The Walt Disney Company: Strategic Initiative

Most successful organizations practice strategic planning. These organizations benefit not only from having a plan, but also from the planning process itself. The plan is the road map to success, and the planning process unites organizational leadership and enhances the communicating of critical company information. Today’s volatile marketplace demands that employees, work groups, and organizations have a clear understanding of their roles, the products and services they offer, and the processes they use to navigate opportunity to create an outcome-based organization culture. The Benefits

In the face of rapid change, organizations have realized they cannot compete on a global basis without a strategic plan that encourages innovation and creates knowledge internally and that builds customer loyalty to their products and services. A strategic plan provides the path an organization will take in the future. Future planning helps to determine (whether a company will stay on course or follow a different direction ran in the past); the predictions of how the marketplace, customer base, and product line will change or react to the future; and the calculated risk that the organization will need to bear to move in that direction. During strategic planning, organizations set their priorities for the next two to five years and identify how major resources are allocated. If done correctly, the strategic plan should be a document that motivates employees to achieve the plan’s stated goals and tactics. When realignment or redirection takes place, the plan explains the change and refocuses the organization’s efforts by redefining the organizational goals and major tactics. Proposed Strategic Initiative

The strategic initiative for 2008 would be to focus a great deal of Disney’s attention on enhancements with the video game business. Although the economy has gone into a downward spin, the video game industry has managed to hold on somewhat, although other industries have taken serious hits. The reason behind this strategic initiative is contributed to the strong financial results of the video game industry. “U.S. video game advertising spending was $502 million in 2007, a figure forecast to increase to $969 million by 2011,” (Miller & Washington, 2008). Not only does the advertising of this industry show positive results, the outlook for this entertainment sector shows positive results with parents; being a wonderful pastime for the children. According to Miller and Washington, (2008), “More than a third (35%) of parents play computer and video games; 93% have children who also play them. Sixty-three percent (63%) of parents with children under the age of 18 consider computer and video games a positive addition their children’s lives. Statistics such as these demonstrate that Disney’s implementation of more video games would be a success for the company overall. 2007 Strategic Initiatives

Disney made a number of significant decisions in 2007 that were designed to make the most of Disney’s creative products, services, and marketing which helped increase revenue while building brand and shareholder value. The following were three strategic initiatives in 2007 that Disney implemented to enhance business.

• Club Penguin
• Online Pirates
• Online Radiator Springs

Disney purchased Club Penguin, a vibrant and entertaining online world for children and families that help anchor the organizational strategy and grow in this important and expanding arena. Disney is the proud owner of Club Penguin, and believes Club Penguin is a perfect fit from a creative and a strategic perspective. According to a PowerPoint presentation from The Walt Disney Company, “Disney.com also launched a richly detailed online Pirates world and is expanding the popular virtual universe built around Tinker Bell and her friends, fans have already created 3.5 million fairies. Disney is also developing an exciting online version of Radiator Springs, making the world of Cars interactive, one of our most successful content and merchandising franchises. The creation of more such compelling, immersive worlds, which feature a safe, entertaining way for children to network and play games, is a key priority of Disney.”

Advertisers are getting into the game; big-name marketers are turning to game developers to woo consumers more interested in the game controller than the remote control. For some baseball video game fans, a trip to the virtual ballpark is getting a bit more realistic with the arrival of in game advertising, which belong to ESPN games, part of Disney’s’ advertising. Video game makers are attracted to in-game ads because they can help offset soaring development costs. When Disney produces a new movie, it continues to capitalize on the characters in the movie long after it has left the box office. Before the movie leaves theaters, the company will have already released a line of corresponding toys and action figures. This is followed by the release of the movie on DVD and depending on its recognition, an existence in Disney’s theme parks or its own television show. In line with this approach of maximizing the value of its content, Disney lately began distributing its content in new ways, such as video-on-demand online and television shows formatted for video iPod users.

This all helps Disney’s initiative impact Cost. The conventional pillars of advertising in print and television media have eroded in recent years as people particularly the subtle demographic of young men have instead spent more time on video games and on the Internet the last few years. Already, advertising revenue from online games, including the more hard-core multiplayer games, is projected to grow to $1.1 billion by 2008, up from between $450 million and $550 million last year, according to the Yankee Group research firm. Although distribution through these new mediums comes with significant risks of piracy, the migration of younger audiences away from traditional television to new media makes finding new ways to reach out to this demographic seriously important.

