Question

What Would You Do? Case Assignment

Walt Disney Company

Burbank, California

Over two decades, your predecessor and boss, CEO Michael Eisner, accomplished much, starting the Disney Channel, the Disney Stores, and Disneyland Paris, and acquiring ABC television, Starwave Web services (from Microsoft cofounder Paul Allan), and Infoseek (an early Web search engine). But his strong personality and critical management style created conflict with shareholders, creative partners, and board members, including Roy Disney, nephew of founder Walt Disney.

One of your first moves as Disney’s new CEO was repairing relationships with Pixar Studios and its then CEO Steve Jobs. Pixar produced computer-animated movies for Disney to distribute and market. Disney also had the right to produce sequels to Pixar Films, such as Toy Story, without Pixar’s involvement. Jobs argued, however, that Pixar should have total financial and creative control over its films. When Disney CEO Michael Eisner disagreed, relations broke down, with Pixar seeking other partners. On becoming CEO, you approached Jobs about Disney buying Pixar for $7 billion. More important than the price, however, was promising Jobs and Pixar’s leadership, President Ed Catmull and creative guru John Lasseter, total creative control of Pixar’s films and Disney’s storied but struggling animation unit. Said Jobs, “I wasn’t sure I could get Ed and John to come to Disney unless they had that control.”

Although Pixar and Disney animation thrived under the new arrangement, Disney still had a number of critical strategic problems to address. Disney was “too old” and suffering from brand fatigue as its classic but aging characters, Mickey Mouse (created in 1928) and Winnie-the-Pooh (licensed by Disney in 1961), accounted for 80 percent of consumer sales. On the other hand, Disney was also “too young” and suffering from “age compression,” meaning it appealed only to young children and not preteens, who gravitated to Nickelodeon, and certainly not to teens at all. Finally, despite its legendary animated films, over time Disney products had developed a reputation for low-quality production, poor acting, and weak scripts. Movies “High School Musical 3: Senior Year,” “Beverly Hills Chihuahua,” “Bolt,” “Confessions of a Shopaholic,” “Race to Witch Mountain,” and “Bedtime Stories” disappointed audiences and failed to meet financial goals. As you told your board of directors, “It’s not the marketplace, it’s our slate [of TV shows and movies].”

With many of Disney’s brands and products clearly suffering, you face a basic decision: Should Disney grow, stabilize, or retrench? Disney is an entertainment conglomerate with Walt Disney Studios (films), parks and resorts (including Disney Cruise lines and vacations), consumer products (i.e., toys, clothing, books, magazines, and merchandise), and media networks such as TV (ABC, ESPN, Disney Channels, ABC Family), radio, and the Disney Interactive Media Group (online, mobile, and video games and products). If Disney should grow, where? Like Pixar, is another strategic acquisition necessary? If so, who? If stability, how do you improve quality to keep doing what Disney has been doing, but even better? Finally, retrenchment would mean shrinking Disney’s size and scope. If you were to do this, what divisions would you shrink or sell?

Next, given the number of different entertainment areas that Disney has, what business is it really in? Is Disney a content business, creating characters and stories? Or is it a technology/distribution business that simply needs to find ways to buy content wherever it can, for example, by buying Pixar and then delivering that content in ways that customers want (i.e., DVDs, cable channels, iTunes, Netflix, social media, Internet TV, etc.)?

Finally, from a strategic perspective, how should Disney’s different entertainment areas be managed? Should there be one grand strategy (i.e., growth, stability, retrenchment) that every division follows, or should each division have a focused strategy for its own market and customers? Likewise, how much discretion should division managers have to set and execute their strategies, or should that be controlled and approved centrally by the strategic planning department at Disney headquarters?

If you were CEO at Disney, what would you do?

Please white down with details

Answer 1

The strategy of growth in any organization is applied for the purpose of increasing profit, market share, value, revenues and to gain competitive advantage over others in the market. There are two ways of applying growth stratrgey in organizations. External growth can take place through acqusition or merging with other organization whereas internal growth takes place directly by expanding existing business of the Company or creating different or similar business.

Stability strategy is applied to continue the same work in the better way. Organizations can undertake the stability strategy for enhancing the technique of selling products and providing services to existing customers. Retrenchment strategy is undertaken by organizations when there is poor performance and lesser production and profit whcih fails to meet expectations. The goal of the retrenchment strategy is to turn the poor performer organization into a stable form through shrinking or cutting the size and scope of business. The primary step for the retrenchment strategy will be to cut down the costs, closing business lines which are poorly performing, selling product and service lines and laying off employees. The next step of retrenchment strategy will be recovery. The recovery action deals with the strategic actions which any organizations takes for the returning of the strategy of growth in its business.

In the above case, it is seen that there is consistent diminished income of Disney with no or very less profit margin acquired as the position of Disney was not stable. The revenue level dropped, operating inocme lowered for Disney TV networks. The numebr of viewers also dropped to significant extent which forced the CEO to take immediate decision to apply a suitable growth strategy among retrenchment, stability and growth strategy. Retrenchment strategy will be suitable for Disney as many of the products needs to be cut down as they are unable to give the desirable output. Continuous loss suffered lead to loss in revenue and profit, so the poor performing products needs to be shut down through the application of retrenchment strategy.

Disney is a business of technology/distribution which requires to find techniques for buying the contents and delivering them as per customer's deamdn and expectations.

From the strategic perspective Disney’s different fields of entertainment can be managed by the strategy that every division should have one focused strategy for its own customers and market so that there is better control and management.

The strategies are to be set and approved by the central strategic planning department at the headquarters of Disney with total control and monitoring of the processes being worked accordingly by the other departments.