Disney

Justin Jeffries The Walt Disney Company: The Entertainment King BA 799 3:30 PM April 21, 2010 Disney’s outstanding history of success has been accomplished through a series of strategic business choices involving synergies, brand management, and creativity. Known as the king of entertainment and media, Disney has also been able to remain profitable for so long due to the company’s various strategies used to create value through diversification, expansion, and integration. Throughout Disney’s history, the company was always operated by key businesspeople that had a goal of maintaining the brand and remaining profitable as the largest multinational entertainment conglomerate in the world. Additionally, Walt and Roy Disney set the stage for future leaders of the company to achieve success through horizontal integration and geographic expansion. An example of horizontal integration would include the acquisition of Disney purchasing ABC for $19 billion in July 1995. This business investment allowed Disney to remain ahead of all other company’s in the market and continue dominating the strategic challenges faced by Eisner and all of Disney’s employees. The strategy of merging with ABC capitalized on Disney’s internal capabilities and created value by increasing diversification and differentiation among all brands and products that Disney owned. Moreover, Disney has been able to remain profitable over the years by investing in multiple company divisions including Walt Disney Studios, Disney-ABC TV, ESPN, Walt Disney Theme Parks and Resorts, and The Disney Channel on network television. Along with these divisions, the company has also continued to generate profits from Hollywood by releasing new animated films and releasing teen/adult films via Touchstone Pictures, Miramax, and even making it onto Broadway. The external threat of other competing entertainment brands neutralized Disney’s strategy of global expansion and created value by, once again, increasing

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product differentiation. By expanding the Disney brand throughout various channels around the world, the company was able to expand its product line and continue introducing new ways to remain creative and manage their brand wisely. The company diversified internationally by installing resorts and theme parks in Paris and Tokyo, which allowed Disney’s leaders to gain a better understanding of how people from all over the world react to its many products (via Retail-as-Entertainment) and other various entertainment programs. In addition, Disney was quick to manage synergies on the corporate level by introducing programs such as Disney Dimensions and Gong Shows. Nevertheless, much of the success attributed to the company is due to the rejuvenation created by Michael Eisner. Disney’s most recent success is due to Michael Eisner’s rejuvenation of the company starting in 1984. Specifically, Eisner increased net income in his first four years by managing creativity, maximizing shareholder wealth and theme park profitability, and expanding into new businesses such as Retail-as-Entertainment. These corporate strategies allowed Eisner to create value through diversification by significantly increasing net income to $445 million in 1987. Exhibit 3 is a prime example of the extreme ways through which Disney and Eisner diversified the company throughout various means of entertainment investment and production. Business lines in 2000 included Media Networks, Studio Entertainment, Theme Parks and Resorts, Consumer Products, and Internet and Direct Marketing. As a result, Disney has not quite diversified too far in recent years, but it’s probably appropriate to say that the company should be careful not to take too many risks associated with expansion and costs. The end of the case talks about expansion into cruise ships and educational retreats, along with synergy affecting Disney’s costs. One can recommend that the company and its executives should limit their spending and be sure to avoid any negative affects that arise due

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to too much expansion and diversification throughout the world. Subsequently, if Disney continues to expand globally, there is a chance that the company will face the external threat of negative monetary issues, which will reduce differentiation and create a cost dilemma if the company is not careful and watching their every move.

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