Evaluate the case, and respond to each question that follows the case using both theory and practical managerial thinking.
1. Disney
Few companies have been able to connect with a specific audience as well as Disney has. From its founding in 1923, the Disney brand has always been synonymous with quality entertainment for the entire family. The company, originally founded by brothers Walt Disney and Roy Disney, stretched the boundaries of entertainment during the 20th century to bring classic and memorable family entertainment around the world. Beginning with simple black-and-white animated cartoons, the company grew into the worldwide phenomenon that today includes theme parks, feature films, television networks, theatre productions, consumer products, and a growing online presence.
In its first two decades, Walt Disney Productions was a struggling cartoon studio that introduced the world to its most famous character ever, Mickey Mouse. Few believed in Disney's vision at the time, but the smashing success of cartoons with sound and the first-ever full-length animated film, Snow White and the Seven Dwarfs, in 1937 led, over the next three decades, to other animated classics including Pinocchio, Bambi, Cinderella, and Peter Pan, live action films such as Mary Poppins and The Love Bug, and television series like Davy Crockett.
When Walt Disney died in 1966, he was considered the best-known person in the world. By then the company had expanded the Disney brand into film, television, consumer products, and Disneyland in southern California, its first theme park, where families could experience the magic of Disney in real life. After Walt's death, Roy Disney took over as CEO and realized Walt's dream of opening the 24,000 acre Walt Disney World theme park in Florida. By the time of Roy's death in 1971, the two brothers had created a brand that stood for trust, fun, and entertainment that resonated with children, families, and adults through some of the most moving and iconic characters, stories, and memories of all time.
The company stumbled for a few years without the leadership of its two founding brothers. However, by the 1980s, The Walt Disney Company was back on its feet and thinking of new ways to target its core family-oriented consumers as well as expand into new areas that would reach an older audience. It launched the Disney Channel, Touchstone Pictures, and Touchstone Television. In addition, Disney featured classic films during The Disney Sunday Night Movie and sold classic Disney films on video at extremely low prices in order to reach a whole new generation of children. The brand continued to expand in the 1990s as Disney tapped into publishing, international theme parks, and theatrical productions that reached a variety of audiences around the world.
Today, Disney is comprised of five business segments: The Walt Disney Studios, which creates films, recording labels, and theatrical performances; Parks and Resorts, which focuses on Disney's 11 theme parks, cruise lines, and other travel-related assets; Disney Consumer Products, which sells all Disney-branded products; Media Networks, which includes Disney's television networks such as ESPN, ABC, and the Disney Channel; and Interactive Media.
Disney's greatest challenge today is to keep a 90-year-old brand relevant and current to its core audience while staying true to its heritage and core brand values. Disney's CEO Bob Iger explained, "As a brand that people seek out and trust, it opens doors to new platforms and markets, and hence to new consumers. When you deal with a company that has a great legacy, you deal with decisions and conflicts that arise from the clash of heritage versus innovation versus relevance. I'm a big believer in respect for heritage, but I'm also a big believer in the need to innovate and the need to balance that respect for heritage with a need to be relevant."
Internally, Disney has focused on the Disney Difference-"a value-creation dynamic based on high standards of quality and recognition that set Disney apart from its competitors." Disney leverages all aspects of its businesses and abilities to touch its audience in multiple ways, efficiently and economically. Disney's Hannah Montana provides an excellent example of how the company took a tween-targeted television show and moved it across its various creative divisions to become a significant franchise for the company, including millions of CD sales, video games, popular consumer products, box office movies, concerts around the world, and ongoing live performances at international Disneyland resorts like Hong Kong, India, and Russia.
Disney also uses emerging technologies to connect with its consumers in innovative ways. It was one of the first companies to begin regular podcasts of its television shows as well as release ongoing news about its products and interviews with Disney's employees, staff, and park officials. Disney's Web site provides insight into movie trailers, television clips, Broadway shows, virtual theme park experiences, and much more. And the company continues to explore ways to make Mickey Mouse and his peers more text-friendly and virtually exciting.
According to internal studies, Disney estimates that consumers spend 13 billion hours "immersed" with the Disney brand each year. Consumers around the world spend 10 billion hours watching programs on the Disney Channel, 800 million hours at Disney's resorts and theme parks, and 1.2 billion hours watching a Disney movie-at home, in the theatre, or on their computer. Today, Disney is the 63rd largest company in the world with revenues reaching nearly $38 billion in 2008.
Questions
1. What does Disney do best to connect with its core consumers?
2. What are the risks and benefits of expanding the Disney brand in new ways?
2. Ebay
Your APA formatted Case Study should be a minimum of 500 words (not including the title and references pages). You are required to use a minimum of three peer-reviewed, academic sources that are no more than five years old (one of which may be your textbook). All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.
