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Case Study
The Walt Disney Company: Its Diversification Strategy in 2012
Xiaofei Liao (MGMT 3800)

KEY ISSUES
Availability of alternatives and substitutes intensifies competition in Walt Disney’s media network division. Customers have a variety of choices on media entertainment: DVD, Internet and video games.
Rapidly changing technologies: Walt Disney is required to stay on the front foot and the company has to either develop or acquire new technologies for better customer satisfaction and competitive advantage.
Unpopular parks and resorts: Walt Disney has to embark on advertisements as well as install costly attractions in less favorable destinations such as Disney California Adventure so as to lure more customers.
Losses incurred in interactive media: Acquisition of Playdom to feature as the gaming hardware and software arm of interactive media proved futile with heavy competition from established gaming consoles.
Costly acquisitions in unproven foreign markets: India, China, Russia and Turkey offer expansion opportunities, but require billions of dollars in a high-risk investment.

ANALYSIS
The Media Networks division at Walt Disney is the highest revenue earner and also the division that faces the highest level of competition in the media industry. Competition is intensified by the fact that media network sells a preference to a customer and not an actual tangible commodity. A customer’s preference might be influenced by multiple factors such as genre of content that is aired, time of day and moods. Customers also have a variety of substitute choices for entertainment and can opt to play video games, watch a movie on DVD or browse the internet. As a result Disney is affected by diminishing advertisement revenues that directly impact finances. Disney counters alternate and substitute competition in an aggressive approach that involves acquisition and adoption of new technologies.

Information Technology is a huge component in facilitating competitive


Bibliography: Burgess, T. (2014). Disney layoffs: $200 million loss, Disney Interactive Playdom layoffs expected http://www.examiner.com/article/disney-layoffs-200-million-loss-disney-interactive-playdom-layoffs-expected Fixmer, A. (2014). Disney Agrees to Pay $500 Million for Maker Studios http://www.bloomberg.com/news/articles/2014-03-24/disney-pays-as-much-as-950-million-for-maker-studios Huddleston, T. (2015) Disney appoints a new COO, triggering talk of Iger’s successor http://fortune.com/2015/02/05/walt-disney-coo-staggs-iger/
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