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Case 2 :-

“Naughty Rule”

Dr. Reddy Instruments is a medium-sized the Industrial Estate on the outskirts of Hyderabad. The company is basically involved with manufacturing surgical instruments and supplies for medical professionals and hospitals.

About a year ago, Madhuri, aged 23, niece of the firm’s founder, Dr. Raja Reddy, was hired to replace Ranga Rao quality control inspector, who had reached the age of retirement. Madhuri had recently graduated from the Delhi College of Engineering where she had majored in Industrial Engineering.

Balraj Gupta, aged 52, is the production manager of the prosthesis dept., where artificial devices designed to replace missing parts of the human body are manufactured. Gupta has worked for Dr. Reddy Instruments for 20 years, having previously been a production line supervisor and, prior to that, a worker on the production line. Gupta, being the eldest in his family, has taken up the job quite early in life and completed his education mostly through correspondence courses.

From their first meeting, it looked as though Gupta and Madhuri could not get along together. There seemed to be an underlying animosity between them, but it was never too clear what the problem was.

Venkat Kumar, age 44, is the plant manager of Dr. Reddy instruments. He has occasionally observed disagreements between Madhuri and Gupta on the production line, Absenteeism has risen in Gupta’s department since Madhuri was hired as quality control inspector. Venkat secretly decided to issue a circular calling for a meeting of all supervisory personnel in the production and twelve quality control departments. The circular was worked thus:

 

Attention: All Supervisors Production Quality Control Departments

 A meeting is schedule on Monday, Feb 20, at 10 a.m. in room 18. The purpose is to sort out misunderstanding and differences that seem to exist between production and QC personnel.

 

 

 

Venkat starred the meeting by explaining why he had called it and then asked Gupta for his opinion of the problem. The conversation took the following shape:

Gupta: That Delhi girl you recruited is a ‘fault finding machine’ in our dept. Until she was hired, we hardly even stopped production. And when we did, it was only because of a mechanical defect. But Madhuri has been stopping everything even if ‘one’ defective part comes down the line.

Madhuri: That’s not true. You have fabricated the story well.

Gupta: Venkat, our quality has not undergone any change in recent times. It’s still the same, consistently good quality it was before she came but all she wants to do is to trouble us.

Madhuri: May I clarify my position at this stage? Mr. Gupta, you have never relished my presence in the company. I still remember some of the derisive remarks you used to make behind my back. I did take note of them quite clearly!

Suresh (another quality control supervisor): I agree with Madhuri Venkat. I think that everyone knows that the rules permit quality control to stop production if rejections exceed three an hour. This is all Madhuri has been doing.

Gupta: Now listen to me. Madhuri starts counting the hour from the moment she gets the first reject. Ranga Rao never really worried about absolute reject rule when he was here. She wants to paint my department in black. Is not that true Riaz Ahmed?

Ahmed (another production supervisor): It sure is Gupta. Every time Maduri stops production, she is virtually putting the company on fire. The production losses would affect our bonuses as well. How long can we allow this ‘nuisance’ to continue?

Thirty minutes later Madhuri and Gupta were still lashing out at each other. Venkat decided that ending the meeting might be appropriate under the circumstances. He promised to clarify the issue, after discussion with management, sometime next weel.

QUESTIONS:

  1. Should Venkat have called a meeting to sort out this problem? Why or Why not?
  2. What do you say about the rule calling for production to halt if there are more than three rejects in an hour? Should it have been enforced? Explain.
  3. What do you feel is the major problem in this case? The solution?

 

 

Case 3 :-

ABC LIMITED

M/s. ABC Ltd. is a medium – sized engineering company production a large-range of product lines according to customer requirements. It has earned a good reputation as a quick and reliable supplier to its customers because off which its volume of business kept on increasing. However, over the past one year, the managing director of the company has been receiving customer complaints due to delays in dispatch of products and at times, the company has to pay substantial penalty for not meeting the schedule in time.

