Marketing Cases Introduction The following cases describe business situations and were written to assess students’ knowledge of branding, marketing communications, relationship marketing and international marketing. • • • •
HongKong Disneyland SCi Entertainment Fayretech Soco International
HongKong Disneyland Case Study In early 2006, Hong Kong Disneyland’s senior management started talking with Chinese travel-industry representatives to find out what was going wrong with a park that, after just six months of operation, was dealing with attendance problems. Some of these were related to the visitor experience at the park. Although it is officially trilingual (English, Cantonese and Mandarin) in reality the rides and shows vary in terms of which languages they use leading to confusion. Visitors have complained about the food and the length of queues. There are also comparisons with Disney theme parks elsewhere in the world, since the one in Hong Kong seems to be relatively small in size with fewer rides and attractions. Indeed some visitors from mainland China have compared it unfavourably to their local theme parks. It was also said that Disney didn't have a big enough presence in China. People knew the Disney name but didn't feel compelled to visit the park. From the very beginning, understanding Chinese visitors was a big problem for Disney. In the words of one Disney executive, unlike Disney theme parks in other parts of the world, people from the Chinese mainland do not have ‘the embedded Disney software (in their heads)’. Visitors would have to be taken by the hand and told what to expect. A new advertising campaign, in 2006, will have to focus on the individual experience and specify clearly what a Disneyland holiday offers. Disney’s arrival in China had not been expected to be this difficult. No company conveys more powerfully the image of a conquering cultural army than Walt Disney. The company’s products and services – unlike, say, fast-food hamburgers or sugary soft drinks – are not merely symbolic of the American way of life, but contain as part of their essence a set of beliefs about good and evil and human aspiration. Disney, moreover, has throughout its history built mutually reinforcing products across many different kinds of media, with theme parks and TV shows, movies and merchandise all working together in service of the Disney way . The company’s drive for the China market shows how this machine can work overseas. The company started by broadcasting its cartoons on television in the mid 1980s, just as the country was opening up. In the 1990s the company brought out Mulan, a highly successful cartoon that brought a traditional Chinese story to a global audience with classic Disney production values. In the wake of Mulan’s warm reception, Disney agreed a deal with Hong Kong to build a theme park. Attendance would be boosted from a major new television agreement, under which Mickey Mouse cartoons would appear daily, in children’s prime time, on China’s biggest television channel. The park itself would be owned and managed by the Hongkong International Theme Parks, an incorporated company jointly owned by The Walt Disney Company and the Government of Hong Kong.
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A year prior to opening the company toured Chinese youth centres in a bid to build awareness of the Disney brand. The youth sessions included storytelling, interactive games and lessons in how to draw Mickey Mouse. The sessions were supposed to improve ‘creativity’. As well as raising awareness amongst visitors the company also sought to make sure its ‘distribution channels’ were established. In the summer of 2005, just before the opening of the theme park Disney held a briefing for local travel agents and industry participants. The company announced its wholesale contracts and special commissions for major overseas agents and local retail agents. Also launched at the event was the Hong Kong Disneyland monthly travel agent newsletter, which provides agents with the latest information and tips on how to promote the park. The company also launched a telephone hotline to handle trade enquiries and take bookings. Despite these efforts, a few months later, there were complaints: Disney’s American management were criticised for not being willing to learn about the local market and Chinese culture. Only after they encountered problems did they start listening to the local travel industry. Disney’s plans were not just restricted to the theme park, however, executives including CEO Michael Eisner and COO Bob Iger made regular trips to China, meeting with top leadership to pave the way for more deals. One possibility was a theme park in Shanghai. However, at the time of the Hong Kong theme park launch, Disney was said to be holding off building a similar theme park in mainland China until it had been assured that it would be able to have its own television channel on Chinese television. This move was in response to the Chinese government's issuance of new media ownership regulations, whose purpose was to preserve Chinese culture. The changes would bar the Disney channel and make it harder for the company to locally produce films and television programmes in China even if they have local partners. For its part Disney was willing to compromise and accept a minority stake in local productions in China and take on local partners. Hong Kong Disneyland itself has not been without problems, however. People have pointed to the fact that Hong Kong has paid $2.9 billion to build the park, more than 80% of the total cost, but it ended up owning only 57% of the park itself. Moreover Disney has not signed an exclusivity deal, allowing it to open other parks in mainland China. Environmentalists have complained about the impact of the park on coral and the coastline. Nearby residents are not happy about the noise and pollution from fireworks, the company is said to use more environmentally friendly fireworks in the US. For their part, economists have questioned the impact of the park on the Hong Kong economy. There have also been concerns raised about the pay and working conditions of factory workers in mainland China who are producing the souvenirs sold at the park. Visitors have not been exempt from criticism. Hong Kong residents have complained about the manners and hygiene of visitors from the mainland. In response to these and other complaints the company has offered Hong Kong residents free and discounted entry passes to the park. Note: references to mainland China are to the People’s Republic of China. References to Hong Kong are to the Specially Administrative Region of the People’s Republic of China, which has a high degree of autonomy from the People’s Republic, except in matters relating to defence and foreign affairs.
