STRATEGY EXECUTION

THE WALT DISNEY COMPANY: THE ENTERTAINMENT KING

THE WALT DISNEY COMPANY - PROFILE
The mega corporation, Walt Disney Company, had its humble beginning in
1923 as Disney Brothers Studio that made a series of short cartoons. The
studio was the combined effort of the two brothers Walt Elias Disney and Roy
Disney.
Within just a year of their first major hit starring Oswald, the Lucky Rabbit,
the brothers experienced a business set back when they found their
distributor had cheated them in an attempt to cut them off their Oswald
franchise. Soon, Walt created Mickey Mouse and it became an overnight hit
with the release of the first cartoon with synchronized sound in 1928.
Realizing that the cartoon shorts would not sustain the business indefinitely,
they ventured into feature cartoon films in 1937. In 1940, the company went
public. After World War II, the company gradually diversified into live-action
films, music company, theme parks and so on. In 1954, television became a
new and successful avenue for the company and in 1955; the first of their
many Disneyland theme parks was opened. The huge success of the first
Disneyland encouraged Disney to expand beyond borders.
In 1966, Walt Disney passed away and he was succeeded by his brother.
After Roy O. Disneys death in 1971, the companys financial performance
started declining. In 1984, Michael Eisner took over the chairmanship of the
company and Frank Wells became the President and the COO. Together, they
helped the company turn its business around as during their first 15 years,
the company generated a 27% annual return to shareholders. By the end of
2000, Disneys net earnings had risen to $25 billion. Also, the number of
employees had increased to 110000 from 1984s mere 28000 employees.
THE WALT DISNEY COMPANYS MISSION STATEMENT
According to its corporate website, the mission of The Walt Disney Company
is to be one of the world's leading producers and providers of entertainment
and information. Using their portfolio of brands to differentiate their content,
services and consumer products, they seek to develop the most creative,
innovative and profitable entertainment experiences and related products in
the world.
THE WALT DISNEY COMPANYS BUSINESS LINES
The company has five main business undertakings and they are as follows:Studio Entertainment: The driving force of the entire enterprise is the studio
entertainment line. It encompasses live-action motion pictures and animated
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cartoons which are managed by Touchstone, Pixar, Walt Disney Pictures,
Buena Vista, and Miramax. Plus, it includes home video, television and cable
production, Broadway shows, music production and distribution businesses.
Consumer Products: This encompasses the development, advertising,
promoting, licensing and selling of products that represent all of the new and
old Disney characters, along with the name Walt Disney. It also includes
direct retail distribution, books and magazines publishing, computer software
products for entertainment as well as educational purposes.
Theme Parks and Resorts: This encompasses all the theme parks and resorts
except for Disneyland Paris. It also includes sports team franchises.
Media Networks: Broadcasting (Television, radio) and Cable Networks (ESPN
Branded cable networks, Disney channel, et cetera) are the core of the
media network.
Internet and Direct Marketing: This includes the companys online activities,
and the Disney Catalog.
MAIN ISSUES
Despite the companys financial performance in 2000, its strong brand name
and its top position in almost all of its business lines, there are concerns
about its sustainable superior performance.
Eisner was consistently
targeting maximizing shareholders wealth through an annual revenue
growth target and ROE exceeding 20%. However, its performance throughout
the 1990s showed much inconsistency, especially in the late 1990s, the ROE
was far below the target of 20%. Plus, a major portion of the profits for the
year 2000 stemmed from a single show at ABC Networks which raised
questions over the appeal of the Disney brand and the sustainability of its
other businesses.
The Walt Disney Company undoubtedly scaled new heights under the
leadership of Eisner, however after almost 16 years of leading the company;
people were starting to raise questions regarding the approach he took to
run the company. Walt Disney always emphasized quality, creativity,
teamwork, communication and cooperation and the loyalty and the
commitment of the employees were pretty clear. However with Eisner in
command, the employee dissatisfaction seemed to be growing gradually.
Hence, the main issues in this case revolve around Disneys strategy for
growth and the impacts it had on the companys performance, the sensibility
of the strategic goals set as well as the strategies, whether they needed to
be revised to comply with the changing environment and ever-increasing
competition. Also, at the pace in which it has been expanding, whether it had
all the grounds covered to execute the strategies successfully. If not, what
were the changes required to be made.

