International Business Strategy of The Walt Disney Company: A Report

This report provides a comprehensive analysis of The Walt Disney Company's international business strategy, focusing on its acquisition of 21st Century Fox. It begins with an executive summary highlighting Disney's move into online video streaming, driven by the shift towards advanced technologies and the decline of traditional movie theaters. The report then delves into external analysis using Porter's Five Forces and Diamond models, evaluating factors like buyer and supplier power, the threat of new entrants and substitutes, and industry competitiveness. Internal analysis is conducted using SWOT and VRIO analyses to assess Disney's strengths, weaknesses, opportunities, and threats, as well as its resources and capabilities. Recommendations are provided based on these analyses, concluding with a discussion of the implications of Disney's strategic decisions. The report underscores Disney's strong brand value and financial resources, while also acknowledging the competitive challenges posed by rivals like Netflix and Amazon. It emphasizes the need for Disney to leverage its assets and market position to succeed in the evolving entertainment landscape.

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International Business Strategy
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1INTERNATIONAL BUSINESS STRATEGY
Executive summary
The Walt Disney Company has made a historical move by acquiring the 21st Century Fox to
enter into the business of online video streaming. As the world is now moving into more
advanced technologies after the smartphone revolution and high speed mobile internet, the online
videos and live sports streaming has become a sensation. The number of people going to the
theaters to watch a movie has reduced quite significantly and rapidly. In this situation, the move
by Disney is a revolutionary one in their area of business. The following report is an overview of
the external and internal analysis of their move and how they can turn their weaknesses to grab
the opportunities. In this report, it is seen that, Disney has a strong brand value and huge capital
base, but there is threat of competition in the existing business. Netflix and Amazon are the
biggest rivals of Disney in the field of online video streaming and Disney must utilize its brand
value, assets of Fox and their existing market to make this move successful.

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Table of Contents
1.0 Introduction................................................................................................................................3
2.0 External analysis of Disney.......................................................................................................3
2.1 Porter’s Five Forces model....................................................................................................3
2.2 Porter’s Diamond model........................................................................................................7
3.0 Internal analysis of Disney........................................................................................................9
3.1 SWOT analysis......................................................................................................................9
3.2 VRIO analysis......................................................................................................................11
4.0 Recommendations....................................................................................................................13
5.0 Conclusion...............................................................................................................................14
References......................................................................................................................................15

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1.0 Introduction
The Walt Disney Company has made a historical move by deciding to acquire 21st
Century Fox for an astounding amount of $52.4 billion. This is one of the largest deals in the
entertainment history. The deal includes acquisition of Twentieth Century Fox movie, TV
studios, majority of their cable networks and global assets and excludes the Fox News and Fox
network (Economist.com., 2017). The aim of the deal is to make an entry into the video
streaming business by Disney. The following report will focus on various aspects of the deal by
Disney through its external and internal analysis and will also provide some recommendations
based on the analysis to highlight the potential opportunities for the company.
2.0 External analysis of Disney
External analysis of a company refers to the analysis of the exogenous factors that have a
significant impact on the operation of the company. These factors cannot be controlled by the
management of the company. Markets, trends and patterns of consumer behavior, competitors,
and demographic factors are some of the external factors that have a considerable impact on the
operations of an organization (Ebert & Griffin, 2016).
2.1 Porter’s Five Forces model
According to the analysis of the deal, there are some external factors that Disney has to
deal with. The Walt Disney Company utilizes the strong brand value to combat with the industry
competition with other video streaming companies, such as, Netflix and Amazon, while making
the acquisition deal with Fox. To analyze the external factors, Porter’s Five Forces model can be
applied (Dinnie, 2015).