The managing director convened an urgent meeting of various functional managers to discuss the issue. The Marketing Manager questioned the arbitrary manner of giving priority to products in manufacturing line, causing delays in products that are in great demand and over-stocking of products which are not required immediately. Production control manager complained that he does not have adequate staff to plan and control the production function; and whatever little planning he does, is generally overlooked by shop floor manager. Shop floor manager complained of unrealistic planning, excessive machine breakdowns, power failure, shortage of materials for schedule. Maintenance manager, say that he does not get important spares required for equipment maintenance because of which he cannot repair machines at a faster rate. Inventory control manager says that on the one hand the company often access him of carrying too much stock and on the other hand people are grumbling  over shortages.

Fed up by mutual mud-slinging, the managing director decided to appoint you, a bright management consultant with training in business management to suggest way and means to put his “house in order”.

QUESTIONS:

  1. How would you examine if there is any merit in the remarks of various functional managers?
  2. What, in your opinion, could be the reasons for different managerial thoughts in this case?
  3. How would you design a system of getting correct information about job status to identify delays quickly?
  4. List some scientific decision aids that you may prescribe to improve the situation.

 

A JAPANESE BRIBE

In July 1976, Kukeo Tanaka, former prime minister of Japan , was arrested on charges of taking bribes ($ 1.8 million) from Locjheed Aircraft Company to secure the purchase of several Lockheed jets.  Tanaka’s secretary and serial other government officials were arrested with him.  The Japanese public reacted with angry demands for a complete disclosure of Tanaka’s dealings. By the end of the year, they had ousted Tanaka’s successor, Takeo Miki, who was widely believed to have been trying to conceal Tanaka’s actions.

In Holland that same year, Prince Bernhard, husband of Queen Juliana, resigned from 300 hundred positions he held in government, military, and private organizations.  The reason : He was alleged to have accepted $ 1.1 million in bribes from Lockheed in connection with the sale of 138 F – 104 Starfighter jets.

In Italy , Giovani Leone, president in 1970, and Aldo Moro and Mariano Rumor, both prime ministers, were accused of accepting bribes from Lockheed in connection with the purchase of $ 100 million worth of aircraft in the late 1960s.  All were excluded from government.

Scandinavia , South Africa , Turkey , Greece , and Nigeria were also among the 15 countries in which Lockheed admitted to having handed out payments and at least $ 202 million in commissions since 1970.

Lockheed Aircraft’s involvement in the Japanese bribes was revealed to have begun in 1958 when Lockheed and Grumman Aircraft (also an American firm) were competing for a Japanese Air Force jet aircraft contract.  According to the testimony of Mr. William Findley, a partner in Arthur Young & Co. (auditors for Lockheed), in 1958 Lockheed engaged the services of Yoshio Kodama, an ultra right – wing war criminal and reputed underworld figure with strong political ties to officials in the ruling Liberal Democratic Party.  With Kodama’s help, Lockheed secured the Government contract.  Seventeen years later, it was revealed that the CIA had been informed at the time (by an American embassy employee) that Lockheed had made several bribes while negotiating the contract.

 

In 1972, Lockheed again hired Kodama as a consultant to help secure the sale of its aircraft in Japan .  Lockheed was desperate to sell planes to any major Japanese airline because it was scrambling to recover from a series of financial disasters.   Cost overruns on a government contract had pushed Lockheed to the brink of bankruptcy in 1970.  Only through a controversial emergency government loan guarantee of  $ 250 million in 1971 did the company narrowly avert disaster.  Mr. A. Carl Kotchian, president of Lockheed from 1967 to 1975, was especially anxious to make the sales because the company had been unable to get as many contracts in other parts of the world as it had wanted.

This bleak situation all but dictated a strong push for sales in the biggest             untapped market left-Japan.  This push, if successful, might well bring in    revenues upward of $ 400 million.  Such a cash inflow would go a long way             towards helping to restore Lockheed’s fiscal health, and it would, of      course, save the jobs of thousands of firm’s employees. (Statement of Carl Kotchian)

Kodama eventually succeeded in engineering a contract for Lockhed with All – Nippon Airways, even beating out McDonnell Douglas, which was actively competing with Lockheed for the same sales.  To ensure the sale, Kodama asked for and received from Lockheed about $9 million during the period from 1972 to 1975.  Much of money allegedly went to then – prime minister Kukeo Tanaka and other government officials, who were supposed to intercede with All – Nippon Airlines on behalf of Lockheed.