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To address these issues, we will have to first understand the industry it
operates in and then analyze its strengths and weaknesses as all these have
a major bearing on the company performance. We will also have to assess
whether these were taken into consideration when devising strategies and
whether the approach Eisner took was appropriate.

THE WALT DISNEY COMPANYS BRIEF INDUSTRY ANALYSIS

Industry Life Cycle Stage: The Walt Disney Company has a long history and
an established name, not only in the United States but throughout the world.
It produces entertaining theatrical productions that are family oriented and
family friendly; creates products and toys that promote their theatrical
productions that are both entertaining and safe for children, and also
interesting enough to attract new customers; entertains families with
children who are looking for a fun and interactive vacation spot both with
resorts and parks, and also cruise lines. Simply, The Walt Disney Company is
in the entertainment industry. The entertainment industry is in the growth
stage due to the change in demographics and the orientations of todays
generations.
Disney has a strong foothold in the industry, an
accomplishment mainly due to their history and roots in the American culture
and their brand value.
Competitive Analysis: As the generations are changing and families are more
prone to taking vacations, the entertainment industry is growing rapidly.
This produces a demand for entertainment and many opportunities for new
players to enter the industry. This also creates a lot of competition for
established entertainment companies. There might not another equal
competitor to The Walt Disney Company, as a conglomerate; however, there
are a lot entertainment companies, existing as well as emerging, competing
with its individual business lines.
In Disneys case, a lot of their competitors for their theme parks are the
same as their competitors for their theatrical productions. For example,
Universal Studios has theme parks and, like Disney, is a global organization
with operations in the United States, Japan, et cetera; Paramount Pictures is
a more local example with many parks situated throughout the United
States. In terms of its Broadcasting business, its ABC Networks faces strong
competition from NBC, Viacom-CBS and AOL-Time Warner. In terms of cable
networks, The Disney channel ranked a distant third to Viacoms Nickelodeon
and Time Warners cartoon Network, both of which entered the market after
The Disney Channel. This affected its consumer product sales as well. As for
its Internet entity GO.com, it did not have leadership [position either and

