Reference no: EM133244439

Mini-Case Walt Disney Company Corporate Strategy

The Walt Disney Company has a diversified set of businesses in movie-making, television show production, media distribution (e.g., ABC and ESPN), interactive and theme parks (e.g. Disneyland, Disney World, Disneyland Paris, and Shanghai Disneyland), and retail and consumer product sales. It is the second largest mass media producer after Comcast, which owns NBC and Universal Studios. While other more focused media content providers such as Discover Communications, CBS, and Viacom have seen decreasing revenues because of lower ratings and TV ad weakness, Disney was strengthened through its other businesses based on its diversification strategy. Although its ad revenues have decreased like other more focused content producers and distributors, its other businesses are growing and allow it to maintain higher earnings compared to other rival media producing firms. Disney's strategy is successful because its corporate strategy, compared to its business-level strategy, adds value across its set of businesses above what the individual businesses could create individually. In the literature this is often known as synergy, or in the more academic literature, economies of scope (defined earlier in Chapter 6). First, Disney has a set of businesses that feed into each other. its studio entertainment, consumer products and interactive media, media network outlets, parks and resorts, studio entertainment parks, and retail enterprises have overlapping aspects Within its studio entertainment businesses, Disney can share activities across its different production firms: Touchstone Pictures, Hollywood Pictures, Dimension Films, Pixar Films, and Marvel Entertainment. By sharing activities among these semi-independent studios, it can learn faster and gain success by the knowledge sharing and efficiencies associated with each studio's expertise. The corporation also has broad and deep knowledge about its customers, which is a corporate-level capability in terms of advertising and marketing. This capability allows Disney to cross-sell products highlighted in its movies through its media distribution outlets, parks and resorts, as well as consumer product businesses Recently, for example, Disney has found success in making live action movies from former comic books through its Marvel acquisition A recent example is the success of Black Panther, a superhero film that deals with issues of being of African descent. Its success follows other Marvel superhero movies such as Wonder Woman, Guardians of the Galaxy, Captain America, and Iron Man Marvel's characters have also led to TV series such as Agency of SHIELD from Captain America: The Winter Soldier Disney has been also been moving from its historical central focus on animation in movies such as Cinderella, The Jungle Book, and Beauty and the Beast, into the same titles or stories using a live action approach. The recent release of 4 Wrinkle in Time staring Oprah Winfrey and Reese Witherspoon is another example Cinderella, a live action version of the original 1950 animated classic, stays particularly close to the "fairy tale version of the script." This approach comes from its understanding of its customers and what they prefer Other approaches can be found in Alice in Wonderland with Johnny Depp and Maleficent with Angelina Jobe, both of which were twists on their respective originals (Maleficent came from Sleeping Beauty). The action versions of these two movies grossed $1.3 billion and $813 million globally, respectively. Although Disney has had some relatively unsuccessful pictures-John Carter, The Lone Ranger, and The Sorcerer's Apprentice-its action movies based on its animated fairy tales have been relatively more successful. Disney successfully promoted Cinderella products in its stores and in other focused retail outlets and advertised its movie-themed products along with direct connections to Alice, Maleficent, and Frozen. All of these have been consumer product successes, and A Wrinkle in Time is likely to have the same appeal. All of these feed products not only into its Disney stores and Disney themed sections in department stores, but also promote resort themes and thus drive interrelated revenue through cross-selling One of the downside problems for these fairy tale themes is that the stories are in the public domain. As such, other competitors are seeking to follow Disney's successful approach. For example, Time Warner Inc.'s Warner Bros. Studio will release Pan, which seems to be beating Disney to the punch on its former Peter Pan movie success. Likewise, Time Warner released Jungle Book in 2017 and has another script based on Beauty and the Beast, Comcast's Universal Pictures is developing The Little Mermaid. However, neither of these studios has the retail marketing power nor the franchising capability of Disney and its interrelated business and corporate skills. Although they are seeking to build these skills, they cannot duplicate Disney's corporate strategy and parent benefit because they are primarily focused on content and distribution. Disney also owns ABC and its sports channel ESPN. Although ESPN subscriber numbers are down recently due to cord cutting. Disney has developed the ESPN Wide World of Sports Complex at The Walt Disney World Resort as a sports-related complex that attracts sports enthusiasts and teams to its Disney World Resort in Florida. The complex also attracts sports teams such as the Atlanta Braves during their training camp. It is planning to reduce the cord cutting by offering its own standalone streaming service, and ESPN is already an anchor tenant of emerging digital platforms, with carriage on Dish's Sling TV, DirecTV Now, PlayStation Vue, YouTube TV, and Hulu. In summary, Disney has a current corporate parental advantage over its more focused movie and content producing and distribution competitors due to the power of its interrelated set of businesses, where the corporation facilitates customer market information sharing and skill transfer among the various business units

QUESTIONS

1. What corporate diversification strategy is being pursued by Disney? What evidence have that supports your position? 

2. How the corporate office pursue a parental advantage, which is difficult to duplicate by its more focused competitors? 

3. What are synergies and economies of scope and how they work at Disney to lower its overall costs? 

4. Given the diversification approach that Disney uses, what are some things that they can do to deal further with the trend toward cord-cutting and competition from large streaming and content producers such at Netflix, Amazon, and other content producers