Describe about the Report on Corporate Strategy of The Walt Disney Company.
About The Walt Disney Company
It is an American company and the second largest media conglomerate in the world. The company was set up in 1923 and operates in four major segments. Studio Entertainment is the primary business segment of the company and The Walt Disney Studio is the unit under entertainment segment that deals in films, music recording label and theatrical divisions. Second major segment of the company is Park and Resorts. The company has theme parks, cruise lines and other major assets related to travel. The third segment of the company is Media Networks in which the company owns television properties. Lastly the fourth business segment is Consumer products and interactive media. The company produces properties such as toys, clothes, merchandises based upon Disney in its products category. The company also has internet, mobile, social media and computer games operations under its interactive media unit. The management of the company has Robert A. Iger serving as Chairmen and CEO of the company. The annual gross revenue of The Walt Disney Company for the year 2015 was USD 52,465 Mn., whereas the net income of the company from all the subsidiaries was USD 14681 Mn. The symbol and mascot for the Disney has been Mickey Mouse, a cartoon that has been created by the company. The company has been listed on NYSE and employees around 180,000 people (About - Leadership, Management Team, Global, History, Awards, Corporate Responsibility - The Walt Disney Company, 2016).
Corporate Level Strategy
The Strategic decisions that businesses makes that have an impact on the organization as a whole. Corporate level strategy includes the financial performance of the business, its mergers and acquisitions along with management of human resources and allocation of resources. The overall scope and direction that will help a corporation in carrying its business operations and will ultimately enable them in achieving the organizational goals (Corporate Strategy - Harvard Business School MBA Program. 2016). There are different types of corporate level strategy that could be employed by an organization.
Value Creating Strategy is the strategy employed by the business to gain more share of the market and edge out its competitors. These strategies plan to exploit the economies and gain an advantage; it could be done in a way by allocating resources and capabilities of the business in a manner that could be used by the entire organization to reduce the cost and increase the efficiency. Diversification is the key idea behind such value creation. To offer various products to the consumers and to capture a large part of market share (Dransfield, 2001).
Value Neutral Strategy is when an organization is concerned with securing a current place in the market and not much focused on resource or manpower allocation. The approach is neutral and it aims at reducing risk and to create a steady cash flow, initiatives like regulatory oversight, creating harmony between departments are such ways of neutralizing the value (Thompson,2001).
Value Reducing Strategy is when the stakeholders and consumers have the feeling that the business is only benefitting the top management. In such cases value reducing strategy focuses on the business market and demographics are defined and unnecessary growth is prevented by putting mechanisms (Furrer, 2016).
The most important part for a business is to decide which strategy it should adopt and how will it benefit the organization.
Corporate Strategy of The Walt Disney Company
The corporate strategy of the company is based on franchising and opportunities that generate revenue. The company has a large network and many platforms. The company creates value by harnessing the resources and using it in multiple business units (Carillo, 2012).
Core Strategy of the company
The theme parks and resorts, video entertainment and consumer products are the one of the most competitive segments; the company tries to position itself such that it creates leverage under the name Disney and is considered as a family entertainment (Kottke, 2015).
The company undertook promotional activities and coordinated them in every aspect of the value chain, the special effects that were created for the films led to matching characters, attractions and consumer products that were made available at the theme park, retail stores and catalogs. All the Disney products and services were actively cross marketed. The merchandises were offered on a limited edition bases through the parks and catalogs.
The coordination and sharing was made highly effective through the horizontal mechanisms. Projects all across the divisions were synergized. The events, like birthday of Mickey Mouse, the mascot of the brand was a coordinated event across all divisions. Employees across all the divisions are provided training and the data or information of the customers that is available is used across all the divisions. Similarly transfers of senior personnel are done across divisions (Corporate Strategy, 2016).
Since the very beginning the company core strategy has been their focus on franchises. The company believes that it’s a full circle : movies drives the sale of the merchandises and leads to increment in the visits of theme parks, which in turn drives interest for sequels and spin offs. This will ultimately lead to repeat and reboot. The synergetic strategy of the company has led to sustained growth.
The key drivers for the growth of the company have been to create innovations so as to boost the theme parks visits, to drive revenue for the resorts and to increase the viewership of its channels.
The future goals of the company have been to fully develop and monetize its brand under franchisee and to increase its global presence. The company has immense success in the United States, but the company focuses on translating that similar success in other parts of the world. The company has to adapt to the technological advancements of the society (Kevin Mayer-the Walt Disney Company 2016).
Strategies of the segments
The company has a clear strategy as per their business environment, it is to own the franchises and the means of distribution for those so as to touch the customer points. The company grows by creating value for its products (Benna 2015).
Media Networks Strategy
The largest segment of the company is media networks. The company operates cable networks, broadcast televisions networks, radio shows and digital operations. 46% of the revenue is generated from this segment. The company uses differentiation strategy for this segment. They own eight separate groups under this segment and cater to different audience with each of their products (Favaro 2015).
