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1. Update the case to 2012 in terms of the exhibits (1, 2 & 3), acquisition by WDC and attempts by other companies to acquire WDC On July 8, 2005, Roy E. Disney returned to The Walt Disney Company as a consultant and with the new title of Non-Voting Director. He is Walt Disney's nephew. On July 17, Walt Disney Parks and Resorts celebrated the 50th Anniversary of Disneyland Park On September 12, 2005, Walt Disney opened Hong Kong Disneyland. Walt Disney Feature Animation released Chicken Little, the company's first film using 3-D animation. On October 1, 2005, Robert Iger replaced Michael Eisner as CEO. Miramax co-founders Bob Weinstein and Harvey Weinstein also departed the company to form their own studio. On July 25, 2005, Disney announced that it was closing Disney Toon Studios Australia in October 2006, after 17 years of existence. Due to Disney's relationship with Pixar wearing thin, President and CEO Robert Iger began negotiations with leadership of Pixar Animation Studios, Steve Jobs and Ed Catmull, regarding possible merger. On January 23, 2006, it was announced that Disney would purchase Pixar in an all-stock transaction worth $7.4 billion. The deal was finalized on May 5 and among noteworthy results was the transition of Pixar's CEO and 50.1% shareholder, Steve Jobs, becoming Disney's largest individual shareholder at 7% and a member of Disney's Board of Directors. Ed Catmull took over as President of Pixar Animation Studios. Former Executive VicePresident of Pixar, John Lasseter, became Chief Creative Officer of both Walt Disney Animation Studios and Pixar Animation Studios, as well assuming the role of Principal Creative Adviser at Walt Disney Imagineering. On December 16, 2009, after a long time working in the company as a senior executive and large shareholder, Director Emeritus Roy E. Disney died from stomach cancer. At the time of his death, he owned roughly 1% of all of Disney which amounted to 16 million shares. He is seen to be the last member of the Disney family to be actively involved in the running of the company and working in the company altogether. On December 31, 2009, Disney acquired Marvel Entertainment, Inc. for $4.24 billion. Disney has stated that their acquisition of the company will not affect Marvel's products, neither will the nature of any Marvel characters be transformed. In October 2009, Disney Channel president Rich Ross, hired by Iger, replaced Dick Cook as chairman of the company and, in November, began restructuring the company to focus more on family friendly products. Later in January 2010, Disney decided to shut down Miramax after downsizing Touchstone, but one month later, they began selling the Miramax brand and its 700-title film library. On March 12, Image Movers Digital, Robert Zemeckis's company which Disney had bought in 2007, was shut down. April 2010, Lyric Street, Disney's country music label in Nashville, was shut down.

