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.
[...] Appendix 1 SWOT Strengths Weaknesses Strong brand equity (consumer An abusive diversification loyalty ) High turn-overs among high Leader in sectors such as amusement executives parks, top money making animating The loss of the Disney spirit films, US box office -Walt Disney legacy is restricting Conglomerated activities: to employees creativity release a film, to promote and -Financial considerations are broadcast it on TV, to license the predominating in the creative characters to manufacturers and aspects retailers and to integrate it in The merger with ABC: two different their amusement park cultures/two large companies/ two The synergy policy different business models No president between 1996-2000 Conflict orientation and a lack of communication between business units (more than increase in employees number) Some Disney products are not contemporary enough Opportunities Threats The development in overseas markets An impressing number of big such as Europe or Asia ( in 1999, competitors: in each segment Disney UK+ FR+IT+GER consumers only spent faces huge competition 40% as much per capita as in the Jeopardizing the brand image by US) entering new businesses A genuine licensing management: Internet : Peer to Peer (films and fewer licensees but better quality TV shows) and image Internet : to advertise more products accurately, sell theme parks 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 . [...]
[...] Clearly, the company should quit its Internet activities or delegate them to a more competent partner because Disney does not have capabilities or competitive advantages in this field (see the fiasco related to the Infoseek search engine and the launch of the www.go.com portal). Disney should also diversify very selectively in the consumer product area as it does not master the production processes (it only licenses its characters to manufacturers) and the brand of the company is only put on the products bad quality product could damage Disney's brand image). [...]
[...] 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. If a new market opportunity occurs, in which the firm is able to take the lead, it has to be integrated in the frame of the current operations value chain. [...]
[...] consider concerns the internal discrepancies which followed the diversification process. Indeed, Disney now presents many business units which need to form a carefully constructed system of interdependent parts rather than individual blocks. No matter how hard Eisner is trying to foster synergies, Disney must find a way to create value through a coherent and strategic coordination of its multi business activities. Indeed, the business units are currently suffering from harsh competition between one another which may result in being counter- productive. [...]
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