Business Case Analysis

Open Case Discussion:

Disney Adds Value Using a Related Diversification Strategy
 Part A: Current Situation Analysis

01: PESTLE Analysis (Environment: Market/Area/Country Analysis)

[Exam: Personal Understanding and Case (If any) (2-3 lines for each factor),
Assignment: Websites, Personal Understanding and Case (If any) (5-6 lines
for each factor)]
 01: PESTLE Analysis (Sample)
• Political Factor:
Disney has been conducting its business in the entertainment industry
and providing services all over the world. So it has to maintain different
set of regulations for different markets. Stable political conditions in
major markets can influence Disney’s strategic management. Also high
taxation and government interference in the entertainment industry
play a vital role for expanding its businesses.
• Economic Factor
Economic growth of a country and the purchasing power of the
perspective customers must be kept in mind while providing services in
the market. Stable economic conditions of a market usually encourage
customers to enjoy entertainment products and services. Since Disney
is a multinational company, exchange rate of different currencies also
should be considered for conducting businesses all over the world.
• Socio-Cultural Factor:
Cultural factors greatly impact Disney as it offers entertainment and it
has to remain in line with the differences of cultures all over the world.
Customer preferences are also changing all the time. North American
and European countries cultures are quite similar. But Life style of
young generation, their choices, values and religious sentiment of
southeast Asia and Africa regions are different and need to be
considered with great attention for providing products and services
successfully.
• Technological Factor:
The social media explosion has allowed interactive engagement with
the customers in real time. Disney uses social media for better
understanding of customers as well as for the promotional activities of
their entertainment products and services. Also Disney is enhancing
their use of advanced computer generated imaging system and
augmented reality to provide better animated products. Moreover,
Technological advancement and R&D can help organization to
understand customers preferences and expectations to differentiate
their services and solve piracy problems.
• Legal Factor:
The legal framework for intellectual properties such as patents and
copyrights for its trademarks, movies and movie characters,
merchandise etc. and piracy prevention laws are not strict in some
developing countries. Some competitors may also imitate their
contents and pirate their products and services. Disney should take
some precautionary steps to reduce these problems while conducting
businesses in those market.
• Environmental Factor:
More and more consumers are demanding products that are eco-
friendly and ethically sourced. Disney can improve its brand image by
increasing environment-friendly products and services as well as some
awareness activities to free the environment from pollution.
 Part A: Current Situation Analysis
02. Five Forces Model (Both Industry Perspective and Company Perspective Analysis)
Exam: Only Company Perspective Analysis

• Bargaining Power of Buyers/Customers:

Industry Perspective: Low – The society is getting entertained by the

different parts of the entertainment industry. There are very few
alternatives available for customers for their refreshment and relaxation.
Company Perspective: High – Different companies offering different kinds of
entertaining products and services to the customers. The switching cost for
customers is pretty low. That’s why Disney has to focus on competitive
pricing strategy on their products and services.
• Bargaining Power of Suppliers/Content Creators:

Industry Perspective: High – To be successful in the entertainment industry,

every company requires efficient suppliers and contents creators. And
there are very few of them to fulfill that requirement. Powerful and skilled
suppliers in service sector use their negotiating power to extract higher
prices from the firms in Entertainment industry.

Company Perspective: Low – As Disney a renowned multinational

company usually orders huge volume of items and maintain related
diversification strategy, suppliers and contents creators do not want to
move to another company. In addition to that, sometimes supplied
products are highly standardized which makes low switching cost for
Disney.
• Threats of Substitute Products/Services:

Industry Perspective: Low – There are few products/services like

tourism industry available as substitute for entertainment industry. But
the entertainment industry is attracting customers and getting popular
all over the world. Differentiated products (Movies, Theme Park, Cloths
etc.) and in-house (TV Channels) services making the industry
affordable and unique.
Company Perspective: High – The availability of substitutes within the
industry creates High threats to Disney. Since majority of Disney’s story-
based movies are in public domain, they can be copied and used
extensively. Also competitors are following the approaches of Disney’s
success which makes the substitute products available within very short
span of time.
• Threats of New Entrants:

Industry Perspective: Low – The entertainment industry is highly capital

based and requires huge establishment cost. So it is not easy for
newcomers to survive and taste success for a long time.

Company Perspective: Low – Disney is a highly renowned company

with a long history. Huge investment, advanced technology and great
brand image make it less susceptible to new entrants.
• Rivalry among Existing Competitors:

Industry Perspective: Low – The competition among industries like

Entertainment industry, Tourism industry etc. exists to some extent but
not fiercely.

