Walt Disney Company: Strategic Management

This report provides a study of the strategic management of the Walt Disney Company, focusing on its theme park business. It discusses Disney's corporate and business level strategies, conducts a five forces analysis, and examines the company's strategic intent. The report concludes with an analysis of Disney's acquisition of Marvel Entertainment.

Running Head: WALT DISNEY COMPANY 0
Strategic Management
Student Details
1/16/2019

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Contents
Introduction................................................................................................................................2
Disney’s Operating Landscape..................................................................................................3
Corporate Level Strategy of Disney.......................................................................................3
Business Level Strategy of Disney........................................................................................4
Disney – A Five Forces Analysis...............................................................................................4
Disney - Business Level Analysis..............................................................................................7
Disney Strategic Intent...............................................................................................................7
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction
Disney is kingdom of entertainment which is founded in 1923 by Walt Disney and Roy O.
Disney. Through its creativity and vision it never stops to surprise us. The wonders that
Disney has brought for the people are efforts and vision of leadership of Disney which strive
to foster innovation, generate creativity, and utilize latest technologies (Ayodele, 2015).
Disney is a combination of multinational and cross cultural platform. Disney has a wide
range of business that includes resorts and parks, media networks, consumer products,
interactive media, and studio entertainment. Disney is currently running its business in
around 40 countries and issues like environment, labour, philanthropy, ethics, and many other
are taken seriously by the company (Chen, 2018). It is not possible to write down the vast
success story of Disney in few pages but here are some of the important facts and statistics
about Disney are listed below that provide an overview about the company:
 Disney was founded on 16 October 1923;
 Products of Disney includes parks, publishing, web portals, cable television, video
games, radio, films, music, and broadcasting;
 Around 180,000 employees works for Disney;
 Its total income is around US$8.38 billion;
 It has total assets of US$88.18 billion (Hebert, 2013).
As mentioned above Disney is divided into various divisions, features of each division are
described below:
 Parks and Resorts: it has cruise line, theme parks, and other travel related assets;
 Studios: it includes music, film, and theatrical divisions of company;
 Media Networks: it includes television properties of company;

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 Interactive Media and Consumer Products: it produces clothing and toys as well as
Disney’s social media, internet, virtual worlds, mobile, and computer games
operations (Opentextbc, 2018).
Disney’s Operating Landscape
In this topic, it is described the strategies that Disney Walt company adopted in different
segments and levels of its business (Williams, 2017).
Source: (Anna et al., 2017)
Corporate Level Strategy of Disney
It is mentioned above that Disney operates in different divisions. Operations in different
divisions are different but the core strategies of all these business units are united as
represented by the mission statement of Disney which says “the mission of the Disney Walt
company is to be on top in providing and producing entertainment and information”.
Everything that Disney carries out aims to achieve mission of Disney (Barnes, 2016).

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Business Level Strategy of Disney
Out of all the business units, Disney’s park and resorts business unit is most profitable. This
unit is currently operating in six different countries around the world which includes Florida,
Hong Kong, California, Paris, Shanghai, and Tokyo. Disney expands its business not just by
copying its business model in home, but instead of that, learning from the past experiences
and as per the situations in the hosting country, Disney adapt two strategies that are joint
venture and licensing (Chen, 2018). Disney has provided license of its brand to a Japanese
company naming Oriental Land Company. In this process, Disney did not involve in
operations and only received revenue and royalties in return. In addition to that, Disney
collaborated with local entities and run its business units in the form of joint venture in
countries including Hong Kong, Paris, and Shanghai (Dpecp, 2018).
Disney – A Five Forces Analysis
Porter’s five forces analysis is used here to describe the external threats that Disney
encountered and have the chances of come across in future. This helps the company in
understanding the business environment and navigates its path towards success and
sustainability (Enelow, 2016).
Source: (Anna et al., 2017)

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1. Business Rivalry: There are mainly four rivalries for Disney parks and resorts; these
are Cedar Fair, Merlin Entertainment, Universal Parks and resorts, and six flags. Four
of these are situated mainly in US and some of them have expanded globally like
Disney itself. Local theme parks also create challenge for Disney outside USA, such
as China (Kinni, 2013).
In order to attract new customers and keeping the old customers coming back, all of
these parks tried to out-perform their competitors by incorporating different themes
and experiences that make them unique in their own way. Infrastructures, new
attractions, restaurants, and rides are the keys that differentiate their business growth
from each other (Mnlson, 2016). Below given charts shows that even if the revenue of
all of its competitors is added together, does not come close to massive success of
Disney. Hence, it can be said that Disney’s rivalry power is medium.
Source: (Anna et al., 2017)
2. Threat of Substitutes: Threat of substitutes is comparatively high in case of Disney
parks and resorts due to the following reasons:
 Museum, concert, zoo, sports, and movie are some of the cheaper alternative
to active entertainment (Walter, 2014);

