The Walt Disney Company

The Walt Disney Company

The Entertainment King

9045-01659 9044-04083 9044-11144 6022-47588 9045-72919

I. Executive Summary

After analyzing the Walt Disney case, we found that the root issues include the need to increase revenue to reach the 20% growth target set by upper management and to expand into new markets and/or industries. We used a Porter’s Five Forces analysis to develop our alternatives (Please See Exhibit A for further information). The alternatives that we proposed were to expand globally and enter the Internet and cable distribution industry. We analyzed these alternatives against a set of selected criteria including: the time to implement, how the alternatives fit with Disney’s corporate culture and corporate synergy, if the alternative would provide a competitive advantage, how costly the implementation would be for Disney, and the revenue potential for the alternative. Upon the completion of our analysis, we recommend that Disney should expand globally in order to capitalize on unrealized markets in order to alleviate its root issues.

II. Root Issues

The two root issues for Disney are:

• To increase revenue to reach the 20% growth target set by upper management

• To expand into new markets and/or industries

III. Alternatives

We proposed two alternatives that address Disney’s root issues. Both of these alternatives are possible solutions to the root issues that we proposed. The alternatives are:

• Expand globally

• Enter the Internet and cable distribution industry

IV. Evaluation Criteria:

A. Implementation Time

Throughout the past several years there have been many mergers especially in the telecommunications and broadcasting market which have left a couple extremely large companies to compete. One of the more recent was a merger between America Online and Time Warner Broadcasting which occurred in 2001, and cost a reported $350 billion. The time to implementation would be a crucial statistic in determining how effective a merger like this would be, however it is very hard to predict the actual time it would take for two huge companies to become fully integrated.

We believe that Disney’s root issue at hand is its declining growth and revenue due to loss of market share, and that one of the ways it can deal with this problem is moving into the cable provider realm by acquiring or merging with one of the large cable providers of today. However, since Disney would most likely merge with one of the largest cable providers, this would affect the time it would take to implement the merger and integrate itself with the other company.

Since Disney already owns several television networks such as The Disney Channel, ABC, and ESPN, it has the means and know-how to compete in the cable industry, so there are many overlapping interests with Disney and a large cable provider. This would prove to be very helpful on the account that Disney actually merges with a provider because it should not be as hard to transfer their competencies from one to another. The time it takes to fully implement the merger should be shortened by the fact that these competencies exist, and it should also help to make the integration of the cable provider with Disney easier.

We can use the time to implement and integrate as a criterion of how successful the merger would be by comparing it to other known mergers that have taken place recently between two large companies. Some of these examples would be the AOL/Time-Warner merger, Wachovia/First Union merger, MCI/WorldCom merger, and several others between two dominant companies in related industries. Even though these are not closely related to Disney and cable, they illustrate that two huge companies can successfully merge and can be used as a comparison for how long such a merger should reasonably take. It is challenging to estimate the actual time to implement, so we should look at this statistic after the fact to get a clear idea of how well the merger went. If the merger seems to take unreasonably long, this should be an indication that the two companies are not a great fit together and it probably won’t work well. The time to implement is a statistic that we believe should be included as criteria to decide whether or not the alternatives we have chosen