Disney Analysis

Topics: American Broadcasting Company, The Walt Disney Company, Walt Disney Pages: 7 (2627 words) Published: March 15, 2013
Disney Strategy Analysis
The Walt Disney Company is the world largest media conglomerate in terms of revenue. In year 2012, Disney generates USD 43 billion revenues, with profits of USD 10 billion. Disney operates in diversified entertainment and broadcasting industry, broken down into 5 business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive. Disney major competitors in the media industry are News Corp and Times Warner. Time Warner and News Corp mainly involve in broadcasting, publishing and entertainment industries. Within the last twenty years, Disney has grown from a film making company to a media conglomerate, through several acquisitions, the major was acquisition of Pixar in 2005. The revenue has increased massively from $7.5billion, 1992 to $43 billion in 2012, nearly 5 times increase. Disney has been a successful firm compared to its major competitor. News Corp generated revenue of $34 billion for 2012 while Times Warner has revenue of $29billion in 2011 (2012 financial statement not yet released), both fall short of Disney $43 billion revenue. On 11th February 2013, return on capital employed for Disney is 35.4%, while for News Corp is 30.16% and Times Warner 46.4%. The market capitalisation for Disney on the same date is $99 billion, Times Warner $48 billion and News Corp $23 billion. Based on the return on capital employed, market capitalisation and revenue generated, it can be concluded that Disney has been relatively successful compared to its major competitors. Five Forces of Strategy (Porter)

Porter suggested five forces that can shape the industry competition. Analysis of the five forces enables a company to react better to the threats and opportunities lying in that particular industry. The first force that will be discussed is the most common one, which is the rivalry with competitors. Disney main competitors are Times Warner and News Corp, who are also media conglomerate. They are roughly equal in size and power, with Disney appeared as the industry leader. Within mass media industry, the industry growth in US is saturated but there is enormous growth potential in Latin America and Asia. These three companies had invested and profited from countries outside US. As huge amount of assets are devoted to the business, the exit barriers for the industry are high. Thus the companies in that industry are committed to their business. Less price competition occurs between Disney and its competitors as the industry involved is a service based industry, thus customers willingness to pay is much higher. In the broadcasting industry, as Disney is targeting the same customer segments as its competitors, which are family households, this leads to zero-sum competition. One firms gain is another firm loss. Mass media industry in general is still a profitable industry, as this service industry improves customers value thus can support higher prices. Threat of new entrants

The threat of new entrants to compete with Disney is low. Being the market leader made it possible for Disney to achieve economies of scale. Over the nine decades since the company existed, huge amount of resources are invested in market and research, finance and advertising. The company has gained experience of curve that new entrants are lacking. Disney has an extensive knowledge of their customers and knows how to serve them in the best way. The brand recognition and loyalty that Disney developed with its customers are hard for entrants to compete. Disney’s diversification into broadcasting, theme parks, and retail industries higher the barriers to entry the industry. Without huge amount of capital, it is hard to compete with the market leader. For example, USD$320million has been invested to in Hong Kong Disneyland. Hong Kong government holds a 57 percent in the Hong Kong Disneyland while Disney holds the rest of 43 percent. Disney was able to leverage the position...
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