx of investment is that the foreign firms see an opportunity to capitalize on the supplier relationships they’ve built, at a time when retailing is coming of age inside China. They already do a volume business with Chinese manufacturers for goods sold in the U. S. or Europe. By further boosting orders to serve the China market, they can cut deals that will let them offer ultracompetitive prices. And that’s key for satisfying budget-conscious Chinese Time Rich, Cash Poor: A lot of Chinese consumers shop based on price.
They have a certain budget, and they will shop around until they get the most they can for that price. They’re still mostly time-rich and cash-poor Acquiring Real Estate: Acquisition-minded foreign outfits are also eager to secure prime real estate in China — not just in the first-tier cities but in second-, third- and even fourth-tier cities. Build relationships with officials: Besides acquiring store locations foreign retailers want to acquire knowledge about Chinese consumers, and to acquire management talent and also store talent.
And hopefully, they’ll get a company that has relationships with the Chinese government — national, provincial and local — and get a sense of how to deal with those officials. Regulatory Changes: The 2004 shift that allowed foreign retailers to begin operating without local partners. For example, Carrefour SA, one of the oldest foreign retailers in China, has been buying out some of the JVs it was required to enter into early in its history. Nature of the retail industry in China: For now, China’s retail industry remains highly fragmented, with mom-and-pop stores dominating. The top 100 retailers ccount for only 10% of the industry, according to Ernst & Young. Walt Disney Co. ‘s retail expansion in China comes in the context of a nationwide retail land grab, with acquisitions driving much of the activity. U. S. – and European-based global chains are racing to build out their networks in the Middle Kingdom, even as local players seek to build scale through tie-ups. The Locally tailored Retail Strategy: By 2007, Disney’s presence was in over 4,200 retail “corners” (400-square-meter Walt Disney Co. children’s clothing and toy outlet within the store) devoted to its merchandise in mainland retail stores.
That’s up from just 1,700 corners a year ago, an increase that reflects a locally tailored strategy emphasizing sales of brand-name goods like sweaters, stuffed animals and watches. Worldwide, Disney’s television, film and theme park divisions account for about 94% of sales, with consumer products chipping in a modest 6%. But in China, Disney’s consumer arm — which includes licensed toys, clothes, books and games — actually accounts for the bulk of company revenue Choosing Partners: The retail strategy involves working with several different kinds of partners.
Global retailers such as Wal-Mart and Carrefour are generally allowed to choose their own suppliers to make Disney-licensed clothes and toys. Meanwhile, Disney’s recent shift to WFOE status has allowed it to do deals with smaller licensees in Chinese renminbi, greatly increasing its base of potential partners. Before, as a representative office, Disney could work only with licensees that did business in dollars. Licensees that make and sell Disney-branded toys, clothes and footwear in local stores run the gamut from multinationals such as Gillette Co. for toothbrushes and Japan’s Unicharm Products Co. Ltd. or diapers all the way down to local outfits that deal in Disney-brand clothing and stationery. While Disney does a healthy business with key accounts such as Wal-Mart and Carrefour, it actually does the majority of its business in China through these licensees Concentration in the retail segment: Many Chinese in their 20s grew up watching televised cartoons of Mickey and Donald Duck and watching videos (albeit often pirated ones) of Disney movies. In 2006, despite tight restrictions on imported movies, Disney managed to obtain theater showings of three of its films, including “The Chronicles of Narnia,” “Eight Below” and “Cars. According to Disney, a theatrical version of “The Lion King” that played in Shanghai in the summer of 2006 set a national record, with 5,000 tickets sold in a single day. Some Chinese Disney fans have even made the pilgrimage to Hong Kong Disneyland, the theme park that opened in September 2005 and is expected to see growing mainland traffic. All this would seem to offer a promising foundation for future expansion China typically allows only 20 films to be imported into the country each year for theater screenings. Disney’s kid-oriented fare does comparatively well under the quota.
But the tight limits also likely contribute to counterfeit sales of movie DVDs priced at $1 or less – a painful source of lost revenue for Disney’s film business. 33 Distribution: Amid that expansion, Disney has sought partners that boast a combination of national presence and strong distribution networks. Disney is looking at moving towards broader distributed products that can reach across the city instead of individual city focus Challenges: Stretch and Penetration: Distribution poses a challenge unique to China. China has over 600 cities, and consistent execution across them is not easy.
