STRATEGIC MANAGEMENT

EVALUATING DIVERSIFICATION AT
DISNEY

Michael Tjowari
01120120061

UNIVERSITAS PELITA HARAPAN

LIPPO KARAWACI
TANGERANG
2015
DIVERSIFICATION
Diversification talks about degree to which a firm conducts business in
more than on arena. Diversification is a corporate strategy to enter into a new
market or industry which the business is not currently in, whilst also creating a new
product for that new market. This is most risky section of the Ansoff's matrix, as the
business has no experience in the new market and does not know if the product is
going to be successful.

The
notion
of
diversification depends
on
the
subjective
interpretation of new
market
and
new
product, which should
reflect the perceptions
of
customers
rather
than managers. Indeed,
products tend to create or stimulate new markets; new markets promote product
innovation.
Product diversification involves addition of new products to existing products either
being manufactured or being marketed. Expansion of the existing
product line with related products is one such method adopted by
many businesses. Adding tooth brushes to tooth paste or tooth
powders or mouthwash under the same brand or under different
brands aimed at different segments is one way of diversification.
These are either brand extensions or product extensions to
increase the volume of sales and the number of customers.
Type of Diversification
1. Vertical integration: diversification into upstream and/or downstream
industries
2. Conglomerate: corporation consisting of many companies in different
businesses or industries
3. Portfolio planning: practice of mapping diversified businesses or products
based on their relative strengths and market attractiveness.

Company Profile

The Walt Disney Company, commonly known as Disney, is an American

diversified multinational mass media corporation headquartered at the Walt
Disney
Studios in Burbank, California. It
is
the world's
second
largest broadcasting
and cable company
in
terms
of
revenue,
after Comcast. Disney was founded on October 16, 1923, by Walt Disney and
Roy O. Disney as the Disney Brothers Cartoon Studio, and established itself
as a leader in the American animation industry before diversifying into liveaction film production, television, and theme parks. The company also
operated under the names The Walt Disney Studio, then Walt Disney
Productions. Taking on its current name in 1986, it expanded its existing
operations and also started divisions focused upon theater, radio, music,
publishing, and online media. In addition, Disney has since created corporate
divisions in order to market more mature content than is typically associated
with its flagship family-oriented brands. The company is best known for the
products of its film studio, the Walt Disney Studios, which is today one of
the large
st and best-known studios in American cinema. Disney also
owns
and operates the ABC broadcast television network;
cable
television
networks
such
as Disney
Channel, ESPN, A+E
Networks,
and ABC
Family;
publishing, merchandising,
music,
and
theatre
divisions; and owns and licenses 14 theme parks
around
the world. The company has been a
component of the Dow Jones Industrial
Average since May 6, 1991. An early and
wellknown
cartoon
creation
of
the
company, Mickey Mouse, is a primary symbol
of
The Walt Disney Company.
In

early 1923, Kansas City, Missouri, animator

Walt
Disney
created
a
short
film
entitled Alice's Wonderland, which featured child
actress Virginia Davis interacting with animated characters. After the
bankruptcy in 1923 of his previous firm, Laugh-O-Gram Films, Disney moved
to Hollywood to join his brother, Roy O. Disney. Film distributor Margaret J.
Winkler of M.J. Winkler Productions contacted Disney with plans to distribute
a whole series of Alice Comedies purchased for $1,500 per reel with Disney
as a production partner. Walt and Roy Disney formed Disney Brothers
Cartoon Studio that same year. More animated films followed after Alice. In
January 1926, with the completion of the Disney studio on Hyperion Street,
the Disney Brothers Studio's name was changed to the Walt Disney Studio.
After the demise of the Alice comedies, Disney developed an all-cartoon
series starring his first original character, Oswald the Lucky Rabbit, which
was distributed by Winkler Pictures through Universal Pictures. The

distributor owned Oswald, so Disney only made a few hundred dollars.

