Assignment 1: Walt Disney Case
1. Disney’s longevity and success is built on implementing strategies that extract value out of their most critical assets, their characters (highly appropriable resources). The inimitability of Disney characters (Mickey Mouse) provides the company with the foundation to tackle competitive forces and build a successful business for the long term. Disney has undertaken a diversification strategy to growing its business with vertical and horizontal integration. By being a large company with different business units, Disney enjoys the benefits of economies of scale and scope. By establishing areas of similarities within its businesses, Disney created economies of scope to cross sell products and characters that are showcased in its shows through theme parks and other delivery channels. When a child watches a Disney show on TV or experiences a Disney store it is natural for that child to ask for a vacation at Disney world. This tightly coupled relationship between its businesses has been the driving force behind Disney’s success.
2. Much of the success can be attributed to Eisner’s no-nonsense leadership style, commitment to corporate values (quality, teamwork) and corporate strategy. By “managing creativity” and reigning out of control costs, Eisner pursued a diversification strategy to accelerate Disney’s growth. In his first four years, Eisner reinvigorated TV production (Disney Sunday movie) and commitment to script driven films (Katzenberg partnership). Eisner opened Disney stores to provide distribution channels to reach its customers. He also raised ticket prices and opened new hotels to maximize theme park profitability and pushed for greater coordination among businesses by creating a corporate marketing function. In the next 4 years, Eisner made a conscious effort to expand into new businesses and regions. With investments in music production (Hollywood Records), book publishing (Hyperion Books), overseas theme parks (Tokyo & Paris), sports (NHL team), Eisner found new distribution channels to promote his products and reach greater audiences. Overall, in his first 4 years Eisner pursued a vertical integration strategy, where efforts were focused on attaining greater control of the Disney value chain. In the next 4 years, Eisner pursued a horizontal integration strategy further intensifying his diversification efforts and penetrating