According to Mr. Carl Kotchian, “ I knew from the beginning that this money was going to the office of the Prime Minister.”   He was, however, persuaded that, by paying the money, he was sure to get the contract from All-Nippon Airways.  The negotiations eventually netted over $1.3 billion in contracts for Lockheed.

In addition to Kodama, Lockheed had also been advised by Toshiharu Okubo, an official of the private trading company, Marubeni, which acted as  Lockheed’s official representative.  Mr. A. Carl Kotchian later defended the payments, which he saw as one of many “Japanese business practices” that he had accepted on the advice of his local consultants.  The payments, the company was convinced, were in keeping with local “ business practices.”

Further, as I’ve noted, such disbursements did not violate American laws.          I should also like to stress that my decision to make such payments            stemmed from my judgment that the (contracts) …… would provided   Lockheed workers with jobs and thus redound to the benefit of their          dependents, their communities, and stockholders of the corporation.  I should like to emphasize that the payments to the so-called “ high           Japanese government officials” were all requested y Okubo and were not      brought up from my side.  When he told me “ five hundred million yen is necessary for such sales,” from a purely ethical and moral standpoint I       would have declined such a request.  However, in that case, I would most    certainly have sacrificed commercial success….. (If) Lockheed had not remained competitive by the rules of the game as then played, we would       not have sold (our planes) ……… I knew that if we wanted our product to have a chance to win on its own merits, we had to follow the functioning           system.  (Statement of A. Carl Kotchian)

In August, 1975, investigations by the U.S. government led Lockheed to admit it had made  $ 22 million in secret payoffs.  Subsequent senate investigations in February 1976 made Lockheed’s involvement with Japanese government officials public.  Japan subsequently canceled their billion dollar contract with Lockheed.

In June 1979, Lockheed pleaded guilty to concealing the Japanese bribes from the government by falsely writing them off as “marketing costs”.  The Internal Revenue Code states, in part.  “ No deduction shall be allowed….. for any payment made, directly or indirectly, to an official or employee of any government …. If the payment constitutes an illegal bribe or kickback.’  Lockheed was not charged specifically with bribery because the U.S. law forbidding bribery was not enacted until 1978.  Lockheed pleaded guilty to four counts of fraud and four counts of making false statements to the government.  Mr. Kotchian was not indicated, but under pressure from the board of directors, he was forced to resign from Lockheed.  In Japan , Kodama was arrested along with Tanaka.

 

 

 

 

Questions :

  1. Fully explain the effects that payment like those which Lockheed             made to the Japanese  have on the structure of a market.  
  2. In your view, were Lockheed’s payments to the various Japanese            parties “bribes” or “extortions” ?  Explain your response fully.
  3. In your judgment, did Mr. A. Carl Kotchian act rightly from a       moral   point of view ?  (Your answer should take into account the effects of the payments on the welfare of the societies affected, on          the right and duties of the various parties involved, and on the         distribution of benefits and    burdens among the groups involved.)        In your judgment, was Mr. Kotchian morally responsible for         his       actions ?  Was he, in the end, treated fairly ?
  4. In its October 27, 1980, issue, Business Week argued that every             corporation has a corporate culture – that is, values that set a     pattern for its employee’s activities, opinions and actions and that           are instilled in succeeding generations of employees (pp.148-60)         Describe, if you can, the corporate culture of Lockheed and relate that culture to Mr. Kotchian’s actions.  Describe some strategies            for changing that culture in ways that    might make foreign    payments less likely.

 

Case NO. 3

M/S HI-TECH ELECTRONICS

M/s. Hi – tech Electronics, a consumer electronics outlet, was opened two years ago in Dwarka, New Delhi. Hard work and personal attention shown by the proprietor, Mr. Sony, has brought success.  However, because of insufficient funds to finance credit sales, the outlet accepted only cash and bank credit cards.  Mr. Sony is now considering a new policy of offering installment sales on terms of 25 per cent down payment and 25 per cent per month for three months as well as continuing to accept cash and bank credit cards.

Mr. Sony feels this policy will boost sales by 50 percent.  All the increases in sales will  be credit sales.  But to follow through a new policy, he will need a bank loan at the rate of 12 percent.  The sales projections for this year without the new policy are given in Exhibit 1.

