Core Ideology

• Core Values:No cynicismCreativity, Dreams and ImaginationPreservation and control of the Disney MagicFanatical attention to consistency and detail

Core Purpose: To make people happy

The Beginnings…

Foundation• 1923 - Disney Brothers Studio founded by Walt and his

older brother Roy • Walt was creative force and Roy handled the money

Journey• 1927 - “Oswald , the Lucky Rabbit” the first major hit• Within a year Walt was outmaneuvered by his distributorCompany Culture• Flat , Nonhierarchical organization• Emphasis on Team Work , Communication and

Cooperation• Workers committed to the company• Company always oriented to fostering an experience that families could enjoy together

Creation of Mickey Mouse

• Modified Oswald’s ears and did some additional minor changes to rabbit’s appearance

• Added synchronized sound – first of its kind in the cartoon industry

• 1928 – Released Steamboat Willie• The Company licensed Mickey mouse for the cover of

pencil tablet.• Won Six Academy awards and successfully introduced

newcharacters such as Goofy and Donald Duck

Diversification to full length films

• 1937- Snow white and the seven dwarfs released• Set goals to release two feature films per year plus a

large number of shorts• 1940- The company went public to finance the

strategy• The company witnessed a downturn during The world

war II• Produced training and educational cartoons for

government such as “How Disease Travels”•1944-Re-released Snow White•Re-issued cartoon classics to new generations of children

Post World War II• 1946- To tide through financial straits released the

movie “Song of the South”-mixed live action with animation

• Further diversified creating Walt Disney music Company to control Disney’s music copyright

• 1950- Disney came out with the first TV special , “One hour in Wonderland” and entered live-action movie production with the release of “Treasure Land”

• 1953-Created Buena Vista Distribution and ended 16 year old distribution agreement with RKO

•Disney eliminated Distribution fees and avoided paying salaries by developing the studio’s own pool of talent

Era of Theme Parks Begun..• 1954-Disney expanded its television presence with the

ABC-produced television program “Disneyland”

DISNEYLAND• Opened in 1955• Built for the entire family including DADDY• Cost was minimized by corporate sponsorship• Disney licensed the food and merchandising

concessions

•Disneyland’s success put the company on solid financial footing•1966-Walt Disney died

With the creative force gone…

• 1971 – Opening of Walt Disney World, 1st year sales $139 million from 11 million visitors

• 1976 - Tokyo Disneyland Opens – Disney Receives 10% gate receipts, 5% other sales, on going consulting fees

• Creativity in film division stifled, more sequels rather than new productions

• New label introduced “Touchstone” targeting the teen/adult market

• Deterioration in Financial performance – Pressure to finish EPCOT,

• 1983 -New Cable venture – “The Disney Channel”

• 1984 -Roy E. Disney resigned from Board of Directors

• Steinberg and Irwin Jacobs made tender offers with the intention of selling off Disney

• Oil Tycoon invested $365 million, rescuing the company and reinstating Roy E. Disney on board

Eisner’s Turnaround

• 1984 ( Oct ) -Eisner was appointed Disney’s chairman and Chief Executive Officer & Frank Wells appointed president and chief operating officer

• Roy E. Disney was appointed the vice-chairman & Paramount executives Jeffery Katzenberg and Rich Frank were brought on-board

• Eisner was committed to maximizing the shareholder wealth through an annual growth target and return on stakeholder investment exceeding 20%

•This was done keeping the values of the company intact, thus putting to rest concerns that the new managers would not understand or maintain them •He deliberately fostered tensions between the creative and financial groups of Disney as each business developed its market position

The TV and Movie Division..• 1986 – Disney Sunday Movie premièred on ABC, demonstrate

that Disney could be inventive and contemporary • Disney then created a syndication operation to sell to

independent TV stations some of the programming that it possessed over the last 30 years

• When Eisner and wells joined the management, Disney's movie division was at its lowest ,covering a mere 4% of the box office share in 1984

• During the next 4 years though 60% of the movies at the box office failed more than 80% of the movies produced by Disney were successful . By 1988 Disney was the box office leader

with a share of 19% and was producing 16-18 movies a year

The TV and Movie Division..

• Convinced the best Hollywood talent to sign multi-deal contracts & emphasized on moderately budgeted films rather than blockbusters.

• The animation division was the most difficult to turn around ,the reason being that it took very long to produce animated movies

• Expanded its animation staff and accelerated the movie production by releasing a movie every 12 to 18 months instead of every 4 to 5 years. They also invested heavily in to CAPS ,reducing the need for animators to draw every frame by hand.

• Took to licensing agreements of merchandise ( Roger Rabbit)

Cashing in on Theme Parks..

