Case Study #1 – The Walt Disney Company: The Entertainment King
Disney has been successful for so long as it successfully created characters and stories that captured the imagination of children and adults alike, and were designed to be timeless and long-lived assets that were protected through copyrights. Throughout its history, management has largely been able to instill and maintain its brand identity and commitment to being family friendly and positive. All of Disney’s brands and businesses created natural synergies through cross-promotion and cross-selling they created synergy.
Michael Eisner rejuvenated Disney by initiating several new approaches. The first was to institute a target of 20% return on equity and revenue growth each year. Second, he committed himself to building the Disney brand while still remaining true to its cultural ...view middle of the document...
Another was the investment in the CAPS animation technology which rejuvenated the animation segment by allowing Disney to produce animated films in far less time with far less cost.
The next 4 years would have Disney experimenting with the expansion into new businesses, regions and audiences. This brought on the “retail as entertainment” concept with the Disney Store, as well as forays into book and record publishing. Overseas expansion efforts included the building of Euro Disney and Tokyo Disneyland.
Neither of the above strategies is necessarily sustainable, but rather it is more important to strike a balance between the two. There are limits to how much value one could drive from existing businesses. Brands, concepts, and characters eventually grow stale and you fail to capture the customer’s imagination. However, expanding into too many businesses can cause management to be spread too thin, leading to bureaucracy, failing products, decline in quality, increased costs, etc.
Disney has in fact diversified too far in recent years. If I were to divest, I would choose to sell off ABC and instead develop a strategic joint venture-like partnership with them instead that preserves access to capital and revenue sharing. Disney is no longer (and may have never been) offering a meaningful set of tangible or intangible benefits to ABC either through offering professional management skills or through saving costs from shared activities. Management styles have been clashing and Disney actually limits ABC’s access to production talent. It is also unclear that owning ABC has given any of its business units a competitive advantage over rivals.
If I were to acquire a business, it would be Nickelodeon (currently owned by Viacom), which is a threat to Disney’s television content business. Disney can benefit from Nickelodeon’s knack for more contemporary children’s programming that Disney cannot emulate due to its wholesome and traditional brand image.