Master of Business Administration – Strategies in Operations Management
Words – 2500
FORMATIVE ASSESSMENT [100 Marks]
Read the case study on Walt Disney and then answer the four questions based on the case study. Forecasting provides a Competitive advantage for Disney
When it comes to the world’s most respected global brands, Walt Disney Parks & Resorts is a visible leader. Although the monarch of this magic kingdom is no man but a mouse—Mickey Mouse—it’s CEO Robert Iger who daily manages the entertainment giant.
Mickey and Minnie Mouse provide the public image of Disney to the world. Forecasts drive the work schedules of 72,000 cast members working at Walt Disney World Resort near Orlando.
Disney’s global portfolio includes Shanghai Disney (2016), Hong Kong Disneyland (2005), Disneyland Paris (1992), and Tokyo Disneyland (1983). But it is Walt Disney World Resort in Florida and Disneyland Resort in California that drive profits in this $55 billion corporation, which is ranked in the top 100 in both the Fortune 500 and Financial Times Global 500. Revenues at Disney are all about people—how many visit the parks and how they spend money while there.
When Iger receives a daily report from his four theme parks and two water parks near Orlando, the report contains only two numbers: the forecast of yesterday’s attendance at the parks (Magic Kingdom, Epcot, Disney’s Animal Kingdom, Disney’s Hollywood Studios, Typhoon Lagoon, and Blizzard Beach) and the actual attendance. An error close to zero is expected. Iger takes his forecasts very seriously. The forecasting team at Walt Disney World Resort doesn’t just do a daily prediction, however, and Iger is not its only customer. The team also provides daily, weekly, monthly, annual, and 5-year forecasts to the labour management, maintenance, operations, finance, and park scheduling departments.
With 20% of Walt Disney World Resort’s customers coming from outside the United States, its economic model includes such variables as gross domestic product (GDP), cross-exchange rates, and arrivals into the U.S. Disney also uses 35 analysts and 70 field people to survey 1 million people each year. The surveys, administered to guests at the parks and its 20 hotels, to employees, and to travel industry professionals, examine future travel plans and experiences at the parks. This helps forecast not only attendance but also behaviour at each ride (e.g., how long people will wait, how many times they will ride).
Inputs to the monthly forecasting model include airline specials, speeches by the chair of the Federal Reserve, and Wall Street trends. Disney even monitors 3,000 school districts inside and outside the U.S. for holiday/vacation schedules. With this approach, Disney’s 5-year attendance forecast yields just a 5% error on average. Its annual forecasts have a 0% to 3% error. Attendance forecasts for the parks drive a whole slew of management decisions. For example, capacity on any day can be increased by opening at 8 a.m. instead of the usual 9 a.m., by opening more shows or rides, by adding more food/beverage carts (9 million hamburgers and 50 million Cokes are sold per year!), and by bringing in more employees (called “cast members”). Cast members are scheduled in 15-minute intervals throughout the parks for flexibility.
Demand can be managed by limiting the number of guests admitted to the parks, with the “FastPass+” reservation system, and by shifting crowds from rides to more street parades. At Disney, forecasting is a key driver in the company’s success and competitive advantage.
Source: Heizer, J., & Render, B. (2020). Operations Management Sustainability and Supply Chain Management (11th ed.). New York: Pearson Education.
Answer ALL the questions in this section
Question 1 (25 Marks)
Good forecasts are of critical importance in all aspects of a business: The forecast is the only estimate of demand until actual demand becomes known. Forecasts of demand, therefore, drive decisions in many areas. With reference to the case study discuss how Walt Disney can use forecasting service demand forecasts as a strategic tool. Your answer should focus on the following areas:
- Supply Chain Management
- Human Resource Management
- Capacity planning
Question 2 (25 Marks)
The demand for electric power at Walt Disney over the past 7 years is shown in the following table, in megawatts. The firm wants to forecast next year’s demand by fitting a straight-line trend to these data. Compute the straight-line trend for the data provided in the table.
Question 3 (25 Marks)
Forecasting in the service sector presents some unusual challenges. A major technique in the retail sector is tracking demand by maintaining good short-term records. For instance, a barbershop catering to men expects peak flows on Fridays and Saturdays. Indeed, most barbershops are closed on Sunday and Monday, and many call in extra help on Friday and Saturday. A downtown restaurant, on the other hand, may need to track conventions and holidays for effective short-term forecasting. Provide recommendations on how Walt Disney might forecast for holidays and other not so productive days?
Question 4 (25 Marks)
In 2018, Disney World raised its ticket prices, twice. Take the park’s platinum pass, for example, it’s the standard option that grants access to all four parks with no blackout dates. In February, the price went from $779 to $849, then in October, its price jumped from $849 to $894, as Disney unveiled its dynamic pricing model. That’s a 15% increase in just one year. Using the TQM philosophy show how Disney can benefit from implementing this lean method so that customers can experience their value for money
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