The Walt Disney Company: The Entertainment King
The Walt Disney Company: The Entertainment King
1. Why has Disney been successful for so long?
Leveraging Horizontal and Vertical Integration
The Disney Company created horizontal scope advantages by expanding globally into ventures that heavily leveraged Disney brand equity, but not its capital dollars. Deals in France and Japan provided residual revenue that expanded the company presence and seized a share of wallets in new markets. The demand for the Disney brand is evident in the rapid growth from its foreign theme park attendance as those parks rank number one and number four annually (Exhibit 4). Time after time when management was confronted by challenges the organization found ways to better leverage existing assets and the reach of its products and services. This was first demonstrated in the section “The Early Years” when Walt opened his own studio to create animated characters and films. This was done on the heels of the commercial success of animated characters he created, that were contractually owned by the distributing partner. On his second try, he used vertical integration to leverage the success of his animated films to create his own distribution network and the Walt Disney Music Company. The music company allowed him to control Disney’s music copyrights and recruit top artists. These actions generated higher profits and increased control while reducing risk and dependence on third parties. This concept was used again in the creation of Buena Vista Home Video (BVHV), which pioneered the “sell through” approach. This method marketed videos at low prices for purchase direct to consumers instead of selling primarily to video rentals stores. They were first to market and became the leader domestically and in all major international markets. The scale of their operation also positioned them best for the change to from VHS to DVD format. One more recent acquisition to grow vertical advantage was the purchase of ABC. From 1996 to 2000 revenue in
1. Why has Disney been successful for so long?
Leveraging Horizontal and Vertical Integration
The Disney Company created horizontal scope advantages by expanding globally into ventures that heavily leveraged Disney brand equity, but not its capital dollars. Deals in France and Japan provided residual revenue that expanded the company presence and seized a share of wallets in new markets. The demand for the Disney brand is evident in the rapid growth from its foreign theme park attendance as those parks rank number one and number four annually (Exhibit 4). Time after time when management was confronted by challenges the organization found ways to better leverage existing assets and the reach of its products and services. This was first demonstrated in the section “The Early Years” when Walt opened his own studio to create animated characters and films. This was done on the heels of the commercial success of animated characters he created, that were contractually owned by the distributing partner. On his second try, he used vertical integration to leverage the success of his animated films to create his own distribution network and the Walt Disney Music Company. The music company allowed him to control Disney’s music copyrights and recruit top artists. These actions generated higher profits and increased control while reducing risk and dependence on third parties. This concept was used again in the creation of Buena Vista Home Video (BVHV), which pioneered the “sell through” approach. This method marketed videos at low prices for purchase direct to consumers instead of selling primarily to video rentals stores. They were first to market and became the leader domestically and in all major international markets. The scale of their operation also positioned them best for the change to from VHS to DVD format. One more recent acquisition to grow vertical advantage was the purchase of ABC. From 1996 to 2000 revenue in