In 1995, Pierre Omidayar, a French-Iranian immigrant, wrote the code for an auction Web site where everyone would have equal access to a single global marketplace. Omidayar couldn't believe it when a collector bought the first item, a broken laser pointer, for $14.83.* Soon the site grew into a broader auction site where consumers could auction collectibles such as baseball cards and Barbie dolls. The momentum continued when individuals and small businesses discovered that eBay was an efficient way to reach new consumers and other businesses. Large companies began using eBay as a means of selling their bulk lots of unsold inventory. Today, people can buy and sell virtually any product or service, on the world's largest online marketplace. From appliances and computers to cars and real estate, sellers can list anything as long as it is not illegal or violates eBay's rules and policies.
eBay's success truly created a pricing revolution by allowing buyers to determine what they would pay for an item; the result pleases both sides because customers gain control and receive the best possible price while sellers make good margins due to the site's efficiency and wide reach. For years, buyers and sellers used eBay as an informal guide to market value. Even a company with a new-product design that wanted to know the going price for anything from a copier to a new DVD player checked on eBay.
eBay has evolved to also offer a fixed-price "buy it now" option to those who don't want to wait for an auction and are willing to pay the seller's price. Sellers can also use the fixed price format with a "best offer" option that allows the seller to counteroffer, reject, or accept an offer.
The impact of eBay's global reach is significant. In 2009, over $60 billion worth of goods was sold on eBay-that's almost $2,000 worth every second. The site has 405 million registered and 90 million active users and receives 81 million unique visitors a month. More than 1 million members make their living from the site. Yet eBay itself doesn't buy any inventory or own the products on its site. It earns its money by collecting fees: an insertion fee for each listing plus a final-value fee based on the auction or fixed price. For example, if an item sells for $60.00, the seller pays 8.75 percent on the first $25.00 ($2.19) plus 3.5 percent on the remaining $35.00 ($1.23).
Therefore, the final-value fee for the sale is $3.42. This pricing structure was developed to attract high-volume sellers and deter those who list only a few low-priced items. With eBay's expansion into a wide range of other categories-from boats and cars and travel and tickets to health and beauty and home and garden-collectibles now make up only a small percentage of eBay sales.
eBay's business model is based on connecting individuals who otherwise would not be connected. It was the first example of online social networking, years before Twitter and Facebook existed, and consumer trust is a key element of its success. While skeptics initially questioned whether consumers would buy products from strangers, Omidayar believed people are innately good, and eBay's originators did two things well: they worked hard to make their Web site a community, and they developed tools to help reinforce trust between strangers. The company tracks and publishes the reputations of both buyers and sellers on the basis of feedback from each transaction. eBay extended its feedback service in 2007 by adding four different seller categories: items as described, communication, shipping time, and shipping and handling rate. The ratings are anonymous but visible to other buyers. Sellers with the highest rankings appear at the top of search results.
eBay's millions of passionate users also have a voice in all major decisions the company makes through its Voice of the Customer program. Every few months, eBay brings in as many as a dozen sellers and buyers and asks them questions about how they work and what else eBay needs to do. At least twice a week the company holds hour-long teleconferences to poll users on almost every new feature or policy. The result is that users (eBay's customers) feel like owners, and they have taken the initiative to expand the company into ever-new territory.
Some falsely believe that eBay was created to help Omidayar's girlfriend find and collect Pez candy dispensers. That story, however, was created by an employee to help generate initial interest in the company.
eBay continues to expand its capabilities to build its community and connect people around the world by adding services, partnerships, and investments. The company acquired PayPal, an online payment service, in 2002 after eBay members made it clear that PayPal was the preferred method of payment. The acquisition lowered currency and language barriers and allowed merchants to easily sell products around the world. eBay also acquired Skype Internet voice and video communication service in 2005, which allowed buyers and sellers to communicate over voice or video free and generated additional ad revenue for eBay. However, in 2009 eBay sold a majority stake in Skype to focus more on its e-commerce and payments businesses, leading the company to acquire Shopping.com, StubHub, Bill Me Later, and others. eBay now has a presence in 39 markets around the world.
Although eBay was a darling in the dot-com boom and has achieved tremendous success since then, it is not without challenges. These include a worldwide recession, increased competition from Google, and difficulties as it expands globally into tough markets such as China. Its CEO, Meg Whitman, retired in 2008 after leading the company for 10 years and was replaced by John Donahue. Under its new leadership, the company continues to focus on one of its founding beliefs: a strong commitment to and investment in technologies that help people connect. Recent efforts to adopt mobile applications, integrate with iPhones, and become more green have helped take the company to the top of such lists such as Newsweek's Greenest Companies in America and Fortunes 100 Best Companies to Work For in back-to-back years.
Questions
1. Why has eBay succeeded as an online auction marketplace while so many others have failed?
2. Evaluate eBay's fee structure. Is it optimal or could it be improved? Why? How?
3. What's next for eBay? How does it continue to grow when it needs both buyers and sellers? Where will this growth come from?