UNIVERSIDADE CATÓLICA PORTUGUESA
Faculdade de Ciências Económicas e Empresariais
Strategy – Walt Disney case study
Francisco Pessoa nº
Rita Saldanha nº
Luca (?)
Dimitri (?)
Introduction
Founded on 16 October 1923, by brothers Walt Disney and Roy Disney as an animation studio,
has become one of the major Hollywood studios and owner and licensor of eleven theme parks,
several television networks such as ABC and ESPN and has recently acquired Marvel
Entertainment. The Walt Disney objective is to “be one of the world's leading producers and
providers of entertainment and information, using its portfolio of brands to differentiate its
content, services and consumer products. The company's primary financial goals are to
maximize earnings and cash flow and to allocate capital profitability toward growth initiatives
that will drive long-term shareholder value”
The secret to Disney's success isn't magic pixie dust; it's much easier to replicate. It's a welltrained, enthusiastic and motivated work force. It's a secret that Walt Disney himself realized
years ago. "You can dream, create, design and build the most wonderful place in the world but it
requires people to make the dream a reality," he said.
Following his dreams, pushing worlds of marketing and merchandising to new levels, being
creative and selective and seizing control, Walt managed to turn Disney in one of the world’s
most recognized and cherished brands. He had pursued his passion to the point where he had
made it successful and his work became a pleasure. He, too, had to learn the difference
between passion and blind faith. While passion was a crucial ingredient to his success, Disney
grew to understand that passion and business savvy did not always go hand in hand and that
success required sacrifice.
Disney's main strength is in its resources, experience in the business, its low-cost strategy.
Furthermore, the company clearly has developed a very strong and well known "brand-name"
over many years.
1. What are the competitive advantages of the Disney group? Which, if
any, are sustainable over time?
According to Michael Porter, in his theory of generic strategies, there are three methods for
creating a sustainable competitive advantage. The cost leadership; occurs when a firma delivers
the same services as its competitors but at a lower cost. The differentiation; occurs when a firm
delivers greater services for the same price of its competitors and Focus ( economics), a focused
approach requires the firm to concentrate on one specific segment. We believe that Disney
group follows mainly the differentiation method, because they do try to be different from the
other cartoons, the tv channels usually take the best programs (ESPN is always live on some
important baseball or American football game) the Parks and resorts and very good and wellknown all over the world. Also because they don’t produce only for a single type of people, it is
usually for everybody to see and experience (although they are mainly for children) and before
Eisner, there were not a very important cost reduction policy. Product quality was always on top
and Disney tried to always have the best.
Many forms of competitive advantage cannot be sustained indefinitely because the promise of
economic rents invites competitors to duplicate the competitive advantage. A firm possesses a
sustainable competitive advantage when its value added- creating processes and position- is not
easy or impossible to be imitated by another firms. A sustainable competitive advantage results,
according to the resource-based view theory in the creation of “supranormal” rents in the long
run.
In this case study Walt Disney has some competitive advantages, has the well know brand
name, the capacity for economies of scale (in the sense they have a media networks and studio
entertainments for movie making), the innovatory animated cartoons that provide an excellent
experience and finally they have a parks and thematic resorts.
The well known brand could be sustainable over time, the quality of the films and cartoon that
they made are in our opinion “immortals”, but it´s important to guarantee the quality instead of
the costs control. Eisner has done the contrary when he asked the remaining highly skilled
studio animators to leave.
When Walt Disney died the dominant chief executive Eisner began by infusing new blood into
the company by recruiting successful businesspeople and reemphasized the Disney culture at
the corporate university while preserving the corporate values of quality, creativity,
entrepreneurship and teamwork.
With the employee base back on track, he started to pit creativity against finance in order to
bring the best out of both sides of the company. As a check against these planned battles, he
created positions to monitor the issues at hand. He was not afraid to risk the possibility of
cannibalization if it could lead to synergy across business units. Eisner also placed a financial box
around movie production to control costs. This cost control politics may sometimes put the
company´s reputation at risk, in the sense that it can cut the company’s strengths, has for the
movie´s quality. If the movie is not good enough and doesn’t sell at the ticket´s office, it will be
very hard for the company to recover the big loss on the costs that a movie making represents.
The innovatory cartoons has Mickey, couldn’t be sustainable over time; they need brilliant
employees who can create all the time new and innovated cartoons and films to continue the
good performance, while never forgetting the first cartoons that gave the success to Disney.
In the future, Disney will have to be aware of the big and growing competition of the media and
entertainment market. It is the most important sector of the holding company and it may face a
downturn in profits during the following years, as it is already happening.
The next years successes of the Disney brand will determine how well their theme parks will go,
because we believe that visiting these parks is highly correlated with the experience that
family’s fell during the movie’s and cartoons. If one doesn’t like the cartoons, why bother going
to Disneyland to see something you don’t usually like.
Swot Analysis
Strenghts
 Know-how
Weaknesses

