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Week 5 Sample Memo1.pdf
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Page 2
Disney: Analyze Disney's
diversification under Michael
Eisner.
Was the strategy
consistent
with
Disney's advantages?
Did diversification
go
too
far?
Michael Eisner's
diversification
strategy
did
go
too
far, though
most parts
of
it
were
consistent
with
Disney's competitive advantages. Disney's
core competency
is
in
content creation
-
the company
provides a
complete entertainment experience
that
focuses
on "timeless
family
entertainment."
Thus,
their key
abilities
must be managing
creativity
and
continually producing
content,
focusing
absolutely
on
their
"message," and
forming
partnerships when
necessary
to
ensure
that
their
content
reaches
their
target audience.
Where
Disney
erred under
Michael
Eisner
was
in
assuming
that
their
expertise
in
creating content
would
extend
to
managing the
channels
by
which
that content
was
distributed.
Adding
and
updating
content
in
movies,
television
and theme parks were
key activities early
in
Eisner's
tenure
but
cannot
truly be
characterized
as
diversification,
as
Disney
already operated
in all
of
these
areas.
These
activities
were
well
in
line
with
Disney's
strategy,
however,
as
they
focused
on
updating the Disney customer's
experience.
One
misstep may
have been
Disney's
49Yo
ownership
stake
in
Euro
Disney;
after successfully
launching Tokyo Disneyland
as
wholly
owned
by
a Japanese
partner,
Disney
had already
created a
formula
in
which
they owned the
"content"
by
designing the park
but
then
let
others
own
and
manage
the
distribution
assets.
There was
no
need
to tinker
with
what
had proven
successful
in
the past,
as
they later
went
on
to
do
in
other
arenas,
as
well.
As
Disney pursued
additional
ways
to
monetize
their popular
content,
they
likely would've
been
better
served
with
a
licensing model
than
with
the
wholly
owned
model
that
they
chose
to
employ;
this
is
the primary
way
in
which Disney's
diversification went
to
far.
While
consumer
products
based on
Disney's
stories, home
videos,
the
NHL
Mighty
Ducks
and Disney-based
Broadway
shows
may
have
proven
profitable,
there was no
need
for
Disney
to
own
all of
these
assets.
Nothing in
Disney's history
suggests
that
they would
be better than
a
licensee
at
retailing toys,
producing and
distributing
home
videos,
running
a
sports franchise
or owning
a
Broadway
theater.
Instead,
they
should have sought out
partners
to
handle the
management
tasks
necessary
for
these
ventures,
while
focusing
their
own efforts
on
producing new
content
with
which to
populate
these channels.
Similarly, Disney
egregiously
overstepped
when
it
purchased
CapCities/ABC and
when
it
invested
in
its
own
intemet
portal.
Though
this
gave
them control over
content
distribution,
it
also
diluted
their
message because
they
did not
have enough content
to
fill
all
of
these
channels.
The
one
bright
spot was the
Disney
Channel,
which they
could populate
with
only
their
own "products"
and
ensure
that they controlled the entire
entertainment
experience. Otherwise, Disney's core
competence
was never
in
actively
managing
the ways
in
which
their products
reached
the
market;
this would
have
been
better
left to
experienced
network
executives,
while
Disney
focused
on
maintaining
itself
as
a
creative force
and
providing
the fresh content that
so
many people love.
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