By reading the article illustrated below, respond the given questions in half-page or one page.
1. What are the long-term financial and organizational implications of shifting to "Mega Deals"?
2. Are they as one European said, more an American phenomenon and less applicalbe to diverse cultural arenas?
Article:
“Discipline,” according to Walt Disney chief Michael Eisner, “is part of creativity. Painters have to use a canvas size that can fit on a wall. They have to use certain kinds of paint. You can’t just go and splash stuff around.” Organization as large as Disney cannot splash around either. At its Burbank, California, head-quarter, Disney managers encourage and promote creativity as part of the corporate motto. But organizing the work force it is another task altogether, especially when organizational charts remain as rare as in Walt’s days of running the company.
For seven years, Dennis Hightower was the key manager organizing Disney’s global markets. From 1987 through 1993, as president of Disney Consumer Products. Europe and the Middle East (DCP-EME), Hightower was responsible for multiple—and widely disparate—country operations and a diverse array of businesses involved in licensing books, software, magazines, music, and assorted merchandise. From his office in Paris, Hightower led the company’s entry into Eastern Europe and the former Soviet Union, as well as the Middle East and post apartheid South Africa. Under his tenure, the retail value of DCP-EME’s businesses grew from $650 million to $3.5 billion.
His first task was reorganizing and integrating European operations. Hightower centralized contract administration and auditing in regional offices so that individual country managers could focus on producing revenue. Each regional office was assigned marketing and creative services divisions to coordinate activities and tap into common resources. Then he began filling those offices with experienced MBA’s recruited from consumer products and creative companies.
Through these offices, Hightower engineered “mega-deals” with partner companies spanning multiple countries. DCP-EME’s comprehensive European agreement with Mattel for toys, for instance, centralized what had been handled through 68 local toy licenses. Transnational deals quickly followed with companies including Nestlé, Kodak, Nintendo, IBM, and Coca-Cola.
But while these deals boosted Disney’s growth, the individual country offices complained that the agreements weakened their business, as well as their autonomy and cultural identity. Griped one country manager, “The mega-deal mentality of one ‘size fits all,’ which may work in the United States, is doomed to failure in Europe, given our diverse cultures.”
Cultural differences were especially notable in the apparel sector, Disney’s largest revenue-producing merchandise category. Before the transnational deals were negotiated, anyone could sell Disney apparel by paying the company a fee, but availability of certain products and their distribution were often sporty. Hightower’s regional office team picked four manufacturers as pan-European licensees, dramatically raising the quality of product and design. Europe-wide sales jumped 24 percent. But there were flaws. The four companies preferred not to compete outside their home bases, and several markets were left under exploited. Germany’s structured retailing sector required sustained relationship building, but since none of the new licenses was German, that country’s sales dropped 30 percent in a year. Italy’s marketplace was ruled by small retailers, and none of the licensees penetrated the market.
Hightower defended the change. “My role is to step back, take a global view, and evaluate tradeoffs. Once I have reached a decision, I try to make my country managers respond to my ideas in order to ensure that the entire region moves in concert.” He believed the deals helped remind those managers of the big picture. “if pan-European deals get the whole of Europe there faster, we will take the pan-European deals route.”
DCP-EME hit the target of 20 percent annual growth. Vertical integration had dramatically raised revenues and increased operating profits—although at lower margins. Europe now marched to the beat of one drummer.
Hightower than quickly began restructuring the rest of the organization, splitting it into separate creative and publishing divisions. He replaces the marketing chide, whose divisive management style pitted one country manager against another. A fourth vice president headed up finance and business development. Below them were three senior managers overseeing human resources, legal issues, and non-Disney licensing. Ten regional and country vice presidents sat on the fourth management tier.
Hightower believed that weaving operations together was creating strong synergies and positive relationships. To oversee Disney’s reorganized global businesses, he established an operating council composed of himself, eight country managers, and four regional executives. They met every quarter and occasionally designated special teams to look into specific issues.
Pockets of resistance did remain to the organization’s “cultural globalization.” In 1992, the United Kingdom’s fiercely independent, pro- British country manager was replaced by an outsider. Most employees, however, admired Hightower’s management skills. “Before Dennis, people in ‘the studio’ would refer to the United States and the rest of the world,” remarked one country manager. “Dennis has made them realize the richness, complexity, and potential of Europe.”