Strategy Formulation

The Walt Disney Company: The Entertainment King
GROUP- 5 MBA- DIV:A Rahul Bafna 04 Vaibhav Gupta 27 Akshay Johur 33 Krishnan PS 43 Akshaya 50 Amogh Yadav 63

However the Disney Brothers bounced back with modified version of Oswald. management and almost all the aspects under which a business operates.Mickey Mouse . Oswald .IntroductionIt all started with a 17-year old boy s dream to become an artist and his subsequent failure that resulted into what we can today easily term as one of the largest corporation on Earth. Incorporating some new techniques like synchronized sound the new adaptation paid off and with the launch of Steamboat Willie Mickey became an international celebrity overnight. it ends with a big question mark.was a their first hit. where he founded Disney Brothers Studio along-with his older brother Roy Disney. The case goes on to describe the journey of The Walt Disney Company from its conception period till today and how the firm went through countless changes in size. the benefits of which however lasted short when they found out that the copyright of the series was now owned by a rival distributor who had hired away employees from Disney in order to shut competition. However success did not come easy for the duo.Does Disney need to change its strategy once again? . And is the case with every case. Walt Elias Disney started his journey with Hollywood in 1923. strategy. structure.

Disney 1993: Michael Eisner 2000: Michael Eisner: Rectification Measures As mentioned earlier that there are basically 2 types of strategies practiced1. We have also made an attempt to link the approaches used by Disney with the 2 types of popular Strategic approaches.Case AnalysisThe case analysis has been done with emphasis on the previously used strategy by Disney. People Proposition To motivate those working for the company to execute the strategy. the current and existing strategy. whereas in case of the Reconstructionlist approach the firm has to resort to Differentiation as well as Low Cost. Structuralist Approach. Disney & Roy E. . Profit Proposition To enable the company to make money out of the value proposition. The study of the case and Disney s strategy has been done in line with the different phases through which the organization has went through and accordingly the evaluation of the firm s key strengths and weakness in its approaches have been discussed. The ignorance of any of the three areas will ultimately cause an imbalance in the successful execution of the plans of the firm. Reconstructionlist Approach.Devising the structure on the basis of the strategy The success of both these strategies however depends on the development and alignment of the 3 propositionsy y y Value Proposition To attract buyers. The only distinguish factor between the 2 strategies is that in the Structuralist approach a firm has to align the 3 propositions through either Differentiation in its product/service or Low Cost of Operations. and whether the company is in the need of any changes in its strategy. In the detailed assessment hereafter we shall see how Disney has made a choice between these 2 approaches and in some case has also used a combination of the approaches in line with the demand of the situation.Devising the strategy on the basis of the structure 2.Structuralist Approach and Reconstructionlist Approach (popularly known as The Blue Ocean Strategy). The learnings from the case and its strategic analysis have been divided into 4 phasesy y y y 1927 1967 1984 1994 1966: The Walt Disney Era 1984: Roy O.

World War II affected the production. 1966. Started developing full-length films to tap the future market. An outdoor entertainment park. It was a flat and nonhierarchical organization. Disney won 6 academy awards for characters like Goofy and Donald Duck. Created Walt Disney Music Company. Creativity and quality were the driving forces for the success of the company. Started mixing live action with animation. Disneyland was opened. Prevailing Company Structure & Subsequent TransitionCompany was in its initial phase and was facing short-term cash problems. Prevailing Market ConditionsThe entertainment market was in its development phase. Special cartoons for government during World War. Various Strategies used by DisneyLicensed Mickey Mouse to overcome cash crunches.Plans to build Walt Disney World and EPCOT y y y y y y y y y y y y y y y y y y y . 1965. The approach here can be said to be more of structuralist in nature when we see that the firm was adjusting its strategies as the entertainment market was developing.Walt Disney dies. financial crunch & getting a permanent workforce. Targeted not just the kids but also the adults.1927 1966: The Walt Disney Era The initial stage for Disney was very much alike what every new venture has to go throughcompetition. World War II affected the production. Company was scaling up and went public in 1940. However the company was lucky enough to get some early break-through ideas like Mickey Mouse which still remains the company s most vital character till date. Adopted the strategy of two films per year plus a large number of shorts. It was responding to the demands of the environment and that was the driving force for its success along with the differentiation factor in its inventions. Direct Competition. Cost savings by launching Buena Vista Distribution. and also released Snow White and the Seven Dwarfs which became the highest-grossing animated movie of all time.