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Figure 1: Porter's Five Forces model
(Source: Dinnie, 2015)
Bargaining
powers of the
buyers
Buyers have the major power in determining the fate of the companies in the
entertainment industry (E. Dobbs, 2014). Disney has become a household
name for its products, such as, movies, videos, amusement parks,
merchandise products etc. and there is a dedicated customer base for Disney
for any of its venture.
With this new deal with Fox, Disney is acquiring a large base of loyal
customers of Fox, along with that of Hulu, National Geographic partners, Star
India, Sky Plc of UK and thus, merging of all these customer base helps
Disney in gaining an advantage in the industry.
Bargaining
powers of the
The producers of the movies, videos and other type of merchandised products
and operations are the suppliers of Disney. Large population of the suppliers

5INTERNATIONAL BUSINESS STRATEGY
suppliers and high level of supply of products making the bargaining power of them
weak. The company supports the products of variety of suppliers and if one
supplier bargains for high price, the company will replace it with another with
a lower price. No supplier would want to lose the support of Disney and Fox
as those are big brands and give huge boost to their business (Brown, 2017).
Threat of
entrants
The Walt Disney Company and 21st Century Fox are hugely established
companies in the entertainment industry of the world for a long time. Disney
faces the threat of new entrants along with low switching cost. On the other
hand, high cost of developing brand is a barrier for the entrants against Disney
(Brown, 2017). New entrants must be having a strong source of funds to
support the R&D, long period time to capture the market share and build a
brand, which becomes quite costlier for a new organization in this industry.
The acquisition of 21st Century Fox by Disney is a step towards reducing the
threat of the new entrants in the entertainment industry and a step towards
entering the market of video streaming, challenging the existing players, such
as, Netflix and Amazon.
Threat of
substitutes
The Walt Disney Company faces a continuous threat of potential substitutes.
There are many firms that are developing different techniques of animations
and animated products, which is the main business line of Disney. There are
other activities also, such as, amusement parks, where the company needs to
make continuous changes and improvements to capture new customers as
well as retain the existing customers. However, the variety of substitutes is
less in case of the products of Disney, making it a weak threat to the

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company, although the company must be making improvements in the
operational strategies for high quality of the products and performances
(Littleton & Steinberg, 2017). By acquiring Fox, Disney makes a move to
achieve an upper position in the market by reducing the threat of substitutes.
Industry
competitiveness
The Walt Disney Company faces industry competition from various
companies in various segments in the business. It is facing rivalry in the video
streaming from Amazon and Netflix. In the theme parks business, it faces
rivalry from the Universal Studios, Sea World and Six Flags Entertainment.
There are many other companies that throw challenges in the mass media
entertainment and marketing, such as, competing against the Pixar Animation
Studio for high level of animation (Brown, 2017). These companies also
compete in the business of merchandised products. Thus, Disney has been
facing challenges in many areas of business. As it acquired 21st Century Fox,
it not only acquired the existing market of Fox, but also acquired the rivals of
Fox in the industry of movie making. However, as it got the stakes in Hulu
and National Geographic partners, it got the comparative advantage in the
video streaming business, but in needs to develop its own technology rapidly
to face the challenges from Netflix and Amazon (Pouliagkos, 2017).

7INTERNATIONAL BUSINESS STRATEGY
2.2 Porter’s Diamond model
Another external analysis is done by using Porter’s Diamond model. It shows the
competitive advantage of a nation or an organization (Porter & Heppelmann, 2014).
Figure 2: Porter's Diamond Model
(Source: Porter & Heppelmann, 2014)
Firm
strategy and
rivalry
Disney has entirely focused on the family and children centric entertainment,
which has been exclusive in this industry, and rivals firms exist in other fields
but not in the family oriented entertainment (Feldman, 2017).

