Walt Disney Company Headquarters, Burbank, California Over two decades, your predecessor and boss, CEO Michael Eisner, a

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Walt Disney Company Headquarters, Burbank, California Over two
decades, your predecessor and boss, CEO Michael Eisner,
accomplished much, starting the Disney Channel, the Disney Stores,
and Disneyland Paris, and acquiring ABC television, Starwave Web
services (from Microsoft cofounder Paul Allan), and Infoseek (an
early Web search engine). But his strong personality and critical
management style created conflict with share- holders, creative
partners, and board members, includ- ing Roy Disney, nephew of
founder Walt Disney. One of your first moves as Disney’s new CEO
was repairing relationships with Pixar Studios and its then CEO
Steve Jobs. Pixar produced computer-animated movies for Disney to
distribute and market. Disney also had the right to produce sequels
to Pixar Films, such as Toy Story, without Pixar’s involvement.
Jobs argued, however, that Pixar should have total financial and
cre- ative control over its films. When Disney CEO Michael Eisner
disagreed, relations broke down, with Pixar seek- ing other
partners. On becoming CEO, you approached Jobs about Disney buying
Pixar for $7 billion. More important than the price, however, was
promising Jobs and Pixar’s leadership, President Ed Catmull and
cre- ative guru John Lasseter, total creative control of Pixar’s
films and Disney’s storied but struggling animation unit. Said
Jobs, “I wasn’t sure I could get Ed and John to come to Disney
unless they had that control.” Although Pixar and Disney animation
thrived under the new arrangement, Disney still had a number of
critical strategic problems to address. Disney was “too old” and
suffering from brand fatigue as its classic but aging characters,
Mickey Mouse (created in 1928) and Winnie-the-Pooh (licensed by
Disney in 1961), accounted for 80 percent of consumer sales. On the
other hand, Disney was also “too young” and suffering from “age
compression,” meaning it appealed only to young children and not
preteens, who gravitated to Nickelodeon, and certainly not to teens
at all. Finally, despite its legendary animated films, over time
Disney products had developed a reputation for low-quality
production, poor acting, and weak scripts. Movies such as “High
School Musical 3: Senior Year,” “Beverly Hills Chihuahua,” “Bolt,”
“Confessions of a Shopaholic,” “Race to Witch Mountain,” and
“Bedtime Stories” disappointed audiences and failed to meet
financial goals. As you told your board of directors, “It’s not the
marketplace, it’s our slate [of TV shows and movies].” With many of
Disney’s brands and products clearly suffering, you face a basic
decision: Should Disney grow, stabilize, or retrench? Disney is an
entertainment conglomerate with Walt Disney Studios (films), parks
and resorts (including Disney Cruise lines and vaca- tions),
consumer products (i.e., toys, clothing, books, magazines, and
merchandise), and media networks such as TV (ABC, ESPN, Disney
Channels), radio, and the Disney Interactive Media Group (online,
mobile, and video games and products). If Disney should grow,
where? Like Pixar, is another strategic acquisition necessary? If
so, who? If stability, how do you improve quality to keep doing
what Disney has been doing, but even better? Finally, retrenchment
would mean shrink- ing Disney’s size and scope. If you were to do
this, what divisions would you shrink or sell? Next, given the
number of different entertainment areas that Disney has, what
business is it really in? Is Disney a content business, creating
characters and stories? Or is it a technology/distribution business
that simply needs to find ways to buy content wherever it can, for
example, by buying Pixar and then delivering that content in ways
that customers want (i.e., DVDs, cable channels, iTunes, Netflix,
social media, Internet TV, etc.)? Finally, from a strategic
perspective, how should Disney’s different entertainment areas be
managed? Should there be one grand strategy (i.e., growth,
stability, retrenchment) that every division follows, or should
each division have a focused strategy for its own market and
customers? Likewise, how much discretion should division managers
have to set and execute their strategies, or should that be
controlled and approved centrally by the strategic planning
department at Dis- ney headquarters? If you were CEO at Disney,
what would you do?
Read the business case "Disney" posted in the module 3
content folder and answer the question "If you CEO at Disney, what
would you do?".