A Strategic Management Case Study on the Walt Disney Company Essay

When brothers Walt and Roy Disney moved to Los Angeles in 1923, they went there to sell their cartoons and animated shorts. One could only dream that their name would one day be synonymous with entertainment worldwide. But then again, that is how The Walt Disney Company has made their fortunes over the last several decades: making â€Å"dreams† come true. The Disney brothers began creating countless cartoons (some successful and others not so much), and in 1928, introduced Mickey Mouse to the world in the animated short, Steamboat Willie—widely described as the first animated film to be synchronized with post-produced music. The Mickey Mouse character gained enormous popularity, and Walt and Roy enjoyed incredible success thereafter with feature films both related and unrelated to the Mickey Mouse character. The Walt Disney Company produced several of its animated classics throughout the 1940s such as Pinocchio, Fantasia, Dumbo, and Bambi; and in 1955, Disneyland opened its doors as the Disney brother’s first amusement park. In 1966, Walt Disney died leaving Roy as the new President, CEO, and Chairman of the Board of The Walt Disney Company. Walt never had the opportunity to witness his namesake creation (Roy rebranded Disney World as Walt Disney World in honor of his late brother) as Walt Disney World opened five years later on October 1, 1971. Since that first day of October in ‘71, The Walt Disney Company has expanded exponentially. The Company owns media networks such as ABC, ESPN, the Disney Channels, SOAPnet, and A & E (television networks); ABC Radio and The Radio Disney Network (online and satellite radio station); and Hyperion Books (literary publishing company). The Company has spread its parks across the world to Paris, Hong Kong, and Tokyo and has taken to sea with four Disney ocean liners. The Walt Disney Company continues to grow with a major expansion to Walt Disney World currently underway and several feature films currently in production in the Disney-Pixar Animation Studio (the result of the Company’s 2006 acquisition of Pixar Animation Studios.) Though profits have been stagnant for the last two fiscal years, the company’s revenue continues to increase. Purpose of Strategic Management Strategic management is a management function that consists of three distinct actions. They are (1) formulating, (2) implement, and (3) evaluate cross-functional decisions that enable an organization to achieve its objectives. Strategic management is vital for companies wishing to prosper in such a dynamic world. With globalization at an all time high, the practice of strategic management among a company’s top executives (at the very least) is an absolute necessity. Considering that â€Å"communication is a key to successful strategic management† and that the empowering of employees is â€Å"a great benefit of strategic management,† it is recommended that strategic management is implemented at a company-wide level. Simply put: successful, polished, professional companies perform strategic planning. A large percentage of the companies that fail in America each year do not perform strategic planning. Company Mission Statement The mission statement can also be defined as a company’s â€Å"statement of purpose.† The current mission statement for the Walt Disney Company is: To be the world’s leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, we seek to develop the most creative, innovative and profitable entertainment experiences and related products in the world. Objectives The objectives of a company are the same as a company’s goals. When setting goals, an organization is determining what results they expect to achieve in both the short-term and the long-term. What is the goal of this company? Of this division? What do we want to have accomplished within the next year? Within the next five years? Generically, the answers to these questions would be a compiled list of objectives of which a company should strive to obtain. Given the current economic climate, setting objectives (or goal-setting) is difficult. As with every company, The Walt Disney Company should set goals for the company as a whole and along functional lines that pressure the company to greatness yet are obtainable. Measurability should be constantly remembered in setting these objectives, and precise and unambiguous language should be used to eliminate all hints of confusion. The Walt Disney Company does not publish its corporate objectives. Strategies Strategies are a company’s methods to reaching its established objectives. Just because a company may have a final destination in mind (an objective or goal) doesn’t mean that every path to that destination is a good one. After setting strategically sound objectives, it is imperative that strategically sound strategies are generated to provide the means of transportation for said objectives. The courses of action on which an organization decide to embark affects all divisions and aspects of said organization. Strategies should be formulated and implemented only once all internal and external factors are assessed. Only then can a strategy be deemed â€Å"safe† for a company for implementation. Internal Audit Strength All companies have actions that they perform more than capably. All companies (at least all those that have been around for a period of time) have past successes on which to build. A company’s â€Å"strengths† are such factors: the positive components of a company’s collective portfolio that have made the company better in one way or another. The strengths for The Walt Disney Company are detailed below. A Vast and Diverse Portfolio The Disney brothers began drawing cartoons long before moving to Hollywood. The Missouri natives spent the majority of their lives imagining characters to which to introduce to the world. Along with the Disney’s impressive collection of new adaptations of old classics such as Robin Hood, Sleeping Beauty, Peter Pan, and Alice In Wonderland; the Company has created countless characters to star in their feature films. Disney’s original characters include Mickey Mouse, Minnie Mouse, Donald Duck, Pluto, Chip &Dale, Simba, Buzz Lightyear, Belle, and Aladdin (to name only a very limited few.) The Walt Disney Company’s huge portfolio is the single best strength of the entire organization. Diversification Disney has moved well beyond its cartoon-oriented roots. Though the company is still involved the production of original feature films and other related media (and though the media network division of the Company is still the organization’s leading generator of revenue) the company has long since stopped being your typical â€Å"animation studio† or â€Å"film production company.