Walt Disney Co Case Debrief

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En provenance du cours de University of Virginia

Advanced Business Strategy

458 notes

University of Virginia

Advanced Business Strategy

458 notes

Cours 2 sur 5 dans Specialization Business Strategy

Advance your strategic analysis skills in this follow-up to Foundations of Business Strategy. In this course, you'll learn the tools to analyze strategy across time (competitive dynamics), industries ( corporate strategy), geographies (international strategy), and institutions (non-market strategy). We'll introduce the tools you need to complete a comprehensive evaluation and understand the strategy dynamics of an industry: Competitive Lifecycle, Internationalization and Stakeholder Analyses, and Diversification Matrices. We'll apply these tools in case studies of industry leaders Disney, Orascom Telecom Holding, Sony, and GE Healthcare India.

À partir de la leçon

Diversification Strategy

Corporate strategy is often a question of diversification. How can firms leverage their current position across markets to build profits? In this module, we'll discuss firm scope and the financial, operational, and strategic reasons to expand and diversify. We'll explore the theory of the firm--or why firms exist and how this relates to their scope. By the end of this module, you'll be able to develop a diversification matrix and apply this tool in a case study about Disney.

Walt Disney Co Case Debrief9:28

Rencontrer les enseignants

Michael Lenox
Senior Associate Dean and Chief Strategy Officer
Darden School of Business
Jared Harris
Samuel L. Slover Research Chair in Business Administration
Darden School of Business

Welcome.

In this video, we're going to discuss our Disney case.

Just as a reminder that these debriefs are not provided to give you a quote,

unquote solution to the case.

Rather, we're trying to raise some issues, and highlight some approaches you might

take while doing an analysis of the case of Disney.

So let's dive right in here.

Our first question asks you to go to Disney's website and

identify their lines of business, and then place them in a diversification matrix.

Now, I would observe, this is a challenging assignment.

Mainly because Disney has such a broad range of businesses.

Theme parks, cruise lines, movie studios, and the like.

All within the one umbrella of Disney.

Now, what's interesting here, is that reasonable people can disagree about

the placement of these various businesses within the matrix.

And in fact, there's not necessarily one right answer.

But I always like to tell my students,

there are often better answers than others.

The key here is the argument you put behind the placement within the matrix,

and I think this applies to many of the tools within our strategist tool kit.

What support can you bring to the argument for

why it should be positioned in one place, versus the other?

At the end of the day, the goal here is to map the businesses according to first

their market attractiveness or industry attractiveness, and

second by the degree of which the individual firm has competitive advantage.

In terms of market attractiveness I want you to think about five forces here.

Think about your environmental analysis.

These other tools in our toolkit,

help paint the picture of how attractive this industry is.

When it comes to competitive advantage,

I want you to think about your capabilities analysis.

Again, a tool that we have used to try to identify

under what circumstances a firm might have, sustainable competitive advantage.

So, let's take theme parks, for example for Disney.

Now, there are many reasons to believe as an industry segment,

that theme parks as relatively attractive.

First, one might expect there to be high barriers to entry.

There's large sum cost.

Once you build a theme park, that's gonna be its use.

Others advertising costs and the like,

that also could serve as barriers to entry.

There's also some things that push back between rivals within the industry.

In particular, we often have geographic differentiation.

Theme parks located in different cities and the like.

There are some exceptions, if you look in the United States for example,

in Orlando there's a number of competing theme parks.

But more often than not there's some geographic separation.

The number of competitors is relatively low.

We've talked before about how that reduces rivalry.

And last, but not least, there's at least an argument to be made,

that consumer demand is relatively inelastic.

This idea again that we'll be willing to pay

prices maybe higher prices if the demand if sufficient enough.

And I can tell you, as a parent, I can attest to this,

if your children really want to go to Disney World,

you might be willing to pay for that at the end of the day.

Now, there are many reasons also to believe that Disney as a particular firm,

has an attractive position within this otherwise, relatively attractive market.

Of course, they have their iconic brands, such as Mickey Mouse, and all of those

are hard to imitate, because of things like legal protection, such as copyright.

And at the end of the day as one student observes,

really the characters are really Disney's advantage here.

Some other students pointed out that sometimes you have a sustainable advantage

in terms of service.

They talked about Disney's culture.

One student suggests that Disney has an awesome training and development program.

I think one student summarized it nicely.

It's core values include, no cynicism allowed, fanatical attention to

consistency and detail, continuous progress via creativity, fanatical

control and preservation of Disney's image, and bringing happiness to millions.