Even if a retailer managed to achieve solid distribution across China’s urban areas — a major feat by any reckoning — it would still be reaching only 40% to 45% of the population. Moving into Tier II cities and Pricing Strategy: As Disney reaches into more second- and third-tier cities, it’s also trying to figure out how to balance quality products with affordable prices that the less affluent customers there can afford. That means selling Disney-branded toothbrushes for only $1. 50, compared to $3 to $4 in the U. S. , or packaging milk in smaller containers.
Pricing Strategy: As Disney reaches into more second- and third-tier cities, it’s also trying to figure out how to balance quality products with affordable prices that the less affluent customers there can afford. That means selling Disney-branded toothbrushes for only $1. 50, compared to $3 to $4 in the U. S. , or packaging milk in smaller containers. The difference for China is that where bigger is better in the U. S. , in China it’s sometimes seen as wasteful. Price Conscious Population: A lot of Chinese consumers shop based on price.
They have a certain budget, and they will shop around until they get the most they can for that price. They’re still mostly time-rich and cash-poor Disney’s Pricing Strategy: Disney prices are relatively high for China. At the Sogo department store in Beijing, a child’s Minnie Mouse sweater costs 308 renminbi ($39) while a Peter Pan jigsaw puzzle goes for Rmb88. 34 The Sogo store caters to especially well-heeled Chinese in one of the nation’s wealthiest cities, so its clientele may be more willing than most to pay extra for a foreign brand name.
Pricing could pose a problem for Disney, based on his informal surveys of Chinese consumers who’ve visited Disney specialty stores. People believe the accessories and toys are a little overpriced. If they want to expand very fast or gain more share in China, they need to set their price at the right levels according to an industry expert. Risks: Besides pricing and demand issues, foreign brands such as Disney confront a risk more specific to China: widespread counterfeiting, including fake goods sold online and by street vendors.
A few days before Christmas, for example, it is easy to find giant Disney stuffed animals being sold alongside generic teddy bears from wheeled carts in downtown Shanghai. Fighting Piracy: Disney’s main anti-piracy strategy is geographic expansion. Counterfeiters tend to have a foothold in areas where we don’t have supply yet. Hence, the key is to make the genuine brand products available. Getting consumer’s involved: Disney has also taken the more unusual step of getting consumers involved in fighting piracy. It labels its products with holograms, and then gives retail customers an incentive to buy only authentic Disney goods.
It also ran a promotion on its TV shows inviting customers who bought Disney products to find the hologram, peel it off, then affix it to a card and mail it in for a chance to win prizes including a trip to Hong Kong Disneyland. The campaign got a huge response. Marketing and Promotions: Partnering with retailers: Disney also teams up with retailers on marketing. Last year in Wuhan, it ran a promotion in which customers who spent at least Rmb88 got a free video compact disc of Disney cartoons. Hong Kong DisneyLand: Hong Kong Disneyland, drew more than 5 million visitors in its first year of existence.
The theme park has been very successful in introducing our branded characters to a new audience. Around 70% of visitors during the Chinese New Year holiday hailed from the mainland Currently until China eases up on its broadcasting regulations, Disney will have to rely on its name-brand goods to drive sales in China. Future in China: Park in Mainland China: Disney has currently finalized a deal to build its first park on mainland China. Shanghai Disneyland will cost an estimated $3. 5 billion to construct and is scheduled to open in 2014.
Disney will own 43%, with the remainder owned by the local government. Move away from Retail Sector: Disney has always seen huge potential in China, but to date the majority of its profits from the country have come from its thousands of retail “corners,” which sell brand-name goods like sweaters, watches and stuffed animals. While revenue from the Shanghai park and an expanded Hong Kong Disneyland won’t overtake those from Disney’s China consumer arm, the parks will help diversify Disney in a country where its growth has been stymied by obstacles including strict media ownerships rules and piracy. Disney: Future Expansion Plans: Honk Kong: The Walt Disney Co. is nearing a deal with the Hong Kong Special Administrative Region government to finance an expansion of Hong Kong Disneyland. The theme park, which opened in September 2005, is operated through a joint venture between Disney and the Hong Kong government. Under terms of the deal, Disney would fund the expansion, and the government would convert existing loans to the JV into equity, retaining its majority 57% stake.