• Spent millions to update and expand by adding new attractions

• Attendance building strategies designed to increase revenues included national television advertisements ,special events , retail tie-ins and media broadcast events

• Lifted restrictions on the number of visitors permitted into the park, kept it open on Mondays (closed earlier for maintenance) and raised ticket prices

• The Disney development center was developed to develop Disney's unused acreage which ranged from having a huge hotel expansion to a $375 million convention center

Co-ordination Among Businesses

• With rapid expansions in various units overlaps among them started to emerge. Disney employed negotiated internal transfer prices for any activity performed by one unit for another

• 1987-a corporate marketing function was installed to co ordinate and stimulate countrywide marketing activities, a marketing calendar for the next six months was released and a monthly meeting of 20 divisional heads was initiated

• The management jointly coordinated the major events of the year. The meetings of the divisional heads generated novel ideas

coordinated schedules and built commitment and excitement towards the year’s theme

Expansion Strategy (I)..

• Consumer products division: 1987 – Disney Stores launched pioneering the

retail-as-entertainment concept

Entered into book, magazine and record publishing

• Theme Parks: 1992- Opening of Euro Disney It still did change its strategy to comply with the

French sensibilities.

At other parks they stepped up with their expansions and added attractions spending almost upto $1 billion in theme expansions over 1984-88

Expansion Strategy (II)..

• Movies Series of highly profitable and critically successful animated features

eg: 1989-Little Mermaid, 1991- Beauty & the Beast, 1992-Aladdin Hollywood Pictures 3rd studio under Disney 1993- Acquired Miramax Studio Increase in volume of Movie output- 68 films in 1994• Home Video Buena Vista Home Video (BVHV) marketed videos at low prices to

customers directly.• They also made an acquisition of an NHL team and named them “The Mighty Ducks” and used the cross marketing opportunities that came along • Unveiled its first Broadway-bound theatre production, which was a huge hit. They also made a deal to restore The New Amsterdam Theater in New York. Eisner thought of the theatre as a long-term stand alone business

Turmoil & Transition

• Lion Ling breaks box office records -Revenue and merchandise sales > $2 billion

• Refinancing of Euro Disney by European banks and Saudi prince

• Death of Disney President Wells on April 4, 1994• Katzenberg’s desire to be the new Disney president• Katzenberg’s bid for a corporate role was rebuffed

by Eisner and he left and founded Dreamworks

•Followed by a series of key executives leaving the company

ABC Acquisition• Disney bought ABC for $19 billion making it the

largest entertainment company in the US• ABC included – ABC Radio networks, 21 radio

stations, ESPN and ESPN2, newspapers, periodicals• Skepticism in some relating to the deal• Cultural clash between executives in Disney and ABC• ABC executives unhappy with usage of ABC to cross

promote Disney brands

•Disney’s termination of agreements which ABC had signed prior to acquisition

The Slump at the End of the Century

• Financial performance began to deteriorate particularly in 1998, 1999.

• The broadcast & cable operations and theme parks gave a boost in 2000

• Change of approach in live action movies, shift to big budget, star driven movies

• 1999- several costly failures and increase in average budget to $55 million

• Revenues from Home video division dropped•Strategy to turn all parks into destination resorts•Use of internet to provide news and entertainment content•Shit Go.com portal in 2001

Managing the Slump..

• Club Disney, ESPN stores & Fairchild publications were closed

• Tried to create synergy between various businesses through the ‘synergy boot camp’

• Divisions filed monthly operating reports in which they were expected to discuss new cross divisional projects

• Sought to generate greater international sales•Consolidation of foreign offices under regional executives, creation of synergy through cross-promotion•Expanded into cruise ships and educational retreats

• Merged Touchstone Television into ABC-saved $50million/year.

• 1999- reduced number of licensed products by half, more emphasis on products featuring its core characters

• Retaining the Brand image and value became a challenge with the expanding business ( Ellen show, Miramax movie Priest )

• Emphasized on wholesome programming whereascompetitors gained momentum through contemporary shows

Managing Creativity..

• ‘Gong Show’- weekly meeting to brainstorm new ideas

• Strategic planners assigned to each business unit• Too much conflict built in Disney’s culture• Money overruled the creative side which drove away

talent• Eisner’s autocratic management style• Was Growth stifling creativity?

•Was there a change required in the management style and strategy?

PESTEL FRAMEWORK

POLITICAL

ENVIRONMENTAL

LEGALECONOMIC

SOCIOCULTURAL

TECHNOLOGICAL

The WaltDisney

•Government StabilityBecause of World War II, 94% of disney work was associated with Govt works e.g Health films, propaganda films, How Disease travels for the arm Services•Foreign Trade RegulationsDid not have majority (51%) ownership of the business in project Euro Disney and same for china; Have low decision making power.•Social Welfare policies.

Political Factors

Financial funding and support from Govt all across the globe e.g. Disney’s Initial investment cost reduced to $200 million from $4.4 billion for theme park because of many incentives from the French Govt including Tax relaxation.

