Overview and History
Historical Highlights
- Disney Brothers Studio formed in Hollywood in 1923.
- “Oswald, the Lucky Rabbit” was their first hit in 1927, but they lost it to their distributor.
- Created Mickey Mouse and produced Steamboat Williein 1928 which became an overnight success.
- First major film titled Snow White and the Seven Dwarfs was released in 1937 and became the world’s highest-grossing animated movie in history.
- First live-action movie, Treasure Island, released in 1950.
- Opened Disneyland in 1955.
- Purchased 27,000 acres of land in Florida in 1965 to develop Walt Disney World.
- Walt Disney died in 1966.
- Opened Walt Disney World in 1971 which becomes the most successful theme park in the world.
- Announces Tokyo Disneyland in 1976 and opens in 1983.
- Opened Euro Disney near Paris in 1992.
- Acquired ABC in 1995 for $19 billion.
Key Facts and Milestones
Placeholder – We can likely combine this area into the Historical Highlights section above.
Leadership and Management Philosophy
- Initially lacked hierarchy – First name basis.
- Sought to generate more revenue by developing full-length movies vs shorts.
- Had to cut back production during WW2 and produced training and educational shorts during the war.
- Made efforts to avoid paying unnecessary costs – Created Buena Vista Distribution in 1953 to avoid losing 33% of their film’s revenues to a distributor.
- Frequently sought to expand their revenue streams – Entering film, tv, sports, merchandising, theme parks, cruise lines, etc.
- Targeted both children and parents (especially regarding their theme parks – Many theme parks were often only really tailored towards entertaining children and not their parents).
- Appointment of Eisner as Chairman and CEO. Frank Wells as President and COO in 1984.
- Targets of 20%+ yearly revenue growth and stockholder equity.
- Training programs at Disney’s corporate university to ensure people were acclimated and invested into the company’s culture.
- Revitalization of Disney’s holdings by Eisner – TV
and movies.
- Same with their theme parks.
- Better coordination of marketing through the various Disney holdings under Eisner.
- Disney President Wells killed in a helicopter
crash in April 1994.
- President passed onto Eisner.
- Eisner had quadruple bypass heart surgery weeks after Wells’ death and managed operations by phone.
- Noting that based on this, there was not adequate planning for develop/succession in the works.
- Recognized need to cut back on some of the spending on various parts of the Disney organization that had ballooned out of proportion during their periods of success.
- The case discusses ways that as Disney grew and
acquired properties, there were conflicts and greater need to more efficiently
integrate everything.
- Consolidating production from ABC into Disney’s own production houses.
- Using cross-promotion to market through their properties.
- Notes of constantly looking to expand and bring the Disney experience to more consumers.
Broad Strategic Agenda – Current Strategy and Results
- Assess short term-medium range goals and long-range
goals
- Walt Disney’s short-term goal is to expanding the business into the subscription based market.
- Walt Disney company’s long-term goal is to:
- Reduce waste and impact on nature.
- Walt Disney’s mission statement is: “The Walt Disney Company’s objective is to be one of the world’s leading producers and providers of entertainment and information, using its portfolio of brands to differentiate its content, services and consumer products. The company’s primary financial goals are to maximize earnings and cash flow, and to allocate capital toward growth initiatives that will drive long-term shareholder value.”
- The major issues:
- The competition with online subscription based streaming service has been troubling Disney. Netflix and Amazon are way ahead of the competition.
- Disney has been investing in technology companies for decades, but the records are spotty.
Situation Analysis
External Analysis
PESTEL – Macro and Micro environment.