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Demand
conditions
There is a huge demand for the products and services of Disney, which gives it a
competitive advantage in the country in the entertainment industry.
Related and
supporting
industries
Disney has been supporting many other industries that are required to produce a
movie successfully. For example, Pixar Animation Studio is leading the
animation. The studio rentals, lighting, editing, sound recording, special effects,
writers, lawyers, talent agencies and market research are all separate industries
that are related in the productions of Disney and supported by it (Tran, 2016).
Factor input
conditions
Disney has the support of almost 2,00,000 employees all around the nation and a
huge amount of capital to back all of its production.
Government The government of the country does not interfere into its business and encourage
them to operate freely, making it helpful for the company to take new ventures
easily.

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3.0 Internal analysis of Disney
Internal analysis of an organization refers to the analysis of the endogenous factors of the
organization that determines the activities and performances of it (Rothaermel, 2015). These
factors are internal and can be controlled by the company to make new strategies or making
changes to the existing strategies for improving the organizational performance. With this
analysis, the management of the organization can focus on the much needed areas to earn above
average return (Brooks, Heffner & Henderson, 2014)
3.1 SWOT analysis
SWOT analysis represents the Strength, Weakness, Opportunities and Threat of an
organization by analyzing the internal characteristics and factors that have an important impact
on the performance of the organization (Grant, 2016). The SWOT for Disney is as follows.
Strength  Strong brand value: Disney has been able to develop a strong brand
value across the world for itself over the years, since its establishment in
1923. It has been able to capture the child audience, and hence, the
family audience through its cartoons and animated films, which displays
good values and ethics and with highly creative and imaginative
products over the years, Disney has become a household name and one
of the best global brands (Dalavagas, 2016).
 Strong financial support: With a strong brand value, Disney was able
to create to very strong financial support for its diversified business
across the world and in 2017, the company had 4.02 billion cash and
15.89 billion current assets (Vuru.com, 2018). The huge amount of

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financial support helped it to grow its business across the world.
 Diversified business: Disney grew from a small animation producing
company to one of the biggest entertainment and media conglomerate of
the world. Apart from animation, it diversified its business into theme
parks, resorts, mechanized stores and products, movies, acquisition of
brands, production studios, toys and accessories, giving a huge boost to
its business and capturing a huge share of the market.
 Wide coverage of cable network: It has a huge cable network spread
across the globe. The company operates ABC family of networks,
Disney channels across the world and ESPN in more than 60 countries
and almost in all local languages. It has earned them more than millions
of viewers (Dalavagas, 2016).
Weakness  Business volatility: The entertainment industry is highly volatile as it
heavily depends on the tastes and preferences of the customers, and that
is very unpredictable. Meeting customers’ expectations is greatly
challenging.
 Loss of ESPN subscriptions: The level of subscription to the sports
channel ESPN has gone down by around 8 million since 2010. Higher
programming cost is a weakness for ESPN.
 Dependence on a single region: The company is heavily dependent on
the revenues from North America, as it earns almost 77% of its total
revenue from the USA and Canada. Thus, regulations of these regions
can make the business vulnerable to any shock (Littleton & Steinberg,

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2017).
Opportunitie
s
 International growth and expansion: Disney is going for further
expansion in all over the world through diversified business.
 Investment ventures in new media partnerships: Disney is making
new investments in the media partnerships, as it did with 21st Century
Fox to increase its market share.
 Rise in demand for online media: In the age of smartphones and tables
and high speed mobile internet, there is a huge market for online movie,
video and sports streaming. Disney has made the attempt to enter into
the online world by acquiring Fox (Feldman, 2017).
Threats  Rising piracy: Advanced technology has increased the rate of piracy of
the movies and videos, which affects the business of Disney from the
DVDs. The company must also improve their own technology to
maintain the high quality of products delivered by Fox.
 Competition in all entertainment areas: Disney has diversified its
business into many segments of the entertainment business and there are
many competitors in each of the field (Dalavagas, 2016).
3.2 VRIO analysis
Another type of analytical technique for internal analysis of an organization is the VRIO
analysis. This is helpful for evaluation of the resources and thus the competitive advantage of the
organization (Cardeal & Antonio, 2012). VRIO stands for Value, Rareness, Imitability and
Organization, that is, arrangement system of the company. The VRIO for Disney is as follows.

