Walt Disneys aspiration was to develop a cartoon business which led to the creation of Oswald, the lucky rabbit,

and succeeding alteration into Mickey Mouse character. Small steps taken by Walt eventually led to the
establishment of mammoth multi-billion-dollar industry. Disneys differentiation-based competitive advantage played
a vital role in generating value for the firm. As layered by creating an all-embracing family oriented entertainment
business, beneath Walt was able to nurture a strong and imperfectly mobile brand and leverage benefit-based
advantage. Disney was able to harness heterogeneity surrounding its brand into other forms of entertainment such
as color live animated movies, television, music and amusement parks. Further, co-specialization of workforce &
its flat non-hierarchical corporate culture mixed with passion towards preserving Walts vision managed to generate
cost advantage through organic growth. Cost advantage also became obvious through developing corporate
sponsorship for its theme parks (once revenues were constant) and through reissuing cartoons with steady flow of
revenue with no extra cost.

The brand was inimitable and created value for Disney, but it was the co-ordination between diverse businesses
which helped it to capture value more profoundly. Disneys value chain was so strong and multitude in nature that
it supported or complemented dissimilar entities. Example of synergy include licensing Disneys assets created a
positive perception in the market; the movie business (owning Buena Vista Distribution company to save third of
revenues) supported theme parks; music company which had its own copyrights & attracted top talent; in house
controlled merchandising to capitalize brand sales, and in house travel company to generate visitors for theme
parks. All these activities were focused on customers needs through complementizing varied capabilities across
entities.

Eisner focused on revitalizing Disneys core-competencies (film & television) through preserving core values (quality
& creativity), and through creating additional co-ordination & renewing competitive advantage by further
differentiation and expansion. The tumultuous endeavor started by growing television business through launching
hit shows (eg. Golden Girls) and creating syndicate programs (selling old programming). Additionally, getting
Katzenberg, whose main role was to identify unique scripts and develop movies at low cost, helped Disney to
become leader in movie business by 2000. Eisner fed on-going success from former entities into Disneys theme
parks. Aggressive ads, raising ticket pricing, adding more hotel rooms and creating additional parks, attracted
people that it did never before. Moreover, Eisner reaped benefits from above mentioned assets and activities to
create new ones such as retail stores which generated top-notch sales per square foot or selling videos directly to
consumers at low prices.

Through studying pre and post Eisner era it becomes discernible that Eisner primarily tried to reinforce Disneys
traditional competitive advantage followed by fostering the same through venturing into new areas of differentiation
or enhancing intellectual capital. Notwithstanding, this led to establish new ways of co-ordination between entities
that were geographically, horizontally and vertically diverse. As consumer benefits from Disneys one-stop-shop for
entertainment started burgeoning, creating synergies through economies of scale, cross-promotion and leveraging
success from different entities became Disneys prime interest.
First, both executives practiced micromanagement style of leadership, desired excessive involvement in various
elements of the business, combined with rather dictatorial approach aimed to tight control throughout the
company. Especially Eisner had rather task specific and target oriented approach, having high demands to his team
in terms of target setting and achieving results. Target setting was important not only in terms of financial goals, but
also encouraging and even demanding innovation and creativity from his people. Demanding approach, strong view
on business development together with hands-on style of micromanagement enabled Eisner to mobilize
underutilized resources available within the company. Together with implementation of vertically integrated
organizational structure it enabled to profit from new initiatives as establishing a theme park in unused land, sales
of videocassettes with well-known Walt Disney characters, and using TV networks to distribute the companys
production. Still, the very much hands-on leadership style created frustration among many top managers leaving
the company and criticizing Eisner on mismanaging the firm.

Second, rather contradictory to the previously described, both applied a management approach aimed to involve
people at all levels to promote informal cooperation between business lines, to identify synergies and to
encourage creativity through regular brainstorming events. Increasing involvement and interaction between
business divisions was aimed to take advantage of Disneys brands and characters, and to exploit unused
resources. Involvement and cooperation between units was important for two reasons. First, to take advantage of
existing characters, trademarks and copyrights through diversification into several business lines and industries
(theme parks, cruise ships, hotels, merchandise, retail, movies, music, etc). Second, to benefit from full vertical
integration of business by driving established themes and characters through means owned by The Walt Disney
Company, namely movie production, distribution channels, TV, retail and theme parks. Also, promoting cooperation
and involvement of people from different business lines was a part of the companys global strategy enabling
learning from experience and achieving economies of scale.

To summarize, management approach advocated and used by Michael Eisner was appropriate and successful as
it enabled to make use of unexploited synergies and underutilized resources available within the company. The
approach was efficient at the times of implementing vital changes to increase profitability of the company, enabling
smooth integration of business lines and leveraging the existing resources (trademarks, copyrights, and existing
characters) into new businesses acquired by the firm. Also, in short term the micromanagement encouraged
creativity by urging creative thinking and cooperation.

Challenges to the chosen management approach are related to the very large size of the company, as in long-
term the method may lead to mismanagement of the company and discontented management team. Top-down
approach applied in traditional industrial companies with limited number of business lines and products, while
contemporary creative industries have chosen a different path aimed to leverage the idea creation and
involvement in business development into large number of employees (Google, Facebook). To maintain its global
leadership position in creativity and innovation, the Walt Disney Company needs to adjust its management
approach by further encouraging out-of-the-box thinking and idea generation in all levels of the organization

The Reason for Disneys Success

The Walt Disney Companys success up until the selection of Michael Eisner was due to
Disneys ability to create unique characters with universal appeal and then truly bring those
characters to life. In addition to Mickey Mouse, the company created such well-known
characters as Minnie Mouse, Goofy, and Donald Duck. The companys family appeal has also
had a large influence on its success. The theme parks and retail stores are based on the
popularity of the original animations. In addition to the companys success with consumers, its
films have also received critical acclaim, winning six academy awards. Walt Disneys vision
still influences the companys strategies, and causes it to continuously search out creative new
ideas.

Key Issues in the Case

The case covers four key issues other than the management of Michael Eisner. These issues

are the revitalization of TV and movies, expanding into new businesses, regions, and audiences,

maximizing theme park profitability, and coordination among businesses.

Coordination Among Businesses

Overlaps necessitated the need for coordination among Disneys various businesses.

Campaigns with outside corporate sponsors had to be arranged through all aspects of the

business. Conflicts also arose over the Disney-owned minute of advertising during The Disney

Sunday Movie. This could be resolved by using general company advertising and only using

specific advertising for large events.

Disney used internal transfer prices for activities that one division performed for another. For

example, when any division wanted to use material from the Disney film library, it paid a price to

the Disney film studio.

If a conflict arose between division executives, Eisner and Wells encouraged them to resolve it

among themselves, but they also provided the option of arbitration for difficult problems.

Management focused on quick resolution, allowing more time to focus on important business

matters.

In 1987, a corporate marketing function was installed to stimulate and coordinate company-wide

marketing activities. A marketing calendar was introduced to coordinate marketing across the

company and was updated at weekly meetings with divisions across the company. All divisions

were responsible for the generation of new ideas, and a monthly meeting of 20 divisional

marketing a promotional executives was initiated to discuss inter-divisional issues.