The Walt Disney Company Case Study
Strategic Management Case 2
The Walt Disney Company: The Entertainment King
1.) Why has Disney been successful for so long?
Disney has sustained prolonged success for a variety of reasons. One source of success was the way Walt and Roy Disney decided to manage the company internally when the organization was founded in 1923. Disney emphasized teamwork, communication, and cooperation in the workplace to make employees feel valued and strengthen their commitment to the company. These values remain at the core of Disney’s corporate culture, and have been formally incorporated into their new-hire training program at the company’s corporate …show more content…
Over the same period of time, income growth averaged 40% each year, and Return on Equity reached 24% and 25% in 1987 and 1989, respectively.
3.) Does Disney pursue vertical integration? Apply transaction cost economics to understand Disney’s vertical expansion decisions.
Disney pursued vertical integration in a variety of ways. Aside from cartoon shorts and animation films, Disney expanded to enter the television, internet, and theme park markets with creations such as Disneyland, DisneyQuest, and the Disney Channel. Disney saw the internet as a possible distribution channel for its film library and its sports and news programming. Disney believed that the internet would soon be where entertainment in the home consolidates.
Disney also pursued forward vertical integration. Disney ended their relationship with distribution partner RKO in 1953 and created Buena Vista to save distribution costs for their animated films. Disney was able to save ⅓ of their gross revenues due to this decision to distribution their movies themselves. Disney also further improved the bottom line by avoiding exorbitant salaries by developing the studio's own pool of talent. Disney also employed forward integration through the initiation of Disney Stores. This provided Disney with a wholly owned retail outlet to distribute product through that generated sales per square foot at twice the average rate of traditional retail. Disney Stores allowed Disney total