Strategic Management The Walt Disney Company

Xavier BruchIsmael GonzlezEstefana SezEduard TaltavullChonglin Zhan

1.BRIEF HISTORY OF WALT DISNEY32.Mission and vision33.SITUATIONAL ANALYSIS53.1.Macro environment analysis (PESTEL analysis)53.1.1Society53.1.2Economy53.1.3Technology63.1.4Ecology63.1.5Politics and legibility:63.1.6Competence:63.2.Internal analysis73.2.1.Organizational structure:73.2.2.Functional areas84.SWOT95.Strategy implementation105.1.Market Development115.2.Disneyland strategies125.3.Mobile Applications125.4.ABC and ESPN145.5.Marvel entertainment155.6.Trilogy Star Wars155.7.Pixar15

BRIEF HISTORY OF WALT DISNEYWalt Disney is the company with whom millions of children have been growing up together and has accomplished the illusion of lots of them. Beside, it is the most important company in the world in terms of cinematography, animations, attraction parks and so on. Walt Disney was born in 1923 and based in California as an animation studio by brothers Walt and Roy Disney. The company went growing up quickly till 1943, time when began the Second World War and the company was almost forced to close the business. After the war, Disney experienced a time of quick recovery but in 1983 it faced another financial problem that almost leaded it to the bankrupt again. Today, the Walt Disney Company comprises a set of brands related to various forms of entertainment and all this in interpreted on the small shoulders of a mouse and one mans dream. The Disney brand was built on characters and animated features, after 1955, Disney began to extend its business further beyond cartoons and animated shorts with the opening of Disneyland. The theme park expanded and shared Disneys positive associations past simply film and animation to include life experiences as well.

Mission and visionAs all we know Disney is one of the most successful companies in the business world. However, what makes Disney that famous? Obviously it is related to its vision, mission and values. The mission of Disney is to be one of the worlds leading producers and providers of entertainment and information, which excels in being a diversified, international, family entertainment and media company. With the vision of to make people happy Disney just wants to achieve to be the preeminent leader in the field of family entertainment. The purpose consists on commitment to produce unparalleled entertainment experiences based on its rich legacy of quality creative content and exceptional storytelling.

Five forces of values are main key for the success of Disney as we can observe in the chart below.

SITUATIONAL ANALYSIS Macro environment analysis (PESTEL analysis)

Society Disney works in a market where the illusion of children remains although the society and the environment change. Disney tries to follow the new trends of technology in a classical and peaceful way so as not to create polemic in the society but involving the new technology trends. Although the products that are offered directly by Disney to children, indirectly these products are also purchased by parents that accompany their children and adults that recall time of their childhood. Economy Disney has different ways to put its products on sale. The main strategy is to try selling the star products to everybody so that everybody can afford them, apart from that, they also offer high-class products segmented to a concrete target of clients that must have a higher purchasing power to afford them. Finally, Disney guarantees that its star products are affordable to all families although there are any changes on environment. Technology Disney has been always using pencil to make its draws in initial time, however, due to the technological evolution, Disney was forced to change the way turning the draws to be made by computers since it means less cost. Thanks for the purchase of Pixar that brings parts of its innovation and research; Disney has accomplished this process of technology switch. Ecology The universally worried conversation issue of many firms like the global warming is also worried and treated by Disney. In addition, Disney tries to save the natural resources that keep remaining in the world today using removable energies o just as its project of amigos por el mundo (friends around the world) which invites young people and families to join in order to cooperate with the protection of the environment realizing simple actions in four basic fields: climate change, lack of water, waste and the habitat. Politics and legibility: To operate in the international market, its easy to find different laws and policy belonged to each country, and this could affect also in the tax benefits. Political differences of each country that Disney works are obstacle to international trade due to that Disney needs to adopt the regulations of each country according to the local law. Beside, the regulations of product safety are tighter than others features, so that Disney needs to care a lot about on this. Competence:The main competitors of Walt Disney today are the Warner Bros Company and universal Company. Warner Bros is an American company and at the same time one of the most companies of film production and television around the world, it also has theme parks and subsidiary companies as Disney has. Warner produces movies as well known as Disneys ones like Harry Potter, Matrix or Scooby-Doo. Universal is also an American company that Works on production and cinematic distribution. It is one of the main studios of American cinema.Although many of its products are destined to different segments, Disney in the moment has not introduced on some of them.

