The Reason of Disney’s Success

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Eisner’s Success

Eisner ended up receiving $203MM in stock options when he left, he definitely deserved it. He is the one who starts to maximize shareholder wealth; who aims to return on stockholders’ equity to exceed 20%; who maintain the core values of creativity, teamwork and quality while building Disney. Furthermore, the market shares of Disney increased from 4% to 19% during the years from 1985 to 1988, which obviously shows the success made by Eisner. For movie parts, in 1988, there are 60% of all movies lost money, but 27 out of 33 Disney’s movies were make huge profits. Six of them earned more than $50 million each, including Three Men and a Baby and Good Morning Vietnam. This new approach of Eisner was successful, which could be one of the reasons for him to earn that much stock options.

Diversification Strategy & Disney

Theoretically, the diversification strategy defines an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes. It could be divided into three types: product, geographic, product-geographic strategies. Either of these three diversification strategies works for the new product line, the revenue of company would increase. The final goal of diversification strategy is going to gain and sustain competitive advantage.

For Disney, I would say they used product-geographic diversification strategies. Like I discussed above, they expanded their business to international sales, especially Europe and Japan. It is geographic part of strategy, which does work well. They made profits by selling products to customers and saving money by renting shared office spaces and coordinating advertising. They opened theme parks not only in the U.S., but also other nations, which is definitely shown the meaning of geographic diversification strategy. On the other hand, about the products, they explored plenty of new products. But not of all products worked well in Disney, for example, they packaged cruise with visits to Disney, it does show the core concept of Disney, but it has low return on capital. Also, they did home video division during the 1990s, it generates revenue when it starts, but the revenues were dropping at the end of the decade. Additionally, Disney chose children as targeted customers, they sold mix of toys and apparel for attracting their eyes. Later, they also entered book, magazine and record publishing. Moreover, they established new channels of distribution through direct-mail and catalog marketing when they saw about the music label by Hollywood Records.

Conclusion

The Walt Disney Company has been extremely successful in the past years, caused by the philosophy from Walt Disney and strategic skills from Michael Eisner. Eisner made the company become profitable and possible, which means Disney is truly “The Entertainment King” in the world.