The Walt Disney Company was founded in 1922. Today they are world leaders in the family entertainment industry. Disney trade on an international level and have over 58,000 employees worldwide with over 200,000 shareholders. Disney like many other organisations probably decided to trade internationally for growth, survival, to beat competition, and as in many cases to gain market share to help increase shareholder value. The key advantage in operating across nations is to expand and obtain experience across markets and to use knowledge and experience in different markets.
To increase economies of scale which is achieved through purchasing large plots of land and large firms. Disney saw the chance of a theme park in Hong Kong as a means of improving its relationship and business opportunities in mainland China. Due to the success of Tokyo Disneyland and the number of Europeans visiting the Disney United States parks Disney decided to open a theme park in Europe. They chose to expand in France because of its advantages over Spain. France had a better central location and Paris was the most visited European city and the French were the largest consumers of Disney products.
A large firm like Disney are likely to get better rates when buying raw materials and seeking financial assistance. Disney took advantage of their success when planning to expand in Europe. After the decision was made in 1985 to expand in France the French government offered to extend the Paris railway to the theme park, linking the theme to the rest of Europe. This venture cost the French government almost $350 million to make space for Disney to build. The French government contributed 22 percent of the funds Disney needed to build. – Case study. The Disney Company also have and make good use of their brand recognition.
The company are recognised on an internal scale this helps to boost sales and their competitive position. The Disney brand name is well known throughout 80 percent of the world today. ‘Changes of their logo and characters has had a positive affect on sales and industry positioning, but in general the public has tended not to be affected by new competition’ – (Reuters, 03,03,03). As well as the advantages of being a large well-known organisation trading internationally there are disadvantages of expanding and trading internationally such as competition and government legislation’s.
Disney does not seem to be facing these disadvantages. The three main areas trade seems to be giving support and financial assistance. Competition in regards to the Hong Kong Disneyland venture, China built more than 2000 amusement parks between 1994 and 1999. The parks have not done well and Disney have recognised that the lack of success with these parks are not because the Chinese are not interested in amusement parks its just that the Chinese people are not interested in bad parks.
Disney’s main strengths are in their resources, experience in the business and trade and their low cost strategy. The company has been able to diversify their operations and products to prevent a fall in sales and production levels. Disney has diverted from cartoons to home video, films, merchandise, radio broadcasting, television and theme parks. They have globally diversified operations from the United States of America to Japan and Europe. Their main strength being their internal resources. Resources such as human resources and financial stability.
Employees at Disney are very innovative. In past years they have produced box office productions. Disney understands that as a company, without new ideas are doomed in today’s competitive business environment. Disney’s low cost corporate strategy is a benefit for the company. They can control costs and at the same time produce quality goods and services. Financial risks are minimised by sharing investment costs with a maximum number of outside participants. Disney invested $140 million in Euro Disney, which cost $5 billion.
They owned 49 percent of the park. In 1994 when they almost went bankrupt due to social effects, the Saudi Arabian investor who helped put in $400 million for a 25 percent stake where Disney lost a mere 10 percent of their stake. The joint venture with Hong Kong will give Disney 43 percent and the Hong Kong government will own 57 percent. By diversifying into more businesses and niches Disney’s workforce will grow even bigger and the organisational structure will have to support the growing workforce.
The Disney corporate strategy is based on a horizontal, decentralised and informal management approach. Ideas are created within individual departments and are passed upwards through the company’s low hierarchy, where the final decisions are made. Disney seems to have a hierarchical organisational structure where the business has layers of management from senior management at the top down to the lower levels of management and supervisors of the lowest rank.
Disney have chosen a clear management structure, it has a clear division of responsibility and allocation of authority where the organisation is controlled from the top. This structure has its disadvantages with many layers of communication, which could slow down the speed in which information is passed through the organisation this could also affect decision-making. Disney seem to have a decentralised working style, where authority has been delegated to lower levels of management, but it is not completely decentralised only in certain areas of the organisation.
A large emphasis is placed on employee participation. ‘The company regularly refreshes it top management staff with new executives which bring new ideas and concepts which have been easily adapted to by the company. ‘ Disney annual report 2001. Expansion is another major strategy used by the company. The corporate policy is to grow slowly and not to impress anyone. Disney understands the importance of meeting demand with the right amount and quality of goods and services, which they achieve by effectively distributing merchandise and effective marketing.