Invested in a new cable venture. Started bringing live shows to major cities. Introduced a new label Touchstone. Film output was declining.house travel company. Disney & Roy E. y y y y y y y y y y y . other businesses under the empire were not doing that well. The Tokyo Disneyland was owned by its Japanese partner but was made to look just like U. Company was facing the situation where it can be sold but was helped by investment from Sid Bass. Tokyo Disneyland was announced. Walt Disney World was opened and it also has two on-site resort hotels. Various Strategies used by DisneyOpened in. Prevailing Company Structure & Subsequent TransitionRoy O. The Disney Channel. Even though Disneyland was expanding its operations in Japan and enjoying heavy success. and this strategy in turn was affecting the industrial branches of the company in innumerable ways. Although the theme park became the top-grossing park in the world. The company was relying heavily on cutting costs. park to retain the identity of Disneyland. to target teen/adult market. Financial performance was deteriorating. its film output declined heavily and the company once again started facing financial problems. the loss of the founder seemed to be just too much to handle for Disney. Although the company still followed the same strategy as earlier.1967 1984: Roy O.S. Roy Disney took over as the chairman but lived long enough only to observe the opening up of the Walt Disney World in 1971. The situation had deteriorated to an extent where the company was on the verge of being acquired. Disney becomes the chairman. and it would have been acquired had it not been for the oil tycoon Sid Bass who invested $365 Million and put Roy Disney back on the board of Directors who had earlier resigned from the company. Disney After the expiry of Walt Disney.

Though Eisner aspired to grow the company. took over as the chairman and CEO of Disney in 1984. Prevailing Market ConditionsTheme Parkso Maturity in US markets o Europe / Asia markets were booming Sitcomso Move from Family oriented Sitcoms & centered less on social issues o Focus on acerbic takes on middle class & on single adults (e.1984 1993: Michael Eisner Eisner. was saving on costs and providing innovative products and services to its ever growing customer-base. This was most probably the most important phase in the Disney Journey. For the first time. This was the transition phase of Disney from its traditional Structuralist approach to the Reconstructionalist approach or the Blue Ocean Strategy where the strategy of the company began to impact the structure of the industry. the core values of Disney remained unchanged and untouched. former president and COO of Paramount Pictures. So the company was managing to employ its various resources.g. Major Competitorso Pixar o Dreamworks Prevailing Company Structure & Subsequent TransitionOn the helm of Takeover New management Team Declining Profits Emphasis on creativity y y y y y y y y . Disney was looking determined to maximizing its shareholders revenue by 20% per year. This stage saw some very massive expansions by Disney in various fields of Entertainment & almost all the industries that the company entered had reaped in profits for the firm. The company went through various ups and downs in this period. Sienfeld) Animationo Beginning of Modern era of US animation referred to as the American Animation renaissance o Beginning of Outsourcing lesser cost of Production. In contrast to this the company also saw declining profit margins in the later half as well as a lot of tension within the organization. With high attrition rates the internal environment had taken a huge beating though the company was showing positive figures on paper. where a number of changes were made through-out the organization and these changes actually began to affect the industry as a whole.

Risky Films ventured into new segments of films Cross Promotional Marketing strategies through o Corporate Tie ups o Retail o Expansion into other businesses o National Hockey League Mighty Ducks o Broadway-bound Theatre production Commitment to live Entertainment .y y y y y y y y y y y y Various Strategies used by DisneySeparated Creative and Financial forces to foster innovation. Magazines and record publishing segment o New channels of Distribution Theme Park Strategies o Euro Disney Very low cost of capital & higher profit margins o Compromised with the French Govt. Instilled Disney s culture in the Employees Network Syndication Fostering creative talent High risk taking Venture capitalist approach Financial o Corporate Sponsorships o Co-ordinated negotiated inter-divisional transfer prices Established Different functional verticals o Corporate Marketing Function o Marketing calendar o Disney film library o In-house media buying group Expanding into new businesses o retail as entertainment concept o Entered into the Book. o Added attractions Night life complex & Water based attractions. & its employees.