| Factor | Consideration |
| Political | Issues in China with President Xi Jinping being compared to the character Winnie the Pooh. The film Christopher Robin was denied a release in China around the time the comparison was made on Chinese social media (Richwine, 2018) Some Chinese Communist Party members spending work time on party matters (Wong & Dou, 2017). |
| Economic | Global financial recession flattens theme park attendance growth. Changes in disposable income can potentially reduce consumer spending on non-essentials. |
| Socio-Cultural | Cultural norms – Euro Disney – Requiring French cast members to shave. Allowing wine in park restaurants (Rukstad & Collis, 2009, p. 7). When entering the Chinese market with licensed merchandise, having to overcome a cultural focus on education and reluctance towards playtime to successfully sell their toys (Euromoney Institutional Investor PLC, 2012) |
| Technological | Technologies allow for new ride and park experiences but contribute to higher construction costs – $1 billion Star Wars expansion cost (Im, 2019). New business opportunities through media streaming – Disney+ |
| Environmental | Comprehensive environmental stewardship plan in place for parks divisions: -Includes initiatives for wildlife, energy usage, water usage, waste generation and disposal, emissions, and other aspects (Walt Disney Company, n.d.) & (Walt Disney Company, 2018) Emissions created by people traveling internationally to visit theme parks. Disney Cruise Line – Dedicated Environmental Officers on all cruises. Efforts to reduce waste, increase fuel efficiency, usage of environmentally friendly and biodegradable cleaning products where possible, and other initiatives in place (Walt Disney Company) |
| Legal | Potential future impacts of increased federal minimum wage requirements – Especially discussed regarding their theme parks. Large size and variety of company holdings leads to additional regulatory hurdles when acquiring additional properties. Had to offer concessions to European Union regulators when purchasing 21st Century Fox (Chee, 2018). |
Porter’s 5 forces – High, medium, low
- Industry competitors:
(https://csimarket.com/stocks/competitionSEG2.php?code=DIS)
- Cable Network wise – Viacom, Discovery Inc
- Media Network wise- Time Warner Inc, Direct TV, CBS corporation (viacom and discovery overlap), Universal Studios, Lionsgate, Sony, Dreamworks
- Online Streaming wise – Netflix, Amazon Prime Video
- Cruise/Theme parks – Carnival Cruise, Six Flags Entertainment
- Threat of substitute products:
- Low threat of substitute products for their merchandise line or their cruise line as consumers are loyal to the Disney shows/movies. Same can be said regarding streaming service Disney+ as Walt Disney has planned ahead and has begun pulling its rights to its shows/films from other streaming services.
- Bargaining power of suppliers: (https://secfilings.nasdaq.com/edgar_conv )
- Low – DIS is a huge part of the market and it’s easier to continue working with a company that shows constant growth rather than negotiating with new companies
- Walt Disney is also continuing to acquire ownership of its competition so suppliers would have more opportunity to increase revenues
- Bargaining power of buyers:
- Varies per different company products – overall low
- Medium – High for overall streaming market as Netflix and Amazon Prime Video are still relevant but people that greatly enjoy or are loyal to Disney entertainment may not have much of a choice but to buy as Disney pulls its films/shows from other entertainment services
- Not much competition for theme parks and cruises
- Threat of new entrants:
- Medium to low depending on what part of the industry we focus on.
- Walt Disney has huge financial backing and share of the entertainment industry with partial ownerships of Hulu and Fox.
- Cruise line – High cost, low threat of entrants
- Theme Parks – High cost, low threat of new entrants
- Entertainment – low to medium threat of new entrants. Companies face high costs and steep marketing challenges to be able to compete in an already heavily saturated entertainment industry. They would need sound financial support and great consumer knowledge to be able to convert people to their products.
Internal Analysis
| VRIO Framework | |
| Valuable | High financial stability.Brand reputation.Distributional network.Employees and working culture. |
| Rare | Brand name.Theme park services. |
| Difficult to imitate | Brand history and personal attachments.Cost to sustain the company. |
| Organization/ non-substitutable | Business structure that has been developed through years of experiments and strategies. |
SWOT Analysis
| Strengths | Weaknesses |
| Brand reputationHighly diversified portfolioGlobal reachStrong financial position | Heavy dependence on the North American market.Few opportunities on growth and major changes. |
| Opportunities | Threats |
| Growth in economic stability resulted in the entertainment industry.Expansion into other culture outside of the United States. | Intense competition with other streaming and television service. |
SWOT Analysis:
- Strength:
- Brand reputation: Walt Disney Company was the No.3 Company on the list of “World’s Most Reputable Companies”. Originally known as the Disney brothers cartoon studio, the Walt Disney Company has been around since 1923, and has been a lot of family’s childhood memory.
- Highly diversified portfolio: Walt Disney Company is a leader in its primary business segments, ESPN, ABC and the Disney Channel offers a wide variety of content for groups of all ages. The company also ties the customer’s experiences together using their other business segments including television, film, consumer products, parks and video games.
- Global reach: Other than the United States, Walt Disney company operates in more than 40 countries in the world. The company’s amusement parks has expanded to China, Japan, and France.
- Strong financial position: Disney has been a profiting company in the world since the 1920s, with the net worth of estimated $130 billion, the strong financial standpoint provides a competitive edge for the company.
