Term Paper: Disney Global Strategy

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Disney Global Stategy

The Disney Company was founded in 1923 by renowned Walt Disney and however it had a slow start, today it is the epitome of success. Structured into four major business areas - Studio Entertainment, Parks and Resorts, Consumer Products and Media Networks - Disney is focused on increasing their revenues and consequently their business at a global level.

The Walt Disney Studios was in fact the first title given to the Disney conglomerate and it began with its creation of characters such as Mickey Mouse or Donald Duck. For 2005, the Studios registered an income of $7,587.00 million, a negative increase of 12.80% in comparison to the previous year. The Disney Parks are present in America, Asia and Europe to serve the needs of citizens and millions of visitors. For 2006, the parks and resorts registered an income of almost $10 billion. The Disney Consumer Products branch has registered for 2006 revenues in the amount of $1.2 billion, an increase of 6.7% as compared to 2005. The Walt Disney Media Networks, including amongst others ABC and ESPN, have reported revenues of $44 million for 2006 and expect a total of $150 million for 2007 and $320 million for 2008.

The general trend within the Disney Company is that of growth and development along with international expansion. The features that support this trend are the revenue sales generated by attractive products and services delivered at high standards, a good marketing of the products and efficient corporate governance.

2. Background

However it had been founded for 17 years, the Disney Company had only established their headquarters in Burbank, California, in 1940. In 1955, they began to open their first resorts in Anaheim, California and then in Orlando, Florida (1971). Afterwards, in 1983, the company went international by opening the first Disneyland outside America, the Tokyo Disneyland in Japan. Since then, the conglomerate has expanded more and more into the American, Asian and European continents. Up to today, Disney has opened businesses in 26 countries within the three continents: 4 countries in America, 9 countries in Asia and 13 countries in Europe. Furthermore, the Disney Company is currently developing new strategies to expand onto the African continent as well.

The strategies at the basis of the Disney growth and development regarded creativity, strict implementation of copyright, the satisfaction of all clients, investors and employees, the inspiration sources and the locations of the Disney facilities. The creativity strategy, adopted along time by other companies, was developed as a three steps program: step one - the dreamer; step two: the realist and step three - the critic. Another strategy implemented by the company regarded their productions. As such, they produced a wide array of shows for the taste of a diversified customer palette that depicted elements from cultures around the world (Mulan) but also events from the day-to-day existence (Grey's Anatomy or Desperate Housewives). Another strategy used both in the past and in the present actions of Disney is the easy access to Disney facilities. As such, all Disney parks and resorts are located in accessible areas.

Other strategies that were successfully used in the past and continue to be used nowadays include copy right and acquisition strategies.

3. Development of strategy

The thinking system at the basis of the global strategy was that of an increased need to expand to other countries. This need was explained as more that just a means of increasing revenues and gaining international recognition. The strategy was developed as a protection means against macroeconomic trends by counterbalancing the negative economic effects within one country with the beneficial economic effects within a different country. Take for instance the example of the Great Depression between 1929 and 1933 which affected the United States and consequently the European countries that were depending on the U.S. As their creditors. Had Disney opened facilities in Asia, the negatives effects of the depression in America could have been counterbalanced with a fruitful year in Japan or China.

A strategy present in the current Disney as well as characteristic of Disney's passed activities is their tendency to present the audience with a wonderful world, a place that is dominated by the good and where the bad always gets punished. This distinct separation of right and wrong as well as the watcher's capability to relate to the characters keep the audience in front of the screen, pouring money into the organization's accounts. Due to this strategy, the Walt Disney Studios has significantly increased its revenues and also the dimensions of its audience. For instance, in 2005, due to two new productions, the animated film Cars and the movie the Chronicles of Narnia, "Walt Disney reported a surprisingly strong 39% rise in quarterly profit as the two films had helped turn around its underperforming film studio division."

Also, due to this strategy, the revenues registered by the Disney Media Networks and the Disney Studios have registered significant increases. For instance, since 2002, the Media Networks have increased their profits from $9,733 million to $14,638 million. Also, the revenues of Studio Entertainment have registered an increase from $6,691 million in 2002 up to $7,529 million in 2006.

The creative strategy was developed and implemented to allow Disney to see three different sides of a new project. The first view point is an ideal one, of the dreamer who only sees the final result without any restrictions. The second view is offered by the realist, who analyses the first view in order to identify the resources needed by the implementation of the new project. And finally, the third view belongs to a critic, who will look into the entire project and point out its strengths and weaknesses.

Yet another global strategy used more and more by the Disney Corporation is the copyright. This strategy is supported by the international legislature and is aimed to protect the intellectual rights of Walt Disney as it prevents other organizations from using Disney creations. The commencement of this strategy came soon after founder Walt Disney's death, during a time of reduced creative activity that increased the risk of Disney characters being "stolen" by other organizations. The strategy is intensively used nowadays to protect all Disney concepts, including the legendary Mickey Mouse who was faced with the risk of becoming property of the public domain and who would "no longer be obliged to toil solely in Disney's vineyards."

And finally, a strategy long used by the Disney Company is that of purchasing other companies and integrating them within the corporation. Two of the most renowned such acquisitions were of Capital Cities ABC Inc. (1996) and of Pixar (2006). If the acquisition of Capital Cities was rather inexpensive, in order to purchase Pixar, Disney paid a total of $7.4 billion.

4. Strategy implementation particular feature of the Disney global strategy that brought the company to the current peak revolves around the productions and their more or less faithful depiction of reality. The strategy was implemented throughout the creation of perfect characters and dreamy locations. Soon, the stories and the characters caught life and millions of people around the world came to Disneyland to see Mickey Mouse and his friends, generating billions of dollars in revenues for the company.

Several organizations have joined their forces and pleaded against Disney's depiction of a false reality, dominated by prices and princesses in a land where wars were glorious. These disclaimers of the fairytale life presented by the Disney creations argued that children should be introduced into reality as it is, but that Disney distorted their perception of the real life. "The Disneyfication of war allows us to ignore its real savagery."

The copyright strategy was implemented throughout the prohibition of all public and private agents from using Disney characters. All those who desired to use a feature of the Disney culture in a business domain had to first attain the creators' permission and pay them an established fee. The strategy was received with reticence by both consumers and the business community, who argued that copyright raised the monopoly issue. Furthermore, numerous specialists in business and economics look down on the strategy, arguing that it reduces the company's revenues, and that "copyright laws will actually kill commercial ventures, not make them more profitable, as free content actually helps push commercial content."

5. Cost/benefit analysis

The actual cost/benefit report is difficult to establish, moreover given the diverse nature of the global strategies implemented by Disney. For instance, the creative strategy implies three development costs instead of one, but has the guarantee of a well designed project. Furthermore, opening new facilities throughout the world presupposes additional marketing expenses, increase of employees' wages and tax increase. But so far, the large majority of the Disney facilities have reported revenues exceeding the opening costs. The only Disney studio that did not measure up to the expectations and eventually went bankrupt was the first Independent Studio, in 1947. But since, the revenues much more than covered the expenses, generating increased profits.

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