Since its humble beginnings in 1923, the transformation and transition of The Walt Disney Company has been staggering. The ability of the organization to integrate and excel in so many business areas is admirable and should be respected on many levels. Michael Eisner’s crucial role in the turnaround of the organization since his arrival in 1984 is valued on many levels, but over that last few years, he has taken many missteps in properly managing the organization.
Although Eisner often vocalized his want for Disney to effectively “manage creativity,” the strategy he implemented while CEO did not reflect this want, and over time dismantled the creative core of Disney, and essentially depleted all the synergy that he had created in his early years as head of the organization.
After assessing Eisner’s actions, it is evident that his want of a sustained 20% increase in earnings per share year over year caused him to acquire and attempt further diversification without fully comprehending the affect of each added business unit.
When Eisner began as CEO of Disney, the organization was an organization that had a related-linked diversification strategy (operating in multiple geographic areas in film, television, and theme parks”. The key factor linking these separate business units was “cross-merchandising” goods so that each new animated film produced became its own miniature industry through strong marketing efforts. Although this “cross-merchandising” strategy was very successful when Eisner began its implementation, in order for the company to maintain growth and diversification, Disney had to keep expanding at a rapid rate.
This expansion may have been valuable initially, but by having the company grow at such a rapid rate (1984: 28,000 Disney employees, 2000: 110,000 Disney employees) the tight knit creative culture that Disney had spent so many years cultivating and maintaining quickly eroded, destroying synergies within the organization and damaging the unique culture that was perceived as its most important asset. Although rapidly expanding created abundant short-sighted profits, this expansion shifted Disney from being an organization with a related linked diversification strategy and shifted them to an unrelated diversification company.
This shift essentially eroded away at the unique creativity-based culture that Eisner deemed as “Disney’s most important asset. ” In 1984, when Michael Eisner was named chairman and CEO, the company was in a bleak state; the Disney organization had established itself with a related-linked diversification strategy during the era of Walt Disney’s control, but since his succession the organization had done little to exploit this opportunity and built organization synergy. During his first four years, Eisner recognized the opportunity to build on this established linked diversification and synergy opportunity.
His efforts to build upon this increased market in each of the business units, such as the “movie market share business unit went from 4% to 19% from 1984-1988 respectively;” along with, increased movie production, “they began releasing 15 to 18 movies often pursing scripts from less established writers. ” Finally, Eisner pushed for expansion of their already established theme parks increasing their size, along with promoting attendance-building strategies such as special events, retail tie-ins, and media broadcast events.
All of these increased investment and production efforts initially promoted tremendous profit initially, but this expansion continued too quickly. As Eisner pushed for expansion of these already established business units in in the first four years, he also simultaneously pushed for coordination between the businesses. This effect was most noticeably reflected through the establishment of a corporate marketing function in the organization in order to successfully implement cross-promotional and cross-merchandising efforts.
By using this team Eisner was focusing on creating unity amongst the products and services provided by the organization, along with building synergy between the business units. Eisner first pushed this with the film Who Framed Roger Rabbit, and was wildly successful. Disney licensed computer games, jewelry, etc. along with pushing for heavy amounts of merchandise for the movie in their theme parks, and heavy amounts of advertising in their television productions.
This established the beginning of Disney focusing on cross merchandising, “using each major movie release as its own miniature industry. ” This link across business units from each release created a synergy between these business units, giving the members apart of the Disney organization an increase sense of identification. This implemented strategy proved incredibly successful for Eisner in his first four years, more than doubling the revenues and assets of Walt Disney Co. long with increasing net income fivefold, but unfortunately the quick expansion of the company eventually encumbered the growth of Disney in later yea In the late 1980’s Eisner began shifting the company to more and more unrelated businesses. At the time, expanding into new business area made sense from a fiscal standpoint, so that Disney could market in an even wider array of industries. Over time, Eisner pushed for product and geographic diversification unrelated to their core businesses.
The acquisitions included opening retail stores, acquiring the Anaheim Mighty Ducks, producing Disney Broadway musicals, creating a cruise line business, and acquiring the television giant ABC, all over a 15 year time span. All of these additions was too much too quickly. By adding many of these new businesses, Disney was not able to assimilate large amounts of these new members into the creative culture properly. Over time, this erosion of culture destroyed the synergies between business units, and left the many areas with a lack of identity about the established beliefs and focused goals of the Disney organization.
This change in diversification efforts proved ineffective and unfortunately could not be undone. Michael Eisner began to focus almost exclusively on a geographic diversification strategy, centering his attention on building and expanding the brand marketing in theme parks and movies oversea. By this point it was evident that the Disney culture had been diminished and the organization could no longer come up with the creative, innovative products that had made them so successful prior.
This loss of synergy lead to divergence between members of upper management; “by the late 1990’s Eisner had lost many of his key executives, 75 between 1994-2000, who had so worked hard to cultivate Disney’s creative based culture,” and could not find effective replacements. This disarray had tremendous negative impact on all Disney employees and business units, losing the unity they once had, and now embodied completely separated organizations. The day of Disney is dead. Michael Eisner’s rapid expansion efforts damaged the creativity-based culture that he said he valued so highly.
The initial effort of exploiting the linked diversification base already established in the company was successful because he was still able to properly assimilate new members into the Disney culture into any new endeavors because they were taking on new employees at a reasonable rate. As time passed and expansion shifted to unrelated diversification efforts, the attempted incorporation of these new unrelated businesses wore away at Disney’s creative core because they could not establish synergy between these new units and the existing business lines.
If Eisner and Disney want to regain this intangible asset, it is going to take many years of repair. It would be most beneficial for Disney to divest from many of its current unrelated business units, and focus on their core (movies, television, & theme parks) where they can effectively cross market products and characters. There can be much more effective cultivation of unity and synergy between these businesses if Disney moves back to a linked diversification strategy.
Cite this Eisner’s Destruction of Disney
Eisner’s Destruction of Disney. (2018, Mar 10). Retrieved from https://graduateway.com/eisners-destruction-of-disney/