Strategic Analysis of Disney's Diversification and Future Prospects

This report analyzes Disney's diversification strategy, focusing on its expansion from animation to theme parks and merchandise. It identifies the diversification as horizontal, highlighting the company's venture into unrelated services like media and clothing. The report evaluates the potential for increased cash flow through Disney merchandise in the next five years, while also acknowledging the challenges of brand criticism, managing multiple units, and maintaining brand name for unrelated products. The analysis draws on references from Forbes and the Strategic Management Journal to support its findings, offering a comprehensive overview of Disney's strategic choices and their implications.

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Using a business publication (Forbes, Wall Street Journal, Business Week, Fortune,
FastCompany) article, find a company that has expanded by diversification. Describe the type of
diversification and how the diversification created value. Evaluate how successful you think the
diversification will be in future (5 or 10 yrs., for instance). What issues or challenges is the
diversification likely to cause?
Disney is a power house and of the largest organizations in the world. This multinational
company was established by the famous visionary Walt Disney in the year 1923. Walt Disney is
known to be a risk taker, as an entrepreneur he had a wide vision for his company. One of the
main strategies of the company is to expand with diversification. Form the inception of the
establishment as an animation company Walt Disney had versioned to open a theme park. His
idea was so strong and powerful in his mind that he had invested almost everything towards the
set-up of the first theme park in 1955. At that point of time Disney had invested almost 17
million dollars on the project that was constructed over an area of 160 acres. There are almost 14
million visitors who spend close to $3 billion in Disneyland (Yang, Narayanan & De Carolis,
2014).
This is a case of horizontal diversification where an animation company changed the path
to provide the existing consumers of the service to a new and unrelated service. There is media
group, a clothing line, and a line of stationery items, theme parks and many more. In next five
years the company is going to earn more and more turnover generating more cash flow into the
business as Disney merchandise has gained immense popularity among the young kids. This will
only make way for the company to invest in more in diversification opportunities in order to
expand the business the issues or challenges faced by the diversification can be of many types:
criticism of the brand is one for constantly diversifying in various sectors for the purpose of

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expansion. And for a company like Disney criticism may effect on the goodwill which is
considered as an assets for the company. Managing multiple units in diversification can be a
challenge for the parent company. Selection and maintaining the brand name for unrelated
products also becomes a problem in the long run (forbes.com, 2017).

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References:
Disney Has Ample Opportunity For Emerging Markets Expansion. (2017). forbes.com. Retrieved
6 September 2017, from
https://www.forbes.com/sites/greatspeculations/2012/09/26/disney-has-ample-
opportunity-for-emerging-markets-expansion/#52c1aa773f6c
Yang, Y., Narayanan, V. K., & De Carolis, D. M. (2014). The relationship between portfolio
diversification and firm value: The evidence from corporate venture capital
activity. Strategic Management Journal, 35(13), 1993-2011.