Company Perspective: High – Many competitors are trying to replicate

Disney’s successful approaches. Firms like Universal Picture, Time
Warner etc. are working aggressively with qualified personnel,
marketing strategy and advanced technology to outrun Disney.
Sometimes moderate differentiation in products and services makes it
harder for Disney to out-perform the competitors.
 03. SWOT Analysis (Specific Company Perspective) (3-4 Points)
(Based on Case Study and personal understanding)
Strengths:
• Strong brand image for products and services like cartoons, movies, theme
parks etc.
• Related diversification strategy strengthens market position and substantially
reduces the risk.
• Broad and deep knowledge about customer base in terms of advertising and
marketing.
• Organized distribution network and franchising capability.
• Mutual cooperation (sharing knowledge, expertise, cross selling) among
related set of businesses to ensure competitive advantage.
Weaknesses:
• The fairy tale themes (stories for movies) are in public domain and
known to people all over the world.
• Ad revenue from TV franchise is decreasing as many competitors are
providing similar services.
• Lack of new characters and stories for cartoons and movies.
• Produced some relatively unsuccessful action movies.
Opportunities:

• As most of the audiences switched to digital technology, Disney

should create an online platform for live streaming and gaming
opportunities which will lead to high audience retention and better
market position.
• Expansion into emerging economies through product/service
innovation based on cultural preferences will increase revenue.
• New trends in the consumer behavior and technological advancement
can open up new market of new characters for cartoons and movies.
• The growth of market and new customer base can help Disney to start
unrelated diversification strategy for investment in education sector,
tourism sector etc.
Threats:
• Many competitors like Comcast, Time Warner Inc. are trying to replicate
Disney’s successful approaches which make it harder for Disney to out-
perform the competitors.
• Weak legal protection for intellectual property rights reduces the
company’s potential revenues, especially in developing countries.
• The growth of Chinese economy will create more competition for Disney.
• Technological advancement and growing demand for digital technology
will create huge challenge for Disney as many competitors are focusing
on that area to achieve competitive advantage.
 04: Management Programs (Current Strategy)
(Company Perspective – From Case Study) (Exam: Only mentionable information)

• Corporate Strategy: Related diversification strategy

• Target Market: Disney's main focus is on the whole family. Their
target market varies from children to teenagers and even adults -
practically anyone who is young at heart.
• Product/Service Consideration: Diversified products. Entertainment
sector (Cartoons, movies, theme park, consumer products etc.) Mass
Media (ESPN, ABC etc.)
• Promotional Consideration: Mass media advertisement and cross
selling technique.
• Distribution Channel: Disney store, Disney theme section in
departmental store, franchising etc.
 Part B: Problem Identification (Only from Case
Study)
Primary Problem:
• Fairy tale themes for movies are in the public domain. So, competitors
are easily recreating those pictures and competing with Disney’s
animation business. Movies like Peter Pen, Jungle Book, Beauty and
the Beast etc. have been released from competitors.
• Lack of new characters in the cartoons and movies makes it difficult
for Disney to hold their market position because many competitors
are trying replicate Disney’s successful approaches and introduce new
contents/characters in the movies based on customer preferences.
Secondary Problem:
• Ad revenue from TV franchise is decreasing as many competitors are
offering similar services.
• Disney had some unsuccessful action movies like John Carter, The
Lone Ranger etc. which failed to not only attract new customers but
also to retain existing customers.
 Part C: Evaluation of Alternatives
(from Personal Understanding)
Solution (Primary Problem):
• Disney needs to release cartoons and animated movies with new
characters/contents based on the preferences and culture of the
customers. Creating new characters requires great deal of time and
money. So it may be costly and time sensitive in the short run. Since,
it has broad and deep understating of the customer base already, the
effort will pay off greatly in the long run by attracting new customers
from all over the world especially young generations and ensuring
high revenue for the businesses. Also intellectual property act will
prevent competitors from recreating their movies and copying their
business approaches.
Solution (Secondary Problem):
• Creating an interactive online platform for live streaming and
developing more focused contents based on the regional target
audiences will lead to high audience retention and high ad revenue.
Also encouraging small businesses into TV advertising can be a great
prospect for Disney. Use of advanced technology will reduce the cost
for providing services as well.
• Action movies market is very competitive and growing rapidly. Buying
popular action movie franchise and character rights will be a major
strategic decision for Disney. Successful action movies will attract
new customer base from developing countries and increase growth in
revenue. Disney is following related diversification strategy. So the
knowledge and expertise from related businesses can be used more
extensively.