Entry Strategy: Walt Disney Co. s looking to implement the same local strategy at its flagging Hong Kong Disneyland theme park — sales were off 30% in 2007 — that it’s used to successfully launch its China retail business. Disney has used a locally tailored strategy emphasizing sales of brand-name clothes and toys to grow its retail stores in China to 4,200 locations in February 2007, up from just 1,700 a year earlier. The rapid growth has been helped by a relatively light regulatory environment in retail. Russia: The Walt Disney Co. has announced a joint venture with Media-One Holdings Ltd. o launch a family entertainment channel on 30 Media-One-owned television stations in Russia. Slated to launch in early 2009, the new channel will air popular Disney programs and original Russian programming. Partnerships/JV’s: In addition to a cash investment, Disney, which will own 49% of the venture, will contribute marketing, advertising and content acquisition expertise. Media-One will contribute its broadcast stations and knowledge of the local market. And as majority owner, Media-One will also appoint a majority of the board of directors.
Disney has been building its brand in Russia for over 15 years, providing television programs, distributing films and selling licensed merchandise. It expanded into video 37 games in 2002, and today is the market leader in the children’s games segment. In September, it began shooting its first Russian-themed feature length film in Minsk. Disney’s Brand Culture “I knew if this business was ever to get anywhere, if this business was ever to grow, it could never do it by having to answer to someone unsympathetic to its possibilities, by having to answer to someone with only one thought or interest, namely profits.
For my idea of how to make profits has differed greatly from those who generally control businesses such as ours. I have blind faith in the policy that quality, tempered with good judgment and showmanship, will win against all odds. ” –Walt Disney (Disney Dreamer 2007) The real magic of Disney is the underlying philosophy of – ‘Dream, Believe, Dare and Do’. Disney as a company has seen several changes since its inception and is still evolving, but the guiding principles are still based on the founding values and beliefs.
It is this passion for people, product and service that has translated into immeasurable success for the company. (‘The Disney Way – Harnessing the management secrets of Disney in your company’, Bill Capodagli, Lynn Jackson, McGraw Hill, 2007) Brand Culture as a Function of Organization Culture Disney’s brand and what we know today as its brand culture has been created and steered by a visionary founder (Walt Disney), a clever top management, the passion of its own people and a vibrant organization culture that not only helps create the characters but gives them their personality.
The corporate culture of Walt Disney is one of magic, empowerment, and diversity. In an interview with CEO and chairman, Michael Eisner (2000), he states, “Make sure people throughout the organization routinely perform ‘practical magic’ – a potent mix of exciting ideas and hardheaded questioning”. The organization is strongly driven by creativity and innovation with emphasis on ‘having fun at work’, collaboration and energy. This creates an atmosphere of empowerment for Disney’s employees and reflects in the creative work as well in its light-hearted optimism.
Disney also has its own Disney University to train new employees in the Disney way of work and play. According to Jim Cunningham of the Customer Service of The Walt Disney Company is known as being the best in the world, and Disney University emphasizes two key points: “The front line is the bottom line,” and, “It’s 10 percent product and 90 percent service”. Brand Culture as a Function of Brand ‘History’ Disney has a strong foothold and wide reach as well as appeal in the entertainment industry, a feat accomplished mainly due to their history and roots in the American culture.
The history and name of Disney are very important when it comes to competition in terms of positioning their products and services in the minds of their consumers. The Walt Disney Company has an 87-year heritage of creativity and innovation, and for generations, the Disney name has come to represent trust, decency, optimism and quality- in short, all ingredients that guarantee high-quality clean family entertainment and fun. This history has given also Disney an advantage of instinct and familiarity when it comes to selling its products.
Disney has now mastered the process of post-release merchandising, with all the pre-release research and marketing strategies already in place and waiting to be implemented following the release of the film. This has been imbibed over the years through following such cycles for dozens of animated theatrical productions and releases. This is one reason why Disney’s branding cycle is still centered on theatrical productions and then riding the wave of popularity of the recent film to further create opportunities to both sell character-based products and popularize the brand culture by individual characters and their symbols.
The products range from television series, cartoon books, hobby ideas, games, dolls, apparel and even content on mobile phones. Every aspect of Disney promotes not only itself but every other aspect as well in a circular rotation and, as Roy Disney was quoted, “keeps [consumers] Mickey Mouse minded” thereby creating a basis for propagating the brand and brand culture of Disney all over again.
Innovation or Tradition?
Disney is known for its ground-breaking innovation and has shown the way forward to many in the entertainment business.