Most important source of revenues is
media, which is in a very competitive
market- need to find new markets

If a movie is not good, it will be a big
loss. They need big capital amounts

Hard to make up with new animated
characters (exp: Nemo)
 Market Dominance
 History
 Brand awareness
 Differentiated products
Opportunities
 Asian markets
 3D movies
Threats

High risk on investments (movies,
parks)
2. Using concepts from this chapter, what are the options available to
Disney over the next five years?
Using the value chain to identify where the company adds it’s value, we believe it to on the
Marketing&Sales and Human Resources. It has mainly downstream functions because they
produce most of their value added on the advertising of the brand and on choosing what the
public wants to watch and/or experience. You can have a very well produced and organized
movie, program or park, which usually cost a lot, but if it is not what your customers want, it will
definitely not sell. The human resources are the ones find the needs and have the know-how to
create the movie or tv programs, this is the best Disney resource.
Using the value chain, we can say that in order to continue doing what Disney does best, and to
continue being successful at it, Disney group should train their human resources and maybe hire
new ones to keep in order to be the best at entertainment production. If not, the highly
competitive market will gradually take over their market share and Disney will face huge losses
in the future. They could also create a new theme park in Asia, which will attract millions of new
Asian customers, but at the same time will cut income from other parks all over the world.
We believe that the strategy used by Eisner of cost cutting in movie, as the creation of the
financial box to control moving making can be a mistake. If the financial officers do not
understand the movie making art, they can make excellent movie creators do their just
differently because the resources are not enough. This will prejudice the brand name and will
create even bigger losses than the previous less control method would. This is another reason
why we say that the Cost leadership is not a good competitive strategy for Disney.
3. Can companies in the media and travel industries, like television
stations and theme parks, gain and retain competitive advantage
simply by offering new products? Or do they need to rethink other
aspects of their strategy? If so, witch aspects?
In the media and travel industries offering new product is the way to survive. They have to
innovate and launch new products. We can call it differentiation. This is their key strategy. Their
products have a short life cycle. In TV industry, channels launch news programs every time. If a
program does not work, it stops it. Why? Because they need to catch people and competition is
very high. It is same for theme parks; they always need to invest in new attractions to keep
customers. In this kind of industry offering new products is vital and costs a lot of money. We
speak about huge investment. So they need to target very well their customers. They have to
know what their customers’ needs.
It is on this way to gain or retain competitive advantage they need to rethink other aspects of
their strategy.
For example if a channel wants to focus on fishing customers. It will develop a specialized
channel and develop a specific product with a high price. To answer of customers’ needs.
In opposite, a channel may want to touch a large audience. It will diversify and propose a large
kind of programs.
Offering a new product is not enough. Because of the industries’ nature, they have to rethink
others aspects of their strategy.
First, they have to define witch target. Existing market or new market. Then, they have to
develop a price strategy. Do they want to specialize or diversify? Do they have the resource to
develop this new product?
Offering new products involve entire rethink strategy.