- Weaknesses:
- Heavy dependence on the North American market: in 2018, the Walt Disney Company earned approximately $45,038 million in the united states and Canada, but only generated $14,396 million in revenue from the rest of the world.
- Few opportunities on growth and major changes: Through years of developing, Walt Disney has reached the point where the company has a set brand reputation and has reached the maturity state of the market. To grow as a company, Walt Disney Company has been trying to branch out into other industries.
- Opportunities:
- Growth in economic stability resulted in the entertainment industry: As the overall economic environment grow, the revenue generated by the company has been steadily growing.
- Expansion into other culture outside of the United States: Walt Disney company has been experimenting with the oversea market, with the newest addition to the Walt Disney amusement park industry in Shanghai, the Walt Disney Company has proven the feasibility of oversea amusement parks.
- Threats:
- Intense competition with other streaming and television service: Netflix, one of Walt Disney’s major competitor, has been growing at an incredible pace. Disney’s media and movie production industries are suffering as the subscription-based television service grow.
Competitor Analysis
| Disney | Amazon | Netflix | |
| Strengths | -Brand reputation -Highly diversified portfolio -Global reach -Strong financial position | -Large existing customer base. People already have amazon prime for their shipping service. -Brand reputation. -Live TV options. | -Original movies. -Users interface. -Large user base. -Relatively low per person rate. -Brand reputation. |
| Weaknesses | -Heavy dependence on the North American market. -Few opportunities on growth and major changes. | -Just started in streaming service. -Brand reputation is set in buying and shipping. -Not enough content. | -Non-diverse product. -Partially rely on coming to an agreement with other companies. -There are lower rate for streaming services. |
| Opportunities | -Growth in economic stability resulted in the entertainment industry. -Expansion into other culture outside of the United States. | -Lower price. -More global reach. -Financially capable of acquiring more content. | -Growing internet usage. -Possible global development. |
| Threats | -Intense competition with other streaming and television service. | -Other competitors. -Later entry to the market. -More focused on other industries. | -Lower cost competitors. -Companies like Disney pulling out and starting their own streaming service. -Illegal downloading and streaming services. |
Streaming Comparison:
| Product | FULL PRICE | LIVE TV | CONCURRENT STREAM |
| Hulu | $44.99/Month | Yes | 2 |
| Sling TV | $40/Month | Yes | 3 |
| Amazon Prime Video | $8.99/Month | No | 2 |
| Sony PlayStation Vue | 49.99/Month | Yes | 5 |
| Fubo TV | 54.99/Month | Yes | 2 |
| CBS All Access | 5.99/Month | Yes | 2 |
| Netflix | 8.99/Month | No | 1-4 |
| Youtube TV | 49.99/Month | Yes | 3 |
| HBO Now | 14.99/Month | No | Unlimited |
Alternatives and Assessment
| Alternatives | Assessments | ||
| # | Advantages | Disadvantages | |
| 1 | Repositioning as an online subscription-based company. | Brand reputation was already set up, brand loyalty is relatively high, and Disney is relatively financially stable to support the migration. | Companies like Netflix already has a head start. Disney’s media content is not diverse enough. Brand reputation and impression for people are relatively hard to change, which limits the type of customer the company attract. |
| 2 | Develop a series of new media lines and different media content to compete with its competitors. | Disney already has an industry in media and advance knowledge in the industry. Disney is financially stable enough to put a lot of effort into research and development. | Companies like Netflix and Amazon is already reasonably familiar with the technology and business sector. Disney’s brand reputation might not be able to benefit the new line. |
| 3 | Reclassify Disney’s branding. | Disney already has successful experience developing a brand. | Disney has been around for a long time and might be hard to reclassify. Disney would be facing a huge amount of risk by reclassifying because they’d lose their largest competitive advantage. |
| 4 | Acquire other popular streaming brands and companies. | Financially able to do fast investment activities and acquiring activities. Already have experience with acquiring with HULU and Fox. | There are many streaming services in the market right now. It’s going be too expensive to acquire the big companies and hard to reach to an agreement. |
Plan for Action and Implementation
- Staging and scenario based adjustments e.g. if EVs become major auto segment and autonomous cars are reliable what implications for auto companies, gas stations, mass transport (do we need this bullet)
- Assess the potential for competitive reactions and
impact
- In response to Walt Disney’s expansion efforts, competitors may opt to join forces as to help them survive the changes in the market. Walt Disney has a mature foundation with hands in various parts of the entertainment industry. As Disney continues to expand and introduce new products/services like Disney+ its competitors are at risk of not have the customer base nor the financial support to compete and retain its consumers. Should even a few of Disney’s competitors join forces in even one sector of the entertainment industry they’d have more power to establish and promote Disney alternatives. Depending on the companies that choose to do so, Disney may be forced to slow its expansion and take a closer look at its product lines and their marketing efforts.