All of these things that we might call culture once again, are very hard to

imitate, and can be the source of a sustainable, competitive advantage.

Now, let's move on to another area.

Let's go look at movies.

Movies are an interesting industry segment,

because of this kinda blockbuster phenomenon that we observe.

On one level, there could be significant barriers to entry to the extent there

are significant sought on cost to generate a blockbuster movie.

We see in some cases hundreds of millions of dollars being spent.

Yet interestingly, there are also examples of relatively cheap movies,

that go on to big success themselves.

And in fact, we often get a high distribution, high variability,

across movies, some doing very well, and some doing very poorly.

So when we think about industry attractiveness here,

it's kind of an interesting nuance story.

There is some great upside, but there's also a potential risk here.

Now we turn our attention to competitive advantage.

Many students argue that Disney seems to have an advantage,

especially in generating high quality entertainment geared towards children.

Perhaps this is due to the talent and systems they put in place.

Perhaps this is due to the intellectual property that they have, once again,

properties such as Marvel and now Lucas Films, famous for the Star Wars episodes.

But what about something like live action movies geared more towards adults?

This is something Disney also produces as well.

Do we believe the same competitive advantage exists here for Disney as well?

So again, reasonable people can disagree and we can have a good argument about

where we think Disney should be within the movie business.

Let's move on.

Disney claims that its business segments are well integrated,

well-connected businesses.

So we ask you, what is the glue that holds these businesses together?

So let me read some quotes here from some students that I think

capture some of the thinking on this well.

The main competitive advantage was Disney created by Walt Disney, for

many years in the past.

The personification of the company into something magical and

reliable, recreating fairy tales for children of all ages.

Creating sympathetic characters and caricatures

that enable the creation of theme parks and thousands of licensed products.

This idea of synergy once again.

Disney's, this is another quote, Disney's main advantage is being a family oriented

company around the world, offering a place where dreams can come true.

Another quote.

Everything that is created by Disney is ready to be reused in its

other businesses immediately.

Again, we talked about this idea of synergy between the businesses here.

One might even think, at the core of what Disney has,

are these iconic characters like Mickey Mouse that they then build off of, and

use in these other properties and the like.

But let me ask a couple questions to challenge this kind of fundamental notion.

First again, they are diversified into a wide number of areas,

including things like the sports channel ESPN, and once again, they make movies for

older adult audiences.

How does that fit the idea of Mickey Mouse, and

these iconic characters that many of you cited as being core to their identity?

Also this question we raised in the video lessons about,

do they have to do everything themselves?

What can they outsource?

Do they have to have all of this under the Disney umbrella?

Which takes us to our last question.

Based on your analysis, which businesses would you recommend that Disney invest?

And which should they potentially divest, if any.

A lot of interesting suggestions.

Many students suggested that they need to more heavily invest in interactivity and

mobile technology.

Some suggested they go into online education, very interesting.

One student I thought had a really interesting idea, quoting the student,

Disney's business potential could increase manifold if they tried to integrate

local stories, local characters, which are popular in the specific region.

So this idea of customizing their content to various geographic

areas around the world.

What about divestment?

So here's a quote from a student that I thought was interesting.

I don't think the broadcast segment really fits in as well as it should.

I'm not sure how ABC and ESPN, contribute to the Disney brand.

Now once again, this is a really interesting question here.

They are valuable properties, no doubt.

But to what degree should they actually be a part of the Disney property?

One way to think about ESPN is, if there are no synergy values,

if there's no value in holding it with the rest of the Disney portfolio,

it might actually be more worthwhile to sell it.

By selling it, arguably because it is a valuable property,

it could bring in a ton of money and command a very high price for that sale.

Now I'm not advocating this, but

I'm pointing out some of the questions you need to

ask when debating whether ESPN should remain in the Disney portfolio or not.

I wanna end with a quote here from a student who says,

Disney looks like a hydra-headed business entity.

I'd advise that they streamline all operations under a company towards family

entertainment and divest all that doesn't fall within that realm.

I think what I've observed over the years as a strategy teacher, is

that I've become a big believer that focus matters for successful organizations.

Many fail when they try to be something that they are not, when they extend to far

into markets that are only tangentially related to their core capabilities.

I think this ties back to our original strategist challenge idea about finding

that sweet spot, between capabilities opportunities and values.

For Disney again, I think its an interesting case can be made about what

should be in the portfolio and what might be tangential there.

But keep it in mind this core idea of what is the core focus, and how do they create

value across these businesses, are the questions we wanna be asking.

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