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Disney
Internal Memorandum
Michael Eisner, CEO
Case Overview
The purpose of this memo is to provide an outline of the case Walt Disney Company: The Entertainment King and the outline the alternatives that Disney has at its disposal. The best alternative for restoring ROE growth is to tap back into what made Disney great in the first place, which is creative ideas that are nurtured and brought to market.
The company has been suffering from a decline in ROE, which is currently below 10%. The rebound Disney experienced last year was almost entirely due to the success of Who Wants to be a Millionaire?, which has masked underlying weakness in the rest of our businesses. The company lost several key executives, creating a talent void. This in turn affected creative output, and the company began its slide at this point. The company's rebound in 2000 was aided by strong performance from its theme parks, indicating that the strategy to cluster parks to create a destination was beginning to pay off in some of the newer locations.
The company is still struggling with movies, however....
Since Katzenberg left, the company has not had as many significant hits, something that has hurt the profitability of the studio arm. In addition, the company is still working to improve synergies between its different divisions. There are opportunities remaining on the table, however, in overseas markets. This different horizontal diversification has been successful in the past, but there is evidence that it has reached the point of diminishing returns, for example with the decreased value of movie tie-ins.
The company's success has always been about exceptional creativity, but also having the business sense to leverage that creativity. We still have the business sense, but it is apparent that Disney has lost that creative edge. Good, creative people come here to get the Disney name on their resume, then they move on to other companies, taking their training with them. That Disney is a factory for other people's leaders is not an acceptable situation at all.
There are several options for strategy for the coming years at Disney. The first is to restore emphasis on creativity by loosening the fiscal controls…
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