Exhibit 1 Sales Projections and Fixed costs

Month Projected sales without instalment option Projected sales with instalment option
January Rs. 6,00,000 Rs. 9,00,000
February       4,00,000       6,00,000
March       3,00,000       4,50,000
April      2,00,000     3,00,000
May      2,00,000      3,00,000
June      1,50,000      2,25,000
July      1,50,000      2,25,000
August      2,00,000      3,00,000
September      3,00,000      4,50,000
October      5,00,000      7,50,000
November      5,00,000      15,00,000
December      8,00,000      12,00,000
Total Sales    48,00,000    72,00,000
Fixed cost      2,40,000      2,40,000

 

He further expects 26.67 per cent of the sales to be cash, 40 per cent bank credit card sales on which a 2 per cent fee is paid, and 33.33 per cent on instalment sales.  Also, for short term seasonal requirements, the film takes loan from chit fund to which Mr. Sony subscribes @ 1.8 per cent per month.

Their success has been due to their policy of selling at discount price.  The purchase per unit is 90 per cent of selling price.  The fixed costs are Rs. 20,000 per month.  The proprietor believes that the new policy will increase miscellaneous cost by Rs. 25,000.

The business being cyclical in nature, the working capital finance is done on trade – off basis.  The proprietor feels that the new policy will lead to bad debts of 1 per cent.

(a)    As a financial consultant, advise the proprietor whether he should go for the extension of credit facilities.?

(b)    Also prepare cash budget for one year of operation of the firm, ignoring interest.  The minimum desired cash balance & Rs. 30,000, which is also the amount the firm has on January 1.  Borrowings are possible which are made at the beginning of a month and repaid at the end when cash is available. ?

 

 

CASE II

 

EMPLOYEE RELATIONS AUDIT

 

Triveni Foods Pvt. Ltd., a multinational confectionary company, having its branches in more than 50 countries and marketing its products in about 135 countries, established one of its production units in 1988 at Mathura near Delhi. It had a workforce of nearly 320 employees and sales turnover was more than Rs. 150 crores. Being a confectionary unit, hygiene was given the upper most priority to the extent that no one was allowed to enter the production area without taking bath and wearing sterilized clothes provided by the company. The entire process was automatic and required only food specialists and labor. In order to match the required standards, emphasis was given on training and welfare of employees on regular basis. Facilities like transportation were also provided since delay by ten minutes could cause production losses at the time of shift changes.

 

Over a period of time due to start and workers’ redundancy, it was observed that problems like lethargy, absenteeism, violation of work practices were increasing. Absenteeism rate went up to 18 percent. Employees visited canteen for drinking water and started gossiping during working hours. Buses did not arrive on time due to which production suffered. Operators came late and left shop floor early without waiting for relievers. Employees were found hovering in administration building without any reason. It was also found that employees were violating personal hygiene standards. Malpractices were also reported with attendance process and records. These activities were having a negative impact on managerial effectiveness and performance of the unit. The management tried to take number of initiatives to overcome these problems. However, these initiatives seemed ad hoc solutions and did not serve the purpose in the long run.

 

In 1996, Alok Trivedi joined the company as Head of the Department H.R. While facing these problems, he realized that the causes of these problems were deep rooted and required a proactive approach. He started with an approach called Employee Relation Audit, developed by him, where everything was to be monitored, regulated and reported on regular intervals. He along with his team prepared an action plan (Appendix 1) and corrective measures were taken accordingly. Facilities of drinking water were arranged at 3 to 4 places in the production area which stopped employees from going to canteen for this purpose. Action was taken against the late arrivals of the buses. A proper time study was done and they were given ten minutes margin so that they could report on time. Operators were frequently questioned and stringent vigilance was kept for amenities. Regular counseling was also arranged. A grievance register was also kept and effective grievance redressal was undertaken. Groups were formed called ‘Pragati’ groups for solving work related problems. Employees were frequently checked for ensuring their strict adherence to personal hygiene standards. For ensuring timely processing and printing of attendance records, training was given to al! line officers and production of records was made mandatory on shift basis.

