UTV and Disney
Strategy Case Analysis
As a publicly-traded, multinational media company striving to penetrate the global market, UTV is analyzing the best means to pursue this strategy and continue to deliver value to its shareholders without jeopardizing managerial control. Specifically, UTV seeks to become one of the largest global M&E companies and to reach Rs 10 billion by 2010. UTV’s core competencies lie in its business-to-consumer model, which is highly scalable and grants the company “the ability to create and retain intellectual property at the top end of the value chain and the capability to disseminate this content through a variety of media across geographies” (pg. 4). Thus, the primary issues affecting UTV is whether a partnership with Disney will enable UTV to expand successfully and whether it is prudent to entirely sell Hungama TV to Disney at a time of fierce competition.
To grow, UTV must consider three potential possibilities: (a) expanding the base of UTV in the Indian market via existing verticals or through developing new verticals; (b) expanding to international markets through a partnership with a foreign studio; and (c) acquiring other Indian as well as foreign companies and thereby fortify the parent company’s overall base (pg. 7). However, due to the hefty investment that any of these three options would entail, UTV needs to find an investor that will strengthen its cash inflow and support its long-term global vision. Since Disney is a 75-year old company that has already acquired numerous subsidiaries and affiliates throughout the world and the company has diversified into four business segments (media networks, studio entertainment, Disney consumer products, and parks and resorts), establishing an alliance with Disney would be ideal because it will enable UTV to pursue any of these possibilities while gaining a bigger presence in the global market. Further, Disney recognizes that UTV is one of India’s leading integrated media companies and by acquiring 14.9 percent of UTV’s shares, Disney will pass onto UTV its global media and synergy expertise—something that can significantly increase UTV’s revenue and profit potential. While UTV can consider other partners, these may lack the focus that Disney has, i.e., setting up its international business “with an objective of making international operations the growth driver” (pg. 8), not to mention the extensive Hollywood and animated success that Disney has had, which UTV can greatly benefit from since UTV’s movie segment contributes to half of its total operating revenues (pg. 4). Understanding the effects of both the external and internal business environment is pivotal.
To address the external business environment that UTV faces, Porter’s Five Forces will be analyzed. Given the extremely competitive nature of India’s media industry and the fact that UTV’s net profits have been decreasing, UTV must immediately act. Otherwise, the company will not achieve its strategic objectives. Rising incomes will unquestionably intensify competitive rivalry and UTV will be in a better position to respond to such rivalry with a strong international partner.
Table 1 – Porter’s Five Forces
|Buyers |High threat. “On average, 30-40 million people were joining the middle class every year, translating | | |into huge spending on mobile phones, televisions, music systems, and similar goods” (pg. 6). Consumers | | |clearly have a large variety of entertainment products to choose from. | |Suppliers |High threat. “The cost of the production and distribution of movies had gone up significantly during | | |2003 to 2006 in the Indian media and entertainment industry” (pg. 6). | |Substitutes...
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