Market share on Studio entertainment Industry

Porters 5 forces analysis The force of threat of new entrants is medium because even though there are major firms, however smaller firms with lower structures can enter the market Threat of substitutes is high because technological innovations and high competition in each segment generate many alternative choices for costumers Bargain power of supplies is low because Disneys vertical integration reduces significantly their power Bargain power of buyers is high because Disneys offerings are desires, rather than necessities. Therefore, financially restricted consumers will not buy Rivalry among firms is high because there is huge competition between companies within specific sectors. Internal analysisOrganizational structure: We can distinguish the four organizational structures that Wald Disney Company has, which ones are divided in products to Disneys consumers, studio entertainment, theme parks and resorts, and media networks broadcasting. We stand out the studio entertainment because we have focused on this structure. The strong point would be Walt Disney Picture, Pixar Studios, Buena Vista records and theatrical productions.

1. Disney consumer productsIt may appear that Disneys target audience is primarily children, but its products arrive to all audiences from preschoolers to adults.Disney products include television programs, books, magazines, musical recordings and movies (Walt Disney).Radio Disney is available in more than 40 U.S. markets and on satellite radio, mobile apps and the web. Disneys Consumer Products segment includes worldwide licenses, manufacturers and retailers who design and sell a variety of products based on Disney characters. These products include character merchandise and publications licensing, books, magazines and the Disney Store2. Studio EntertainmentThis is regarded as the most visible business within the Disney Company, is also the most extensive with the integration of then production branches, like Walt Disney Pictures and Television, Miramax Films, Pixar Studios...The majority of the revenue comes from fees charged to cable, satellite and telecommunication service providers who operate under multi-year agreements3. Parks and resortsParks and resorts from Walt Disney that we can find around the world like Disneyland Paris and Tokyo Disney.This part creates the essence of animation to live it in person4. Media Networks BroadcastingThe groups portfolio includes: ABC Television, ABC Owned Television Stations Group, Disney Channels Worldwide, Disney Media Distribution, Hyperion and Radio Disney Network.

Functional areasHow much does each functional area contribute to the company?

SWOT StrengthsWeakness

Brand reputation/loyalty (worldwide known brand) High diversification Is strongly present in some branches of the entertainment industry Strategic and tactical acquisitions Economies of scope High quality products Largest worldwide licensor of character based merchandise Global standardization Responsiveness to markets High costs (sunk costs, R&D costs and costs of operations) Walt Disney highly associated with specific target audiencechildren Unstable top management Approaches antirust law limits Concentration of revenues in North America High risk factor Parks and Resorts success unpredictable: Seasonal Leisure time Travel trends Not easily accessible leading to a costly trip for visitors

OpportunitiesThreats

To develop the market in emergent countries Growth through further diversification Improve through new technologies Build a more eco-friendly image Creation of new successful stories and characters Increase Media Networks market share Strong competitors in the entertainment industry Competition on finding and affording the most creative human resources Increasing salaries and labor costs Lack of protection of intellectual property in many non-developed countries (piracy) Changing consumption behavior Decrease of DVD sales Maintaining product differentiation Economic recession Continuous need for technological update

Strategy implementationStrategies that Disney has used in its beginning after 1920s under the vision formula for success.The Disney Company has implemented certain critical strategies that contributed to its success. Disney has got the success because Disney has always maintained its vision and mission, the use of innovative technology and the global market have affected the company to change its strategies as they have turned to use computer to draw instead of pencils.Strategic differentiationDisney continues to differentiate itself as a classic entertainment company built on tradition with a clear vision of the futureThis strategy is one that Porter recommends as profitable for a company facing competition, and is enhanced by the companys continued partnerships with digital technology leaders Such as Apple, Facebook and Sprint, and desire to sustain expansionProduct differentiationWalt Disney has additional brands such as ESPN (one of the biggest sports channels in the world), Miramax, Touchstone and Pixar.Disney stores are located in malls and super centers. Particularly in urban locations in order for them to be visible and accessible by the publicWalt Disney Studios produces films through imprints Walt Disney Pictures, Disney Animation, and Pixar, and its Marvel Entertainment is a top comic book publisher and film producer.Walt Disney Parks and Resorts operates the companys popular theme parks including Walt Disney World and DisneylandThe multiplane allowed the animator to re-use the same background, foreground, or any elements not in motion, saving hours of labor.

