Walt Disney Company free essay sample

Walt Disney Company is famed for its creativity, strong global brand, and uncanny ability to take service and experience businesses to higher levels. In the early 1990s, then-CEO Michael Eisner looked to the fast-food industry as a way to draw additional attention to the Disney presence outside of its theme parks its retail chain was highly successful and growing rapidly. A fast-food restaurant made sense from Eisner’s perspective since Disney’s theme parks had already mastered rapid, high-volume food preparation, and, despite somewhat undistinguished food and high prices (or perhaps because of), all its in-park restaurants were extremely profitable. From this inspiration, Mickey’s Kitchen was launched. The first two locations were opened in California and in a suburb of Chicago, adjacent to existing Disney stores. Menu items included healthy, child-oriented fare like Jumbo Dumbo burgers and even a meatless Mickey Burger. Eisner thought that locating each restaurant next to existing Disney stores was sure to increase foot traffic through both venues. Less than two years later Disney closed down the California and Chicago stores and shuttered further expansion plans. Eisner cited overwhelming competition from McDonalds and general oversaturation in the fast-food industry as the primary reasons for closing down the failing Mickey’s Kitchen. [a] Based on your own knowledge of Disney and the information provided in the scenario, does Disney appear to create value in its businesses primarily through a cost-leadership or through a differentiation strategy? Cost leadership strategy means selling the goods at the cheapest price in the market. The logic of the cost leadership strategy approach is driven by volume and market share where more sales than any other competitors lead to greater profitability. Essential to this generic competitive strategy is efficiency and the ability to keep costs to a minimum. Organizations that achieve the greatest possible defining their market position as one of being a lower-priced substitute to another product or service. Differentiation Strategy involves selecting one or more criteria used by buyers in a market and then positioning the business uniquely to meet those criteria. This strategy is usually associated with charging a premium price for the product often to reflect the higher production costs and extra value-added features provided for the consumer. Differentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products. As Walt Disney Company is famed for its creativity and strong global brand, Disney appear to create value in its business primarily through a differentiation strategy. [b] What resources and value-chain activities did Disney try to leverage through the opening of Mickey’s Kitchen? Walt Disney Company has financial support on Mickey’s Kitchen opening. Moreover, Disney’s theme parks had already mastered rapid, high volume food preparation and undistinguished food. The primary and support activities in the company and its theme park is an advantage to the opening of Mickey’s Kitchen. The primary activity are inbound and outbound logistics, operations, marketing and sales, and service. The support activities which is a secondary activity are procurement (e. g; sourcing and negotiating with materials supplier), human resources management, technology development and infrastructure. These resources and value chain activities provided Mickey’s Kitchen with strong based to enter the fast-food industry. [c] Why do you think that Mickey’s Kitchen failed? Mickey’s Kitchen failed due to its CEO Michael Eisner business decision. A fast-food restaurant made sense from Eisner’s perspective since Disney’s theme parks had already mastered rapid, high-volume food preparation, and, despite somewhat undistinguished food and high prices (or perhaps because of), all its in-park restaurants were extremely profitable. Eisner thought that locating each restaurant next to existing Disney stores was sure to increase foot traffic through both venues. His sense, perspective and thought were not supported with any facts and research based. Referring to the HBR articles discussed in previous class titled â€Å"Stop Making Decisions That Waste Time and Money†, many managers rely on gut instinct to make important decisions, which often leads to poor results. On the contrary, when managers insist on incorporating logic and evidence, they make better choices and their companies benefit. The articles recommended three ways to introduce evidence-based management at the company: 1. Demand evidence. Whenever anyone makes a compelling claim, ask for supporting data. Dont take someones word for it. 2. Examine logic. Look closely at the evidence and be sure the logic holds up. Be on the lookout for faulty cause-and-effect reasoning. 3. Encourage experimentation. If you dont have evidence, create some. Invite managers to conduct small experiments to test the viability of proposed strategies and use the resulting data to guide decisions. Eisner should create evidence by developing information system to understand customer’s preferences. Menu items included healthy, child-oriented fare like Jumbo Dumbo burgers and even a meatless Mickey Burger probably not the customer’s preferences.