Roll No. …………………..
Lingaya’s University, Faridabad
MBA 2nd Year (Term-IV)
Examination – Nov, 2010)
S e r v i c e M a r k e t i n g ( B A- 2 2 4 )
[Time: 3 Hours]
[Max. Marks: 100]
Before answering the question, candidate should ensure that they
have been supplied the correct and complete question paper. No
complaint in this regard, will be entertained after examination.
Note: Attempt five questions in all; picking up any two from Section A, any
two from Section B and the last Section C question 8 which is compulsory.
SECTION – A
Q-1. What kind of actions customers can take in response to service
failure? Why is it important for a service firm to have a strong service
recovery strategy? Illustrate your answer with suitable examples. (20)
Q-2. How does the design of physical environment enhance service
experiences positively? How can service firms reduce the impact of waiting
lines on the customers? Give examples.
(20)
Q-3. What is the difference between desired service and adequate service?
Why would a services marketer need to understand both types of service
expectations?
(20)
SECTION – B
Q-4. Briefly explain the services triangle giving suitable examples. Why are
service employees critical to the success of any service organization? (20)
Q-5. What is managing people for service advantage? What is service
leadership and culture?
(20)
Q-6. Write short notes on any two of the following:
(20)
(a) gaps model
(b) technology in services
(c) delivering service through intermediaries
Q-7. How to plan and brand service products? What is effective pricing?
(20)
SECTION – C
Q-8. Read the enclosed case titled “The Walt Disney Company” and
answer the questions given at the end of the case.
(20)
The Walt Disney Company : Riding its Theme Parks into Tomorrowland
When Michael Eisner became chairman and chief executive officer of The
Walt Disney Company in 1984, the much-beloved firm was best known for
its revolutionary animated movies, U.S. amusement parks, and children’s
television programming. During the next two decades, Eisner expanded the
company’s holdings by building more theme parks; adding a cruise line and
a chain of retail stores; and acquiring movie production companies, specialeffects firms, cable and network television stations, and sports teams.
Eventually, the House of Mouse became overextended, and in 2003 sold
several of its high-profile enterprises. In addition, a power struggle ensued
between Eisner and Walk Disney’s nephew, Roy Disney. Ultimately, in
January 2005, Eisner announced that he would step down from his
executive posts in September of that year.
Despite these problems, the year 2005 looked promising for the venerable
corporation. Disney’s net income was on the rise, up 85% in 2004
compared to 2003. Also, the company was preparing to celebrate the 50th
anniversary of its first theme park, Disneyland, in 2005. A new theme park
was scheduled to open in Hong Kong late in the year. And the ABC
television network was being revitalized by a bunch of Desperate
Housewives and a group of travelers who became Lost.
Opening the First House of Mouse
The first Disney Park was conceived and funded by the company’s
namesake. Walt Disney purchased 182 acres of land in Anaheim,
California, and transformed the site into Disneyland, which opened in 1955.
Later, the company bought 28,000 acres in Orlando, Florida. The Magic
Kingdom at Walt Disney World opened in 1971, followed by Epcot in 1982,
and Disney-MGM Studios in 1989. Disney acquired another 55 acres of
land in Anaheim, and Disney’s California Adventure debuted in 2001.
Walt Disney World has also been seeking more visitors. It continues to add
attractions: most recently Disney’s Animal Kingdom in 1998, followed by
the spectacular Animal Kingdom Lodge. However, it is also trying another
approach. “Many people perceived that we were just for families,”
explained a marketing executive for the company. “We’re reinventing the
branch by making it relevant to various life stages.” Four markets are being
targeted: younger couples, older couples with grown children, families with
young children, and families with teens. By emphasizing its golf courses,
Pleasure Island (a nightclub-type setting located in Downtown Disney), and
fine dining options, Disney World is trying to attract everyone from
honeymooners to retirees, with the latter group hopefully bringing their
grandchildren.
Spreading the Magic Overseas
The Walt Disney Company entered into a licensing agreement with
Japanese company called Oriental Land and opened Tokyo Disneyland in
1983. The park was a huge success, drawing 13.2 million guests in 2004.
Tokyo DisneySea opened in 2001. Much like its California Adventure
counterpart, this complementary attraction was intended to boost
attendance at Tokyo Disneyland-perhaps from 17 million to 25 million a
year. DisneySea is targeting a slightly order crowd with wilder rides, a fullservice spa, and alcoholic beverages. Disney’s operations in Tokyo face
stiff competition from Universal Studio, which opened its own theme park in
Osaka in 2001.
The second park that Disney built outside the U.S. was Euro Disney, which
opened for business in 1992. Located outside Paris, the park initially had to
deal with criticism from some people and apathy from many others. In stark
contrast to Japanese enthusiasm about Disney parks, some French
intellectuals characterized Euro Disney as a cultural wasteland. The park
lost hundreds of millions of dollars in its first several years of operation.