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SCi Entertainment Case Study The market for video games is a major part of the global entertainment industry. Video games are sold online, in games stores and also in supermarkets. While ‘hard core’ gamers tend to buy online or from specialist shops, ‘casual gamers’ tend to buy from supermarkets. Hard core gamers will have seen advertising for games in specialist magazines and heard about them online in discussion forums. Casual gamers are likely to see a game for the first time on supermarket shelves. The most successful and profitable games appeal to both casual and hard core gamers. SCi Entertainment Group (SCi) a British video games publisher rose to prominence with its 2001 Playstation game based on the film ‘The Italian Job’. Consumer familiarity with the film, particularly in the UK, meant that the game could take advantage of a significant amount of positive brand attitude and recognition on shop shelves This was particularly important in making sales to casual gamers. In 2002 SCi released ‘Conflict: Desert Storm’, based on the 1991 Gulf war. Over the years the Conflict series has become an important brand for SCi, and the North American rights to the next title in the series (Conflict: Global Storm) have already been assigned to a major US publisher who has made a minimum sales guarantee. This ensures that SCi is guaranteed a certain minimum amount of revenue from the US publisher and reduces the risk for SCi should the game be commercially unsuccessful. However, such arrangements also mean that if the game is very successful the US publisher will gain proportionately more. There are also other risks in such an arrangement. For example, one of the games in the ‘Conflict’ series was based on the Vietnam war, however the American publisher that SCi were using had launched their own game based on the war and there were concerns about a conflict of interest. Given the costs and risks associated with developing a new game, companies often prefer to launch subsequent instalments on what seems to be a successful franchise, such as the Conflict series. Investments can then focus on functional added values, which will help ensure that a game keeps up to date with the latest technical developments. Given the widespread adoption of similar technology, what differentiates games is the speed at which the game-play is managed, and the sophistication of plotting, environment and effects. In the past SCi had tried to manage the riskiness of games development by working with independent games developers, relationships could be relatively easily ended if a product was unsuccessful and SCi had the freedom to choose developers who seemed to offer the best ideas. Once the success of the Conflict franchise was clear, SCi acquired the developer, Pivotal, responsible for producing the game. The acquisition allowed SCi to keep more of the profits generated from the game. However there were concerns that SCi may be tempted to use this developer for other projects regardless of the quality of their work, while this may make short term financial sense, it could lead to the production of games which are not commercially successful. Recently, SCi has also acquired Eidos plc, which has historically been a much larger company than SCi and is behind some well known games including the Tomb Raider series. Following the acquisition SCi decided that all future Group products would be released under the Eidos brand. This branding decision was undertaken because of Eidos’ high degree of recognition with consumers and retailers, particularly in the United States. This would not affect the corporate identity of the Group, which would continue to be known as SCi Entertainment Group. SCi has kept Eidos’ North American publishing operation, since it will enable SCi to earn significantly higher margins on products than was previously the case. It will also allow SCi to have greater control over global product marketing. Moreover all future products will be published by Eidos in North America. Similarly, in Europe all products will be sold through Eidos’ existing distribution arrangements. This will also increase the margin earned on each product sold.
