What is Disney's strategy?
Walt Disney was founded by Walter Elias Disney and his brother Roy in Hollywood in 1923 after several attempts in cartooning. Their first animated short became a hit but lost the copyright to the character to his distributor. The Euro Disney venture ran into a number of hurdles and did not live up to expectations. The company faced many cultural issues with this venture. However, the international expansion was a step in the right direction (Broadwin, p.59).
Disney has also employed its efforts in aggressive expansion of hotel and resorts businesses which has enabled it to maintain a high utilization rates well above industry averages. The decision to introduce moderately priced hotels was a key factor in enabling Disney to segment its customer base and extract maximum value.
Disney has also ventured into sports entertainment a positive effort towards continuously differentiating its products to suit customer's needs. This could be achieved due to the inherent cross-dependencies between sports events, hotel stays, TV broadcasting, and merchandising (Walt Disney, para.5).
Disney has continuously shifted to declining costs through its good cost-control efforts in the film industry.This has well served a positive contribution and a healthy profit margin
Additionally, Disney expanded its market beyond the primary 'family entertainment' market by launching the Buena Vista label and acquiring Miramax.
Disney's planned entry into software and multimedia has been a step in the right direction. This new medium represents a challenge to all the players in the market, and offers the Disney Imagineers the opportunity to showpiece the world with their innovations.
On the whole, Michael Eisner has made the right strategic decisions by carefully developing alliances and growing his business from within while continuing to exercise fiscal responsibility
Did the ABC acquisition make sense?
Yes it made sense through its expansion, it hoped the program would stimulate both financing and generates public interest. With the investments, Disney became the largest entertainment industry in the U.S and facilitated the distribution outlets for its creative outlets. This venture offered extensive synergies - Disney now had a vast new domestic and international channel through which it could distribute its various entertainment contents. Disney also benefited through the strategic alliances created from the investment in ABC.
Why has Disney been so successful for so long?
Since its inception, Disney has evolved through many changes. Its entertainment has been able to accommodate every viewer in the society, from children, youths to adults. Its growth from within has been a very contribution to the company maintaining its strong culture and identity. With the above happenings, the company has been innovative for long by reinforcing the company's image by giving the impression of everything exciting about the company (Broadwin, p.72).
Knowing about the importance of copyrights and legal action
Copy rights and legal protection has been key attribute towards its success. Today, the copyright protection on Mickey Mouse and other characters is arguably Disney's most valuable asset. The company has also employed other factors that prevent new entrants and other incumbents from simply imitating Disney. The Walt Disney Company has a formidable reputation and one of the strongest brand names in the world (Walt Disney, para.7).
Imperfect Mobility and Co-specialization
The strong legal protections for Disney prevent competitors from copying or imitating the wildly successful Disney characters. Additionally, over the years, the company has exploited the synergies between its various businesses to develop a cohesive strategy in which the 'whole product' is much greater that the sum of its parts.
This makes it virtually impossible for a competitor to make good use of any isolated Disney asset that it might gain access to. While competitors may be able to lure away some of Disney's employees, it will be very difficult for them to duplicate the vibrant Disney culture.
Walt Disney was the first person to identify the market for family entertainment. Also, Disney realized very early on that a key differentiator would be the ability to 'control' the various factors that might affect the company business. The large real estate purchases in Florida were a direct result of this foresight. Finally, Disney clearly understood that the entertainment industry is driven by creativity, and therefore structured the company such that it fostered creativity without external pressures from unions and stockholders (Walt Disney, para.6).
Has Disney gone too far with their diversification (expansion into other businesses) plan?
Disney has created a marketplace in which a number of inter-dependent and cross promoting businesses feed into each other, thus creating a 'virtuous circle' across the value chain. Through its creative research it has ventured into a multiple of businesses including publishing, movies, home video and T.V/radio. Disney has refined this single-minded focus into an integrated strategy - extracting maximum value from a group of related businesses by exploiting the inherent synergies between them (Broadwin, p.81).
There are two primary factors that enable Disney to create value across its businesses:
a) Disney achieves economies of scope and a strong competitive advantage by having a strong presence in virtually every business associated with the entertainment industry.
b) These businesses act as strong compliments for each other, thus generating the 'tornado effect' and growing the business as a whole.
Additionally, Disney has leveraged its early mover position by purchasing prime locations in Hollywood and Florida, thus gaining superior access to customers.
Finally, the legacy of Walt Disney's leadership, preserved admirably by Michael Eisner, coupled with a corporate strategy that emphasizes employee relations, has maintained a strong culture within the company.
Did the acquisition of ABC and Pixar make strategic sense?
Disney's acquisition of ABC in 1996 was an excellent move. The investment made Disney the largest entertainment industry in the U.S and facilitated the distribution outlets for its creative outlets. This venture offered extensive synergies - Disney now had a vast new domestic and international channel through which it could distribute its various entertainment contents. Disney also benefited through the strategic alliances created from the investment in ABC. Disney's acquisition of Pixar a Northern California studio specializes in computer generated imagery offers tremendous commercial opportunities for Disney in the new media and entertainment landscape acclaimed for both its technical wizadry and its story telling skills.
By many accounts, Pixar has been of great positive impact to Disney's animation business, filling its production pipeline but doing so with the same success that Disney's traditional animation business attained before.
In addition, Pixar films are digitally created, not cell animated, like most of Disney's older animated films. Beyond reinvigorating the animation genre with visual style, these films have also allowed for more cost efficient and easy repurposing of digital content. But most significantly, Pixar's films were born of great story-telling, the foundation of Disney's long-held dominance in animation. Pixar films are also known to maintain action, comedy and music elements, segments of which can be repurposed into short-form programming which, like music, is easily downloadable and attractive for a variety of consumer electronic devices, including mobile ones, such as Apple's new iPod Video.
Are there business units Disney should divest of?
Yes there is a need to divest because their business philosophy is to keep the chain smaller in total number of stores, with a focus on the best malls that support the high store productivity (Broadwin, p.106). This can be achieved through focusing in urban street locations, regional malls and outlet centers. The improved business remodeled stores will embrace technology by having well sophisticated lighting system to alter their atmosphere. The new stores will feature moveable fixtures and point-of-sale counters, so that new content and characters can be accommodated in the future.
For this to be achieved, Disney has introduced training and development programs for first managers to acquire skills and expertise.
Should Disney own retail stores?
Yes, they should because retail stores represent a significant factor in the growth of the Consumer Products division. The more the retails stores are opened internationally, the more they create attention. They exhibit the Disney brands in what has become known as a unique shopping and entertainment experience for quite some time. For instant, if you have a retail store making sales become easier because, if a customer walks into a Disney Store, they are therefore a specific character. For example, if a consumer is looking for Mickey Mouse merchandise, they will get it easily
Disney Company they do understand their own customer needs and is better placed to provide it rather than a franchise. In addition to having more space to work with, these specialized stores feature a large percentage of exclusive merchandise that consumers cannot purchase outside of the respective chain. Only a small amount of The Disney Store's merchandise is available outside of the stores as licensed product. In summary retail stores are critical since distribution of animation-based products is made much simpler.