•Persian Gulf War Travel Decreased Less

footfall

•Objection from the Chinese Govt. to the movie

Kundun

Continues……

Money SupplyAfter merger with ABC, debt ratio increased from 20% to 34%Inflation•Rising cost of programming especially in sports hurt their profitability e.g. In 1998 they paid $9 billion for the right to air NFL games •High cost of producing animated films -> Invested in CAPS.•Started producing Low Budget Movies : Financial Box•Disposable Income

Economic Factor

Per capita spending of people on Disney Products was less in Britain, France, Germany, Italy and Japan as compared to the US.eg 40 % in Europe and 80 % in Japan. •It could easily recuperate from economic turmoil around the world

Population Demographics and Consumerism•High end collector items were included in merchandising store to cater to the Disney grown up fans.•Emphasizes on complete Family entertainment.•Variable Ticket pricing.•Live action movies for contemporary audiences.•Change from good script movies to Big name stars due to Growing impact of international audiences.

Sociocultural Factors

Lifestyle Changes• Tackling Cultural differences : Availability of Wine in the restaurants of Euro Disney.• according to French sensitivities•Objection to Ellen Show

•Objection to the Movies Priest and Aladdin•Apologized publicly for the partial nudity in movie Splash(1984). So they started making R-rated movies.

Attitudes to work•Culture Clashes between executives of ABC and Disney.•Culture Clash due to shift from New York to L.A.•Intra-company Power Politics. E.g 75 high-level executives left the company.•Communication problem Led to Bureaucracy which was unlike their flat structure.

Continues…….

New developments•Invested $30 million in a computer animated production system (CAPS)•Combined Animation with Live Action.

Internet•1996:- Disney Began selling its products online•1999:- Merged its Internet assets with search engine Infoseek.

Introduced special Effects that transcends Language Barrier.

Technological Factors

Speed of Technology Transfer•Old classic movies formatted from VCR to DVD.•Technical advancements in the Theme Park

Animal right activist protested against treatment of animals at Animal Kingdom Theme Park.The Trains at Disneyland now run on biodiesel made with cooking oil from the resort’s restaurants and hotels.In the 1960s, the company set aside nearly one-third of The Walt Disney World Resort property in Florida as a dedicated wildlife conservation area in perpetuity.In 1990s, the Walt Disney World Resort voluntarily began to reduce its reliance on pesticides and started work on an Integrated Pest Management (IPM) program that uses alternatives to harsh chemicals

Environmental Factors

•Disney brothers lost Copyright of Oswald-The Lucky rabbit, to their distributors.

•Walt Disney Music copyright.

•LicensesMickey Mouse pencil Tablets

Mickey Mouse Comic strip, Comic Book and Doll.

From the movie “Who Framed Roger Rabbit” onwards they started licensing all their characters for merchandising.

Legal Factors

Impact Matrix

Key Macro- Influences Walt Disney

Political 4

Economic 5

Socio cultural 3

Technological 2

Environmental 1

Legal 2

Factor Weight for Importance

StatusNature of Threat / Opportunity

StatusStrengths and Weakness of the firm to address the issue

Remarks , probable course of action, Retaliation and counter course of action

Threat of New Entrants 1 - +++

Supplier Bargaining Power 2 - ++

Buyer Bargaining Power 3 -- +

Threat of Substitute Product 2 - ++

Inter-firm Industry Rivalry 3 --- +++

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•High Entrance Barriers

•Disney has 80 years of existence and Strong financial footing

•Difficult to develop brand recognition/identification, and product differentiation

•Large Capital required

•Diversified businesses, one can leverage on the other

•Economies of scale acts as a barrier due to large fixed costs

Disney is not the market leader in certain areas like the Television industry. Faces Threat from entrants specializing in thesebusinesses

•Differentiated and unique industry with High switching costs.

•Disney is amongst the most important customer for many suppliers

•Orders in large volumes, creates dependency

•Self sufficient production schemes supplemented by licensing agreements

•Formation of Strategic sourcing group to cut procurement costs.

•Large number of customers are needed to run the business

•Entertainment industry forces customer to pay more hence customer satisfaction is imperative

•Returns are intangible in the entertainment industry

•Attendance at movies, tuning into Disney’s media network, and theme park attendance is entirely driven by the consumers

•People will relentlessly seek amusement and entertainment in until the end of times.

•Disney is perceived as a very friendlyBrand, believes in making people happy,huge respect amongst the customers

• Gaming industry – kids prefer interactive entertainment whereas disney’s offerings are passive

•Increased piracy

•Exposure to the internet, mobile phones

•Theme parks don’t have an educational value whereas other forms of entertainment have educational values which parents prefer

• Ticket prices high as compared to competitors like Universal Studios and island of adventure in the theme parks category

•Disney takes over/collaborates any threat it perceives. E.g. Pixar, Miramax

•Equal dominance by Warner, Universal and Paramount pictures in the movie industry

•Large number of players in the Network television division, giants like Turner Broadcasting systems

• Leaders in every segment but the internet

•New cartoon figures appear everyday and pose a huge threat