Term Paper on "Walt Disney Company"

Term Paper 7 pages (2914 words) Sources: 6 Style: Harvard

[EXCERPT] . . . .

Disney Company

The Walt Disney Company is well-known around the world for its cultural products and especially for the various characters, animated and otherwise, created for various film and television products. Many of these creations have a life of their own in marketing and generate income through dolls, games, images on other products, and so on, as well as from the film and television works from which they derive. The public may believe that the company is golden and always succeeds, but in fact, the company has made certain strategic decisions that have not been so successful and that have required strategic changes in order to improve performance. One of these decisions was to build Eurodisney, a theme park in Paris; the other decision was to purchase Capital Cities/ABC in 1995. Both ventures can be seen as fitting with the general business mission of the company and with its core film business, with Eurodisney being similar to other theme parks operated by the company and benefiting from films, characters, and images from the core business extending back through the entire history of the company.

Eurodisney

EuroDisney was built in the 19902 and opened in 1992. From the first, business was not at the level anticipated or required to justify the investment. The experience differed from what the company had known from other Disney theme parks, for each of those had opened to large and growing business. In Paris, though, the park lost money from the first. The company projected 11 million visitors and $100 million in earnings in the first year, which would mean a small pre-tax profit. The park actually lost more than $900 million in the first two years. Attendance in 1992 only reached 9.2 million, and visitors spent 12% less than hoped. The park did make its first quarterly profit in 1995, three years after opening, and st that time, it was predicted that the park would break even a year earlier originally projected (Cunningham 1995, p. 21). Still, EuroDisney did not do as well in Europe as Disneyland has done in the United States at both its California and Orlando, Florida locations. One major reason cited for this is cultural, though other forces as well have contributed to the differences.

One continuing problem faced by the park was seasonal -- winter in Europe is harsher than in California or Florida, and business is much more reduced in the winter months. Most of Europe's big theme parks are in northwest Europe, and the unpredictable weather can cause problems. One of Disneyland Paris's major difficulties has been the damp climate, particularly in winter. Most of the competition is closed this time of year, but the Disney park stays open. On the other hand, when hot weather has been seen in northwest Europe, business also suffers, as many families choose to go to the beach instead. Thus, business often did not prove sufficient in the summer vacation months as desired, either, in the first two years (Cunningham 1995, p. 21). Coincidental changes in airfares in 1992 produced a situation where it was cheaper to travel to Disney World in Orlando than to EuroDisney in Paris, but this situation did not continue.

In that early period, the location itself was a problem. It had been selected to attract visitors from all over Europe, and the company failed to see the coming recession which reduced the ability of most Europeans to travel to France and take advantage of this park. The Gulf War added to this problem by bringing about changes in the world economy. The World's Fair in Seville and the Olympics in Barcelona competed with EuroDisney and drew away large parts of the potential audience.

In the early period of the park's operation, the French did not make use of the park in spite of its being so near, and several factors accounted for this. The Disney characters are not as beloved by the French, who have their own cartoon characters which interest them more. Many in France were hostile to the entire project, which was evident in the planning stage. Critics saw Disney as a cultural bully pushing its own brand of entertainment and forcing out indigenous forms. There were also tensions with farmers and others over the way the land was acquired and developed. Disney also failed to take a proper gauge of French culture when it banned alcohol in the park. Employees also had to sport the clean-shaven Disney look, which does not fit with French culture as a whole.

Disney attracted the interest of many European financial institutions, but changes in the economy created tensions and contributed to the view of many in France that Disney was taking advantage. Management also had problems with labor and political leaders responding to the concerns of their constituents. The Park encountered labor problems in 1994 and again in 1998, with strikes both times. In the second instance, the strike was much smaller and involved, striking workers wanted the company to implement a 1996 charter which regulates status and salaries in French amusement parks because that would increase salaries by an average of 30 per cent. The company did not sign the charter and was not by law required to do so because the agreement applies to seasonal parks, while Disneyland Paris is a permanent operation. The company also argued that with its hotels and restaurants, the site is more than just an amusement park. The strike was briefly bolstered by a group of technicians but only marginally affected EuroDisney's operation, which employs 13,000 people. The company relied on short-term contract employees hired for the high season to replace the employees on strike, and most of the 35,000 visitors a day, 60 per cent of them foreign tourists, were unaware that a strike was taking place (Coron 1998, p. 17).

Capital Cities/ABC

Walt Disney Co. has expanded and acquired new businesses under its coronate umbrella, creating a situation in which growth in size is not being matched by growth in revenues or profits. In part, this is because such acquisitions have costs, but at the same time, some of the acquisitions -- notably the ABC television network -- are not performing up to expectations.

For the Disney company, this means that while the movie business is doing well and the theme parks continue to grow, the television acquisitions are not doing as well as in the past. There are good reasons for this. The television viewer today has far more choice than in the past, and the Big Three television networks -- including ABC -- have been losing viewers at a high rate. People today have cable, satellite broadcasting, the Internet, and other demands on their time, and the loyalty people once gave to the three major networks has waned. The growth of the Fox Network has also taken some viewers, while the smaller new networks, the WB and UPN, have siphoned off a smaller number of viewers.

CEO Michael Eisner is faced with assuaging unhappy stockholders in a time of decreasing income. He must formulate a growth strategy, create new synergies to that end, and develop a stronger team of successors who can implement the plan and carry it forward in his absence. The company is well-placed to achieve some of this, notably developing new synergies, while other aspects of the problem depend greatly on how Eisner can develop his team.

The acquisition of ABC provided another outlet for Disney product as well as for taking advantage of the still large advertising market provided by a television network. However, this acquisition has been something of a drain to date because ABC has been able to develop many popular shows and has been losing audience more rapidly than the other two major networks as a result. Without many shows of sufficient popularity, the network also cannot charge as much for its ad slots, either. The purchase can be seen as a case of satisficing, which is recommended for most strategic choices, meaning that the objective is escalated, but not beyond the pint of attainability (Harrison & Pelletier 1995, p. 53). The idea behind the purchase was to give Disney more outlet for its product and to do so with a related business entity that would grow even as it offered a return to Disney. However, the changing nature of network television in the face of an audience shift to cable and other media sources ahs contributed to the losses now faced by Disney, and the reduction in income from ABC is made all the worse by the other business losses being experienced by Disney at the same time.

Disney has developed the idea of synergy between different markets to a high degree over the years. The company has long been able to produce films and then market the characters as toys and other products. It also uses the characters as attractions for its theme parks. More recently, the company has utilized films and characters it developed for Broadway productions… READ MORE

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