Walt Disney's Strategy
Discuss whether or not Walt Disney’s lineup reflects a strategy of related diversification, unrelated diversification, or a combination of related and unrelated. Explain your answer and justify the extent to which the value chains of Disney’s different businesses seem to have competitively valuable cross-business relationships:
Here, related diversification consists of when an organization adds or expands its existing product lines or markets. For instance, a telephone company that adds or expands its wireless products, I.e., cell phones, Bluetooth’s, etc., and services by purchasing another wireless company is engaging in related diversification. Likewise, with a related diversification strategy you have the advantage of understanding the business and of knowing what the industry opportunities and threats are, yet a number of related acquisitions fail to provide the benefits or returns originally predicted. Conversely, it’s usually because the diversification examination underestimates the cost of some of the softer issues like change management, integrating varied cultures, handling employees – layoffs and terminations, mergers, promotions, and even recruitment. And on the other side, the diversification examination might overestimate the benefits to be gained in synergies.
On the other hand, unrelated diversification occurs when an organization adds new, or unrelated, product lines or markets. For instance, taking the same telephone company might decide to go into the television business or into the radio business. Additionally, this is unrelated diversification, i.e., there’s no direct fit with the existing business.
As such, an organization may want to engage in unrelated diversification because there may be cost efficiencies. More or less, the acquisition might provide an offsetting cash flow during a seasonal lull. Thus, driver for the acquisition decision is profit as it needs to be a low risk investment, with high potential for return.
Here, related diversification consists of when an organization adds or expands its existing product lines or markets. For instance, a telephone company that adds or expands its wireless products, I.e., cell phones, Bluetooth’s, etc., and services by purchasing another wireless company is engaging in related diversification. Likewise, with a related diversification strategy you have the advantage of understanding the business and of knowing what the industry opportunities and threats are, yet a number of related acquisitions fail to provide the benefits or returns originally predicted. Conversely, it’s usually because the diversification examination underestimates the cost of some of the softer issues like change management, integrating varied cultures, handling employees – layoffs and terminations, mergers, promotions, and even recruitment. And on the other side, the diversification examination might overestimate the benefits to be gained in synergies.
On the other hand, unrelated diversification occurs when an organization adds new, or unrelated, product lines or markets. For instance, taking the same telephone company might decide to go into the television business or into the radio business. Additionally, this is unrelated diversification, i.e., there’s no direct fit with the existing business.
As such, an organization may want to engage in unrelated diversification because there may be cost efficiencies. More or less, the acquisition might provide an offsetting cash flow during a seasonal lull. Thus, driver for the acquisition decision is profit as it needs to be a low risk investment, with high potential for return.