83893938-Group-4-Strategy-Case-Disney-v-1-4.docx

FULL-TIME INTERNATIONAL MBA
2011 - 2012
Case
‘The Walt Disney Company:
The Entertainment King’
‘Strategic Management’
Prof Dr Venkat Subramanian
Students:
Serhat Kurum, Ott Jalakas,
Stijn Lefebure, Marc Licha
Matteo Mantiero, Sajjad Sheikh
Engaging in irregularities is severely sanctioned in correspondence with article 34 of the Examination rules.
We hereby declare that we have not engaged in any such irregularities.
Student(s)’s signature(s)

Strategic Management | Case ‘ The Walt Disney Company: The Entertainment King’
FTIMBA 2011-2012 | Team Assignment
Group #4 : S. Kurum, O. Jalakas, S. Lefebure, M. Licha, M. Mantiero & S. Sheikh
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Strategic Management
Case
The Walt Disney Company: The Entertainment King
Introduction: In this report we aim to present Case ‘Walt Disney Company’. Our approach
will be as follows: Firstly there will be an overview of the ‘big picture’ of the relationships
within the Walt Disney different businesses, next the report will progres on Business Model
into two branches: a) Value Proposition and b) Activity model. After all the analysis stated,
the two questions will be answered in the final part.
Disney Business: An Overview
I only hope that we never lose sight of one thing – that it was all started with a mouse.
-Walt Disney
STUDIO
ENTERTAINMENT
CREATION of Characters
and STORY
Theme Parks
& Resorts
Experience
Internet & Direct
Marketing
Distribution Channel
Consumer Products
Bring the characters
into family homes
Media Networks
Distribution Channel
of Studio
Entertainment and
Portfolio enhancing

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Picture of Walt Disney Company
Everything starts in Walt Disney by Creation of the ‘Creature’ or live action motion movie, on
top of the diagram. The department, called Studio Entertainment, includes Theatrical Films
division. In addition, Buena Vista Home Entertainment, which is a channel for the movies,
belongs to this group. As shown in the diagram Studio Entertainment feeds all other
departments such as Theme Parks & Resorts, where the customers can purchase the
experience of the animation or movie. At the same time, another department called
Consumer Products, for which Theme Parks & Resorts are place to reach the customers. In
addition to Theme Parks, go.com, the website of Walt Disney also serves as online shopping
place for those products. In addition to that, even though the online place was not a
successful part in 2000, it is a channel for all product ranges. In addition to its online channel,
by acquisition of ABC, Walt Disney put broadcasting capabilities on cable television networks.
This department is called Media Networks. This networks not only enabled Walt Disney to
reach out its customers of animation or movies, but also helped the company to gain new
audiences through hit shows such as “Who Wants to Be a Millionaire” on ABC.
Value proposition
Walt Disney is in the family entertainment industry, where it is the global leader. The mission
of Walt Disney says “A magical world where dreams come true”. The value proposition of
Walt Disney is in its product leadership. To deliver this value proposition they invest in:
Creativity
Since more than sixty years, the company develops appealing characters and storylines that
are the base of its success. The company has developed a management style that is both
results driven and risk oriented, in order to manage and foster creativity in a large size
business such as Disney.
Commercialize their ideas quickly
The company manages to stay on top because of their ability to stay close to its ever evolving
customer segments, both in the characters they develop as in the way in which they target
their customers. The firm is to a large extent vertically integrated. It creates movies and tv-
shows, which are distributed through privately owned channels and film distributors. Also the
firm controls the valorization of the characters through merchandizing, retailing and theme
parks. This enables them strategic control over all elements of their core value proposition,
namely the “Disney Experience”.

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Relentlessly pursue ways to leapfrog the latest product or service
The company is flexible in the adoption of new technologies, which enter the firm through
intensive cooperation with external partners. In the case of Pixar, this partnership has
evolved into a merger.
Mickey Mouse vs Bugs Bunny
Our team decided to do a comparison between the two big media conglomerates. Given the
limited data available within the ‘case’ about the competition, we decided to go for a group
discussion about our perception about Disney and Time Warner (as consumers too).
Our discussion leads us to consider that the two big conglomerates differs first in vertical
integration in favor of Disney, being able to benefit from more
Disney and Time Warner are almost on the same level if we consider adoptions of new
technology. While Disney was (and is) on the edge with the realization of movies with the
latest technologies for special effect, Time Warner was ‘experimenting’ and benefitting since
the beginning of the videogames era with the acquisition of Atari in the early eighties.
However lately Disney is back on top with new technology adoption after signing a
partnership with Pixar, and hence creating tremendous successful CG movies such as Nemo,
Toy Story, Monsters Inc and so on.
As for the multichannel presence and global presence, Disney scores again higher than Time
Warner benefitting in particular from its huge exploitation of theme parks, merchandising (i.e.
McDonald’s happy meals), licensing and direct customer relations thanks to its stores
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Walt Disney
Time Warner