 

It was further decided that based on this action plan an audit should be carried out at regular periods so that actual performance could be measured. For quantification, a 5 point. scale 0- poor, 2-below average, 3-average, 4-good, 5-v.good) audit report was prepared featuring practices, criteria for evaluation, standards, observations/comments and rating :Appendix 2). For example, in canteen criteria for evaluation there were food quality, menu, timings and unauthorized presence of the employees in the kitchen. The standards were strict adherence to the rules defined. For transportation, arrival, departure and punching of cards by drivers were the criteria for evaluation. Internal teams of auditors were asked to observe and comment against the set standards and give the rating accordingly. Performance vas evaluated on the basis of percentage, the highest point being 215. For example, if the total points scored on various parameters in a audit report was one hundred and fifty five, hen percentage score would be seventy-two (l55/215xl00 = 72 per cent). The first audit “as carried out in August 1999 and percentage of performance was sixty two.

 

In the year 2000, the performance rose to sixty-five per cent. Proactive approach of solving le problems was adopted. For example, registers were maintained at different work areas, write down the complaints experienced by employees and action was taken by the concerned person. A complaint of tap leaking in a bathroom was recorded in register by a workman. It was attended by a supervisor in charge and he got it repaired immediately. At times these were reviewed and signed by H.R. department and the higher management. Due to these practices, a lot of improvement was observed. Better working conditions, increased productivity, rise in employees’ commitment towards their goals and better superior -subordinate relationship could be seen. In 2001, the percentage of the performance rose to seventy two. While reviewing the Employee relation audit, Alok Trivedi was quite satisfied to note the steady though slow improvement in the figures of performance.


 

QUESTIONS

 

  1. Had you been in place of Alok Trivedi, what additional measures would you have taken?
  2. Critically analyze the Employee Relations Audit in the light of its contribution to self motivation of employees.

 


CASE II

ARROW AND THE APPAREL INDUSTRY

 

Ten years ago, Arvind Clothing Ltd., a subsidery of Arvind Brands Ltd., a member of the Ahmedabad based Lalbhai Group, signed up with the 150-year old Arrow Company, a division of Cutlet Peabody & Co. Inc., US, for licensed manufacture of  Arrow shirts in India. What this brought to India was not just another premium dress shirt brand but new manufacturing philosophy to its garment industry which combined high productivity, stringent in-line quality control, and a conducive factory ambience.

 

                        Arrow’s first plant, with a 55,000 sq. ft. area and capacity to make 3,000 to 4,000 shirts a day, was established at Bangalore in 1993 with an investment of Rs. 18 crore. The conditions inside – with good lighting on the workbenches, high ceilings, ample elbow room for each worker, and plenty of ventilation, were a decided contrast to the poky, crowded, and confined sweatshops characterizing the usual Indian apparel factory in those days. It employed a computer system for translating the designed shirt’s dimensions to automatically mark the master pattern for initial cutting of the fabric layers. This was installed, not to save labour but to ensure cutting accuracy and low wastage of cloth.

 

                        The over two-dozen quality checkpoints during the conversion of fabric to finished shirt was unique to the industry. It is among the very few plants in the world that makes shirts with 2 ply 140s and 3 ply 100s cotton fabrics using 16 to 18 stitches per inch. In March 2003, the Bangalore plant could produce stain-repellant shirts based on nanotechnology.

 

                        The reputation of this plant has spread far and wide and now it is loaded mostly with export orders from renowed global brands such as GAR, Next, Espiri, and the like. Recently the plant was identified by Tommy Hilfiger to make its brand of shirts for the Indian market. As a result, Arvind Brands has had to take over four other factories in Bangalore on wet lease to make the Arrow brand of garments for the domestic market.

 

                        In fact, the demand pressure from global brands which want to out outscore from Arvind Brands, is so great that the company has had to set up another large for export jobs on the outskirts of Bangalore. The new unit of 75,000 sq. ft. has cost Rs. 16 crore and can turn out 8,000 to 9,000 shirts per day. The technical collaborates are the renowned C&F Italia of Italy.

