The Walt Disney Company: Its Diversification Strategy in 2012

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- RECOMMENDATION

For further improving The Walt Disney Company’s performance, the company’s management needs to take a look on their innovative fronts. Disney must continue to strengthen operations by identifying new opportunities in the current target markets, with Disney's incredible brand recognition in market it will not be that hard. But along with that Disney also need to maintain their values and be fully compatible with either their entertainment niche or also possibly along the informational divisions.

SWOT Analysis

Strengths

Weaknesses

Strong brand portfolio.

Diversified entertainment businesses.

Brand reputation.

Competency in acquisitions.

Diversified businesses.

Localization of products.

Concentration of operation.

Few opportunities for significant growth through acquisitions.

Opportunities

Threats

Increased focus on expanding presence in emerging economies.

Growth of entertainment industries in emerging markets.

Expansion of movie production to new countries.

Competitive pressure.

Increasing piracy.

Strong growth of online TV and online movie rental.

Strengths

The Walt Disney Company’s products product portfolio provides a competitive advantage for the company over its competitors. Their brand has been known for more than 90 years and has been widely recognized worldwide, especially due to its Disney Channel, Disney Park resorts and movies from Walt Disney studios. One of the strongest sides the company has is its competency in acquisitions. The Walt Disney Company has acquired Pixar Animation Studios in 2006, Marvel Entertainment in 2009 and Lucasfilm in 2012. Those have already proved to be very successful in terms of revenue and profit growth. Few other Disney competitors have had such record of successful acquisitions. The business operates five different business segments, in many different economies and is generating their income using different business models. Due to such diverse operations, Disney is less affected by changes in external environment than its competitors are. Recently, Disney has started adapting its products to suit local tastes. Besides the parks and resorts, company’s movies and consumer products are adapted for Chinese market to attract more visitors. This is rarely initiated by the movie studio itself and is something that few other studios are doing.

Weaknesses

Heavily dependent on North America, although Disney operates in more than 200 countries, it heavily depends on United States and Canada markets for its income. More than 70% of the business the revenues come from US alone, while the major Disney’s competitor News Corporation receives less than 50% of revenues from US, making it less vulnerable to changes in US market (Market Daily News, 2013). There are few opportunities for significant growth through acquisitions. They are the largest entertainment provider in the world and has become so due to acquisition of competitors. The last Disney’s acquisition had to be approved by Federal Trade Commission so that the company wouldn’t have to deal with antitrust problems. This means that the size of the Disney’s business has become a concern for the government due to significant market concentration and that the company has very few opportunities to acquire competitors. Otherwise, Disney may become a subject to antitrust laws (Market Daily News, 2013).

Opportunities

Disney Company has already entered international markets and should continue to strengthen its position there to benefit from such high industry growth. Also, Disney has an opportunity to expand its movie production, where movie production industries have developed good quality infrastructure. This would result in lower movie production costs and more localized movies for international markets.

Threats

The intense competition in very competitive industries is the biggest threats. The competitive landscape changes quite drastically in the industry and new competitors with new business models compete more successfully than incumbent media companies. Disney’s parks and resorts business segment also receives strong competition from local competitors who can offer better-adapted product. This results in growing competitive pressure for Walt Disney Company. Disney also faces the bad side of advancements in technology, piracy. Copying, transmitting and distributing copyrighted material is much easier and this poses a great risk to Disney’s income, as fewer people would go to watch movies in a cinema or buy its DVD, when it’s freely available online.

The SWOT Analysis indicates that Disney must pay close attention to the potential threats that can inhibit the company’s continued growth and threaten its financial security.

REFERENCES

Carillo, C., Jeremy C., Kendree, T., & Jeffrey S. H. (2012). The Walt Disney Company: A corporate strategy analysis. University of Richmond: Robins School of Business.

Gamble, J., Peteraf, M. A., & Thompson, A. A. (2013). Essentials of strategic management: the quest for competitive advantage 4th Ed. New York: McGraw-Hill Education.

Market Daily News. (2013). The Walt Disney Company: A Fairy Tale Growth Story. Retrieved from http://marketdailynews.com/2013/05/20/the-walt-disney-company-nysedis-a-fairy-tale-growth-story/.