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In May 2010, the company sold the Power Rangers brand, as well as its 700-episode library, back to Haim Saban. In June, the company cancelled Jerry Bruckheimer's film project Killing Rommel. In September 2010, Disney Interactive Studios was downsized. In November, two ABC stations were sold. In April 2011, Disney broke ground on Shanghai Disney Resort. Costing $4.4 billion, the resort is slated to open in 2015. In August 2011, Bob Iger stated on a conference call that after the success of the Pixar and Marvel purchases, he and the Walt Disney Company are looking to "buy either new characters or businesses that are capable of creating great characters and great stories." In early February 2012, Disney completed its acquisition of UTV Software Communications, expanding their market further into India and Asia. \ The Walt Disney Company operates as four primary divisions: The Walt Disney Studios or Studio Entertainment, which includes the company's film, recording label, and theatrical divisions; Parks and Resorts, featuring the company's theme parks, cruise line, and other travel-related assets; Disney Consumer Products, which produces toys, clothing, and other merchandising based upon Disney-owned properties, and Media Networks, which includes the company's television and Internet operations. Its main entertainment features and holdings include Walt Disney Motion Pictures Group, Disney Music Group, Walt Disney Theatrical, Disney-ABC Television Group, Radio Disney, ESPN Inc., Disney Interactive Media Group, Disney Consumer Products, Pixar Studios, and Marvel Entertainment. Its resorts and diversified holdings include Walt Disney Parks and Resorts, Disneyland Resort, Walt Disney World Resort, Tokyo Disney Resort, Disneyland Paris, Euro Disney S.C.A., Hong Kong Disneyland Resort, Disney Vacation Club and Disney Cruise Line. 2. What are WDC`s competitively valuable resources? Why? Explain your rationale Disney handles a lot of resources in its businesses, but we can consider that there is one main critical resource that it tries to leverage: creativity, and in a way, all the resources that are linked to it. Walt Disney wisely chose its resources and capabilities. It further developed them and decided how to use them taking into consideration the ever competitive environment. By this, the Walt Disney Company has been able to remain successful many years by making strategic choices that helped it build a sustainable competitive advantage. Walt Disney handled a lot of resources in its businesses, but the one main critical resource that it tri leveraged upon all these years is creativity, and in a way, all the resources that are linked to it. Actually, over the years, Walt Disney adopted different strategies, diversified its activity, always trying to manage creativity in the best way. Disney has maintained its competitive advantage by routinely making wise decisions about what resources and capabilities to acquire, what resource and capability to invest in, and which ones to develop. All the other tangible and intangible resources that Disney
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possessed were the result of this creativity. Then may be The Mickey mouse, The Donald Duck or other characters and the brand equity they possessed. Under Eisner, creativity was handled through the brain-storming meetings, and when they were reduced or became useless, they were regretted. Furthermore, the only way to survive for the company was to keep being creative, which is why it had hard times when creativity was not sufficient or handled correctly. Brand image, brand loyalty, a rich culture that revolves around Walt`s legacy are some of the main competitively valuable resources of WDC. 3. What are WDC`s core competencies? Why? Explain your strategic rationale Walt Disneys strength lies in their resources, strong business portfolio, and an effective organization. Its original core competence was cartoons and animated movies. By combining Imagineering with engineering Disneys company reached unparalleled success with the creation of the first full length animated movie. This success led to new ideas and one of them was to open a park, a different kind of park. In Disneyland Walt used new technology to bring his characters to life. There are four Core Competencies of WDCAnimation: - Disney has been the pioneer in the field of automated show elements. The competency in animatronics performs many characters in animation: singing Country Bears and Tiki birds to pirates and ghosts and even restaurants entertainment such as like Sonny Eclipse t Walt Disney Wonderland. Customers seem to value its corporate ability: Pirates of Caribbean is still popular after 30 years. Disneys competitor has not been able to catch up. Operational Efficiency: - EDC invented how to run efficient modern theme park and reach entirely new levels of cleanliness, safety and productivity while giving a uniformly high quality entertainment experience to very large numbers of people. These themed parks have become big attraction to people all over the world and majority of people are satisfied with experience. The movies and the theme parks - There are many shows of the film which is based on the stories like: Pirates of the Caribbean and Indiana Jones or Space Mountain and Big Thunder. These films are evaluated highly and make strong impression on audiences. It is difficult for its competitors to imitate and make such films. So we can see that the core of the company is mainly these features, the movies, and the theme parks, which are still profitable and are very important for the image of the brand, as the embodiment of Walt Disney culture. 4. Why has WDC been successful overall during its almost 100 years of history? Identify the strategic inflection points and other milestones. Explain the strategic rationale for WDC`s actions and responses

Disneys long-run success is mainly due to creating value through diversification. Their corporate strategies include three dimensions: horizontal and geographic expansion as well as vertical integration. Disney is a prime example of how to achieve long-run success through the choices of business, the choice of how many activities to undertake, the choice of how many businesses to be in, the choice of how to manage a portfolio of businesses and the choice of how to create synergies between those businesses. All these choices and
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decisions are made through Disneys corporate strategies and enabled them to reach longterm success.
The Walt Disney Company all these years, has continued to make the right strategic decisions about the resources and capabilities required to develop, how to utilize these resources and capabilities in the best way possible in response to the ever changing competitive market condition. The company demonstrates a number of typical characteristics of long-term sustainability which made it successful all these years.

