Disney Company
The Disney Company Date: August 8, 2003 Executive Summary The Walt Disney Company’s principal business activity is providing quality family entertainment to a wide consumer base. ... The company conducts operations in the United States, Europe, Asia Pacific, Latin America, and other countries. Each of the business lines present different challenges and in recent times the consumer products division, which houses Disney’s retail stores, has fallen on hard times. Since Michael Eisner took over the CEO’s position in 1984, the company has experienced rapid growth. During Eisner’s first 13 years as CEO, the stock price grew 27% a year and the company’s market capitalization climbed from less than $2 billion to a peak of $90 billion in 2000. During this time period the company has established itself as a household brand, been lead by top-flight management, and acquired a strong asset base. ... These efforts have greatly benefited the Disney brand and one of Disney’s core holdings, ESPN. Of recent concern is the scope and breadth of Disney’s business lines. The wide array of assets has lead Disney away from core competencies and over time this has diminished the profitability of the firm. Disney seems to have strayed too far from core competencies and divesting certain divisions may serve as part of the answer regarding how to save this struggling company. Also of great concern is the fact that Disney seems to be Michael Eisner’s company, rather than the shareholders. Although he was responsible for the tremendous growth of Disney, it seems the time has come to let him go and spread the decision making powers elsewhere. Historical Background of The Disney Company The Walt Disney Company was established in 1922 by Walt Disney, a man legendary in his time and very much a celebrity like his successor, Michael Eisner. ... Walt’s great vision led his company from this humble beginning to the launch of the first Disneyland in Anaheim, California. ... It was not until the opening of "the Happiest Place on Earth" in 1955, that the spotlight began to show on the Disney Company. Since that time the spotlight has rarely dimmed, and the theme park business has become one of the Disney Company’s cornerstones. ... Encouraged by the success of Disneyland, Walt Disney felt that a similar park could be opened on the east coast of the United States. ... With experience gained from the World Fair, construction of Disney World based in Orlando, Florida was planned. At the end of 1966, shortly after the launch of Disney World, The Disney Company’s founder and the man with the creative vision passed away. Walt Disney died on December 15, 1966. His brother, Roy Disney, postponed his planned retirement to take the reins of the company and began construction of Florida’s Magic Kingdom. A major innovation for the Florida complex was the addition of Disney owned and operated resort hotels. Soon after the opening of Walt Disney World, Roy Disney retired and the Disney Company was taken over by Card Walker. Walker ran the company until 1984. The company languished during those years. ... Disneyland and Walt Disney World became museums that displayed the history of Walt Disney. ... Miller would probably have proven capable of bringing the company back to its former glory, but before Miller could take action, an investor take over coup installed Michael Eisner in the chairmans seat. Under Eisners direction, the company began its rise to glory. ... Walt Disney World was originally built with several themed resorts. However, there are several hotels built on property Disney granted to outside developers. When the new management took over, Disney began to build and operate its own themed resorts. During the reign of Michael Eisner, new assets were added to Disney’s balance sheet at a tremendous rate, as the Disney Company rode the decade long economic boom the rest of the nation experienced during the 1990’s. During that time, the value of the company soared from merely $2 billion in 1984 to $90 billion in 2000. Disney’s stock experienced an annual increase of 27%. ... Other highlights of the Disney Company’s history include: · In April 1983, the Tokyo Disney World opened. · In April 1992, the Paris Disney World began operation · In 1987, Disney opened its first Disney Store in Glendale, California. ... · In 1995, Disney acquired ABC for $19. ... The hyper growth experienced by The Disney Company came to an abrupt halt in 2000, and was aggravated by the terrorist attacks of September 11, 2001. Disney’s stock value dropped from $43. ... Since that time, many have speculated about the future of The Disney Company, in particular its CEO, Michael Eisner. Disney’s Business Lines and Their Performance The number of corporations under Disney’s control is exhausting. ... The business lines and their respective annual revenue and net income in 2002 are as follows: Business Segment Annual Revenue 2002 Net Income % Annual Income Media Networks 7,763 million 990 million 33 Parks and Resorts 6,465 million 1,169 million 28 Studio and Entertainment 6,691 million 273 million 29 Consumer Products 2,441 million 394 million 10 Parks and resorts are still the most important profit center in the Disney group. ... The consumer product business is not performing well; in fact, the company is considering eliminating 600 of their existing Disney stores. SWOT Analysis of Disney Strengths The Walt Disney Company’s key strength is its brand image, one that is recognized worldwide. ... Take away the Disney brand and its influence and the businesses under the corporate umbrella lose their competitive advantage, an effect that would be similar to Delilah cutting Samson’s hair. Add to it, however, the strength of the ESPN name and other broadcast networks, the creativity and innovation of Disney studios, the tremendous industry experience, strong corporate culture and leadership, and their strong asset base including the treasure trove of classic animated films and you have the making of an unbeatable entertainment giant. The Disney Company has a strong foundation upon its four cornerstones: Studio and Entertainment, Parks and Resorts, Media Networks, and consumer products. The synergy created by the Disney brand between these segments is the mortar that holds the foundation together. Without any one of these cornerstones, Disney would ultimately struggle. ... The Disney Brand. ... As an icon of the family entertainment industry, quality programming and products are easily associated with Disney. This brand name brings Disney the power to bargain not only with suppliers and customers, but also with governments of other nations, which is a catalyst for future growth. ... The strength of the ESPN name is an incredible anchor for Disney. ... ESPN is currently one of the definite bright spots in the Disney bullpen. ... Although it is questionable whether the ABC television network is a strength to Disney, it cannot be argued that the strength of ABC sports is a perfect complement to the strength of ESPN. Add to this the appeal of children’s programming through its Fox Family Networks and Disney has a growing influence in broadcast television. ... Disney’s management team is one of the best in the entertainment industry. CEO Michael Eisner has done a tremendous job expanding and building the Disney brand during the past decade. ... One of the Disney Company’s tremendous assets is its treasury of classic animated films. Disney has taken advantage of this resource to a certain extent with its staggered re-releases of these films in evolving formats. The beloved nature of these classics creates a cash cow that Disney can continue to milk into the future with very little resource expenditure if well managed. ... Over the years Disney has built an empire of physical and trademarked assets that rivals can only hope to emulate. Disney has accumulated a large number of physical assets in the theme park, hotel, and resort industry. ... Disney has the capability and product offerings to reach beyond the theme park business and touch consumers in many different ways. ... Walt Disney theme parks are the first name in the theme park industry. ... Disney has begun to expand this concept into the global market and has learned some tough lessons doing so. ... Another of the Disney Company’s core strengths is the synergy created by the relationship between its business segments. ... This is another strength on which the Disney Company must continue to capitalize. ... Disney’s core strength remains its family-centered image. ... A lack of focus that could allow the strong bond between Disney and family to become damaged would be devastating. This is an asset that Disney must continue to nurture.