- Keep all stakeholders in focus and assess any major impact issues
Basically – Choose an alternative and how would we implement it?
- Reclassifying the Disney Brand
- Currently, Disney has competition from companies that have diverse marketing portfolios. The Disney brand focuses on the family/children sector of the market- majority of their products, parks, and entertainment appeals to those demographics. Its competitors on the other hand combine products/entertainment services that are meant to meet everyone’s needs. Even with a loyal consumer base, Disney would benefit from marketing its brand to include more than family related products as to avoid excluding a major part of the market segment. They can do this by creating advertisements that appeal to adults more; they can also yes their platform to provide more information on what all they have to offer and educate consumers on the various acquisitions they’ve taken on such as parts of ESPN, Hulu, and Fox. (Are we going to allocate money to research and development? Explore new acquisitions? Consider merging the Disney brand image into one of its acquisitions to appeal to a more diverse demographic?)
Conclusion
- Wrap-up by bringing together your key facts and recommendations. Point out the upside and downside potential and resource requirements.
- Take this opportunity to provide updated information – how well does this fit with the strategic analysis? Comment on M&A strategy focal company is using. How is the situation improving or potentially deteriorating e.g. Walmart vs. Amazon eCommerce factors.
References
Chee, F. Y. (2018, October 15). Disney offers EU antitrust concessions over $71.3 billion Fox deal. Reuters. Retrieved from https://www.reuters.com/article/us-fox-m-a-disney-eu/disney-offers-eu-antitrust-concessions-over-71-3-billion-fox-deal-idUSKCN1MP0WS
Euromoney Institutional Investor PLC. (2012). Hello Kitty and Disney reveal China licensing secrets. Managing Intellectual Property. Retrieved from https://librarylink.uncc.edu/login?url=https://search.proquest.com/docview/994775100?accountid=14605
Im, J. (2019, May 1). Disneyland’s $1 billion Star Wars: Galaxy’s Edge attraction is opening this month—take a look inside. CNBC. Retrieved from https://www.cnbc.com/2019/05/01/pictures-inside-disney-parks-billion-dollar-star-wars-galaxys-edge.html
Richwine, L. (2018, August 7). China denies entry to Disney’s Winnie the Pooh film: source. Reuters. Retrieved from https://www.reuters.com/article/us-film-winniethepooh/china-denies-entry-to-disneys-winnie-the-pooh-film-source-idUSKBN1KS282
Rukstad, M. G., & Collis, D. (2009). The Walt Disney Company: The Entertainment King. Harvard Business School Publishing.
Walt Disney Company. (2018). Corporate Social Responsibility Update. Walt Disney Company. Retrieved from https://www.thewaltdisneycompany.com/wp-content/uploads/2019/03/2018-CSR-Report.pdf
Walt Disney Company. (n.d.). Environmental Fact Sheet. Retrieved from About Walt Disney World: https://aboutwaltdisneyworldresort.com/releases/environmental-fact-sheet/
Walt Disney Company. (n.d.). Environmental Overview. Retrieved from Disney Cruise Line: https://disneyparksnews.com/uploads/sites/4/2019/07/DCL_Env_Fact_July-2019.pdf
Wong, C. H., & Dou, E. (2017, October 29). Foreign Companies in China Get a New Partner: The Communist Party. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/foreign-companies-in-china-get-a-new-partner-the-communist-party-1509297523
Delaney, Tom, and Tami Stawicki. “The Walt Disney Company.” University of Connecticut, 12 Oct. 2016, smf.business.uconn.edu/wp-content/uploads/sites/818/2016/12/DIS-Report.pdf#targetText=The%20Walt%20Disney%20Company%20is,%2C%20Consumer%20Products%2C%20and%20Interactive.
“Disney History.” D23, d23.com/disney-history/#targetText=Originally%20known%20as%20the%20Disney,to%20an%20all%2Dcartoon%20series.
“Disney – Leadership, History, Corporate Social Responsibility.” The Walt Disney Company, www.thewaltdisneycompany.com/about/.
