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Walt Disney is one of the largest media and entertainment companies in the world. The company has 11 parks, four cruise lines, and 43 resorts. In this essay, we critically analyze Disney corporate-level strategies that enable the firm to remain competitive in the market. Disney competitive advantage arises from the fact that management has been able to diversify business operations in different geographical locations. The company has an impressive opportunity to expand and grow by taking advantage of new opportunities in Europe and Asia-Pacific.
Disney’s theme parks and resorts undoubtedly represent the ability of the company to invest and manage businesses in multiple market segments. According to Goold & Luchs (2010) this is a unique part of the company since account for a significant value of the company (p.139). For instance, in 2013 Disney theme parks sales increased by an estimated 8.5 percent, while operating income increased by 15 percent. The company intends to grow sales by opening new theme parks in China, Russia, and India.
The long-term objective of Walt Disney is to become the best company in terms of service delivery in its theme parks. For instance, the Shanghai Disney Resort in China is expanding its operations, and it is expected to be the best theme park in China. The Shanghai resort plans to expand its operations by adding two themed hotels and resorts.
Walt Disney ventured internationally with an objective of increasing sales, expanding its operations and diversifying its theme parks to minimize potential risk. Moreover, the company intends to ‘go green’ by reducing greenhouse gas emission by at least 50 percent by 2020.
The company has the potential not only to attract new clients, but also to retain low-cost laborers in its theme parks. Walt Disney applies backward and forwards integration strategy by acquiring ABC television network. Through this acquisition, Disney controls a distribution channel for its content. Forward and backward integration strategy can be employed when the company intends to control inputs and outputs it uses.
Competitive dynamic is one of the best strategies that play a significant role in policy formulations. Applying this approach will allow the organization to respond in many ways to the dynamic in the industry. Disney theme parks and resorts employ a defensive strategy such as aggressive competition to increase market share and diminish the ability of a competitor to compete.
For instance, Walt Disney uses the most talented workforce to produce animated films aimed at decreasing the ability of it main rival Universal Studio to compete in the same industry (Enz, 2010, p. 57). The company then uses an aggressive advertisement and promotion strategy to gain market share.
Disney should use this strategy internationally to expand into new market segments through acquisitions and mergers. In the theme parks, the company uses high-tech; world-class entertainment to create a ‘magical’ place that is most appealing to families and young people. An aggressive strategy can only be successfully executed after Walt Disney has acquired adequate resources to create a product that is rare and challenging to imitate.
Walt Disney pursues a diversified corporate-level strategy through its horizontal integration strategy aimed at increasing market share. The company is expanding internationally to exploit emerging market opportunities in China and Russia through the acquisition of related businesses.
According to David (2015), acquiring affiliated companies reduce not only competition, but also enhance efficiency in the acquirer (p.136). Moreover, acquisition of related firms is easier to manage since managers of the acquirer are more likely to understand business operations of their targeted company.
Disney’s intensive and diversified strategies are purely driven by the growing need to expand it business internationally that will give Disney strong dominance in the industry. These procedures can be executed successfully especially when Walt Disney is facing stiff competition from a rival firm that can be acquired with available resources in the organization.
For example, Walt Disney applied horizontal integration strategy through the acquisition of Jim Henson Studios and Lucas films after accumulating enough cash flows. These entities have given Disney more resources and a large market share that supports continuous growth. Hitt, Ireland & Hokinson (2009) posits that Walt Disney applies unrelated diversification strategy that creates value through financial economies(p.165). The firm has been able to realize economic of scope by proper allocation of investment capital in a diversified portfolio.
Walt Disney uses joint ventures to penetrate into new market segments. For instance, Disney has a joint venture in France that enables the company to compete effectively with local theme parks. Disney theme parks have applied integration strategy through a combination of hotels, dining, merchandise and accommodation. When a family visits Walt Disney theme parks, they eat there, book hotel rooms (owned by Disney theme parks) and buy Disney merchandise. Moreover, families can also buy videos and books that leave a long lasting emotional experience.
In conclusion, Walt Disney intends to expand its operations to other geographic regions to increase sale while minimizing risk. Walt Disney has a long-term objective of ‘going green’ by reducing the rate of greenhouse gas emission. Disney intends to rely more on renewable sources of energy that are not only environmental friendly, but also reduce greenhouse gas emissions.
The company uses both related and unrelated strategy (diversified strategy) to create economies of scope through corporate relatedness. Although these strategies have worked in favor of Walt Disney, management should consider sharing activities among its different Theme Parks and resorts to gain economy of scope. Moreover, in case of an acquisition, management should target businesses in the same industry because they are more likely to create synergies. Acquiring a competitor in the same business line reduces duplication of facilities thus creating efficiency in operation management.
References
David, F.R. (2015). Strategic management concepts (15th Ed.). Saddle River, NJ: Pearson Education, p. 155-168.
Enz, C. (2010). Hospitality strategic management concepts and cases. Hoboken, N.J: John Wiley & Sons, p. 55-68.
Goold, M., & Luchs, K. (2010). Managing the multibusiness company: strategic issues for diversified groups. London New York: Routledge, p.135-140.
Hitt, M., Ireland, R., & Hoskisson, R. (2009). Strategic management: competitiveness and globalization: concepts. Mason, OH: South-Western Cengage Learning,p. 162-163.
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