 

                        Among the cutting edge technologies deployed here are a Gerber make CNC fabric cutting machine, automatic collar and cuff stitching machines, pneumatic holding for tasks like shoulder joining, threat trimming and bottom hemming, a special machine to attach and edge stitch the back yoke, foam finishers which use air and steam to remove creases in the finished garment, and many others. The stitching machines in this plant can deliver up to 25 stitches per inch. A continuous monitoring of the production process in the entire factory is done through a computerized apparel production management system, which is hooked to every machine. Because of the use of such technology, this plant will need only 800 persons for a capacity which is three that of the first plant which employs 580 persons.

 

                        Exports of garments made for global brands fetched Arvind Brands over Rs. 60 crore in 2002, and this can double in the next few years, when the new factory goes on full stream. In fact, with the lifting of the country-wise quota regime in 2005, there will be a surge in demand for high quality garments from India and Arvind is already considering setting up two more such high tech export-oriented factories.

 

                        It is not just in the area of manufacture but also retailing that the arrow brand brought a wind of change on the Indian scene. Prior to its coming, the usual Indian shirt shop used to be a clutter of racks with little by way of display. What Arvind Brands did was to set up exclusive showrooms for Arrow shirts in which the functional was combined with the aesthetic. Stuffed racks and clutter were eschewed. The products were displayed in such a manner that the customer could spot their qualities from a distance. Of course, today this has become standard practice with many other brands in the country, but Arrow showed the way. Arrow today has the largest network of 64 exclusive outlets across India. It is also present in 30 retail chains. It branched into multi-brand outlets in 2001, and is present in over 200 select outlets.

 

                        From just formal dress shirts in the beginning, the product range of Arvind Brands has expanded in the last ten years to include casual shirts, T-shirts, and trousers. In the pipeline are light jackets and jeans engineered for the middle age paunch. Arrow also tied up with the renowed Italian designer, Renato Grande, who has worked with names like Versace and Marlboro, to design its Spring / Summer Collection 2003. The company has also announced its intention to license the Arrow brand for other lifestyle accessories like footwear, watches, undergarments, fragrances, and leather goods. According to Darshan Mehta, President, Arvind Brands Ltd., the current turnover at retail price of the Arrow brand in India is about Rs. 85 crore. He expects the turnover to cross Rs. 100 crore in the next few years, of which about 15 per cent will be from the licensed non-clothing products.

 

                        In 2005, Arvind Brands launched a major retail initiative fir all its brands. Arvind Brands licensed brands (Arrow, Lee and Wrangler) had grown at a healthy 35 per cent rate in 2004 and the company planned to sustain the growth by increasing their retail presence. Arvind Brands also widened the geographical presence of its home-grown brands, such as Newport and Ruf-n-Tuf, targeting small towns across India. The company planned to increase the number of outlets where its domestic brands would be available, and draw in new customers for readymades. To improve its presence in the high – end market, the firm started negotiating with an international brand and is likely to launch the brand.

 

                        The company has plans to expand its retail presence of Newport Jeans, from 1200 outlets across 480 towns to 3000 outlets covering 800 towns.

 

                        For a company ranked as one of the world’s largest manufacturers of denim cloth and owners of world famous brands, the future looks bright certain for Arvind Brands Ltd.

Company Profile     

Name of the Company : Arvind Mills
Year of Establishments : 1931
Promoters : Three brothers – Katurbhai, Narottam Bhai and Chimnabhai
Divisions : Arvind Mills was spilt in 1993 into three units – textiles, telecom and garments. Arvind Brands Ltd. (textile unit) is 100 per cent subsidiary of Arvind Mills.
Growth Strategy : Arvind Mills has grown through buying – up of sick units, going global and acquisition of Germanand US brand names.

 

 

Questions

  1. Why did Arvind Mills choose globalization as major route to achieve growth when domestic market was huge?
  2. Hoe does lifting of Country-wise quota regime’ help Arvind Mills?
  3. What lessons can other Indain business learn from the experience of Arvind Mills?


CASE III

 

AT THE RECEIVING END ! 