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Resources and
capabilities
Valuable
(V)
Rare (R) Imitability
(I)
Organization
(O)
Competitiveness
Studio
entertainment
Yes Yes Yes Yes Long term competitive
advantage
Media and
networks
Yes Yes No Yes Temporary competitive
advantage
Merchandized
products
Yes Yes No Yes Temporary competitive
advantage
Theme parks
and resorts
Yes Yes Yes Yes Long term competitive
advantage
Disney
interactive
Yes No Yes Yes Competitive parity
Value: According to Forbes (2017), the value of Disney is around $179.5 billion and its annual
profit is around $49.7 billion. Other than that, the company has a high level of brand value across
the world.
Rareness: Disney has been presenting unique products, such as, cartoons and animated movies
for the children for more than 90 years. Hence, they present a complete different experience
through the characters of the movies and cartoon series, from the consumer products of other
companies.
Imitability: Apart from the merchandized products and the capabilities for media and networks,
none of the resources of Disney is imitable, giving it the status of temporary competitiveness.

13INTERNATIONAL BUSINESS STRATEGY
Organization: Disney has been managing their resources in an excellent manner for a long time.
Its huge employee base, theme parks and resorts in multiple cities around the world, and huge
amount of media and networks are handled in a well organized manner by the management.
From the above analysis, it can be said that over the years, Disney was able to create a
competitive advantage for itself through its capabilities and resources, which will help them to
move in the right direction for the new venture with Fox.
4.0 Recommendations
Based on the above external and internal analysis, few things can be recommended to Disney in
their new venture.
 As stated in the article by Economist.com (2017), the high competition from the online
video streaming companies and lack of a new technology by Disney is a big gamble in
this deal. Disney itself has rented out many productions to Netflix and Amazon. Hence,
while launching the new streaming site with collaboration of Fox in 2019, it must
develop a technology with new innovative and creative features to attract the customers.
 Gaining Fox’s assets and utilizing those strategically will benefit Disney in the long run
as it can further expand its business internationally with the resources of Fox, such as, it
should utilize the reach of Star India as one of the fastest growing TV service provider in
one of the most populous markets.
 They should increase their span of cable network for live programming. Netflix do not
have any rights for live sports or other programs, while Amazon has limited rights for
live sports. Disney can utilize this opportunity with a support of big finance, new

14INTERNATIONAL BUSINESS STRATEGY
technology and brand value, such as, live sports under the name of ESPN. Bulk cable
network will be beneficial in the long run while negotiating fees for pay-TV.
 Disney should also think about some more mergers in other fields, such as, acquiring
61% of Sky. Attaching the brand value will help Disney to expand its business.
 Disney is facing competition from many companies in various fields, such as, Universal
Studios, Sea World and Six Flags Entertainment in amusement Parks, Time Warner Inc.,
Comcast Corporation and Verizon in cable and satellite, Warner Brothers by Time
Warner’s in production studio and Amazon and Netflix in online video streaming. It
should take advantage of this to make improvements in their products and services.
 To reduce piracy, the company can reduce the price of the DVDs and make those easily
available to all. In can hamper the sales revenue in the short run but it will be hugely
beneficial in the long run.
5.0 Conclusion
From the above report, it can be said that, The Walt Disney Company has taken a big step
towards foraying into a new world of business by acquiring the 21st Century Fox. It is now
focusing on the business of online video streaming. Disney has the strength of brand value and
strong financial base, which it can use for developing own technology and use the assets and
market share of Fox to make an entry into this market. It also has competitive advantage for its
resources and capabilities. At the same time, it can turn the threats of competition and substitutes
turning the weakness into strength with the use of strategic moves and improving the quality of
products and services and introducing new services. Acquisition of Fox can be hugely beneficial
to Disney if it can utilize the combined resources in the right direction.