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faced tough competition from the likes of Yahoo. Despite all these, the
history and the brand are very important when it comes to competition in
terms of positioning the products and services in the minds of the consumers
and Disneys name and history in the entertainment industry supersedes all
of its competitors
THE WALT DISNEY COMPANYS MAIN STRATEGIES
In general, The Walt Disney Companys main strategies are:
Related Diversification: The Walt Disney Company is a diversified
entertainment company. Originally, it was involved in studio
productions only. Gradually, it diversified into many fields like media
networks, theme parks, consumer products to name a few but the
diversifications always remain within the entertainment industry. It is
involved in studio entertainment and theatrical productions for
children, teens and adults of all ages; television stations targeting a
wide variety of audiences: ABC for news and families, Disney Channel
for children, ESPN, ESPN2, ESPNEWS, and ESPNU for the sports
fanatics, SOAPnet for the stay at home mothers and fathers; theme
parks like Disneyland, Disneyworld and the Disney World Resort to
attract families with younger children looking for a good vacation, et
cetera.
Growth through acquisitions: The Walt Disney Company gradually
added to its capacity and the services it provided through acquisitions
aimed at expanding its reach to a wide variety of customers. The IPO in
1940 strengthened the company by giving it the ability to use a
publicly traded security to make strategic acquisitions in diverse but
related areas for growth. In 1992, it acquired an NHL team to venture
into sportswear merchandising and it also provided the company with
cross-marketing opportunities. In 1993, it acquired Miramax, an
independent production studio that made low-budget art films. One of
its major acquisitions was ABC network. Recorded as the second
largest acquisition in US history at $19 billion, it enabled the brand to
enter into a new business territory. All its mergers and acquisitions
increased the scale of the business dramatically.
Focus on creativity and technology for leadership through customer
satisfaction: To become a leader in the industry, Disney has a team of
people involved in the process of developing new technology called
Disney Imagineering. It is the R&D section of Disney which
continuously thinks up, designs, and implements new, fun and exciting
products for the Disney Company that will attract, amaze, and excite
their customers. From developing rides and attractions of Disneys
theme parks, new movie technologies offering cutting edge visual
effects to their Disney resorts, Disney Imagineering is involved in all
development to enhance the brand appeal of Disney in all aspects that
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matter.
Symbiotic ( cross-promotional) marketing program: Disney combined
the studio's movie productions with television promotion through the
Wonderful World of Disney. The television shows also showcased the
Disneyland as well as upcoming feature films. The parks featured rides
based on Disney's films and the animated films themselves were
re-released every few years in order to market to the newest group of
children. This not only bolstered the sales in its home video division
(Video tapes and DVDs) but also gave way to merchandising its
consumer products. The placement of Disney characters on school
supplies and lunchboxes, in malls, and on the walls of their theme
parks, in turn, served as a daily advertisement for the company and
reinforced its brand image.
THE WALT DISNEY COMPANYS PERFORMANCE ANALYSIS
The Walt Disney Company has been through a lot of ups and downs to
become the entertainment powerhouse that it is today and the strengths and
weaknesses are internal reflections on why it performed the way it did. Some
of its general strengths and weaknesses are discussed below:Strengths
Well-defined and targeted market is one reason for the companys
successful performance. Its target market is not only children, but the
parents as well. It has understood that it's one thing to make products
that kids are excited about but the efforts often fall short if parents
don't approve of it.
Another of its strength is its universal appeal such that it not only has
an attracting effect on children but teens and adults as well. It can
attract younger children who identify with the Disney characters and
enjoy seeing them in full life form. It also attracts the older children
who still identify with the characters in the form of enjoying the
themed rides that feature their favorite movies and characters in them.
Plus, it appeals to the adults by bringing the fond memories of their
childhood back to them.
Its creative and technological capabilities are also major strengths.
Being in the entertainment industry, catering to a large group of
customers that differ demographically, it is a must for the company to
incorporate creativity and ingenuity in its products. For that, an
advanced technological capability is indispensible and Disney has a

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great pool of creative talents along with a sound technological
infrastructure.
The company has developed a very strong brand name, image and
brand portfolio. Disney has one the most recognized and powerful
brand names in the entertainment industry. Not only does it have a
strong corporate brand, it has additional brands such as ESPN (one of
the biggest sports channels in the world), Miramax, Touchstone, and
Pixar. These, being other brands of Disney, have high brand equity.
The Walt Disney Company utilizes multiple positioning bases to its
advantage, due to its long, successful history. The main positioning
base employed by Disney is the customer benefit-a family-friendly,
safe, fun environment that is open for business all year. It also offers
specials for families, such as discounts on flights, car rentals and hotel
rooms, to attract more people to their parks, and this tactic is
considered in the price and quality base indicating a value bargain to
their potential customers. But the most important positioning base
utilized by the company that distinctly sets them apart from any of
their competitors is emotion. Being founded in 1923 that produced
widely popular cartoons, the name Disney has been a part of peoples
lives for a very long time and people can easily relate to them.
Weaknesses
Disneys frequent change in top management and the enormous

amount of employees are two major sources of problems. As of 2000,

there were 110, 000 people working for Disney. Expanding their
business portfolio and gaining many different niches gave them a
bigger image, but it also meant greater possibilities for
miscommunication and a high chance for a bureaucracy in the
company. Also, the changes in top management were too frequent and
it hindered strategic implementation to some extent, which reflected in
the balance sheet as well.
Another point is that the company relied too heavily on mergers and
acquisitions. Failure to develop a common unified culture that each
new acquisition could identify with caused a lot of trouble for the
company, especially after the ABC acquisition.
THE WALT DISNEY COMPANY AND EISNERS LEADERSHIP
The Walt Disney Company, since its inception, has undergone much
upheaval. The company was doing great till Walt Disneys leadership. After
his demise, the performance started declining bit by bit. In the late 1970s
and early 1980s, its film division ( a major source of its revenue) declined.
The results from heavy investments into newer ventures were yet to