These characteristics include: Inimitability

Disney has a strong guard against imitation. Disneys tight control over its properties has given it a strong defense against entrants and competing incumbents. Fortified by these protected characters, Disney has built a strong brand that further deters competitors efforts to imitate. The Walt Disney Company has a formidable reputation and one of the strongest
brand names in the world. Additionally, Disney has leveraged its early mover position by purchasing prime locations in Hollywood and Florida, thus gaining superior access to customers. Heterogeneity

Since inception, Disney pursued a strategy that mirrored Walt Disneys philosophy of providing timeless and wholesome entertainment for the entire family. This unique positioning in the entertainment business continues to differentiate Disney from its competitors, who have chosen to focus on specific segments (children, youths, or adults) of the market. Another differentiating factor is its growing from within strategy for expanding its markets. This has enabled the company to maintain its strong culture and identity after all these years, Disney is still Disney and not a conglomerate of many loosely integrated entities. Finally, the company has maintained and nurtured Walt Disneys obsession with continuous innovation. As a result, while Disney continues to reinforce its family fun image, it also promotes the idea that Disney always has something new and exciting to offer. Imperfect Mobility and Co-specialization

The strong legal protections for Disney prevent competitors from copying or imitating the wildly successful Disney characters. Additionally, over the years, the company has exploited the synergies between its various businesses to develop a cohesive strategy in which the whole product is much greater than the sum of its parts. This makes it virtually impossible for a competitor to make good use of any isolated Disney asset that it might gain access to. While competitors may be able to lure away some of Disneys employees, it will be very difficult for them to duplicate the vibrant Disney culture. Strategic Inflection PointsOver these years Disney has faced inflection point at quite a number of occasions which are as mentioned below Oswald the lucky rabbit-Painful experience and The Mickey Mouse a shining star: 4

Shirish Aparadh(PG-IB-43) Though this animation cartoon was a great success, the distributor betrayed Disney and Walt was outmaneuvered by the distributor. The distributor got the copyright of Oswald character. To overcome this setback Disney desperately tried to design a new character and this gave birth to The Mickey Mouse. It was an instant success worldwide. Also at that time the company was short of cash, so they licensed Mickey Mouse for the cover of a pencil tablet, this was the starting point for the hundreds and thousands of licensing agreements that Disney got into for its characters. Thus in this was it also got into the Merchandising goods segment which again later went on to become one of the major businesses of Disney. Full length featured film-Snow white and the seven dwarfs : The in 1937 cam the worlds first full length feature film Snow white and the seven dwarfs. With this Disney got into animated film production which later became the most important SBU for Disney.

Amusement ParksThen in 1955 Disney diversified from its traditional entertainment business and built the Disneyland. The idea behind the park was to build a park for the entire family and not just for children.

5.

Explain how WDC`s resources add value to WDC`s SBUs? Using the tetrathread framework explain WDC`s responses to imitation, substitution, holdup & slack

Disney handles a lot of resources in its businesses, but we can consider that there is one main critical resource that it tries to leverage: creativity, and in a way, all the resources that are linked to it. Actually, over the years, Walt Disney adopted different strategies, diversified its activity, always trying to manage creativity in the best way. Under Einer, creativity was handled through the brain-storming meetings, and when they were reduced or became useless, they were regretted. Furthermore, the only way to survive for the company was to keep being creative, which is why it had hard times when creativity was not sufficient or handled correctly. Diversification is also a way to expand creativity to many fields keeping the Walt Disney spirit and culture. The companys expansion into parks, resorts and entertainment has made the Disney Corporation a powerful company to compete against. Of course, all of Disneys projects have not been a success story but the company has not allowed low profit ventures to bring the company down. The Disney Company has continued to discover new and creative ways of entertaining their customer. The success of one venture or division is the success of the company as a whole. Disney has managed to develop synergies across several of their business units and maintained control of their business resources. Disney ensures all their divisions are working in sync to the same tune making Disney a successful company.

