The first issue the Walt Disney Company has to face concerns diversification: has it diversified too far? It is legitimate to consider such a question as the number of businesses Disney presents has exploded since the company's beginning. Indeed, being first a company based on movie-making, Disney then expanded into the music business with records, into theatrical and television productions, into broadcasting networks, into theme parks and resorts, as well as into internet activities and sports teams ! Although Eisner got rid of some activities in 1999, we still wonder if Disney has diversified too much and whether it has a coherent offer through which it can really create value. A diversification process cannot spare a company's image, that is why Disney also has to focus on its brand image. Indeed, by entering new businesses, the company may jeopardize its brand equity and brand image. Walt Disney's original legacy seems to be fading, which provokes internal disagreements as well as external negative consequences. Disney has already suffered from boycotts because it failed to respect its original values and position.
[...] However, this scenario has some limits; first by choosing not to diversify in new segments of activity, the Walt Disney Company risks missing some great market opportunities. Indeed, this choice would limit Disney's possibilities to integrate new segments of the entertainment industry and so to have a global approach of the entertainment world. The choice also includes the risk to loose some competitiveness on some segments of the entertainment industry comparing to other competitors. Appendix 1 SWOT Strengths Weaknesses Strong brand equity (consumer An abusive diversification loyalty ) High turn-over among high Leader in sectors such as amusement executives park attendance, top-grossing The loss of the Disney spirit animating films, US box office -Walt Disney legacy is restricting Conglomerated activities: to employees creativity release a film, to promote and -Financial considerations are broadcast it on TV, to license the predominating on the creative characters to manufacturers and aspects retailers and to integrate it in The merger with ABC: two different their amusement park cultures/two large companies/ two The synergy policy different business models No president between 1996-2000 Conflict orientation and a lack of communication between business units (more than increase in employees number) Some Disney product are not contemporary enough Opportunities Threats The development in overseas markets An impressing number of big such as Europe or Asia ( in 1999, competitors: on each segment Disney UK+ FR+IT+GER consumers only spent faces huge competition 40% as much per capita as in the Jeopardizing the brand image by US) entering new businesses A genuine licensing management: Internet : Peer to Peer (films and fewer licensees but better quality TV shows) and image Internet : to advertise more accurately the products, sell theme parks Appendix forces of Porter applied to the entertainment industry Bargaining power of buyers High: theaters retailers show promoters and publishers big corporations (advertising) local governments Low: individuals licensees Note: 3/6 Bargaining power of suppliers High: the entire movie and television sector - licensees Low: suppliers for amusement parks Note: 4/6 Rivalry among competitors Big players in each segment: Disney / Sony / AOL-Time Warner / Vivendi- Universal/ Murdoch Group . [...]
[...] Indeed, the business units are currently suffering from harsh competition between one another which may result counter-productive. In addition, the recent ABC acquisition has reinforced this cohesion issue, because of the culture gap between the two companies and the clashes it provokes among executives. II. Mobilize strategic choices As Disney is not a traditional firm with a main product marketed on different segments, the McKinsey matrix is a performing tool to classify their myriad businesses (see appendix 3 for more details). [...]
[...] Indeed, the success of the Walt Disney Company is based on its studio which is one of the biggest Hollywood studios and on its eleven theme parks and several television networks. Moreover, an abusive diversification could weaken the Walt Disney Company as it would have to face strong competitors for each of its new business units. The fiasco in the launch of the search engine Infoseek and in the internet website go.com demonstrates that the Walt Disney Company investments should be refocused. [...]
[...] Does ABC radio networks and stations are that relevant to Disney businesses, we may doubt about it or ESPN channel (even if it is the most profitable channel in the US). The limits of this scenario concern the critical size that an entertainment giant has to have in every segment of the industry. 2nd scenario: to continue diversification to dominate every segment of the industry As the entertainment industry is very concentrated among few but gigantic competitors (such as Vivendi-Universal, Sony, AOL Time-Warner not to be present on most every aspects of entertainment would let others take advantage in a global strategy. [...]
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