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 But due to the distinctive properties of Disney like family fun rides and
animated characters, it is not easy for the competitors to provide such
experiences to the consumers and thus making Disney relevant (Sakar, 2012).
3. Potential Entrants: Threat of new entrants in western countries is low due to the
mature market of amusement parks with over more than 400 amusement parks in U.S
and about 300 in Europe. Also, constructing a new park needs a huge capital, for
example $5.5 billion were invested in the construction of Shanghai Disney. Addition
to that some amusement parks have shown loss in last year. Therefore, these reasons
are enough to resist new entrants into this business (Bakker, 2016).
4. Bargaining Power of Suppliers: Due to the following reasons, it can be said that the
bargaining power of supplier is medium for Disney park and resorts:
 Limited Suppliers: there are only few companies in this industry of building,
producing, and maintaining amusement parks. Therefore, these companies
have large flexibility of bargaining with Disney (Calandro, 2010).
 Switching Cost: The unique products and services of Disney are popular
among customers of Disney. For producing toys or character related products,
Disney can ask any company to produce merchandise and thus have lower
bargaining power. But in amusement industry, Disney can buy rides from
some specific limited companies only, and the switching cost will be higher if
the Disney wants to change the supplier (Carillo et al., 2012).
 Supplier Sustainability: Suppliers do not control the bargaining power
strongly because they are aware that Disney is a big firm and can provide
business to them for long period of time (Dimalanta, 2016).
5. Bargaining Power of Buyers: In providing entertainment and parking industry, there
are four major companies including Six Flags, Universal, Disney, and Seawood

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(Lillestol et al., 2015). Buyer’s bargaining power is much lower as Disney is the
leader in this service industry.
Disney - Business Level Analysis
Parks of Walt Disney do not give the impression of cost leadership. When the cost of a long
family vacation at the Disney in Orlando Florida is compared with the Florida beach
destination then obviously the Disney is more expensive than the beach which is not a fair
comparison as entertainment level of both of them is far different. However, comparison with
another Orlando theme park like Universal Studios is a fair comparison (Unruh, 2013). From
the different analysis, it has found that Disney is creative in its cost structure and is
considered as the cost leader in the business of theme park. Admission ticket of an adult for
one day at Disney Park is $105, while it is $155 for the Universal Studios. At first look, it
seems that ticket price of Disney is cheaper as compared to the Universal Studios. But, the
ticket of Universal Studios includes access to both of its parks while Disney takes another
$50 for the ‘park hopping’. For the consecutive day, both companies provide discount on the
fares. The structure of ticket price for the park makes it attractive to choose from one of the
parks for the long week vacation but not both (Williams, 2017). Customers find Disney more
attractive as compared to the Universal studios because it offers access to the four parks
versus just two in the same price. In addition to that Disney is more popular due to the
marketing power of supporting companies. Due to the name recognition and its popularity
among people, Disney has maintained its sustained competitive advantage in the business of
theme park (Mnlson, 2016).

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Disney Strategic Intent
Disney decided its acquisition of Marvel Entertainment, Inc. on 31st August 2009 for $4
billion. This price was approximately 29 per cent more than the market value of Marvel. Due
to bankruptcy of Marvel in 1996, Disney acquired 37 per cent of Marvel in 1998 for just $238
million. After acquisition of Disney, the investment value has grown to $1.5 billion till now.
This acquisition of Disney has resulted in significant growth for Marvel (Calandro, 2010).
The strategic logic behind the acquisition of Marvel by the Disney as considered by its
executives was to provide the best leverage to Disney’s core entertainment based competency
and brand value in a dramatic way. When the deal was announced, business press considered
it as a strategic fit but the company did not provide any analysis to support this conclusion
specifically the price paid by the Disney. Disney adopted modern Graham and Dodd
approach to value Marvel during its acquisition (Ayodele, 2015). This analysis of Marvel
provided a net-asset value of $424 million, which is only 10 per cent extra of the deal price of
$4 billion. Second approach for valuing Marvel along with the Graham and Dodd is earnings
power value (EPV) that resulted amount of $1.7 billion for Marvel and this amount was four
times the NAV. Difference of NAV and EPV gives the franchise value of $1.3 billion
(Lillestol et al., 2015). Therefore, by estimating the growth value of Marvel, the resulted
amount is $2.3 billion.