Tetra Threat Framework

We would analyze WDC`s responses to imitation, substitution, holdup & slack by using tetra threat framework. Threat of ImitationDisney has a strong guard against imitation. Disneys tight control over its properties has given it a strong defense against entrants and competing incumbents. Fortified by these
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protected characters, Disney has built a strong brand that further deters competitors efforts to imitate. Threat of SubstitutionDisney acquired ABC. The cost for Disney to enter this business was far higher than profits. Disneys current distribution channel is a cable station. It has major threat of substitution from rapid growth of multimedia and internet. Also Disney cannot be the sole content provider of ABC; they will lose control from other substitute content provider. Threat of holdupWhen firms co-specialize the threat of holdup comes into picture. If both parties need the other in order to succeed, each party is in a position to threaten a hold up of operations that may be extremely costly to the other party. Disney had the distribution and marketing expertise for animated lms. Disney could observe the quality of the lm Pixar produced, but quality is suciently amorphous that it would be dicult, if not impossible, for it to be described in a contract or demonstrated in court unambiguously. Giving Pixar appropriate incentives would, then, seem problematic. If Disney commits to buy at a xed price, then Pixar, acting opportunistically, has no incentive to work hard for Disney. Pixar and Disney will both have ecient incentives under a contract that gives ownership of the lm to Pixar, but gives Disney an option to purchase it at a price that equals the lms nal value to Disney assuming Pixar exerts optimal eort. Absent renegotiation, this contract is ecient, but, as we show, Disney has an incentive to let its option expire and subsequently renegotiate a lower price for the lm. Threat of slack Walt Disneys profitability and market share fell down in the network channel though it maintained its market share in its theme parks, its. ABC was top rated before its acquisition, its profits fell after it was acquired by Disney. Disney responded to the slack by following a cost cutting measure: Eisner refocused on the leaner marketing of products, reduced film budgets and outputs and tightened cost control in its TV production.

6.

Comment on WDC`s vertical scope & geographical scope. Explain WDC`s rationale & whether you agree with it
Vertical Scope

Walt Disney favored vertical integration: for instance, many of its products such as books, magazines, VHS, audio and computer software, etc were sold in stores simultaneously owned by Disney. The acquisition of ABC can also be considered as an expression of this strategy of vertical integration, to the extent that it was a way for Walt Disney to diffuse some of its programs on its own. The acquisition of ABC can also be considered as an expression of this strategy of vertical integration, to the extent that it was a way for Walt Disney to diffuse some of its programs on its own. In the movie making business, it expanded into end to end operations in movie making. 6

Shirish Aparadh(PG-IB-43) Starting with the script for the movie, Disney opened studios for production, bought animation companies like Pixar, had the distribution company of its own to retain up to one third of the revenue earned by the movie. Geographical Scope

WDC has done geographical expansion mainly to diversify risk of operating in one country where market can saturate after some time. In 2000, we can find five big main fields of action where Walt Disney operates: Media Network, studio entertainment, theme parks and resort, consumer products and internet and direct marketing. Moreover, each of these categories is itself divided in other categories characterized by the horizontal diversification strategy. It also expanded to increase its presence worldwide to fulfil the vision of its founder to become a global entertainment company. The geographical scope is related to setting up of various theme parks across the globe. This has led WDC to be market leader in the world in the theme park market. This also helped WDC to generate its 21% revenue from abroad. Thus, the different strategies presented were used several times over the years, for different purposes. The main point is that Walt Disney relied on many logics of diversification to implement the introduction of new products on the market, and to diversify its activity, that is why its activity seemed to be so flourishing and so wide.

7.

Using Ansoff`s matrix comment on extent of WDC`s diversification. Has WDC diversified too far in recent years?

