DISNEY CASE STUDY: STRATEGIC ISSUES 1
Analysis of strategic Issues
Strategic Issue # 1: Poor performance in the90’s.
After Eisner took over, he turned the companyaround. However, in 1996 when Disney formed a merger with ABC, returnon equity began to drop. By 1999, return on equity had dropped to 10%from 24% when Eisner arrived at the company (Rukstad & Collis,2009).
The underlying causes
The first cause is Disney’s heavy investment on new enterprises. This was a major contributor to the poor performance.
Lavish spending on cruise ships and new theme parks proved to be too heavy a load for the company to bear. Some of the investments did not pay off as expected further increasing Disney’s financial woes.
ABC’s declining ratings negatively affected the performance of the company. After the merger, ABC fell from first place to third place. Since Disney had already formed a merger, she could not ditch ABC for a more popular TV station.
Strategic Issue # 2: Management difficulties
The increasing number of employees implied thatEisner could no longer be hands-on. When he arrived, Disney had20,000 employees. In 2000, the employee population had plummeted to110,000. Some of the employees never knew who Eisner was and what hisideologies were.
The underlying Causes
The first cause is difficulties in managing the Disney brand. With the increase in partnerships, it became a daunting task to manage Disney’s brand.
The second is reduced control over the brand. With many partners came little control over the brand. Disney could not control what the partners were doing to the brand. New businesses that were performing poorly also had a negative impact on the brand.
The third cause is failure to manage creativity. The dynamic nature of the entertainment industry made it hard for Disney to manage creativity. Each year brought its own challenges in terms of creativity and the changing nature of the industry. The taste of the clientele kept shifting as days went by.
Finally, unprofessional work by the staff led to the problem. Disney lost money when it hired the services Michael Ovitz who turned out to be a flop.
Rukstad, M. G., & Collis, D., (2009). TheWalt Disney Company the entertainment King. HarvardBusiness School, 2009