Spread over 121 countries with 30,000 restaurants, and serving 46 million customers each day with the help of more than 400,000 employees, the reach of McDonald’s is amazing. It all started in 1948 when two brothers, Richard and Maurice ‘Mac’ McDonald, built several hamburger stands, with golden arches in southern California. One day a traveling salesman, Ray Kroc, came to sell milkshake

 

MARKETING SPOTLIGHT- DISNEY

The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customers value in the Disney brand: a fun experience and homespun entertainment based on old-fashioned family values. Disney responds to these consumer markets. Say a family goes to see a Disney movie together. They have a great time. They want to continue the experience. Disney Consumer Products, a division of the Walt Disney Company, lets them do just that through product lines aimed at specific age groups.

Take the 2004 Home on the Range movie. In addition to the movie, Disney created an accompanying soundtrack album, a line of toys and kid’s clothing featuring the heroine, a theme park attraction, and a series of books. Similarly, Disney’s 2003 Pirates of the Caribbean had a theme park ride, merchandising program, video game, TV series, and comic books. Disney’s strategy is to build consumer segment around each of its characters, from classics like Mickey Mouse and Snow White to new hits like Kim Possible. Each brand is created for a special age group and distribution channel. Baby Mickey & Co. and Disney Babies both target infants, but the former is sold through department stores and specialty gift stores whereas the latter is a lower-priced option sold through mass-market channels. Disney’s Mickey’s Stuff for Kids targets boys and girls, while Mickey Unlimited targets teens and adults.

On TV, the Disney Channel is the top primetime destination for kids age 6 to 14, and Playhouse Disney is Disney’s preschool programming targeting kids age 2 to 6. Other products, like Disney’s co-branded Visa card, target adults. Cardholders earn one Disney “dollar’’ for every $ 100 charged to the card, up to the card, up to $75,000 annually, then redeem the earnings for Disney merchandise or services, including Disney’s theme parks and resorts, Disney Stores, Walt Disney Studios, and Disney stage productions. Disney is even in Home Depot, with a line of licensed kid’s room paint colors with paint swatches in the signature mouse-and-ears shape.

 

 

Disney also has licensed food products with character brand tie-ins. For example, Disney Yo-Pals Yogurt features Winnie the Pooh and Friends. The four-ounce yogurt cups are aimed at preschoolers and have an illustrated short story under each lid that encourages reading and discovery. Keebler Disney Holiday Magic Middles are vanilla sandwich cookies that have an individual image of Mickey, Donald Duck, and Goofy imprinted in each cookie.

The integration of all the consumer product lines can be seen with Disney’s “Kim Possible’’ TV program. The series follows the action-adventures of a typical high school girl who, in her spare time, saves the world from evil villains. The number-one-rated cable program in its time slot has spawned a variety of merchandise offered by the seven Disney Consumer Product divisions. The merchandise includes:

  • Disney Hardlines – stationery, lunchboxes, food products, room décor.
  • Disney Softlines – sportswear, sleepwear, daywear, accessories.
  • Disney Toys – action figures, wigglers, beanbags, plush, fashion dolls, poseables.
  • Disney Publishing – diaries, junior novels, comic books.
  • Walt Disney Records – Kim Possible soundtrack.
  • Buena Vista Home Entertainment – DVD/video.
  • Buena Vista Games – Game Boy Advance.

“The success of Kim Possible is driven by action – packed storylines which translate well into merchandise in many categories,’’ said Andy Mooney, chairman, Disney Consumer Products Worldwide. Rich Ross, president of entertainment, Disney Channel, added: “Today’s kids want a deeper experience with their favorite television characters, like Kim Possible. This line of products extends our viewer’s experience with Kim, Rufus, Ron and other show characters, allowing (kids) to touch, see and live the Kim Possible experience.

Walt Disney created Mickey Mouse in 1928 (Walt wanted to call his creation Mortimer until his wife convinced him Mickey Mouse was better). Disney’s first feature-length musical animation, Snow White and the Seven Dwarfs, debuted in 1973. Today, the pervasiveness of Disney product offerings is staggering – all in all, there are over 3 billion entertainment-based impressions of Mickey Mouse received by children every year. But as Walt Disney said. “I only hope that we don’t lose sight of one thing – that it was all started by a mouse.’’

 

Discussion Questions

  1. What have been the key success factors for Disney?
  2. Where is Disney vulnerable? What should it watch out for?
  3. What recommendations would you make to their senior marketing executives going forward? What should it be sure to do with its marketing?