Walt Disney Case

Analysis and Recommendations

MGT 405: International Business Strategy

By: Margot James, Marissa Garcia, Briana Stanley, Marcus, Donghan

Table of Contents

Corporate Strategy………………………………………………………………………………...3

Five Forces………………………………………………………………………………………...4

Internal Capabilities……………………………………………………………………………….5

SWOT Analysis…………………………………………………………………………………...6

Industry Attractiveness……………………………………………………………………………7

Sustainable Competitive Advantage………………………………………………………………8

Evaluation and Recommendations………………………………………………………………..9

Corporate strategy

There are three major corporate strategies for Disney. First, Disney’s Corporate strategy

is centered on creating high-quality family content. Second, Disney aims to exploit technological

innovations to make the consumer entertainment experience more memorable. For instance,

Disney’s acquisition of Pixar and Marvel allowed the company to gain resources and capabilities

within its core animation business. The Walt Disney Company’s third strategy, international

expansion, is a current and key activity. Their primary focus is on the big four countries (China,

India, Russia, and Turkey). Disney recently acquired UTV, which is India’s leading media and

entertainment company. With this acquisition Disney is expected to be a major film studio

producing both UTV and Disney-branded local films. Furthermore, the Shanghai Disney theme

park will open in 2016, greatly increasing the brand’s international presence.

Five Forces

While there is no other competitor with equivalent size or diverse business units as

Disney, there is still high competition within the each market sector Disney participates in. The

threat of a new entries is low because Disney continues to dominate the family entertainment

market and it has a very diverse business units. There is a high entry cost and capital

requirements due to the advanced technology needed in this industry, making it very difficult for

potential competitors to enter. It is very easy to find a substitute in entertainment industry; and

Disney faces high competition in every segment of their business units. However, Disney has a

strong and loyal customer base. The power of buyers is high due to pricing being expensive and

not necessary for the customer. The buyer has the power not to consume Disney’s products and

service. Also, the customer traditionally has the power in the overall entertainment industry

because there are numerous substitutes. The bargaining power of suppliers is low because the

Disney company is a unique and important customer of many of the suppliers, therefore,

suppliers face high switching costs.

Internal Capabilities

Disney has a handful of notable internal capabilities. For one, it is broadly diversified,

meaning that it operates in a number of industries. From theme parks, to broadcast television

networks, to children’s book publishing, the company has its hand in many markets. From an

investor’s standpoint, this is a great attribute because more diversification calls for less risk when

the economy shows signs of slowing and growing in different areas. Another important

capability of Disney is its very large and successful acquisitions of other companies. In 2006, the

company acquired Pixar, a large company that is very successful with its own animated films.

Other major acquisitions include Marvel, ESPN, and ABC. Thirdly, Disney is extremely brand-

focused, meaning that most of its capital is invested in the brand. While the animated films

themselves do not actually provide Disney with a great amount of revenue, they help to sustain

the overall brand image and keep the brand alive for years to come. Disney also adopted a

technology approach to their business model at the time when technology first began to boom. It

offers much of its content digitally, such as the WatchESPN app and e-books. Lastly, while the

profits in the United States continue to be well over 50% of total profits, Disney now operates

overseas much more in recent years, with operations in more than 40 countries.

SWOT Analysis

Conducting a competitive SWOT analysis on the Walt Disney Company, Disney will be

very happy to know that they are sitting in a great position both Internally and Externally.

Strengths:

A diversified portfolio and strong synergy amongst the different businesses allows Disney to

leverage their different business units to help each other. For example, Disney's parks making

rides and attractions based on their movies. Disney's ability to create "magical" stories and push

the boundaries of digital animation. A huge strength of theirs too is of course the brand

awareness.

Weaknesses: Disney's biggest weakness that can really be said is that the majority of their

revenues is in the North American Market primarily. Somewhere around 70% of their revenues

are here in America.

