Walt Disney Company Corporate Strategy

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Ch apte r 6. Mini -Case

W alt Disney Company Corporate Strategy

Th e W alt Disne y Compan y ha s a dive rsified se t of bus inesse s in mov ie-mak ing , telev ision sho w

produc tion , med ia distribu tion (e.g., AB C an d ESP N), interac tive an d the me pa rks (e.g.,

Disney land , Disne y W orld, Disney lan d Pa ris, an d Shangha i Disney land ), an d retail an d

consu mer produc t sa les . It is the secon d larges t mas s med ia produce r after Comcas t, which

owns NBC an d Unive rsa l Stud ios . W hile othe r more focuse d med ia con ten t prov ide rs suc h as

Discove r Comm un ica tions , CBS , an d Viaco m hav e see n dec reas ing revenue s becaus e of lower

rating s an d TV ad weakness , Disne y was streng thene d throug h its othe r bus inesse s base d on its

dive rsifica tion strateg y. Althoug h its ad revenue s hav e dec rease d like othe r more focuse d

con ten t produce rs an d distribu tors, its othe r bus inesse s are growing an d allow it to maintain

highe r ea rning s co mpa red to othe r riva l med ia produc ing firms.

Disney ’s strateg y is success ful becaus e its co rpo rate strateg y, co mpa red to its bus iness – leve l

strateg y, add s va lue ac ros s its se t of bus inesse s abov e wha t the ind ividua l bus inesse s cou ld

crea te ind ividua lly. In the literature this is often kno wn as syne rgy, or in the more acade mic

literature, econo mies of scop e (de fine d ea rlier in Chap ter 6). First, Disne y ha s a se t of

bus inesse s tha t fee d into eac h othe r: its stud io en tertainmen t, consu mer produc ts an d interac tive

med ia, med ia ne twork ou tlets, pa rks an d reso rts, stud io en tertainmen t pa rks , an d retail

en terprise s hav e ove rlapp ing aspec ts. W ithin its stud io en tertainmen t bus inesses , Disne y ca n

sha re ac tivities ac ros s its differen t produc tion firms: Touchs ton e Pictures , Hollywoo d Pictures ,

Dimens ion Films, Pixa r Films, an d Marve l En tertainmen t. By sha ring ac tivities amon g thes e

se mi-independen t stud ios , it ca n lea rn fas ter an d ga in succes s by the kno wledg e sha ring an d

efficienc ies assoc iated with eac h stud io’s expe rtise . Th e co rpo ration also ha s broa d an d dee p

kno wledg e abou t its cus tomers, which is a co rpo rate-leve l capab ilit y in terms of adve rtising an d

marke ting . Th is capab ilit y allows Disne y to cross -se ll produc ts high ligh ted in its mov ies throug h

its med ia distribu tion ou tlets, pa rks an d reso rts, as well as consu mer produc t bus inesses .

Recen tly, for exa mple, Disne y ha s foun d succes s in mak ing live ac tion mov ies from former co mic

book s throug h its Marve l acqu isition . A recen t exa mple is the succes s of Blac k Pan the r, a

supe rhe ro film tha t dea ls with issue s of be ing of Africa n descen t. Its succes s follows othe r Marve l

supe rhe ro mov ies suc h as W onde r W oman , Gua rdian s of the Galax y, Cap tain America , an d Iron

Man . Marve l’s cha rac ters hav e also led to TV se ries suc h as Agenc y of S.H.I.E.L.D. from

Cap tain America : Th e W inter So ldier. Disne y ha s bee n also bee n mov ing from its historica l cen tral focu s on an imation in mov ies suc h

as Cinde rella, Th e Jung le Boo k, an d Beau ty an d the Beas t, into the sa me titl es or stories us ing a

live ac tion app roach . Th e recen t releas e of A W rink le in Time staring Oprah W infrey an d Rees e

W ithe rspoo n is ano the r exa mple. Cinde rella, a live ac tion ve rsion of the origina l 195 0 an imated

class ic, stay s pa rticu larly clos e to the “fairy tale ve rsion of the sc ript.” Th is app roac h co mes from

its unde rstand ing of its cus tomers an d wha t the y prefer. Othe r app roache s ca n be foun d in Alice

in W onde rlan d with Johnn y Dep p an d Maleficen t with Ange lina Jo lie, bo th of which were twists

on the ir respec tive origina ls (Maleficen t ca me from Sleep ing Beau ty). Th e ac tion ve rsion s of

thes e two mov ies grosse d $1 .3 billi on an d $81 3 milli on globa lly, respec tive ly. Althoug h Disne y

ha s ha d so me relative ly unsuccess ful pictures — Joh n Carter, Th e Lon e Range r, an d Th e

So rce rer’s App ren tice — its ac tion mov ies base d on its an imated fairy tales hav e bee n relative ly

more success ful. Disne y success fully promoted Cinde rella produc ts in its stores an d in othe r

focuse d retail ou tlets an d adve rtise d its mov ie-the med produc ts alon g with direc t connec tion s to

Alice , Maleficen t, an d Frozen . All of thes e hav e bee n consu mer produc t successes , an d A

W rink le in Time is like ly to hav e the sa me appea l. All of thes e fee d produc ts no t on ly into its

Disne y stores an d Disney -the med sec tion s in depa rtmen t stores , bu t also promote reso rt the mes

an d thu s drive interrelated revenu e throug h cross -se lling .