Parks and Resorts Strategy
After media networks, parks and resorts generate second largest revenue for the company, approximately 29%. This is the segment which is more capital intensive. This segment incurs 70% of the total expenditure made by the company. However when compared with the other segments in terms of revenue generation and expenditure incurred this segment does not contribute much but amounts to a lot of investment, but it align with the strategy of the company to grow on a global level (Zenger 2013).
Studio Segments Strategy
This segment of the company consists of the animated and live action films, music and theatrics. The studios create, promote, produce, sell, acquire and distribute the projects under the name of the company. This segment slows the company to have a global presence by allowing distribution of its products worldwide and cater to audience all around the globe. This segment generates approximate 16% of the revenue for the company (Coverly 2013).
Consumer Products Segments Strategy
The company runs this segment to capitalize on the brand. The idea behind running this segment is revenue generation, which was 7% in the year 2011. The company creates merchandises and offers them in the markets to the customers at the theme parks, stores and catalogs. These merchandises create a brand for the company and is related to the characters developed by the studio. This in turn increases the revenue of the parks, resorts, studios as well as also generates revenue by selling of the merchandise (Yau 2015).
Interactive segments Strategy
Smallest segment run by the company that generated 2% revenue in year 2011. This segment aims at introducing the customer to the Disney brand in the way of interactive media and interactive games coined by the company.
The strategy of the company is to align all its resources and create value for all its offerings, whether it is parks and resorts, merchandise or media networks. The company has been following the policy of synergizing all its resources so that they could be harnessed for the overall benefit and value creation of the company. The company has adopted value creation strategy. They exploit the resources and plans on achieving economies of scale, by integrating their operations and aligning all its products in such a way that development of one leads to development of another and the company gains competitive advantage.
Strategies to exploit overseas business marketThe company plans on establishing it operations and cater to customer all over the globe. The current global presence of the company is more dominant in the U.S. with its operations in more than 200 countries. To understand the potential business opportunities for the company the SWOT analysis of the company is undertaken (Jurevicius 2013).
The company has strong product portfolio that includes television network, which is one of the most watched cable networks in the world. The diverse portfolio provides a competitive edge to the company.
The company has a strong brand name and has built the reputation over its name. the company is considered as a family entertainment company, whether it is their parks, channels, movies or studios they are considered as a family entertainers and this has given them strong advantage over their competitors.
Diversified business and localization of products- the company operates in five segments both online and offline. They generate stable revenues from all the different business models and are less affected by the changes in the external business environment because of this diversity. To also adapt to the local taste, the company has adopted localization in some segments. This has added to the strengths of the company as it has given them advantage of their competitors and boosted their customer base.
The company is heavily dependent on its income from North America even after operating in more than 200 countries. A major change in the economy makes the company vulnerable.
The company has become so huge that they have to seek approval from federal trade commission before any acquisition. The size of the company and its share in the market is a concern for the government. So the company is left with fewer options for acquisitions of competitors.
Growth of Television industries in emerging markets like China and India seemed like a potential business opportunity for the company. The company has already entered these emerging potential markets.
Movie Production Expansion- the Company has an opportunity to take its productions in to the emerging markets of the developing countries that have developed good infrastructure.
Intense competition- the company has to face intense competition in media, tourism, parks and resorts and interactive media industries. The news and medias have gone online giving the company a very tough competition and new technologically developed business model gives the company tough competition. Parks and resorts segment get strong competition from the local competitors who can offer a more locally adaptive product. Growing competitiveness in the market is giving the company a tough competition.
Piracy is a matter of concern for the company. Piracy allows the content to be copied, transmitted and to be distributed without the issues of copyright. The new wave of internet has allowed piracy to gain commonness amongst people; this has been a setback for the company in the movies segments.
Online Television and Movie renting has also affected the business of the company along with piracy. In addition to online renting of the movies and television subscription the company has also got reduction in the bargaining power because internet infrastructure is often maintained by different companies and that takes away the power from the cable providers.
The Walt Disney Company has its operations in five segments. The company has the core strategy of synergizing their resources in all these five segments so that they could be harnessed for the overall benefit and value creation of the company. They exploit the resources and plans on achieving economies of scale, by integrating their operations and aligning all its products in such a way that development of one leads to development of another and the company gains competitive advantage. The strength of the company lies in its diverse product portfolio and the strong brand name the company has built over the years. The size of the company makes it difficult for them to acquire any new business of the competitors because of the antitrust laws in the U.S. And they are also heavily dependent on the U.S. economy for their business revenues, both of these factors accounts as a weakness for the company. The opportunities that the developing markets have are been tapped by the company and operations have been set up in the developing countries like India and China. The threats faced are the piracy issues, transitional shift from offline to online renting and subscriptions along with the intense competition faced in all the five segments. The company’s strategy has proved too worked for the company for the past years of operations and will continue to be the core strategy for the next decade.
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