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Walt Disney Co. The Entertainment King Case Solution
The report analyzes the rebirth of Disney in the corporate and entertainment world. Michael Eisner revitalized the company in the year 1984, when he was made the head of the company. The company followed aggressive expansion strategy and was able to achieve soaring growth rate of 20%, which in absolute term looks unreasonable. However, Eisner made sure that the company met its goals religiously and efficiently. Eisner made sure that corporate culture intended by the founder was kept intact. For this, he started Disney’s corporate university. The turmoil for the company started due to a number of events, from the death of Disney’s president to acquisition of ABC. The company acquired ABC in the pursuit of its aggressive expansion strategy. In the initial phases, financial position of the company started dwindling, but due to Eisner’s strategies, the company was stabilized.
Following questions are answered in this case study solution:
Why is Disney in the hotel business?
What is good about having animated cartoon characters at the center of the company?
How did Michael Eisner rejuvenate Disney when arrived in 1984?
How do you evaluate the current corporate strategy?
Why does Disney own a cruise line?
What are the pros and cons of buying Cap-ABC?
Does Disney have a core competency in today’s environment?
Why did the good times end for Eisner?
How does a Corporation, as opposed to a unit of a corporation, add value?
Walt Disney Co The Entertainment King Case Analysis
1. Why is Disney in the hotel business?
Disney entered the hotel business in order to attract traffic and provide a wholesome experience to its customer. In the initial phase, this was deemed as a risky project as the company had taken massive loans from the banks to build theme parks and other facilities. Theme parks’ major offering is not any product it’s experience and services. So, in order to provide a complete experience to its customers, Disney entered the hotel market. In this way, customers could reside in the resorts/hotels and later enjoy the experience provided by the theme park. From a business point of view, this measure had to be taken in the pursuit of aggressive expansion strategy; the company had to revive its cash flows and profits. Lastly, hotels elongated the stay of its customers at the theme park, and it also attracted conferences due to lower rates.
2. What is good about having animated cartoon characters at the center of the company?
There are a number of advantages of having cartoon characters at the center of the company. The first one is that these characters are in full control of the company as they do not make unacceptable demands like real actors. Secondly, it helps the company in avoiding any negative imagery, which can have a long-lasting effect on its brand equity and brand image. Thirdly, the cost of “hiring” (creating) these characters is much lower than real actors. Lastly, the company does not have to take the blame in case their characters do anything wrong, which they cannot as they are self-created by the company. On the other hand, in case of real actors, the company, which hires them, is answerable to the general public in case they do something negative; which not only harms their image, but also harms the image of the company.
3. How did Michael Eisner rejuvenate Disney when arrived in 1984?
Eisner hired top executives from giant production houses, which not only brought professionalism in the company, but also brought leadership. Every employee and executive of the company was sent to Disney’s corporate university to take training and was also ordered to spend a day in a theme park (dressed as a character). Eisner inculcated the spirit and culture in employees that was intended by the founder of the company, by taking aforesaid measures. The company increased its share in TV/Movie production market from 4% to 19%. Heavy investments and huge cash injections brought the company back on track. Eisner also revitalized the inculcated synergies in business; marketing activities of the company, spread around the U.S, were synchronized very skillfully. Lastly, Eisner made the company expand, from in-house distribution to live theatrical performances.
4. How do you evaluate the current corporate strategy?
Disney aims at growing 20% on an annual basis, which is seemingly a challenging task. However, Eisner had been achieving these targets religiously. Disney promotes internal conflicts, which is against the rules of sound management. Eisner has been following his autocratic style of leadership from the beginning. Now that the company has grown into a multi-billion corporate giant, Eisner is still following the same style. This corporate strategy of rapid expansion has brought Disney back on the corporate map. Eisner has a strategic view of the global giant, and he made sure that spirit and culture, which was intended by the founder, is inculcated in every employee. The company does not need to change its strategy. Critics have been criticizing every move of Eisner and yet the company keeps achieving soaring heights. So, the company needs to follow the strategy devised by Eisner.
5. Why does Disney owns a cruise line?
Disney cruise line is a part of their “Walt Disney Attractions”. Like Disney World and Resorts, cruise line also provides a wholesome experience to its customers. Disney is known for its creativity and aggressive expansion. As a part of its plan, the company initiated the cruise line to expand its customer base. It aimed at attracting customer who wanted cruise ship experience. So, Disney penetrated the cruise-ship services market. It not only catered to the children, but it also attended to adults and complete families. Secondly, it helped Disney in bringing in customers from around the world to experience the “Disney World”.
6. What are the pros and cons of buying Cap-ABC?
Acquisition of ABC was the second biggest acquisition in the history of the United States of America. There were a number of advantages and disadvantages of this acquisition. It made Disney global as ABC had roots in foreign lands, as well. Secondly, it gave the company more power and more room to use its creativity. The channel base of Disney expanded as ABC owned a number of hit channels like ESPN and ESPN2. The disadvantage of this acquisition was that company’s debt ratio jumped from 20% to 34%, which means the company had increased debt on its shoulders. The second disadvantage was the cultural clash between Disney and ABC. Every company has its own culture, defined by a number of micro and macro level variables. The cultural clash created operational inefficiencies. In the long-run, the problems posed by acquisition were resolved by executives and it proved beneficial to the company.
7. Does Disney have a core competency in today’s environment?
Disney still has its core competence in today’s environment because it has not only been able to maintain its customer base, but it also has been able to expand it. Its core competency lies in its culture and creativity. Both features complement each other; Eisner created a culture of internal conflicts, which made the “best idea pop out”. However, one the former imaginer at Disney claimed that the company has lost its creativity and now it is all about the money. Interestingly, the company is still able to achieve its targets, which means that its core competency is intact. Disney is one giant conglomerate, which offers a wide range of services; this suggests that the company has a huge base of competitors, which is tackled by the company skillfully.
8. Why did the good times end for Eisner?
There were a number of events which ended the good times for Eisner. The first event was related to death of Well. However, Eisner managed it effectively by redistributing Well’s duties to respective executives. Second event was Eisner’s surgery, during which Katzenberg assumed his responsibilities. Katzenberg did not have a strategist mind, although he was an excellent studio operative. Due to dispute between Eisner and Katzenberg, Katzenberg left the company. Along with him, a number of other executives also left the company. The last event that affected the company’s financial performance directly was the acquisition of ABC, when financial position of the company started dwindling. However, despite all the aforesaid events, Eisner still effectively managed to bring the company back on track.
9. How does a Corporation, as opposed to a unit of a corporation, add value?
A corporation not only provides direction to its units, but it also provides the resources so that it can follow the designated direction. In the case of Disney, Eisner and other executives like Well and Katzenberg, headed the corporation. Each unit had to follow corporation’s guidelines in order to achieve its goals. In case the unit achieved its goals, it ultimately added value to the corporation.
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