One of the do wns ide prob lems for thes e fairy tale the mes is tha t the stories are in the pub lic

do main. As such , othe r co mpe titors are seek ing to follow Disney ’s success ful app roach . Fo r

exa mple, Time W arne r Inc .’s W arne r Bros . Stud io will releas e Pan , which see ms to be bea ting

Disne y to the punc h on its former Pe ter Pa n mov ie success . Like wise , Time W arne r release d

Jung le Boo k in 201 7 an d ha s ano the r sc ript base d on Beau ty an d the Beas t. Comcas t’s

Unive rsa l Pictures is deve lop ing Th e Littl e Mermaid. Howeve r, ne ithe r of thes e stud ios ha s the

retail marke ting po wer no r the franch ising capab ilit y of Disne y an d its interrelated bus ines s an d

co rpo rate sk ills. Althoug h the y are seek ing to bu ild thes e sk ills, the y canno t dup lica te Disney ’s

co rpo rate strateg y an d pa ren t bene fit becaus e the y are primarily focuse d on con ten t an d

distribu tion .

Disne y also owns AB C an d its spo rts channe l ESP N. Althoug h ESP N subsc ribe r nu mbe rs are

do wn recen tly du e to co rd cu tting , Disne y ha s deve lope d the ESP N W ide W orld of Spo rts

Complex at Th e W alt Disne y W orld Reso rt as a spo rts-related co mplex tha t attrac ts spo rts

en thus ias ts an d tea ms to its Disne y W orld Reso rt in Florida . Th e co mplex also attrac ts spo rts

tea ms suc h as the Atlan ta Brave s du ring the ir training ca mp. It is plann ing to reduc e the co rd

cu tting by offering its own standa lon e strea ming se rvice , an d ESP N is alread y an ancho r tenan t

of emerging digital platforms, with ca rriag e on Dish ’s Sling TV, DirecT V Now, PlayS tation Vue ,

You Tub e TV, an d Hulu. In su mm ary, Disne y ha s a cu rren t co rpo rate pa ren tal advan tag e ove r its more focuse d mov ie

an d con ten t produc ing an d distribu tion co mpe titors du e to the po wer of its interrelated se t of

bus inesses , whe re the co rpo ration fac ilit ates cus tomer marke t information sha ring an d sk ill

trans fer amon g the va riou s bus ines s un its.

Sou rces : Sou rces : E. Lo w, 2018 , Fo rge t ESP N, this pa rt of Disne y is ‘unde rapp rec iated ’ by W all

Stree t, Inves tors Bus ines s Daily, Feb rua ry 7, 20 ; S. Mende lson , 2018 , Bo x office : Marve l’s ‘Blac k

Pan the r’ top s $800 M worldwide toda y, Fo rbes , ww w.forbes .co m, March 2; A. Gara, 2017 ,

Disney ’s 199 5 dea l for AB C mad e Bu ffett billi on s by marrying Micke y Mous e with Spo rtsCen ter,

Fo rbes , ww w.forbes .co m, May 23 ; C. Harrison , 2017 , ESP N subsc ribe rs drop to 14 -yea r low,

pu tting pressu re on Disne y, Bloo mbe rg, ww w.bloo mbe rg.co m, Nove mbe r 22 ; N. LaPo rte, 2017 ,

Marve l rules the un ive rse , Fas t Compan y, May, 60 -68 ; B. Fritz, 2015 , Disne y recyc les fairy tales ,

minu s ca rtoons , W all Stree t Jou rna l, March 11, B1 , B6 ; M. Gottfried , 2015 , W alt Disne y ha s bu ilt

a be tter mouse trap , W all Stree t Jou rna l, Fe b 5, C8; M. Lev -Ram, 2015 , Empire of tech , Fo rtune ,

Janua ry 1, 48 –58 ; C. Pa lmeri & A. Sakou i, 2015 , Disney ’s princesses ’ give a littl e live ac tion ,

Bloo mbe rg Bus iness W ee k, March 9, 30 – 31 ; D. Leona rd, 2014 , Th e mas ter of Marve l un ive rse ,

Bloo mbe rg Bus iness W ee k, Ap ril 7, 62 –68 ; C. Pa lmeri & B. Fa ries , 2014 , Big Micke y is watch ing ,

Bloo mbe rg Bus iness W ee k, March 10 , 22 –23 .

Cas e Discuss ion Ques tion s

1. W ha t co rpo rate dive rsifica tion strateg y is be ing pu rsue d by Disney ? W ha t ev idenc e do yo u

hav e tha t suppo rts you r pos ition ?

2. How doe s the co rpo rate office crea te a pa ren tal advan tage , which is difficu lt to dup lica te by its

more focuse d co mpe titors?

3. W ha t are syne rgies an d econo mies of scop e an d ho w do the y work at Disn ey to lower its

ove rall cos ts?

4. Give n the dive rsifica tion app roac h tha t Disne y uses , wha t are so me thing s tha t the y ca n do to

dea l furthe r with the tren d toward co rd-cu tting an d co mpe titi on from large strea ming an d

con ten t produce rs suc h at Netfli x, Amazon , an d othe r con ten t produce rs?