Disney executives threatened to close Euro Disney unless costs were
slashed and revenues increased. Financing was rearranged, ticket prices
were cut, and attractions were added. The park also changed its name to
Disneyland Paris. Attendance jumped 21% from 1994 to 1995, up to 10.7
million visitors; hotel occupancy increased as well. Perhaps more
important, the park turned a profit of $23 million in 1995.
Disneyland Paris is now the number one tourist attraction in Francedrawing more visitors than the Louvre and the Eiffel Tower combined-and
is a major tourist destination for all of Europe. In 2002, it attracted 13.1
million visitors. Optimistic Disney executives approved the construction of a
second park to attract even more guests. Walt Disney Studios Paris
replicates many of the most successful attractions at its sister park, MGM
Studios in Orlando, but it also features a variety of rides and shows that
have a distinct European flavor. It too faces competition, this time from
Warner Brothers, which has its own parks in Germany and Spain.
It was hoped that Walt Disney Studios Paris would draw eight million
visitors its first year, and help increase attendance at Disneyland Paris to
16 million visitors by 2004. That didn’t occur; the two parks’ combined
attendance was 12.2 million visitors in 2004. Euro Disney reported a loss of
$190 million for the 2004 fiscal year. Analysts agreed that the war in Iraq,
uncharacteristically hot weather, and a weak economy all dampened
demand. Nevertheless, the French government rallied to support the
enterprise by securing more financing from local institutions and working
out a deal with Disney (which owns 41% of the Paris complex) to defer
debts and forgive loans.
On the other side of the globe, Disney hosted a groundbreaking ceremony
for a new theme park in Hong Kong. Eisner referred to this Chinese site as
“a beach-head for the Disney brand in the most populous nation on earth.”
Disney reportedly provided $314 million toward the park’s construction,
giving it a 43% stake, with the Chinese government spending an additional
$416 million. Hong Kong Disneyland, slated to open in September 2005, is
being modeled after Disneyland in Anaheim, with two hotels, a number of
retail stores, and several restaurants.
In mid-2002, the Hong Kong Economic Times reported that Disney
intended to open a second park in China, this one in Shanghai. According
to some observers, the two parks would compete for the same customers.
Not surprisingly, Disney had a different view, namely that China’s
population (over 1.3 billion) was more than large enough to support two
parks. Still, Disney postponed the opening of the new park until 2010, partly
to give the Hong Kong park sufficient time to grow and flourish. Disney’s
decision was welcomes news to Universal, which planned to open a theme
park in Shanghai in 2006.
Consolidating and Strengthening Mickey’s Holdings
Disney’s theme parks are interrelated with the rest of the firm’s holdings. In
the parks, for example, you will find a wealth of Disney merchandise as well
as shows that promote its network and cable programs, such as popular
Disney Channel cartoons. Radio Disney hubs and Internet kiosks that
feature Disney websites are also highly visible. And the ESPN Zone
restaurant, located within several parks, is especially popular on game
days.
The man responsible for The Walt Disney Company’s broad holdings is
Eisner. He judged that long term success required diversification as well as
expansion into fast-growing international markets. Thus Disney started a
chain of retail stores in the 1990s, but sagging sales caused the company
to rethink its retail strategy. In October 2004, Disney announced the sales
of its stores to Children’s Place Retail Stores Inc., a chain that specializes
in fashions for babies and kids.
Two of Disney’s higher-profile enterprises were Major League Baseball’s
Anaheim Angels and the National Hockey League’s Mighty Ducks of
Anaheim. The two-fold rationale for purchasing the teams was to allow
cross-promotion of Disney’s other properties in the area and to keep
tourists in Anaheim for a longer period of time. However, the results didn’t
justify the expense, so Disney sold the Angels in 2003 and the Ducks in
2005.
In contrast, Disney’s 1995 purchase of ESPN, the successful TV channel,
has produced huge returns. As of 2004, largely because it commanded the
industry’s highest subscriber fees, ESPN was generating more than $1
billion worth of profits each year. ESPN’s success was a key factor in
Comcast’s decision to try to purchase the Walt Disney Co. in 2004. To
Comcast, one benefit of the acquisition would be avoiding the $2-persubscriber fee it was paying each month in order to have the right to
include the ESPN channel among its cable offerings.
Trying to Keep the Kingdom Magical
Comcast’s takeover bid eventually failed, but shareholders of The Walt
Disney Company were upset by the attempt. Eisner also received criticism
for allegedly alienating several people who did business with the company.
Questions
i) Explain the meaning of the term ‘service’ in the context of the Walt
Disney Company.
ii) How does Disney address the unique challenges and opportunities
posed by the four distinguishing characteristics of a service?
iii) Do you agree with Disney’s decision to split its retail locations into adultand kid-focused stores? Why or why not?
iv) How Disney’s theme park contributed to the success of its other
interrelated businesses? Elaborate.