According to Disney Corporate (2007), “as a part of its strategy for long-term growth through applying new technologies to the creation and global distribution of high-quality family entertainment, The Walt Disney Company (NYSE: DIS) has acquired Club Penguin, one of the fastest-growing online virtual worlds for children.” In addition, the welcoming of Club Penguin to Disney’s existing online assets will help brace the company’s goal of creating a clear leadership in online virtual worlds for families and their children. Since its launch in October 2005, award-winning Club Penguin has grown to more than 700,000 current paid subscribers, and has achieved this remarkable subscriber and user growth with very limited marketing efforts, relying mostly on strong product and word of mouth awareness among children (Disney Corporate, 2007). The site also has more than 12 million activated members as well as users, which are mainly in the U.S. and Canada, and is one of the fastest growing and popular online programs for children ages 6-14.

The site is not only educational, but also challenging for the children who use this program. The site features animated penguin avatars that inhabit a snow covered virtual world, converse with other users, participate in group activities, create, and furnish a virtual home with currency earned inside the game (Disney Corporate, 2007). In 2007, The Walt Disney Company made a major purchase when they acquired New Horizon Interactive’s Club Penguin. The purchase of this interactive website cost the company an estimated 350 million dollars (and potentially up to double that amount). Many people (mainly outsiders who are unaware of the virtual marketplace) may believe this was a bad decision, was it? Risk are inevitable in all businesses adventures, from Disney’s perspective, the risks may be far greater as the dollar amounts spent are significantly more than many of us can fathom. Disney is also looking to invest significantly more money in Disney.com, an online site where consumers can experience many things Disney.

In most deals, the overriding possibility is the obvious risk of failure. Will this 350 million dollar deal backfire and end up costing Disney all that money? Another risk, is that of how this looks to the public and thus to the vast number of Disney supporters and customers? Should this deal fall through it could look bad for the organization and cause doubt. All these risks are surely possible but another does exist. How long and for how many subscribers will the online gaming and virtual marketplace continue to thrive? Is this gaming site, and thus others like it, a temporary fad that due to potentially better technology or a new better fad, becoming a thing of the past? That is the key risk here and Disney did its research. They believe the answer is no. Currently Club Penguin has roughly 700,000 paid subscribers, each paying $6 per month (Jesdanun, A. 2007). According to the quick math, that is an intake of roughly 46 million dollars a year. That figure does not include the sales generated through online purchases of Club Penguin merchandise and potential marketing monies.

At least for the foreseeable future Disney’s investment and returns seem to outweigh the risks associated with these ventures. Although spending a large amount of money, they seem to know the potential income they could draw is enormous. As such, it would be wise for them to keep an eye open for potential competitors that may be offering a similar (if not better) virtual game site for children of the same age range for a lesser and in some cases free price. The Disney Company may soon seek to make the most out of this new purchase, or look to expand its offerings and make it more attractive to a larger audience. Disney has rehabilitated its importance on its core approach of creating and distributing striking content for children and syndicating this content through its various entertainment channels.

For example, when Disney produces a new movie, it continues to capitalize on the characters in the movie long after it has left the box office. Before the movie leaves theaters, the company will have already released a line of corresponding toys and action figures. This is followed by the release of the movie on DVD and depending on its recognition, an existence in Disney’s theme parks or its own television show. In line with this approach of maximizing the value of its content, Disney lately began distributing its content in new ways, such as video-on-demand online and television shows formatted for video iPod users. Although distribution through these new mediums comes with significant risks of piracy, the migration of younger audiences away from traditional television to new media makes finding new ways to reach out to this demographic seriously important.

Reference:

Disney Corporate. (2007). The Disney Company Acquires Club Penguin. Retrieved on December 20, 2008through Google,http://corporate.disney.go.com/news/corporate/2007/2007_0801_clubpenguin.html

Jesdanun, A. (2007) Disney Acquires Club Penguin. San Francisco Chronicle. Retrieved December 20, 2008, from http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2007/08/01/financial/f135118D73.DTL&type=business Miller, R., & Washington, K. (2008). Video games. EBSCO Host, Retrieved December 19, 2008, from

http://search.ebscohost.com.ezproxy.apollolibrary.com/login.aspx?direct=true&db=bth&AN=34617879&site=ehost-live Yankee Group research firm. (2008). Gamers and Advertising. Retrieved December 19, 2008 from http://www.yankeegroup.com/home.do