Introduction
Walt Disney is one of the world’s most successful companies and has struggled throughout its history. In 1984, when Michael Eisner became CEO, the company narrowly avoided breaking up (Rukstad et al., 2009). By the end of 2000, it was able to increase revenues, but later, its results were below targets (Rukstad et al., 2009). Such performance trends are linked to Disney’s attempts at diversification between 1983 and 2000. The most successful diversification was the development of a network of theme parks, while the purchase of ABC was profitable only in the long run.
Diversification Strategy Analysis
Performance Trends in 1980-2000s
Disney’s performance in the last quarter of the 20th century was erratic. The company constantly tried to expand and increase the pace of film production, but it was not always successful. By 1984, it was approaching a decline in productivity, which threatened the company (Rukstad et al., 2009).
Opening theme parks during this period was lucrative but required a substantial financial outlay. Successful products were interspersed with those that failed to cover costs. The desire to balance successful films and box office failures led Disney to develop a cost-cutting strategy by 2000 (Rukstad et al., 2009). The company overcame the unstable period due to its commitment to the brand idea.
Media Expansion: The Disney Channel and Sunday Movies
The first diversification strategy in the period under review is the development of the Disney Channel. The cable business opened in 1983, but did not immediately save the company from losing profits (Rukstad et al., 2009). This is an example of related diversification as the company has expanded how it enriches its product exposure. By 1984, Eisner intended to return Disney to stability and regular profits (Rukstad et al., 2009).
One of the new CEO’s decisions was to launch a Disney Sunday movie on ABC (Rukstad et al., 2009). Although Disney strives to introduce a new product to a new audience, the launch of the Disney Sunday movie is also an example of related diversification. This is justified by Disney not entering a new industry but seeking to increase brand awareness by operating in a familiar area. Even though releasing a film was risky in alienating the target audience, Disney films were later successful. The diversification strategy was generally successful as it worked to increase brand awareness.
Theme Parks as a Vehicle for Geographic Diversification
The expansion and development of a network of theme parks achieves Disney’s successful diversification. The considerable investment was offset by strategies to increase attendance, including higher ticket prices (Rukstad et al., 2009). The opening of Disneyland Euro was an effective related diversification for Disney, as the theme park was part of an already established network intended to boost revenue in the new region.
At the same time, Paris Disneyland initially had difficulty covering the costs, which forced Disney to reduce ticket prices to attract an audience (Rukstad et al., 2009). However, theme parks have generated significant profits for the company since the 2000s. An example of diversification with the opening of new theme parks has allowed Disney to generate more profits in the long run due to high attendance around the world.
Retail Expansion and Brand-Based Diversification
Disney has resorted to geographically related diversification to expand its footprint. The most successful attempt was establishing Disney stores to increase sales of related products (Rukstad et al., 2009). In these stores, Disney sold goods connected with the heroes of the studio’s animations and films. The range was aimed at both children and adults, increasing the brand’s awareness worldwide. This diversification strategy was successful because it involved small funds and maintained brand value.
Strategic Acquisitions: ABC and Its Long-Term Benefits
Disney sought to increase productivity to minimize production time. This led to a significant budget increase, which the box office did not always cover. To minimize costs, Display turned to fundraising to distribute its products within its budget. To actively distribute new products, the company acquired ABC in 1995 (Rukstad et al., 2009). This related diversification proved to be a significant success in the long run. This deal made Disney one of the largest entertainment companies and opened up wide distribution of its content.
After the ABC acquisition, Disney’s financial performance deteriorated, but growth resumed in 2000 (Rukstad et al., 2009). By the new millennium, Disney had managed to stay afloat and maintain its status as a creative entertainment empire. The synergy between Disney and ABC positively impacted the company’s development, providing opportunities for free product distribution to a broad audience.
Conclusion
In conclusion, the Walt Disney Company has constantly sought to expand its representation in the entertainment market. In the long term, most diversification initiatives have been successful for the company. The ABC audience allowed Disney to maintain its brand status in the early 2000s. Theme parks are still popular all over the world despite rising ticket prices. It was able to maintain and subsequently increase revenue through the use of a related diversification strategy that was not associated with significant risks.
Reference
Rukstad, M. G., Collis, D. J., & Levine, T. (2009). Walt Disney Company: The entertainment king. Harvard Business School. Web.