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materialize, its financial performance deteriorated rapidly from 1980 to 1983,
and it was facing hostile takeover and dismemberment. It was after 1984,
when Michael Eisner joined as Chairman and the CEO and Frank Wells as
president and the COO, that the company turned a new leaf. Eisner brought a
rich base of executive experience while Wells brought his operating
management skills and his experience as an entertainment lawyer to Disney.
Doubts regarding their ability to understand and maintain Disneys corporate
value of quality, creativity, entrepreneurialism and teamwork faded quickly
and together, they helped the company to enter newer realms successfully.
To revitalize the company, Eisner hired Jeffrey Katzenberg to make movies
under two new brand names namely Touchstone Pictures and Hollywood
Pictures. He also took initiatives to rebuild its TV business. He also
syndicated to sell some of its TV programming accumulated over the years
to independent TV stations. Under his management, the company also
entered home video arena. Disney offered the "classics" of Disney animation
in the expanding home video market through Buena Vista Home Video and
the revenues from this division provided an immediate boost to the
companys profits.
The existing theme parks were updated and many new attractions were
added. It engaged in attendance-building strategies that included national
television ads, retail tie-ins, media broadcast events, et cetera. It also
stepped up expansion of its hotels and resorts to encourage longer stays and
attract major conferences. In 1992, Euro Disney was established in Paris,
which was later renamed Disneyland Paris.
In late 1980s, Disneys consumer products division expanded into retailing
through Disney stores, book, magazine and record publishing through
establishment of Disney Press, Hyperion Books and Hollywood Records. It
also established new channels of distribution through direct mail and catalog
marketing. In 1993, Disney also entered theatrical productions which added
a new revenue stream to the company. As new theatrical productions were
released, it allowed for new product lines based off the features characters
to be made and sold in strategically placed stores throughout the United
States. The stores were located in malls and in urban locations in order for
them to be accessible, and they were also located within the theme parks
where they could be heavily sought after by eager vacationing families.
The company resorted vertical, horizontal as well as geographical
integration. To maintain coordination among its multiple business lines,
Eisner-Wells team introduced a corporate marketing calendar to facilitate
companywide cross-marketing activities. Several promotional campaigns

