Walt Disney Company’s Product Diversification

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Introduction

The complexity of modern society and the tendency towards the sophistication of all spheres of human activities result in the emergence of a need for effective management tools that will help to solve the majority of arising problems and create the basis for the further evolution of various organisations. At the same time, there is the tendency towards the growing importance of business and the increased significance of giant corporations that impact the development of economies.

Under these conditions, strategic management acquires the top priority as one of the approaches to drive positive change via the analysis of the current situation and all possible options. Moreover, regarding the constantly growing level of rivalry in various market segments and the appearance of new competitors, the ability to generate a competitive advantage becomes fundamental for successful outcomes. That is why the choice of the effective strategy is a critical element of organisations’ functioning as it impacts their work and results. In this regard, the paper is devoted to the analysis of Disney’s strategic decision to diversify its products via buying popular brands such as Marvel and Lucasfilm.

Background

The central reason for choosing the Walt Disney Company for the investigation is the corporations fundamental role in the sphere of entertainment and cinema. At the moment, it is one of the most powerful conglomerates that function in the mass-media segment and provide content to viewers and other individuals. The company is headquartered in Burbank, California; however, it offers products for various countries in the world. London Stock Exchange considers it a promising and profitable brand with a high potential for further evolution and growth (Walt Disney CO n.d.).

At the same time, the rising popularity of movies and media products in the modern world stipulated the high level of rivalry in the market segment, and Disney has to compete with such corporations as Sony, CBS, Warner Media. The existence of powerful rivals as well as a particular decrease in popularity preconditioned the need for the implementation of a new strategic incentive aimed at the diversification of products via the purchase of new brands and creation of new products.

Strategic Incentive

Outlining the central details of the utilised strategy, it is critical to state that the approach presupposed the improvement of Disney’s functioning via a chain of popular brands’ acquisitions to diversify products and enlarge the target population affected by the corporation. Pixar’s purchase can be considered the background for this strategic decision as it showed that the existence of multiple opportunities associated with this sort of deal and the positive impact on the conglomerate’s functioning (Whitten 2018). Moreover, in accordance with Robert Iger’s (Disney’s CEO) strategic plan, the company should create a new value and diversify its products, which can be achieved by acquiring rights for popular franchises and utilising them to offer new products.

For this reason, the strategic incentive presupposing buying Marvel Studios and Lucasfilm was accepted as the potent way to continue the evolution of the company and create a competitive advantage that will help to overcome rivals and hold leading positions in the sphere of entertainment. Marvel was bought in 2009 for $4 billion, and Lucasfilm was purchased in 2012 for $4,2 billion (Clark 2009; Whitten 2018). These deals became the most significant events in the given market segment as Disney got rights for all products created by these two brands, which provided multiple options for the further rise and extension because of their popularity among various populations regardless of the gender, age, location, and cultural peculiarities.

SWOT Analysis

To understand factors that preconditioned the implementation of this incentive, the analysis of the conditions, threats, and opportunities that impacted the strategy development should be performed. First of all, utilising the SWOT framework, the state of the company that can be analysed:

Strengths – the company’s main strength was the existence of multiple resources for the engagement in new projects and supporting already known and popular products. Being a popular brand, Disney benefited from the particular target audience and conglomerate’s recognised character.
Weaknesses – regardless of the high potential and existence of multiple facilities and resources, Disney lacked diversification of its products as they were mainly focused on children of different age with the prevalence of girls who were inspired by princesses and fairies (Whitten 2018). The company also had no clear strategic plan for its development regarding the new characteristics of the market and people’s demands.
Opportunities – the powerful financial base supported by numerous facilities, creative ideas, and resources provided multiple opportunities for the implementation of new strategic plans that would help to reconsider the company’s functioning. Additionally, the positive image of the brand and the existence of devoted clients provides the ground for new projects.
Threats – there is the growing popularity of the content that is not covered by the company such as comics and superheroes. There is also the diversification of clients’ needs and reducing interest to classic cartoons.

The analysis shows that regardless of the existence of multiple opportunities for evolution, the company experienced problems because of the growing rivalry and absence of diverse products to gain new clients.

PESTEL

Application of the PESTEL framework can help to evaluate the grounds for the strategic decision to buy Marvel and Lucasfilm from another perspective as it provides a list of influences on the accepted strategy and its success.

Political – the existing political impacts were beneficial for making a deal as there were no limits on purchases of this sort. Antimonopoly commission’s decision was also positive as there were no signs of unfair competition or ethical issues (Duyne 2016).
Economic – Disney benefited from the powerful economic position because of the existence of various theme parks and the target audience. Additionally, the growing popularity of cinema stipulated the growth in the level of revenues associated with the industry.
Social – the existing trends indicated the emergence of diversified requirements to the quality of content provided by filmmakers and entertainment companies. For this reason, there are prerequisites for the acquisition of famous and potent brands to diversify products and achieve success.
Technological – the existing level of technological development provides opportunities for the creation of more realistic and attractive visual content to interest consumers and expand the target audience.
Environmental – the given aspect is not as significant as other ones regarding the company’s nature; however, the positive image of the brand contributes to its popularity globally.
Legal – the existing legal environment was not considered a barrier for the planned change because of the absence of prohibitions or penalties.

In such a way, in accordance with this model, the decision to acquire Marvel and Disney as a part of the strategic incentive can be considered a successful one as there was the positive environment preconditioning the deal.