You can see all the strategies of the Walt Disney Corporation in the Ansoff matrix:PRODUCTS

Existing

New

ExistingNewMARKETS

Market PenetrationNew Products

Targeted Market Segmentation Though acquisitions Related Diversification Diversification in branding Vertical & Horizontal integration.

Market developmentConglomerate Diversification

Foreign Outsourcing Direct Investment Licensing---------------

Market Development- Expanding movie market The way for Disney to enter the new movie market which increasing the quality of movie- Big Entertainment Company Disney enter the new level of big entertainment company and the result is famous and popular brand of Disney- Enter the new Advertising Corporation Become the target from the other company to advertise- Conglomerate of Entertainment Business Disney become the great company with the nature of conglomerate to many business field in entertainment world

Disneyland strategiesDisney Company has got impressive loyalty with his clients. And we all wanted to know how does it get this success, as far as we concerned, here are some major strategies worth thinking about. 1. All theming, all the time, If you take away the theming, theres nothing particularly special about Disneylands rides. The thing is, Disneys theming isnt just slapping a few cartoon animals on the sides of rides. Its immersive, complete. 2. Immersion Fans keep coming back because theres always more to see. Disneys motto isnt Lots of Ridesits The Happiest Place on Earth. And Disney maintains constant interest by making sure theres always something else to notice as following elements: Interesting and interactive areas for the rides. Sporadic and spontaneous performances by Mary Poppins or Alice and the Mad Hatter at various times of day. Rides like the Jungle Cruise that is strikingly different at night. Holiday theming. Different fireworks displays. Limited-time only eatables.1. Everyone is a princessDisneys strategy consists on offering to clients the experience they desire and they can complement it with Disney. For instance, Cast members give children badges and balloons at random; princesses stop to greet little girls dressed in princess gear; guests are allowed to captain the Jungle Cruise or Mark Twain Riverboat. Beside, Disney is very considerate with guests of disabilities, and avoids allergic food. Mobile ApplicationsOnce analyzed the SWOT, we can observe certain opportunities in the market that might be filled. Once of them was the chance to obtain huge benefits with the advances and mobile games, this allowed at the same time realize various stories with characters and personages that were created. Therefore, according to these opportunities, Walt Disney decided to create and develop different mobile applications and games by adding new personages that the company has saved in its portfolio1- Strategy ImplementationPreparation of the appropriate BudgetAllocation of personnelCommunication of the strategic vision, the strategic themes and their roles to the employeesUse of presentations, workshops, meetings, frequent updates2- Evaluation of StrategyMobile could drive total games software industry revenue to $100B by 2017 Mobile/online games could grow to $60B revenue Mobile/online games could take 60% games software market share by 2017 Total global games software revenue could grow to $100B revenue by 2017Games dominate mobile app usage and revenue Games took 32% of 2013 mobile app usage (smartphones, tablets with IOS/Android) Games took 72% of 2013 mobile app revenue and 40% of mobile app downloads

Source: www.digi-capital.com

Source: www.digi-capital.com3. Evaluation of strategy Rumelts criteriaThe recommended strategy is:1. Consistent It will be developed by the existing Interactive Department so that interdepartmental disorder is avoided2. Consonant It will be an adaptive response to the recent social trend for mobile games app.3. Successful Disneys financial state can support the recommended strategy which will result in the companys growth in the short-term4. Maintaining the competitive advantage The companys position in the market will be strengthened

ABC and ESPNDuring the fist stage at 80s, Disney bought the ABC chain by 19.000 millions of dollars, with the objective to integrate it with ESPN that was a posterior purchase achieved in 1995 and sign the conglomerate ABC sports. Disney began to produce a big amount of parallel programs to its main signals, which were segmented by sports with alternatives that best fit the American taste. Disney made all these purchases in order to center in the three factory brands: Disney, ABC and ESPN.Marvel entertainmentAnother purchase was realized in august of 2009 that Disney paid 4.1 billons of dollars for Marvel Entertainment due to it has some licenses of movies like Wolverine or Iron Man 2, and also a big amount of video games. We should recall the purchase by 763 millions of dollars for Playdom. Trilogy Star WarsIn the end we should detach the operation with Lucas film, purchased by 4.05 billons of dollars. This purchase opens positive sceneries for Disney as it has advertised a new trilogy of Star Wars that will be screened out in 2015. With this operation Disney snatched to Fox (ex-distributor of Saga), one of the major world and historical collections.