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with corporate sponsors in one business needed to be coordinated with
similar initiatives by other Disney businesses. A monthly meeting of 20
divisional marketing and promotion executives was initiated to discuss
interdivisional issues. This created synergy and boosted revenues through
cross promotion and scope. An in-house media buying group was also
established to coordinate media buying for the company. Every aspect of
Disney promoted not only itself but every other aspect as well. He also
introduced a system whereby every few months 25 executives from every
business were necessitated to take part in a synergy boot camp for eight
days. They cleaned bathrooms, cut hedges and played characters in the
park. This enabled them to bond not only with the company but with each
other as well.
With all these, Eisner made the Disney balance sheets glow. From 1986
through 1990, the company broke profit records and operating margins
remained above 20%.
PROBLEMS UNDER EISNERS LEADERSHIP
Under Eisners reign, Disney first defied and later fell short of expectations.
Eisner, along with Wells, was responsible for Disney's monumental success
after 1984; however things started to go downhill in the late '90s. In 1994,
after a decade of contributions to the company, Frank Wells was killed in a
helicopter crash. From 1984 to 1994 Wells and Eisner helped to increase
annual revenues from $1.6 billion to $8.5 billion. Well's death marked the
beginning of a misfortune for Eisner and Disney. He and Wells worked well as
a team. They seemed to complement one another with their marketing and
executive leadership abilities, but after Wells death, Eisners leadership
faltered. Some of the problems under his leadership are discussed below: 20% growth target: When Eisner entered Disney; he targeted annual
revenue growth and ROE exceeding 20%. After more than 15 years, he
has stuck to the same strategic target throughout. With operations in
five different businesses, he seems to have overlooked the emergence
of competitors and changes in the customer demographics as the target
have not been revised ever since. This reflects on the companies
inconsistent financial performance. Considering its ever growing
businesses, the target is quite vague as the targets for the individual
businesses seem to be missing. This will create problems in evaluating
their actual performance and the long term viability.
Mergers and acquisitions: Apart from what has already been explained
earlier, Disney underwent a lot of mergers and acquisitions in a
relatively short span of time. It seems that the company did not plan
them well. They went ahead with them as easy option for growth without
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giving much thought to whether the companies they acquired were on
similar grounds in terms of culture, brand image and value or whether it
had enough capabilities to manage the successfully manage the new
acquirements. Moreover, the company had grown so big and its
problems so far-reaching that they could not be counteracted by a
couple of hit movies or TV shows or additional Disney stores.
Cultural clashes with ABC Networks: The organization culture of Disney
totally clashed with that of ABC. The highly combative culture at Disney
did not go well with the executives at ABC who were used to working in
a relaxed and congenial atmosphere. Disney also cancelled ABCs earlier
agreements when it had already incurred costs and it was yet realize the
results. This strained the rating as well as the financial performance of
ABC, thereby deteriorating Disneys performance as well.
Cost control at the expense of quality and creativity: To pare back
operations that had been bloated during Disneys long run of success,
Eisner started a cost cutting plan, starting in 2001. He cut down the
number of its licensed products by half, reduced film budgets, and
tightened cost control in its TV production unit. Club Disney, a chain of
shopping mall play centers and ESPN stores were also shut down in
attempts to cut down cost.
High employee turnover: There were increasing grievances regarding
the combative culture, too much focus on making money and Eisners
management style. Between 1994 and 2000, approximately 75 highlevel executives left the company. The creative minds of the company
Disney started to feel that their creativity was being smothered. With
increased emphasis on making money, Eisner moved towards tightening
cost control and undermined creativity and quality in the process.
Deteriorating core brand image: With its series of diversification and
acquisitions, Disney increasingly faced the prospect of damaging its
brand. Disneys core image as a wholesome entertainment provider was
instilled with traditional family values and family orientation. With its
careless diversifications and acquisitions, it was risking its most valuable
asset, its brand name and image. Also, high employee turnover raised
speculation about the companys image.
Apart from these, under Eisners leadership, Disney faced a public feud
between Eisner and Jeffrey Katzenberg (who went on to co-found
DreamWorks Studios with Steven Spielberg); sinking ratings for ABC
television; limited success at the box office; ill-considered theme park
developments; and a famously bad billion-dollar gamble on the Internet via
the subsidiary Go.com.
PROBLEMS WITH EISNERS MANAGEMENT STYLE

