The Walt Disney Company: Strategic Outlook

The Walt Disney Company: Strategic Outlook

In modern economy, highly integrated and globalized companies can no longer benefit only from easy access to the natural resources, skilled specialists or advertizing policies. The only way to stay competitive is to make correct decisions more quickly and be able to evaluate their effect on the organization’s position in the long-term perspective. The aim of this paper is to show how important it is to choose the right strategy on an example of the Walt Disney Company. This giant corporation with almost 90 years history was named to creativity and brilliant ideas of its founders, Walt and Roy Disney. However, it was able to survive and become one of the largest mass media and entertainment providers only with the proper strategic decisions made by its top managers.

The Walt Disney Company announces its general objective as follows: “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 Walt Disney Company, 2012). This objective has been achieved by the latest most famous managers of the company in two different ways: vertical structure with top down approach first and decentralization policy thereafter. The work describes these two consecutive management strategies of the company.

The first part of the paper is devoted to the strategy kept by the former chief executive officer (CEO) of Disney – Michael Eisner. His strategy was successful at his time but turned out to be out-of date by the end of the XX century. The second part represents the analysis of the new CEO, Robert Iger, who started managing Disney in 2005 and introduced a number of critical changes to the strategy of the corporation. Thereafter, we will conclude on the modern strategic outlook of the analyzed company.

Michael Eisner’s Era

Centralization and control were the two main management strategies chosen by Michael Eisner. In the 1980-90s he built a strong vertically integrated corporation and expanded its activities as wide as it was possible at his time. Eisner postulated his management policy on several principles such as centralization, control of initiatives via top down approach and micromanagement strategy, international expansion and product diversification (Gunther, 1999).

The most significant change to the company’s management system was made by the transformation of its structure. Eisner introduced a Strategic Planning Committee which included top managers responsible for the different functional areas and decided on all the most important financial and investment assignments of the Disney Company. This provided a strictly vertical structure of the organization and centralized the whole decision-making process. The Committee acted as the key instrument to concentrate on the main activity of the company, creation of animated films, and to bring the company’s name to the category of premier brands.

Further, as any noteworthy project had to be approved by the Committee, Eisner implemented overall control of initiatives. Eisner set creativity as the main priority of the Disney Company, especially for film production division. Having the top down approach to management, he established strict controls for every running project and got the results. At the beginning of the 1990s, the Disney Company produced well known classical animations such as Beauty and the Beast, Aladdin, The Lion King, Pocahontas, etc. (The Walt Disney Company, 2012). As cited by Gunther (1999), at that time Eisner declared that “[t]he interesting thing about our company, which I think is extremely flattering, is that everybody takes for granted that we make good products”. Discipline and control of the entire production process brought the company success in becoming the top provider of family films and animations. Moreover, the Disney Company obtained an extremely valuable asset in the long-term perspective – the customer loyalty.

International expansion and product expansion was the next cornerstone of Eisner’s strategy. The Disney Company opened theme parks in Japan and France, started selling toys via Disney Store, maintained its TV channel (The Disney Channel) worldwide and published books at Hyperion Books, the Disney publishing company. It also stepped into the World Wide Web with www.disney.com and a separate division, Disney Interactive (The Walt Disney Company, 2012). This movement towards the international markets and wide diversification of activities turned the U.S. based mass media company into an international corporation. This was the time when Eisner’s strategy of centralization could no longer be an effectively way of management.

Unfortunately, Michael Eisner’s strategy did not count the fact that the company was expanding and it was impossible to control all its activities by the means of one Committee. Along with the company’s growth, every significant project (for example, recreation parks or online presence) developed into an independent business line. Consequently, the Committee could not make proper decisions and control all of them in time. The micromanagement strategy, which was optimal for a national company of Walt Disney, turned out to be sluggish and outmoded for a worldwide corporation (Gunther, 1999).

Robert Iger and management reformation

In 2005 Robert Iger started his management practice at the Disney Company from the reformation of its organizational structure. He dissolved the Strategic Planning Committee and announced decentralization of the management system. Iger believed that “the problem wasn’t the people running the show, it was the work environment – and he set about changing it” (Grover, 2007, p.75). Iger organized the system of independent business segments operating under one brand name of Disney. They are as follows: Disney Media Networks (TV, radio and publishing services), Walt Disney Parks and Resorts (including cruise lines and clubs), the Walt Disney Studios (the main activity of the company – films and animations), Disney Consumer Products (toys, electronics, home décor, etc.) and Disney Interactive (opened in 2008 business line offering digital media platforms, networks and websites) (The Walt Disney Company, 2012). Each of these business units is operated now by its own management team that can decide on optimal development ways and new projects independently.