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Fayretech Case Study Fayretech is a major multinational company in the data processing and computer equipment field. Fayretech has three divisions which are centred around specific business activities. Each division is represented in the countries in which Fayretech operates. Some of Fayretech’s products are purchased by manufacturers who use them as components in their own products (that are sold to end users) and who prefer not to have the components carry Fayretech branding. With increased spending on research and development and an emphasis on technology as a core value Fayretech is keen to make end users aware of its brand and the added value associated with it. Fayretech serves a number of companies across a number of different countries. For this reason Fayretech is considering establishing global key account management (KAM). The few organisational customers that would qualify as key accounts would represent 50% of total turnover. Key account managers will liaise with people within each division as well as representatives from Fayretech’s country offices. These people may be senior to them; perhaps located in another part of the company and may often have different objectives and motivations. Historically, in some countries, some of Fayretech’s products have been distributed by locally based distributors. These distributors have had privileged relationships with organisational customers, and they have tended to guard information jealously. In order to improve profitability Fayretech intends to drop the use of distributors. In order to focus on personal relationships, the company is also intending to shift the emphasis of marketing communications from advertising to personal selling. What advertising does take place will be on a global basis and promote the Fayretech brand. However there has been some debate within the company about the role played by different types of promotion and how effective personal selling would be to attract new organisational customers and stimulate demand from end users.
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Soco International Case Study Soco International is an international oil exploration and production company based in the United Kingdom with operations in Vietnam, Libya, Yemen and the Congo. The strategy pursued by the company relies on cultivating relationships which can allow the firm to gain early access into regions, projects or situations. The company adds value to the ventures in which it participates by providing managerial, technical and commercial expertise to progress activities through the initial stages. Early in Soco’s life a group of private investors (Toro group) acquired a significant proportion of its shares. In exchange they were expected to contribute by using the Toro group’s past experience, to establish credibility and leverage its relationship base to make strategic introductions. Recently contacts effected by members of the Toro group have led to the company acquiring the opportunity to drill for oil in Congo. As well as relationships on an individual basis Soco also takes advantage of institutional level relationships. The company’s interest in Libya is via it’s joint venture, ODEX which is a Libyan company and on whose board is a member of the Libyan national oil company. A coinvestor in ODEX is a subsidiary of the Russian gas giant Gazprom which became a Soco shareholder in 2004. Hopes of a deal in Libya were raised when the Russian Prime Minister Vladimir Putin visited the country in 2005. Talks are still on-going. In Vietnam one of Soco’s partners is PTTEP which was originally set up by the Petroleum Authority of Thailand to develop Thailand’s oil reserves. PTTEP is a strong organisation that brings regional credibility and expertise to the Vietnam projects. Relationships are cemented locally through a programme of corporate social responsibility which has seen the company invest in projects that help local communities in the countries in which it operates. Relationships are important in the oil exploration industry since there is a great deal of competition between firms in order to acquire the opportunities to explore for oil. Such competition is becoming more intense as firms from rapidly developing countries such as India are also becoming involved. An example of how Soco adds value to projects through technical expertise can be seen from its recent Vietnam drilling programme where it was able to find significant quantities of oil in a geological setting where oil is usually difficult to find. This expertise was then used to good effect in Yemen where there was some geological similarity to Vietnam. In both instances the company had to negotiate with its partners. Furthermore, one of the reasons for the company winning a concession in the Congo was because it was felt that the expertise gained in Vietnam could also be used here. As an exploration company with limited revenues, investors are an important stakeholder group for Soco. As well as releasing news through the regulatory news service statements (RNSs) of the London Stock Exchange the company also makes presentations to institutional investors. RNSs report any significant developments taking place. Presentations are used to highlight areas of progress and draw attention to the opportunities facing the organisation. As Soco’s drilling campaigns have delivered and deals have matured so has the need for cash. Such success has helped to raise awareness of the company amongst institutional investors and also promoted a favourable attitude towards the company as an investment prospect. This is an important issue for Soco since there are many oil and resources companies looking to raise capital. Because of its success Soco has had more stockbrokers undertaking research on the company and a national British newspaper has recently run a profile of one of the directors. In mid 2006 the company raised US $250m in the form of a loan. As a result of the high level of institutional interest the issue was oversubscribed.
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