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Eisner was a good leader when he had a joint leadership role with Wells, but
when he took charge after Wells died, problems emerged with his
management style are as follows:Autocratic and Micromanagement: Eisner was running the Disney empire
single handedly and this became more apparent after Wells died. He headed
an organization structure that was hierarchical, centralized, and slow. His
management style is apparent from the fact that he did not delegate his
authority even when he had his bypass surgery. Also, every decision had to
pass through him. His micromanagement style seriously hurt the creative
process at Disney and it created an atmosphere where the creative force
could not perform their best. Program ideas, script decisions, even decisions
on which writers might be signed, often had to go through as many as six
executives, then through Eisner. This stifled the creativity in the company
which is the core value of Disney. Eisners micromanagement was one of the
main reasons for clash with ABC executives.
Lack of succession planning: There seems to be an apparent lack of
succession planning in Disney. For a company of Disneys stature, a clear
succession plan is indispensible for the company to operate smoothly.
Eisner's failure to incorporate succession planning in his management has
negatively affected the company. To fill Wells position, Eisner hired his longtime friend Michael Ovitz, but that did not work out. Eisner paid a severance
package that included a $38.9 million cash payout and stock options valued
at more than $100 million. Ovitz worked for only 14 months with Disney, and
Eisner paid him enough for life. In the span of about a year, almost $100+
million was irresponsibly spent. Also, his persistent failure to name a
successor for himself has been a major concern.
Inflexibility: The economy, businesses, customers change with time; so there
has to be revisions made to accommodate such changes. The recognition of
these changes was delayed, which caused more chaos for Disney than was
needed. In a business, checks and balances are vital, and for any business to
prosper, it has to focus on strategy. This analyzes competition, but it also
looks at the customers and clients of the entity. They are the ones the
organization is trying to reach, and the customers should have more input,
especially when it is publicly traded. This is where I feel Eisner went wrong.
Deviation from the core corporate values of quality, creativity and teamwork:
Walt E. Disney created an environment where his employees felt welcomed,
and empowered, to speak freely their mind. Walt's management style
empowered the company to cultivate fresh ideas and they abided by their
corporate values to make profits. Eisner lost a lot of money with a negative
approach, and then cut back costs, which resulted in many poor quality films
and merchandise. Also, Eisner talked about teamwork and empowerment
but continued to seek control. He fostered favoritism by hiring top executives
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that he wanted instead of letting the board decide. Eisner pitted employees
against each other to show their worth. There was too much conflict built
into the organization. The environment that used to be fun and light changed
into a highly competitive and pressurized environment.
CONCLUSION
It is undeniable that The Walt Disney Company has created an empire that
is unmatchable. It strived for excellence and is continually growing. It is
surrounded with the best artists, the most innovative creators, and the
newest technology. Above all, the consumers are the driving force behind the
mega enterprise.
The Walt Disney Company in very interdependent on its various sections; it is
a global leader in the industry of entertainment; and it is a continuously
growing company with a strong foothold on several aspects of business
practices. The studio productions seem to get the ball rolling, providing
characters to base their products after, and themes to model their
attractions. Because of the rich selection Disney has from which to produce
its products and attractions, it enables Disney to have many options and
opportunities to expand their product lines. They certainly are a leader in
the domestic market in the United States, and with their reach into many
different diverse countries their global expansion is also among the tops in
the industry.
Michael Eisner was successful in attaining financially positive goals for the
Walt Disney Company, but he did it at the expense of losing quality
employees, business relationships, as well as tarnishing the companys
image
and
reputation.
By
using
a
dictatorial,
authoritarian,
micromanagement style, Michael Eisner was somewhat successful in
increasing Disneys bottom line but it also damaged key relationships and
business associations. However, Because of Eisners track record and
demeanor, it was hard for others to point out his faults and realize he was no
longer the best one to guide Disney into the future.
RECOMMENDATIONS
Its strategy (M&A) did contribute to its growth into a mammoth
organization, however continuing with mergers and acquisitions is not
advisable in the long run for the reasons already discussed above. To
achieve growth, it can pursue markets worldwide by leveraging its core
competencies.
The exact strategic target of 20% growth rate does not seem sensible
considering how far the company has reached in terms of size and
scope. The targets need to be revised as per the changes occurring
and they should be more specific. Instead of a 20% growth rate for the
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entire company, the targets need to be individualized in accordance

with the investments made in them and their level of operation. Also, it
should learn from its earlier mistakes (GO.com, cultural issues at
Disneyland Paris, et cetera). While fixing targets and devising
strategies, the organizational capabilities as well as their ability to
tackle the competition have to be taken into consideration.
There has to be changes in the way the company is being managed. A
multi-billion dollar conglomerate like Disney definitely requires more
than one person controlling its overall activities, from minutest details
to major policy decisions. Micromanagement is not a productive form
of leadership because for employees to be innovative, they need
guidance without conformity. Decentralization in authority will not only
help motivate the employees, but it will also enable management to
provide deserved attention to all the businesses, activities, thereby
strengthening management. This will also enable decision-making at
the right time.
Disney is a company known for providing wholesome family
entertainment. This is what differentiates it from the rest and it should
preserve it. Its brand name and image is its most valuable asset.
Without it, the company will easily fall into oblivion. So , extra care
should be taken to preserve them
The strategic role of human resource management is pivotal for a
companys overall success in accomplishing its mission and business
strategy. The company should give due importance to the role of the
employees to motivate them to put their best foot forward. While
certain conflicts can give rise to new and innovative ideas, too much of
it can paralyze the company as well. Teamwork always fares better
than tension and hurt ego.
Most importantly, a clear succession plan should be incorporated in the
organizational policies. It will help the transitions in top management
to take place without much friction and with as little implications on
the company performance as possible.

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March 3, 2010