Having restructured the company’s management, the new CEO had to decide on the further perspectives of the Disney Company’s development. As stated at his official leadership profile, Iger’s strategy was centered on the following fundamentals: producing as perfect and creative products as it was possible; implementing innovations and new technologies; and expansion to the new world markets (The Walt Disney Company, 2012). Iger found his unique ways to deal with each of the proposed objectives.

 First of all, the Walt Disney Company experienced the need to enhance creativity level of its employees, especially inside the strategic business line of the Walt Disney Studios. The new CEO used two means to solve this problem. Iger is well-known for his relationship management skills. He decided to manage the company in collaborative style, which provided teamwork culture and cooperation of managers and workers (Daft, 2008, p.147). At the same time, Iger realized that the company needs an inflow of the new ideas and professionals. Therefore, he convinced the Disney Company to acquire another media giant – Pixar Animation Studios. He gave the professionals’ team of Pixar the foreground right in deciding on the film and animation product line’s development and achieved in this way a critical change from traditional “family” entertainment business to “kids, teenagers and adults” differentiated products and market segmentation (The Walt Disney Company, 2012).

Obtaining the team of Pixar in 2006 was as well a step towards the second objective proposed by Robert Iger – innovation and technological development. Formerly owned by Apple Inc., Pixar had always been one of the technologically strong companies in the world of mass media services. At the same time, the Disney Company started close cooperation with iTunes and Apple and applied their modern technologies to the highest possible extend. Content of the Walt Disney Studios’ products became available on iTunes and through the company’s own websites and mobile platforms. This reached the company name as an “industry pioneer” because it was the first major company to use these technologies (The Walt Disney Company, 2012).

Expansion to the new international and product markets, presented as the third cornerstone of Iger’s strategy, was achieved through the opening of the franchising facilities. This policy was completely new for the Walt Disney Company, which historically operated the whole business by its own means. Franchising allowed the company to get integrated into the new cultures with adjusted products and local shows but unchanged content. Moreover, the new business line, Disney Interactive, which was founded nearly 4 years ago, provided the company with timely and extremely important entrance to the world of digital entertainment. Online virtual worlds and family websites gave Disney a chance to become present in any place of the world where children play computer games and parents plan their vacation time (The Walt Disney Company, 2012).

Iger’s management strategy transformed the company to an organization which is able to react on rapid changes in the business environment and without unnecessary bureaucracy on the top management level. According to the theory of Agarwal and Helfat (2009), Disney became capable of the “incremental renewal”, which means that if the company needs to adapt to the modern technological or other international innovations, it can transform only relevant part of its business and does not need to reconstruct the whole company in some critical way. With the incremental renewal approach, Disney Company changes step by step on everyday basis, updating its business strategies and products to the current market condition.

Conclusion

The management policies of the Walt Disney Company can be viewed as good examples of the two opponent strategies. Still it is obvious that both ways to manage the company were necessary, each in its own time, and complemented one another. Michael Eisner constructed a strong brand name of the Disney Company and started the process of international expansion. This was logically continued by Robert Iger, who decided to extend the company’s geographical presence and implement new technologies available in the modern world.

Under the management of autocratic Eisner, the company achieved strong financial position and became recognized provider of family entertainment services in America, Europe and Japan (The Walt Disney Company, 2012). Imposing strict controls on the running projects, Eisner obtained perfect outcomes and opened a wide range of new business areas for the company. Still, it became impossible to keep control of the entire processes as the company grew internationally and centralization strategy became outdated.

New era of the Iger’s management changed the company’s culture critically. Innovations, consultative approach and company reconstruction led to a more sustainable way of operating in the modern international business environment. Creation of the five strategic business lines allowed the Disney Company to adapt incrementally and, in this way, to react more quickly on any new event. This provided the company with significant competitive advantage and put it again to the first place among international entertainment corporations.

Generally, both strategies were important to form the current position of the Walt Disney Company as the international entertainment leader. The formula of perfect products and gradual international expansion have built its enormous brand name and created several generations of “Disney youths”. The output of the company’s management strategies is the stability of the Disney’s market position in its major business area, first-rate financial results, customer loyalty and dedication of its employees.