† In 1951, with the opening of Disney’s first theme park (Disneyland, in Anaheim, California) the Company made a dramatic shift from a media-oriented company to the broader category of an entertainment-oriented company. In the midst of the rollercoaster’s and hot dog stands in sunny California, the Company found also a unique market place for consumer products and a chance to entwine and implement the Organization’s already impressive portfolio of film characters into the parks attractions. The Walt Disney Company also began launching and purchasing media outlets for which their productions and promotions to air. Disney owns now several media broadcasting networks television as well as several radio stations for terrestrial, satellite, and online hosts. Incredible Customer Service The Walt Disney Company prides itself in many things and rightfully so. If you ask the average person what Disney is known for â€Å"Mickey Mouse† or â€Å"the castle† might quickly be their reply. Ask any business professional, however, and one thing is certain to be heard time and time again—â€Å"Customer service.† Disney demands nothing less than stellar customer service from their employees. If you have never experienced the â€Å"Disney Difference,† I urge you to travel to one of their many theme parks or retail stores worldwide. Their level of customer service takes those who know to look for it back. Former customer service experts and teachers for Disney have written very successful books on the topic and their experiences from the â€Å"holy grail† of customer satisfaction. Acquisition of Pixar Animation Studios In 2006, The Walt Disney Company made an acquisition of Pixar Animation Studios. Until 2006, Pixar had collaborated with Disney on multiple occasions to produce such award winning films such as Toy Story, Finding Nemo, and Monsters, Inc. Because of the partnership involved in these movies, however, Disney had limitations on the rights to use and reuse the characters contained within the films. The Company saw this as a negative. Too, seeing as Disney produces the majority of its films without collaboration or partnership, the Disney-Pixar relationship was an enigma around which to carefully navigate. In addition, as Disney’s traditionally produced animated films (with pen and color artists) being left in the shadows in comparison to the progressively produced animated films (with CGI and digital artwork, it seemed like the best approach that could be taken in order to â€Å"catch up with the times.† Weaknesses With the fact that all companies have actions that they perform more than capably, the fact also arises that there are some internal factors that are of a negative consequence. Even companies as successful as The Walt Disney Company have attributes and characteristics that are not at all positive. A company’s â€Å"weaknesses† are those such factors: the negative components of a company’s collective portfolio that have made the company worse in one way or another. The weaknesses for The Walt Disney Company are detailed below. The Constant Need of Successful Creative Material Any analyst should be quick in stating that Disney is wonderful at generating â€Å"successful creative material†Ã¢â‚¬â€œwhich they are. The weakness associated with this factor, however, is of great importance. The key words in this factor are â€Å"constant need.† Though The Walt Disney Company is possibly the world’s greatest generator of successful creative material, the constant need to churn out successful film after successful film and wonderful attraction after wonderful attraction is daunting at the very least. The fact that there could be a flop at the box office, or a ride that is negatively reviewed is terrifying for the Company that prides itself in its perfection. High (and Increasing) Cost of Operation Unfortunately for the Disney Company, their industry is one with astronomical costs and expenses. Needless to say, it is quite expensive to produce or successful feature film or build a theme park. With recently diminishing profits and the economic recession, the company’s realization to the increasing costs of doing business has been mundane. This weakness is not to be confused with â€Å"high barriers for entry,† which might be viewed as an opportunity. That would be considered an external factor. From an internal point of view, however, the high (and increasing) costs to operate are doubtlessly a weakness for The Walt Disney Company. Lack of Developmental Property The Walt Disney Company Parks and Resorts Division has expanded drastically over the last three decades. With the first international park being established in Tokyo in 1983, the Paris, Hong Kong, and Shanghai parks began to fall in place shortly after. At the Disney World Resort in Orlando, Florida, the Company owns several square miles of land that will surely be apportioned for park editions in the long term. Outside of the extra property in Florida, however, The Walt Disney Company has little acreage elsewhere. Future developments in California’s Disneyland Resort are very unlikely due to the rapid pace at which property was bought in the forties when the â€Å"new theme park project† hit the news, limiting Disney’s land around the resort. Lack of developmental property within a company that survives due to its innovation is a serious issue and a strong internal weakness of this organization. Lagging Consumer Products Revenue The consumer products division of The Walt Disney Company is handedly the smallest division within the organization. While revenues continue to trend upward for the division, they do so at a slower rate to the other Disney divisions, proportionally. Consumer products should be a division of the Company that performs, proportionately, as well as the other three divisions of the company. If a consumer watches and really thoroughly enjoys Disney’s new studio release, Cars 2, than it is safe to say that the viewer might also want a Cars 2 t-shirt or action figure. The same is true for the media networks or parks and resorts divisions: a consumer who has experienced the products of any division of the Organization should be prone to purchase consumer products related to such products. The fact that the increasing revenue of the consumer products division is doing so at a slower rate of the other divisions shows a lack of marketing and promotion put on the division. Internal Factor Evaluation (IFE) Matrix The Internal Factor Evaluation (IFE) Matrix is an Input State (State 1) strategic management tool that that helps with the summarization and evaluation of the major strengths and weaknesses in the functional areas of an organization. Internal factors (namely strengths and weaknesses) are compiled, given weights as it relates their relative importance, and assigned a rating. The weighted scores [weight (x) rating] are totaled to comprise a total weighted score for the IFE Matrix. The figures generated in the IFE Matrix are used in a multitude of other strategic management tools and matrices.