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Source: (Calandro, 2010)
Based on this valuation, expected growth was 57 per cent of the acquisition price.
Reinvestment rate of 21.3 per cent was determined from the growth value. As per the
evaluation, $4 billion price for the acquisition of Marvel was too high.
Conclusion
This report provides the study of Walt Disney Company in brief detail. Disney has different
business segments and level of business including Disney parks and resorts, Disney studios,
Disney media, and Disney consumer products. The report is more focused on the theme park
business of the Disney. It shows that the history of Walt Disney is a century ago. Analysis of
its strategies suggests that Disney runs its business on its vision which says about creating
happiness for everyone through providing all kinds of entertainment. Disney has six theme
parks around the world that are bringing happiness and joy to the life of people. It has been
clear from the report that there are other theme park business too that are competing with
Disney but none of them is even close to leading position of Disney. Porter’s five force
analysis gives tells about the external threats for the Disney. This analysis suggest that all the
five threats are lower for the Disney and Disney does not has any major rivalry or threat from

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other competitors. Disney has adopted the cost leadership business strategy where it provides
better and more services to the consumers in same price that of other entertainment studios.
At last, in 2009 Disney merged with Marvel Entertainment for $4 billion which resulted huge
growth for Marvel. The strategic logic behind this acquisition as per its executives was to
enhance the core entertainment and brand value of Disney.

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References
Aboutdisneyparks, 2019. Walt Disney Parks & Resorts. [Online] Available at:
https://aboutdisneyparks.com/about/company-overview.
Ayodele, A., 2015. Selecting a Strategic Option for Walt Disney. [Online] Available at:
https://www.researchgate.net/publication/282869047_UPDATED_Selecting_a_Strategic_Opt
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Bakker, M., 2016. Disney-Business Level Strategy. [Online] Available at:
https://prezi.com/6fqvkfp_19xk/disney-business-level-strategy/.
Barnes, B., 2016. Disney Introduces Demand-Based Pricing at Theme Parks. [Online]
Available at: https://www.nytimes.com/2016/02/28/business/disney-introduces-demand-
based-pricing-at-theme-parks.html.
Calandro, J., 2010. Disney's Marvel acquisition: a strategic financial analysis. Strategy &
Leadership, 38(2), pp.42-51.
Carillo, C., Crumley, J., Thieringer, K. & Harrison, J.S., 2012. The Walt Disney Company:A
Corporate Strategy Analysis.
Chen, I.-C., 2018. Disney reshuffles business, adds new direct-to-consumer segment. [Online]
Available at: https://www.bizjournals.com/losangeles/news/2018/03/14/disney-reshuffles-
business-adds-new-direct-to.html.
Dimalanta, M.A.M., 2016. Disney Strategy Mergers & Acquisitions. [Online] Available at:
https://www.slideshare.net/MitaAngelaMDimalanta/disney-strategy-mergers-acquisitions.

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Dpecp, 2018. The Walt Disney Company Announces Strategic Reorganization. [Online]
Available at: https://dpecp.disney.com/the-walt-disney-company-announces-strategic-
reorganization/.
Enelow, S., 2016. 5 Insights Into Disney and Universal’s Modern Theme Park Strategies.
[Online] Available at: https://skift.com/2016/11/01/5-insights-into-disney-and-universals-
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Hebert, P.A., 2013. The business lessons behind Disney's magical experiences. [Online]
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Kinni, T., 2013. Leadership Lessons from the World of Walt Disney. [Online] Available at:
https://www.strategy-business.com/blog/Leadership-Lessons-from-the-World-of-Walt-
Disney?gko=5dded.
Lillestol, T., Timothy, D.J. & Goodman, R., 2015. Competitive strategies in the US theme
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Mnlson, 2016. Chapter 6: Cost Leadership. [Online] Available at:
https://mnlson11.wordpress.com/2016/02/25/chapter-6-cost-leadership/.
Opentextbc, 2018. Focused Cost Leadership and Focused Differentiation. [Online] Available
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Sakar, S., 2012. Business Level Strategy Analysis. [Online] Available at:
https://www.slideshare.net/savassakar/business-level-strategy-analysis-12628629.

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[Online] Available at: http://panmore.com/disney-generic-competitive-strategy-intensive-
growth-strategies.