Cruise ships. It seemed that though Disney had it s strategies in place. Educational retreats Merging of touchstone with ABC y y y y y y y y y y y y y y y y y y .1994 2000: Michael Eisner: Rectification Measures The year 1994 saw the demise of President Wells in a helicopter crash which created a void within the company that could not immediately be filled. it was not able to meet or adhere to all the 3 propositions of Value. The phase also saw the 2nd largest acquisition in the U. Prevailing Market Conditions & Company PerformanceLion King s roaring success Euro Disney back on track Demise of the President Wells Katzenberg leaves Disney Merger with ABC Impact of ABC MergerDebt ratio 20% to 34% Culture clash Change of ABC s congenial atmosphere Growth declines and then stabilizes Eisen s StrategyEntry into movies having big name stars and expensive special effects Excellent prediction of market for DVD s Converting theme parks into destination resorts Foray into Internet and TV Cost cutting plan Maximizing corporate synergy Cross promotion Entry into Restaurants.S history when Disney acquired ABC for $19 Billion without any financial borrowing. However soon there were rumors about cultural clashes taking place between the workforces of the two newly joint firms. Profit and People in alignment with its strategies.

Evolution of the Strategy at DisneyPhase of Operations 1927 1966 Key Strategies Adopted y y y y Cost Savings through BackwardIntegration Adjusting the Company Strategies according to the market aking Risks that paid off Disneyland Going beyond the traditional market segment.Including Adults More emphasis on Cost-Cutting Venturing into different industries ransition of focus from Film Industry Going Live through shows in major cities Creativity & Innovation prove to be the main driving forces Heavy expansion in various industries. Managing the Synergy effect More emphasis on creating a sustainable brand awareness Bringing back the lost creativity back to life Major initiatives to develop its operations through the Internet and TV Focus on the International Market ¡   1967 1984 y y y y 1984 1993 y y y 1994 2000 y y y y y . particularly with respect to theme parks Creating bridges between various departments and industrial branches of the company and urging them to compliment each other in their businesses.

Broadway versions of their critically acclaimed movies Creation of synergy group to handle communication after the ABC merger Shared office space in international market Strategic Planning Unit Gong Show to keep the innovations going . regions and audience. At Euro-Disneyland. making cultural allowances Purchase of NHL team Foray into DVD to have the first movers advantage and compensate the high costs Impact of Strategy on Company Structure y y y y y y y Retails-as-entertainment concept at the Disney stores Venture into books. recording labels Tapping of the Home Video market by launching the video cassettes at affordable price.Impact of External factors on Strategy (Post 1994) y y y y y y y Movie tie ins revenues decreasing Culture clash More focus on selling merchandise of core characters Gong show Encouraging conflict between top management High attrition rate One man show Impact of Structure on Strategy y y y y y y y y y y y Signing of Hollywood s best actors and directors Pursuing High quality Scripts from lesser known writers Reduction of time between releases Use of technology Increase in number of licenses to help recover costs Need for innovative attractions at the theme parks Special marketing function to handle company wide marketing activities. magazine. Exploration of untapped businesses.

More of a one man show Competitors: National. Online Websites Develop more attractions for theme park Threats y y More money focused thus losing image a s a fun company Facing fierce competition from Paramount Parks. paying and retaining innovative people. Searching.Overall SWOT Analysis of Disney s Strategies over the years- Strengths y y y y Eisner s leadership Values of the company Disney s Brand value Mickey mouse legacy Ability to venture into different areas and make profits successfullydiversification Global Standardization Target Audience.Everyone Constant Innovation Popular characters Consistent business for theme even at premium prices Occupying the top spots in Theme Park & Animated Films industry Weaknesses y y y y y y y y y y y Autocratic leadership Frequent change in top management High sunk cost Excessive Research & Development High Investment High Risk Factor Unprofitable/Hasty acquisition Cultural Imperialism Media Network Competition Too Large Organization Consistent business for theme even at premium prices y y y y y y Opportunities y y y y y y y y y y Merchandise GLOCAL-Global Localization: Think global. Act Local Characters of national or regional appeal Cheaper alternatives to soft toys Disney Music Channel Disney School of Management/Training Institute Move into different segments Market development in untapped countries. Universal Studios and Six Flags Theme Parks. Regional & Global Highly Demanding in terms of Sales. Maintain product differentiation. Creativity and Innovation Too Large Organization y y y y y y .

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