Opportunities: Their weakness also happens to be their opportunity and there is a lot of

opportunity for Disney overseas. Disney has already started to make these moves with the

purchase of UTV, filming movies in other countries, and also opening parks up around the

world.

Threats: Some exterior threats to Disney's businesses are illegal piracy from online downloading,

online television services, and general competition.

Industry Attractiveness

For the most part, Disney’s long-term attractiveness is high. Each of the separate

businesses (media networks, parks and resorts, studio entertainment, consumer products, and

interactive media) create their own revenue, but some much more than others. The media

networks are the most profitable, because of all of the successful acquisitions of popular

networks like A&E, Lifetime, History, ABC and ESPN. Revenue for media networks have been

increasing over the past few years. Its parks and resorts have shown to be the most reliable long-

term investment choice because they are the main cause of Disney’s popularity. The revenue

from the parks and resorts did drop in 2009 but have since picked back up and are still expected

to produce long-term growth. The studio entertainment business is smaller than competitors, but

has shown steady increase over the years, which is healthy. Consumer products are similar in

that they are also a small sector of business, but show steady growth. Disney’s interactive media

has had concerning issues with its profitability and poses a threat to the overall industry

attractiveness. It had revenue losses from 2009-2011. The previously researched “Industry

Attractiveness Assessments” chart provides a score for each business’ individual long-term

attractiveness. Industries with a score of 5 or lower were seen as unattractive. The attractiveness

for Disney’s industries were as follows: Media Network was 8.05, Parks and Resorts were 7.03,

Studio Entertainment was 6.40, Consumer Products were 6.65, and Interactive Media was 3.28.

Overall, The Walt Disney Company does have long-term attractiveness.

Sustainable Competitive Advantage

Disney’s sustainable competitive advantage is its powerful ability to acquire companies,

and it does so for different reasons. One tactic is to acquire companies that are technologically

advanced in areas that Disney is not. Playdom had the capability of social gaming that Disney

did not have. If Disney were to learn the industry and build its own social gaming system, it

would have taken a long time-maybe even too long. So Disney acquired Playdom at the time

when social gaming was taking off in the technological world. Another reason Disney will

acquire a company is if it complements Disney’s weaknesses in a particular industry. Playdom is

an example of this too, as we just mentioned. There is also the example of UTV, an Indian media

and entertainment company, which was acquired by Disney because it was a simple way for the

company to expand its presence overseas. The third argument for Disney’s acquisitions is that

some companies have intellectual property that is under-exploited. Both Marvel and Pixar had

“buried treasure” but were not reaching their full potential before being acquired by Disney.

According to the “Competitive Strength Assessments” chart, the individual competitive strength

scores are as follows: Media Network was 8.47, Parks and Resorts were 7.25, Studio

Entertainment was 6.77, Consumer Products were 6.47, and Interactive Media was 2.95. A score

of above 6.7 means a strong market contender, while 6.7-3.3 shows moderate competitive

strength, and below a 3.3 is competitively weak. Overall, Disney is valuable, rare, difficult to

imitate, and without substitutes, making it a company with a sustainable competitive advantage.

Evaluation and Recommendations

The Walt Disney Company is, and will likely remain, the world’s dominating

entertainment and theme park provider in the world. With revenues, theme park attendance, and

acquisition of businesses all seeing growth, Disney should continue with its current corporate

strategy. There are however, a few areas Disney should monitor closely and exercise caution

when risking capital and seeking heavy investment. It has been identified that the Interactive

Media segment is small and a weak market contender for Disney. Rather than focusing on this

business unit, it would be wise to shift the focus to the emerging mobile media segment for TV

audiences. Park expansion is also a key player in Disney’s continued success as these

entertainment hubs currently account for one third of the company’s total profit. While up-front

costs are high and profit is realized later on, theme park additions have proven to be winners.

Take for example Disneyland Paris, which was once considered a low performer compared to the

U.S. parks, is now a top profit generator.