Porter’s Five Forces

Finally, Porter’s 5 Forces Model can be applied to the discussed solution to analyse all factors impacting the strategy selected by Disney. Regarding this paradigm, there are five central forces affecting competition intensity and profitability of a market which are:

The threat of entry – comparatively low because of the dominance of giant corporations such as Disney, Warner Bros and a need for substantial financing for running a new business venture in this market segment.
Bargaining power of buyers – significant and continues to increase because of the growing popularity of cinema as a potent entertainment tool.
The threat of substitutes – high because of the constant emergence of new products that are designed to attract new customers and preserve their interest at appropriate levels.
Bargaining power of suppliers – constantly increasing because of the rise of the industry and opportunities to earn money by supplying the demanded products.
Rivalry – severe rivalry preconditioned by revenues and the necessity to attract individuals to sell products and evolve (Iyer 2014).

The application of the given model also proves the fact that the implementation of the discussed strategic incentive was preconditioned by the beneficial situation at the market and existence of multiple options for the further evolution via the utilisation of the new plan presupposing the purchase of well-known franchises.

Factors Impacting Strategy

The in-depth investigation of all factors helped to determine the existence of a set of aspects introducing the need for the implementation of the strategy and its use. As it becomes clear, being a powerful corporation, Disney still lacked diversity of its products which resulted in the narrowing of the target audience and inability to satisfy the growing demands of other population groups. It was dangerous for the corporation’s leading position because of rivals’ effective work and their focus on products that would be able to satisfy clients (Pherson & Pherson 2016).

For this reason, the strategic incentive presupposing the purchase of Marvel and Lucasfilm results from a need for diversification, creation of new value, and the further company’s rise. Additionally, the necessity to engage in new activities to avoid stagnation was another factor that stipulated the adherence to this plan and its support by all departments of Disney corporation.

Main Features

The discussed incentive can be determined as a generic strategy that is focused on the differentiation and diversification of existing products via the acquisition of new brands and creation of products under these franchises (Johnson et al. 2014). The given approach presupposes that the company will try to affect wide populations by making its products as exclusive as it is possible to increase their attractiveness and competitiveness (Dobbs & Dobbs 2016). For instance, possessing the rights for Lucasfilm products, Disney is the only corporation that can make Star Wars movies, souvenirs, and other related goods (Baidawi 2016).

In such a way, the effectiveness of the strategy is preconditioned by the existence of unique opportunities for the creation of new offerings that will be welcomed by the audience (Kotler & Armstrong 2015). Additionally, there is the focus on the diversification as Marvel and Lucasfilm interest people all over the world regardless of their age, gender, and social position which helps Disney to reconsider its functioning and transform into a company that is attractive not only for children.

Results

Nevertheless, the application of the analytic tools helped to conclude that the majority of factors evidenced the success of the planned intervention and its ability to improve the state of the company. In fact, the purchase of Marvel and Lucasfilm became one of the most successful deals in the modern history of the media market (Duyne 2016). Disney managed to acquire rights for the two most popular franchises that are appreciated in all parts of the globe. It also helped to significantly diversify the target audience and products, which is critical for the company’s functioning and evolution (Rothaermel 2018).

The beneficial impact of the given deal can also be evidenced by the fact that the Star Wars Episode VII managed to generate about $2 billion at box offices because of high viewers’ expectations and their desire to see a new part of the most famous saga (The Walt Disney Company 2018). Disney managed to cover all spending associated with this deal and now benefits from the ability to create products associated with Marvel and Lucasfilm’s Universes.

Conclusion

Altogether, the analysis of the strategic incentive of Disney to buy two famous brands shows that there are multiple factors impacting the decision making and the choice of the way to evolve. The utilisation of Porter’s 5, PESTEL, and SWOT analysis helped to determine the existence of a set of factors that served as the background for the given decision.

These included the high level of rivalry, a need for the diversification and differentiation of products, the necessity to create new value, expansion of the target audience, and the introduction of popular products. Having evaluated all these aspects, the corporation made the only possible decision to purchase brands that acquired popularity. This solution turned out to be successful as it generated stable income and promoted the basis for the further development of Disney.

Reference List

Baidawi, A 2016, ‘Star Wars, Marvel, Pixar: why Disney bought them all’, InTheBlack. Web.

Clark, A 2009, ‘Disney buys Marvel Entertainment’, The Guardian. Web.

Dobbs, J & Dobbs, J 2016, Strategic planning – a pragmatic guide, Independently published, New York, NY.

Duyne, K 2016, Strategic analysis of the Walt Disney Company, Kris Van Duyne, New York, NY.

Iyer, A 2014, Porter’s model: Porter’s diamond, Porter’s generic strategies, Porter’s 5 forces, Porter’s value chain, KAPP Edge Solutions, Ney York, NY.

Johnson, G, Sir, R, Angwin, D, Regner, P & Scholes, K 2014, Exploring strategy: text & cases, 10th edn, Pearson, London.

Kotler, P & Armstrong, G 2015, Principles of marketing, 16th edn, Pearson, New York, NY.

Pherson, K & Pherson, R 2016, Critical thinking for strategic intelligence, 2nd edn, CQ Press, London.

Rothaermel, F 2018, Strategic management, 3rd edn, Mc Graw Hill India, Deli.

The Walt Disney Company 2018, Fiscal year 2018 annual financial report. Web.

Walt Disney CO. Web.

Whitten, S 2018, ‘Disney bought Lucasfilm six years ago today and has already recouped its $4 billion investment’, CNBC. Web.

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