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worldwide. This reflects even the different approach to its customers; while Disney focus
more on creating an experience for the whole family with its ‘Disney magic’, Time Warner for
examples in its cartoons focus more on humor, fun and violence (Wile E. Coyote is a big
consumer of TNT for example).
Overall, in our team discussion, Disney seems to do have some more arrows to shoot when
compared to Time Warner. Further, Disney is without doubt one of the most valuable brand in
the world and the company seems to exploit it far better than Time Warner. Compared to
Disney, they are not making extensive use of its brand but focus on separate ‘product brand’
more than its umbrella one.
Activity Model
In order to further develop our analysis of the Disney Business Model we use the following
“activity framework” that help us to understand Disney focus on the three main activities
being Operational Excellence, Product Leadership and Customer Intimacy.
Cost Benefit
Product 1. Best total cost
(Operational Excellence)
2. Best Product
(Product Leadership)
Service
3. Best total solution
(Customer Intimacy)
1. Operational Excellence:
 Combination of quality, price, and ease of purchase that no one else in the
market can match
 Don’t care about relationship with customers
 Perfect execution and low price guarantee
2. Product Leadership:
 Push the product into the realm of the unknown
 Leading edge products or new applications for existing products
 Creativity, quick commercialization and constantly following ways to leapfrog
the latest product
3. Customer intimacy:

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 Delivering value via customer intimacy bonds with customers
 Deliver what the customer wants
 Know people’s needs and wants
 Tailor the products and services, and do so at reasonable prices
Discussion of the Activity Model
Disney always strive to be the best in product leadership and customer intimacy without
neglecting the operational excellence.
Since its creation, Disney is (and was) pioneer in different sectors and has created many
business lines to enhance and support its original business model as a studio producing
animated shorts and full-length features. Over the years, they have had their ups and downs
but recently, Disney successfully fulfilled its mission to position itself as one of the
world’s leading producers and providers of entertainment and information.
Moreover, because customer intimacy is very important to them, Disney has developed
their staff to be responsive, flexible and empowered them in order to effectively delivery on
customer expectation. In fact, a 3 days training program is required by every new worker and
executive in order to embrace Disney’s values and during this program, everyone has to
dress as a character for a full day. As a result, workers become fiercely committed to the
company and they manage to deliver the experience that Walt Disney wanted. In addition,
Walt Disney’s philosophy is to create universal timeless family entertainment and this
requires the company to be the best in customer intimacy. Disney wants the families to enjoy
the Disney experience and spend time together without caring about time. Its theme parks
are also customized in order to accommodate for the cultural differences. Consequently,
people feel that they receive value for money.
As for product leadership, Disney focuses on creativity, quality, teamwork, communication
and cooperation in order to excel in their business. They create amazing movies and they
invest in all the new technologies in order to stay on top. They have pioneered in the theme
parks, the animated movies, the “sell through” approach and the Disney stores. They have
gained their position as market leader in the movie industry. They also use their strong media
network to expand globally and they manage to maintain and increase their market share
through their ability to blend new innovative technologies with traditional stories and values.
Disney couldn’t have survived for almost 90 years without having an excellent operation
management system. Over the years, they acquired many related businesses to reduce
costs and to be more efficient. And thus, they have created an empire around the Studio
Entertainment line. They eliminated the distribution outsourcing and created their own
distribution firms and acquired others in order to reduce costs without decreasing the quality.

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They operate their parks all over the world in an excellent way. However, due to the
acquisition of ABC, they face synergy and integration problems that have decreased the
operational efficiency for a while, but eventually they now managed to overcome this hurdle
through better governance, integration and synergy programs.
Finally, if we were to give a score to Disney on a scale to 10 on these 3 criteria, it would be 8
for operational excellence, 9 for product leadership and 10 for customer intimacy.

