Disney Analysis

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Case Analysis of The Walt Disney Company: The Magic of Disney

Fall 2003 Sean Housley Haas School of Business University of California, Berkeley MBA Candidate, Spring 2004 housley@mba.berkeley.edu

Abstract Disney has led the entertainment industry for much of its storied 80-year history. What exactly is the ‘Magic of Disney’? And how has Disney sustained the magic for so long? This paper analyzes Disney’s historical competitive advantage, drawing emphasis on the remarkable synergies Disney created across its various businesses. This paper then addresses the contributions of CEO Michael Eisner, credited with restoring Disney to greatness in the mideighties. Finally, this paper evaluates Disney’s growth strategy over the last decade.

Sustainable Success Disney is an outstanding example of a company that has maintained its competitive advantage by routinely making wise decisions about what resources and capabilities to acquire, invest in, and develop. Further, Disney has exhibited an uncanny ability to successfully make decisions about what to do with its resources and capabilities given its competitive environment. These decisions constitute Disney’s strategy. And, while Disney’s strategic decision-making record is not perfect, it is strikingly superior to most firms.1 As with enduring market leaders in other industries, Disney’s sustainability is explained by elements of its strategy that are heterogeneous, are inimitable, exhibit foresight, and include imperfectly mobile and co-specialized elements. Heterogeneity Disney is different. No other entertainment company – perhaps no other company period – evokes the feeling of wholesome family goodness that does Disney. Disney has taken extreme care from its early roots under founder Walt Disney in 1928 to ensure that its image is fun, imaginative, clean, and appeals to people of all ages. It places high priority on making products predictable and safe. The control of image and attention to detail exists throughout the company; from the theme parks, which are washed down each night; to the retail stores, which bear twice the construction cost of the U.S. average; to the licensing of characters themselves, which in some cases require approval from CEO Michael Eisner himself. Disney bolsters this image by encouraging creativity and innovation among employees. It further reinforces its unique culture by training employees at Disney University, by maintaining company archives to preserve its history, and by promoting from within. Inimitability Walt Disney said, “It all started with a mouse.” Actually, preceding Mickey was Oswald, the Lucky Rabbit. However, Walt Disney lost the rights to Oswald because he did not own the copyright. What he gained instead was an early education in the value of intellectual property. Since that time, Disney’s tight control over its properties have given it a strong defense against entrants and competing incumbents. Fortified by these protected characters, Disney has built a strong brand that further deters competitors’ efforts to imitate. Finally, 1

For example, Harvard Business School Case The Walt Disney Company (A): Corporate Strategy (Michael Porter, 1988) cites industry estimates that only 20% of films in the 1980s were profitable. The case indicates that Disney, on the other hand, produced profit on “nearly all” pictures produced from October 1984 to March 1988, at the targeted production rate of 15-18 new films per year.

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Disney’s corporate culture, resting squarely upon Walt’s legacy and vision and bolstered by Michael Eisner, adds to Disney’s inimitability. Strategic Foresight Despite early failure of his first cartoon business, Walt Disney had the vision and confidence to pursue several previously untested ideas. In 1928, Disney released the world’s first fully synchronized sound cartoon, “Steamboat Willie”. In 1937, Disney released the first full-length, full-color animated feature, Snow White and the Seven Dwarfs. He had...
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