It constantly keeps itself updated with the latest technical and technological techniques to make enjoying its products truly enjoyable. Its innovative policies at its theme parks like FastPass, PhotoPass etc, based on consumer insights have been widely appreciated by visitors for the convenience offered, while simultaneously giving Disney more opportunities to generate more revenue. It also comes up with some of the most innovative business propositions, a legacy of its creator who believed it to be the key ‘differentiator to stay ahead in the race. ’ Disney has identified its strategic priorities (Disney India website) as:
Creating quality and innovative content that continues to differentiate Disney as best-in-class; Deploying cutting edge technologies to showcase our content for early competitive advantage while enhancing the customer experience; Expanding and adding depth to our global presence, particularly in emerging markets. This holds across all its businesses. Disney’s goal is to create the world’s best family entertainment and apply innovative technologies to raise the level of the consumer experience in a way that differentiates Disney- this value dynamic is referred by Disney employees as the Disney Difference.
- Despite all the emphasis on creativity, fresh ideas and innovation, Disney still sticks to a tried and tested process when it comes to branding activity:
- Mickey Mouse is still its most visible brand symbol s Disney film productions still animate fairy/ popular tales though throwing in some modern context
- Theme parks run the same iconic shows or shows with similar formula and music as that of decades ago when Disneyland opened in 1955 41
Disney itself continues to be known as a children’s entertainment company that caters to the whole family with its wholesome features and products despite the company owning channels like ABC News and ESPN as well. These are the results of deliberate policy on part of the Disney Company to keep the ‘feel’ of the brand the same, despite its product-portfolio increasing ten-folds. This means that its current brand culture is very much the same as it was decades ago.
This has admittedly gone more in favor of the company than against it, though for a company which has built itself up on creativity, it is a somewhat ironic fact but not one that its customers are complaining against. The Disney brand has been projected as decent, forever child-like and unchanged against changes in politics and history. This manner of projection captures the agegroup of 4-12 years old, and creates a legacy among adults who continue to regard it fondly as part of their growing years and might like to initiate their own children to it.
On the flip side of this culturization, the attractions of its products are rather limited, a handicap that Disney is trying to overcome with new business ideas and propositions. For instance, Disney has attracted young girls through the Disney Princesses Belle, Ariel, Sleeping Beauty, Snow White, Cinderella, and Jasmine. Now Disney is under continuous pressure to continue growing their Disney Princess Sector, and the result is the targeting of even younger girls – girls still in the crib.
To accomplish this Disney will be making products such as cribs and various infant products picturing the various princesses and even some new princesses who are due to make their appearances in the near future (Marr, 2007). Family Orientation The attribute base is employed within Disney by the customer benefit–-a familyfriendly, safe, fun environment that is open for business all year. Disney is very much a family-oriented company that targets families of median incomes. Disney offers specials and value bargains for families, such as discounts on flights, “Kids Fly Free” ads, 42 iscounts on car rentals and special package hotel rooms to attract more people to their parks. But the most important positioning base utilized by the Walt Disney Company is the one that distinctly sets them apart from any of their competitors: Emotion (Hair, Lamb & McDaniel, 2008). This is where the Disney history and brand culture come into play. The name Disney has been a part of people’s lives for a very long time ad embodies characters every child has enjoyed in the same format since 1923. The Disney brand can have the effect of bringing fond memories of childhood, producing a sense of eternal youth.
Disney indeed attracts people of all ages- the young as well as the old. With plans to sell Princess Series cribs, Disney is literally targeting people right from their cradles! Brand Culture & Different Geographies The Disney Company is primordially a US company that started out by propagating its American-ness and is now continuing growing after more than 80 years on the back of successful glocalization. While designing marketing campaigns, rather than tapping into narrow subsets, Disney expands perception of the general market to include them.
Disney’s success is due to its commitment to diversity in both its creative content as well as its work force. The campaigns are designed in such a way as to engage the specific niches. These are the values Disney has carried forward to other geographic markets, maintaining a balance between its iconic American characters and its multi-faceted local marketing initiatives ranging from Disney Consumer Products (merchandise) to Disney Fashion to television/ film. It has tasted success in some markets more than others.
For example, about 75% of Disney’s business still comes from US and Canada- a result of its years of experience in these familiar markets, while India has been identified as a major emerging market with a lot of branding and brand-culturing activities going on. Disney has realized through its successes and more through its failures that merely establishing a known brand-name in a new market and expecting it to work its magic on its own 43 does not work. Today’s change in world political and cultural perceptions means that all markets expect and demand equal attention and will not settle or left-overs. For instance, in 2006, Disney launched the Ebony Perspectives Community, a branded online community to improve its cultural relevancy to the African American guests. But Disney was unable to draw quality insights from this due to the low participation rates. Gener