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Answering the questions:
Q1. How does the Business Model help Disney make (lose) money?
Having already discussed the activity model, background and value proposition framework of
Disney we take a step further to delve deep to analyze Disney’s model under scrutiny of
making or loosing money. It is essentially a mix of operational excellence, product leadership
and customer intimacy that helps it to make money… or lose them, when the mix is not
optimal.
Essentially, Disney bases its model on how the public thinks about fun and entertainment and
they have created a whole array of offerings that helps to complement and synergize each
other. Propelled by vision to create a unique experience for its customers, it diversifies and
adds to its offerings by working with related businesses such as theaters, television, hotels,
toy selling, television and Internet to generate a holistic experience for its customers. This
enables Disney to sell more to the existing customers and increase customer loyalty. Further
to this, it benefits Disney by charging premium on its products while trying to reduce internal
costs significantly through synergies.
Disney also expands its markets geographically reaching more customers. Simultaneously,
its machinery is geared towards continuous promotion through all its business lines and
creative methodologies such as entertaining its customers while waiting in queues at its
theme parks.
Where creativity is core to business it invests highly in its people and development of ideas
or creativity. Training and inspiring talent is essential for Disney. It is clear to understand how
it makes money when communication and coordination in the company works best and
looses money with it experiences problems here or when the best of its talent leaves or feels
demotivated. Which is apparently the case lately due to a lack of proper change in
management (see answer to question 2).
Furthermore, Disney has done a good work at following and creating trends and
capitalizing on them. It further showed some flexibility to adapt its offerings to a broader
market such as offering from a cartoon experience, such as Cinderella to not only children
but to their parents as well, while at theme parks through hotels, etc. The success of its
money-making depends on the quality of the experience they created as well as on fostering
and sharing creativity and new ideas all over the business divisions.
Lastly, much of the nature of business offered by Disney such toys, hotels, theme parks can
be classified as luxury and is subject to favorable market conditions. In times of economic
growth and certainty the business model generates exogenously fueled growth. During

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market downturns, as is the case in recent years, if Disney does not demonstrate agility
through cost cutting (i.e. closing unprofitable businesses) on one side, and on the other
investing on fostering creativity in the whole organization, it looses money.
Q2. What type of management approach does Disney use in managing its
business units? Is that appropriate?
The management style applied by Walt Disney, and especially by Michael Eisner, a long-term
CEO of The Walt Disney Company, can be characterized by two, sometimes contradictory
features.
First, both executives practiced micromanagement style of leadership, desired excessive
involvement in various elements of the business, combined with rather dictatorial approach
aimed to tight control throughout the company. Especially Eisner had rather task specific
and target oriented approach, having high demands to his team in terms of target setting and
achieving results. Target setting was important not only in terms of financial goals, but also
encouraging and even demanding innovation and creativity from his people. Demanding
approach, strong view on business development together with hands-on style of
micromanagement enabled Eisner to mobilize underutilized resources available within the
company. Together with implementation of vertically integrated organizational structure it
enabled to profit from new initiatives as establishing a theme park in unused land, sales of
videocassettes with well-known Walt Disney characters, and using TV networks to distribute
the company’s production. Still, the very much hands-on leadership style created frustration
among many top managers leaving the company and criticizing Eisner on mismanaging the
firm.
Second, rather contradictory to the previously described, both applied a management
approach aimed to involve people at all levels to promote informal cooperation between
business lines, to identify synergies and to encourage creativity through regular
brainstorming events. Increasing involvement and interaction between business divisions was
aimed to take advantage of Disney’s brands and characters, and to exploit unused resources.
Involvement and cooperation between units was important for two reasons. First, to take
advantage of existing characters, trademarks and copyrights through diversification into
several business lines and industries (theme parks, cruise ships, hotels, merchandise, retail,
movies, music, etc). Second, to benefit from full vertical integration of business by driving
established themes and characters through means owned by The Walt Disney Company,
namely movie production, distribution channels, TV, retail and theme parks. Also, promoting
cooperation and involvement of people from different business lines was a part of the

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company’s global strategy enabling learning from experience and achieving economies of
scale.
To summarize, management approach advocated and used by Michael Eisner was
appropriate and successful as it enabled to make use of unexploited synergies and
underutilized resources available within the company. The approach was efficient at the times
of implementing vital changes to increase profitability of the company, enabling smooth
integration of business lines and leveraging the existing resources (trademarks, copyrights,
and existing characters) into new businesses acquired by the firm. Also, in short term the
micromanagement encouraged creativity by urging creative thinking and cooperation.
Challenges to the chosen management approach are related to the very large size of the
company, as in long-term the method may lead to mismanagement of the company and
discontented management team. Top-down approach applied in traditional industrial
companies with limited number of business lines and products, while contemporary creative
industries have chosen a different path aimed to leverage the idea creation and involvement
in business development into large number of employees (Google, Facebook). To maintain
its global leadership position in creativity and innovation, the Walt Disney Company needs to
adjust its management approach by further encouraging out-of-the-box thinking and idea
generation in all levels of the organization.

83893938-Group-4-Strategy-Case-Disney-v-1-4.docx

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