PixarDisney bought the Pixar Company in match of 2006 by 7.4 billons of dollars. The reason was the success that Pixar registered with its productions as Toy Story, Bichos, and Monsters etc. After the purchase, the company kept growing with success as Cars, Ratatouille, Up Owing to this transaction, Steve Jobs became the biggest actionist of Disney with 7% of actions since he had already owned 50.1% of Pixars actions Strong capabilities Pixar has and comparative with Disney.

PixarWalt Disney

AreaShort films and commercialsAnimation movie

Animation3DLeading computer animation technologyTraditional 2D

Software10 years of proprietary softwareIn 2005, used in 100 films and 44 of the last 47 movies won the OscarNo available

SkillMost technical employees held PhDs (doctors)Lack of CG skill (CG creative multimedia, poorly)

AssetCGStory telling creativityMovie industry knowhow and experienceGreat movies (sequel)

Distribution channelNo availableMovie, TV, DVD.

CultureBottom up Free-spirited Creativity Egalitarian Collaboration PerfectionismTop down Managers establish and reinforce culture

Operation costNo required the skills of hundreds of people working over 2-3 years Toy story was made with 110 staffLarge staff, Large Budget, lots of timeTarzan (99) Budget = $80 million vs $150 million Animator (drawing)

For Disney, are there any other alternatives like strategic alliance better than acquiring Pixar?

CAPS Computed animated production systemMake 2D animation movies ex (Rescuer Down under, Lion King)Feature Film AgreementCo-production agreement

DateMay 1991February 1997

LengthOne movie + 2 movies (option)Until 5 film is delivered (10years)

ExclusivityDisney exclusivity film, TV, home video, theme parksApproval of Disney-commercials, special effect for film and live showExclusivity on movies until 12 months after the 5th movie featuredDisney exclusivity-film, TV, home video, theme parksNon exclusivity commercials, special effect for film and live show

RevenuesSmall % for Pixar 10-15%50:50 (12,5% for distribution fee)

OwnershipTech PixarFilm DisneyCharacters DisneySequels DisneyTech PixarFilm Disney and PixarCharacters Disney and PixarSequels Disney and Pixar

Creative controlPixar propose, Disney decidesPixar and Disney (Pixar had full creative control of Cars)

Increasing Power & influence of Pixar / Less profitable contract with Pixar.Risks factor when trying to acquire Pixar Disney Mainly include 2 risk factors that we believe important 1. Financial stock dilution The company is valued by Pixar 6.5 billion when the purchase is 7.4 trillion and Steve Jobs to become the largest shareholder of Disney2. Different culture between Pixar and Disney Disney Company is a huge bureaucracy due to its size; it has more than 150,000 employees and shows a distance between the directional structure and the middle managers that could be a problem for Disney because it has a brain drain owing to that they are not allowed to be more creativeDisney tries to find more profitability of its norms but quality; therefore the executives are ones who make decisions more creative as they work with a tight agenda. In contrast of Disney, Pixar has a major freedom towards its employees that they can contribute their creativity being by this way free spirit. Their work places are decorated individually, they can wear shirts as Hawaii style and they are against a policy then against the contractIn Pixar, there is an egalitarian collaboration where the spaces are open, there are area for games and living room for entertainment. The employees of Pixar called their installations in Emeryville, California as the Pixar University where they give class to their employees. What they want to find out it talented workers who could be promoted and developed its capacity in the company.The projects are worked by team and for them, art is a team sport, in which everyone receives a bonus and are perfectionist in its short films and stories. We can stand out three basic principles that Pixar has Whole the world can offer ideas All workers have freedom to communicate with any person Maintain the innovations that happen in academic community After this analysis, we can observe some important differences between Disney and Pixar Disney is a solid company in searching profitability Pixar is an artistic company with the junction of creativity and the freedom

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