The Walt Disney Company: The Entertainment King
1. Why has Disney been successful for so long?
Leveraging Horizontal and Vertical Integration
The Disney Company created horizontal scope advantages by expanding globally into ventures that heavily leveraged Disney brand equity, but not its capital dollars. Deals in France and Japan provided residual revenue that expanded the company presence and seized a share of wallets in new markets. The demand for the Disney brand is evident in the rapid growth from its foreign theme park attendance as those parks rank number one and number four annually (Exhibit 4). Time after time when management was confronted by challenges the organization found ways to better leverage existing assets and the reach of its products and services. This was first demonstrated in the section “The Early Years” when Walt opened his own studio to create animated characters and films. This was done on the heels of the commercial success of animated characters he created, that were contractually owned by the distributing partner. On his second try, he used vertical integration to leverage the success of his animated films to create his own distribution network and the Walt Disney Music Company. The music company allowed him to control Disney’s music copyrights and recruit top artists. These actions generated higher profits and increased control while reducing risk and dependence on third parties. This concept was used again in the creation of Buena Vista Home Video (BVHV), which pioneered the “sell through” approach. This method marketed videos at low prices for purchase direct to consumers instead of selling primarily to video rentals stores. They were first to market and became the leader domestically and in all major international markets. The scale of their operation also positioned them best for the change to from VHS to DVD format. One more recent acquisition to grow vertical advantage was the purchase of ABC. From 1996 to 2000 revenue in this division grew from 4 billion to over 9.5 billion. Disney heavily leveraged success of TV programs like “Who Wants to Be a Millionaire” to grow advertising revenue and increase viewership to the network. Growing viewership on the ABC networks allowed strategic placement of Disney produced series, shows, and products to increase sales and customer awareness of the Disney brand. Building Cultural Competency
The Disney has done a phenomenal job managing creativity and its brand. The creative tension and culture created by Disney CEO Michael Eisner, specifically during his years of leadership with Frank Wells, increased profitability and allowed best ideas to bubble to the top. Concepts like the Disney’s corporate university, the gong show, and business unit coordination fostered an atmosphere that valued cohesiveness. Conflicts were resolved amongst business units and generated many cross business unit ideas. Leveraging Cost and Technology Advantages
Disney created cost advantages by constructing similar attractions in different parks. Park concepts, rides, and ideas were replicated across the parks resulting in economies of scale both for costs and creativity. This is an advantage only a company the size of Disney could benefit from. Since the beginning, Disney has been a leader in animation. Early on, it turned animated pictures into movies. In the early 80’s, its computer animated production systems changed the speed and quality of film production. Disney’s technological and scale advantages drove its profits well ahead of its competitors and fueled its aggressive expansion efforts. 2. What did Michael Eisner do to rejuvenate Disney? Specifically, how did he increase net income in his first four years? Studio and Entertainment
A top priority in 1984 was to rebuild the TV and movie business. Eisner first innovated by bringing the Disney Sunday Movie to ABC, which brought quality Disney programming to a wide audience where it proved it was evolving with...
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