The Walt Disney Company can be seen as a highly diversified company. Its diversification strategy closely relates with the Ansoffs matrix. Ansoffs product/market growth matrix suggests that a business attempts to grow depend on whether it markets new or existing products in new or existing markets. Over the years, Walt Disney has pursued a wide range of diversification strategies that we can enhance: Horizontal integration: obviously, Walt Disney has invaded several markets, diversifying its offer to many fields. In 2000, we can find five big main fields of action where Walt Disney operates: Media Network, studio entertainment, theme parks and resort, consumer products and internet and direct marketing. Moreover, each of these categories is itself divided in other categories characterized by the horizontal diversification strategy. In a way, we can also consider that Walt Disney favored vertical integration: for instance, many of its products such as books, magazines, VHS, audio and computer software, etc were sold in stores simultaneously owned by Disney. The acquisition of ABC can also be considered as an expression of this strategy of vertical integration, to the extent that it was a way for Walt Disney to diffuse some of its programs on its own.

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In 1954, Walt Disney started pursuing a strategy of financial economies: the ABC-produced television program Disneyland was actually destined to generate financing and stimulate public interest. The creation of the first park in 1955 pursued the same strategy. With Eisner, management incentives appeared with the employees training. At the same time, the efforts made to maximize theme park profitability were the result of a revenue enhancement strategy by coordinating the businesses in order to increase to willingness to pay of the consumers; the retail-as-entertainment concept is coherent with this strategy. The calendar of promotional activities of the next six months, introduced in 1987, responded to this strategy too through the concept of cross promotion. The different strategies presented were used several times over the years, for different purposes. The main point is that Walt Disney relied on many logics of diversification to implement the introduction of new products on the market, and to diversify its activity. 8. What are the current and emerging challenges for WDC? Outline your strategic recommendations for WDC today & explain your strategic rationale

Strategic challenges Synergies: Synergy affected the scope of Disneys business geographically horizontally and vertically. it boosted revenues through cross promotion; but the groups purpose was to maximize synergy to get the most out of the added value. This way the company reduced the number of licensed brands to half and Disney tried to lay less focus on merchandise and more emphasis to products related to its core characters Brand It had to limit the diversification beyond a certain point in order to save its brand image and retain customer confidence. 8

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Current Challenges Too much outsourcingWalt Disney has been outsourcing a lot of its activities. Disney has an outside vendor/company do the things Disney used to do. Here's a quick rundown of some things that are outsourced. Some restaurants across Walt Disney World property (Rainforest Cafe, Yak & Yeti, Via Napoli) Audio Animatronics Some attractions (Rock 'n Roller Coaster, Primevil Whirl) Magical Express (used to be run by Disney, now Bags Inc runs it) Strollers High prices-

Prices for nearly everything at Walt Disney World over the last 5-10 years have grown to become out of touch for what they ought to be. The premium Disney has put on its tickets, resorts, merchandise, restaurants and more are very high. Recommendations Short-Term Goals Short-term goals are considered goals achievable within a years time. After completing and analyzing the several strategic management tools and matrices contained within this analysis, the following short term goals have been recommended for The Walt Disney Company: a. Rerelease past Disney classics to DVD as special editions or with new special features. This goal is one that could without question be completed in a years time. Too, this goal is a cash cow of sorts for the companythe products are already produced and completed so that a marketing push would be the only serious movement by the company to get this cheap option underway and a success. Boost customer service in the parks as a way of besting competition without increasing expenses. The great thing about exceptional service is that it is no more expensive than adequate service. Already in place is a series of managers that supervise Disney employees who have direct contact with guests.

b.

Long term goals a. Develop current Disney Channel actors into musicians with their multitalented abilities. In a time where the American Idol and Americas Got Talent television programs are at the forefront of pop culture, now is as good as time as any for The Walt Disney Company to develop their actors into music stars as well. Disney has had success with this in the past, but an increased focus should be made on the goal to drive the Company into the music industry as a main player rather than just a novelty act. Place increasing focus on radio channels and programming. As a follow up to the above listed long term goal, The Walt Disney Company should look for every outlet on which to feature the music of 9

b.

Shirish Aparadh(PG-IB-43) their new music stars, and what better way to manage that than to own radio channels and control the programming on those channels. Much like Disney has done with The Disney Channels and ABC, the Company does not worry about what station will air the shows that their studios have producedthe Company owns their own channels on which to show their content.

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