The first issue of the Walt Disney Company has to face concerns about diversification. It was considering the extent to which it had to diversify and whether it diversified too far. It is legitimate to consider such a question as the number of businesses Disney presents has exploded since the company's beginnings. Indeed, being first a company based on movie-making, Disney expanded into the music business with records, into theatrical and television productions, broadcasting networks, theme parks and resorts, as well as into internet activities and sports teams. Although Eisner got rid of some activities (Club Disney, ESPN stores and Fairchild Publications) in 1999, we may still wonder if Disney has diversified too much and has now a coherent offer through which it can really create value.
[...] The limits of this scenario concern the critical size that an entertainment giant has to have in every segment of the industry. 2nd scenario: continue diversification and dominate every segment of the industry: As the entertainment industry is very concentrated among few but gigantic competitors (such as Vivendi-Universal, Sony, AOL Time-Warner they are not present in many aspects of entertainment and would let others take advantage with a global strategy. That is to say, diversification has to be done in an integrative approach of all current Disney businesses. [...]
[...] The diversification process of the Walt Disney Company I. Identify the key issues Identifying the core business The first issue that the Walt Disney Company has to face concerns diversification: has it diversified too far? It is legitimate to consider such a question as the number of businesses Disney presents has exploded since the company's beginning. Indeed, being first a company based on movie- making, Disney then expanded into music business with records, into theatrical and television productions, into broadcasting networks, into theme parks and resorts, as well as into internet activities and sports teams ! [...]
[...] According to the matrix and figures, the firm should maintain its position in theme parks and in the film industry: they provide profitability higher than competition average due to a very effective cost management (Disney is able to produce films cheaper than other players that encounter huge success; out of 30 Disney released films 24 will be profitable animated films) and visionary diversification (not only does Disney manage parks but is also creating an entire experience around them with the opening of Disney cruise and Disney Institute). The media network business is quite different, even if it is central to Disney and represents the most part of its revenues. [...]
[...] However, this scenario has some limits; first by choosing not to diversify in new segments of activity, the Walt Disney Company risks missing some great market opportunities. Indeed, this choice would limit Disney's possibilities to integrate into new segments of the entertainment industry and so to have a global approach of the entertainment world. The choice also includes the risk in losing some competitiveness in some segments of the entertainment industry when compared to other competitors. Appendix 1 SWOT Appendix forces of Porter applied to the entertainment industry Bargaining power of buyers High: theaters retailers show promoters and publishers big corporations (advertising) local governments Low: individuals licensees Note: 3/6 Bargaining power of suppliers High: the entire movie and television sector - licensees Low: suppliers for amusement parks Note: 4/6 Rivalry among competitors Big players in each segment: Disney / Sony / AOL-Time Warner / Vivendi- Universal/ Murdoch Group . [...]
[...] Disney's brand promise cannot help being affected by the new businesses into which it has entered, but it must remain coherent. The company has to choose between modernity and tradition, which is between respecting its original image and evolving towards a more modern position. This obviously implies that the brand equity is going to evolve and might be damaged, as consumers' loyalty and associations may change, which is quite hazardous for the brand. The internal cohesion The final issue Disney has to consider concerns the internal discrepancies which followed the diversification process. [...]
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