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Topics: The Walt Disney Company, Walt Disney, Disneyland Park Pages: 14 (3145 words) Published: April 15, 2015
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 advantage at Walt Disney. Robert Iger, the CEO reveals an aggressive acquisition policy that buys Intellectual Property that is either underused or under-exploited. While the policy has proved fruitful in the acquisition of Pixar and Marvel, it has the downside of high-risk acquisitions. The acquisition of gaming company Playdom is presented as a valid example. The company aggressively acquired Playdom in efforts to exploit the already saturated and highly competitive games and console industry. Playdom would offer product development in online games for social websites thereby creating a gateway for a powerful renowned brand in Walt Disney. The approach resulted in annual operating losses averaging $300 million from 2009 to 2012. The company has continued to hugely invest in information technology so as to better reach customers as well as carter for customer needs using the internet. The latest technological investment in media networks offers Walt Disney a mobile phone application that allows subscribed users to watch content at anytime, anywhere on their smart phones. The approach might prove to be a success similar to Pixar or Marvel, or might prove to a costly venture that annually operates in loses similar to Playdom. Walt Disney assumes an aggressive acquisition policy that is consistently high risk.

While the media networks are Walt Disney’s highest earner, the company’s identity is embedded in its Parks and Resorts. As a result Disney has heavily invested in its themed parks and resorts. However, there are multiple issues that reflect on Walt Disney’s strategic planning. The opening of Disney California Adventure was to ease the congestion at Disney World which had resulted in counter-productivity as customers rejected Disney World due to congestion. Disney California Adventure proved to be a costly investment as customers complained that it lacked night time appeal and would instead go back to Disney World further compounding the issue of...

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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