The Walt Disney Company: The Entertainment King
I. Why has Disney been successful for so long?
Disney’s long-run success is mainly due to creating value through diversification. Their corporate strategies (primarily under CEO Eisner) include three dimensions: horizontal and geographic expansion as well as vertical integration. Disney is a prime example of how to achieve long-run success through the choices of business, the choice of how many activities to undertake, the choice of how many businesses to be in, the choice of how to manage a portfolio of businesses and the choice of how to create synergies between those businesses (3, p.191-221). All these choices and decisions are made through Disney’s corporate strategies and enabled them to reach long-term success. One will discuss Disney’s long-run success through a general approach. Eisner’s turnaround of the company and his specific implications/strategies will be examined in detail in part II. Disney could reach long-run success mainly through the creation of value due to diversification and the management and fostering of creativity, brand image and synergies between businesses (1, p.11-14). The most important part of Disney’s long-term success is due to its key strategic choices and incorporation of various diversification strategies. Disney created value mainly through “vertical integration” of its business lines, especially through the concept of forward integration. For example, Disney integrated production of movies and the final distribution in cinema’s or on television, especially through its acquisition of ABC in 1995 (1, p.6/7). Through this acquisition, Disney was able to extent its boundaries quickly and gain access to a wider level of distribution for its products. Furthermore, forward integration was accomplished between its various channels and its retail stores (“retail-as-entertainment” concept) (1.p.6) or theme parks, which enabled Disney to gain access to new business opportunities (especially through synergies between production and its retail business). In addition, Disney was also able to integrate backwards through its strategic alliance with Pixar. Disney needed their strong creativity and ideas in the production of new movies and simultaneously offered Pixar strong distribution channels (class notes). Also, Disney reached geographic diversification by better integrating its overseas operations and horizontal integration through establishment of completely new types of entertainment (1, p.12). In general, Disney realized early on that its core business “studio entertainment” was not as profitable as other industries and would not enable them to survive in the long-term. Thus, through diversification and congruence of its corporate strategies, Disney was able to align and reach synergies between all its various business lines and establish long-term success. Not only in the Walt Disney years, but also in the following duration, Disney always was focused on not loosing their sight of preserving corporate values like quality, creativity, entrepreneurship and teamwork, at which the success of Disney was built on in the first place (1, p.4). This has been accomplished by managing synergies and creativity and in leveraging its strong brand image throughout the years. Developing synergies was very important. It enabled Disney to increase its scope of business geographically, horizontally, and vertically. For instance, Disney increased synergies between its businesses through “synergy boot camps” (1, p.11). Moreover, Disney was able to sustain creativity through strong H&M management methods like “gong shows” (1, p.13). II. What did Michel Eisner do to rejuvenate Disney? Specifically, how did he increase net income in his first four years?
As already discussed above, Disney’s success is most notable due to Michael Eisner’s rejuvenation of the company after he took over in October 1984. At...