What WouldYou Do? Case Assignment
Walt DisneyCompany
Burbank,California
Overtwo 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 Webservices (from Microsoft cofounder Paul Allan), andInfoseek (anearly Web search engine). But his strong personality and criticalmanagement style created conflict with shareholders, creativepartners, and board members, including Roy Disney, nephew offounder Walt Disney.
One ofyour first moves as Disney’s new CEO was repairing relationshipswith Pixar Studios and its then CEO Steve Jobs. Pixar producedcomputer-animated movies for Disney to distribute and market.Disney also had the right to produce sequels to Pixar Films, suchas ToyStory, without Pixar’s involvement.Jobs argued, however, that Pixar should have total financial andcreative control over its films. When Disney CEO Michael Eisnerdisagreed, 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 promisingJobs and Pixar’s leadership, President Ed Catmull andcreative guru John Lasseter, totalcreative control of Pixar’s films andDisney’s storied but strugglinganimation unit. Said Jobs, “I wasn’t sure I could get Ed and Johnto come to Disney unless they had that control.”
Although Pixar and Disneyanimation thrived under the new arrangement, Disney still had anumber of critical strategic problems to address. Disney was “tooold” and suffering from brand fatigue as its classic but agingcharacters, Mickey Mouse (created in 1928) and Winnie-the-Pooh(licensed by Disney in 1961), accounted for 80 percent of consumersales. On the other hand, Disney was also “too young” and sufferingfrom “age compression,” meaning it appealed only to young childrenand not preteens, who gravitated to Nickelodeon, and certainly notto teens at all. Finally, despite its legendary animated films,over time Disney products had developed a reputation forlow-quality production, poor acting, and weak scripts. Movies “HighSchool Musical 3: Senior Year,” “Beverly Hills Chihuahua,” “Bolt,”“Confessions of a Shopaholic,” “Race to Witch Mountain,” and“Bedtime Stories” disappointed audiences and failed to meetfinancial goals. As you told your board of directors, “It’s not themarketplace, it’s our slate [of TV shows and movies].”
Withmany of Disney’s brands and products clearly suffering, you face abasic decision: Should Disney grow, stabilize, or retrench? Disneyis 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, andmerchandise), and media networks such as TV(ABC, ESPN, Disney Channels, ABC Family), radio, and the DisneyInteractive Media Group (online, mobile, and video games andproducts). If Disney should grow, where? Like Pixar, is anotherstrategic acquisition necessary? If so, who? If stability, how doyou improve quality to keep doing what Disney has been doing, buteven better? Finally, retrenchment would mean shrinking Disney’ssize and scope. If you were to do this, what divisions would youshrink 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/distributionbusiness that simply needs to find ways to buy content wherever itcan, for example, by buying Pixar and then delivering that contentin ways that customers want (i.e., DVDs, cable channels, iTunes,Netflix, social media, Internet TV, etc.)?
Finally, from a strategicperspective, how should Disney’s different entertainment areas bemanaged? Should there be one grand strategy (i.e., growth,stability, retrenchment) that every division follows, or shouldeach division have a focused strategy for its own market andcustomers? Likewise, how much discretion should division managershave to set and execute their strategies, or should that becontrolled and approved centrally by the strategic planningdepartment at Disney headquarters?
If you wereCEO at Disney, what would you do?
Please whitedown with details