Disney completed 26 Oswald shorts before losing the contract in February
1928, when Winkler's husband Charles Mintz took over their distribution
company. After failing to take over the Disney Studio, Mintz hired away four
of Disney's primary animators (the exception being Ub Iwerks) to start his
own animation studio, Snappy Comedies.
Deciding to push the boundaries of
animation even further, Disney
began production of his first featurelength animated film in 1934. Taking
three years to complete, Snow
White and the Seven Dwarfs,
premiered in December 1937 and
became highest-grossing film of that
time by 1939. Snow White was
released through RKO Radio Pictures,
which had assumed distribution of
Disney's product in July 1937, after United Artists attempted to attain future
television rights to the Disney shorts.
Using the profits from Snow White, Disney financed
the construction of a new 51-acre (210,000 m2)
studio complex in Burbank, California. The new Walt
Disney Studios, in which the company is
headquartered to this day, was completed and open
for business by the end of 1939. The following year
on April 2, Walt Disney Productions had its initial public
offering.
The
studio continued releasing animated shorts and features,
such as Pinocchio (1940), Fantasia (1940), Dumbo (1941), and Bambi (1942).
[4]
After World War II began, box-office profits declined. When the United
States entered the war after the attack on Pearl Harbor, many of Disney's
animators were drafted into the armed forces. The U.S. and Canadian
governments commissioned the studio to produce training and propaganda
films. By 1942 90% of its 550 employees were working on war-related
films. Films such as the feature Victory Through Air Power and the
short Education for Death (both 1943) were meant to increase public support
for the war effort. Even the studio's characters joined the effort, as Donald
Duck appeared in a number of comical propaganda shorts, including the
Academy Award-winning Der Fuehrer's Face (1943).
In 1954, Walt Disney used his Disneyland series to unveil what would
become Disneyland, an idea conceived out of a desire for a place where
parents and children could both have fun at the same time. On July 18, 1955,

Walt Disney opened Disneyland to the general public. On July 17, 1955,
Disneyland was previewed with a live television broadcast hosted by Art Link
letter and Ronald Reagan. After a shaky start, Disneyland continued to grow
and attract visitors from across the country and around the world. A major
expansion in 1959 included the addition of America's first monorail system.
For the 1964 New York World's Fair, Disney prepared four separate
attractions for various sponsors, each of which would find its way to
Disneyland in one form or another. During this time, Walt Disney was also
secretly scouting out new sites for a second Disney theme park. In November
1965, "Disney World" was announced, with plans for theme parks, hotels,
and even a model city on thousands of acres of land purchased outside
of Orlando, Florida.
Disney continued to focus its
talents on television throughout
the
1950s.
Its
weekday
afternoon children's television
program The
Mickey
Mouse
Club, featuring its roster of
young
"Mouseketeers",
premiered in 1955 to great
success,
as
did
the Davy
Crockett miniseries,
starring Fess
Parker and
broadcast
on
theDisneyland anthology
show. Two years later, the Zorro series would prove just as popular, running
for two seasons on ABC. Despite such success, Walt Disney Productions
invested little into television ventures in the 1960s, with the exception of the
long-running anthology series, later known as The Wonderful World of
Disney.
Disney's film studios stayed busy as well. Averaging five or six releases per
year during this period. While the production of shorts slowed significantly
during the 1950s and 1960s, the studio released a number of popular
animated features, like Lady and the Tramp (1955), Sleeping Beauty (1959)
and One Hundred and One Dalmatians (1961), which introduced a
new xerography process to transfer the drawings to animation cels. Disney's
live-action releases were spread across a number of genres, including
historical fiction (Johnny Tremain, 1957), adaptations of children's books
(Pollyanna, 1960) and modern-day comedies (The Shaggy Dog, 1959).
Disney's most successful film of the 1960s was a live action/animated
musical adaptation of Mary Poppins, which was one of the all time highest
grossing movies[4] and received five Academy Awards, including Best
Actress for Julie Andrews.

The theme park design and

architectural group became so
integral to the Disney studio's
operations
that
the
studio
bought it on February 5, 1965,
along
with
the WED
Enterprises name.
On July 8, 2005, Walt Disney's
nephew, Roy E. Disney returned
to The Walt Disney Company as
a consultant and with the new
title of Non Voting Director,
Emeritus. Walt Disney Parks and
Resorts celebrated
the
50th
anniversary of Disneyland Park on July
17,
and
opened Hong
Kong
Disneyland on September 12. Walt
Disney Feature Animation released
Chicken Little, the company's first film
using 3-D animation. On October
1, Bob Iger replaced Michael Eisner as
CEO.
Miramax
co-founders Bob
Weinstein and Harvey Weinstein also
departed the company to form their own studio. On July 25, 2005, Disney
announced that it was closing Disney Toon Studios Australia in October 2006,
after 17 years of existence.
In 2006, Disney acquired Oswald the Lucky Rabbit, Disneys pre-Mickey silent
animation star. Aware that Disney's relationship with Pixar was wearing thin,
President and CEO Robert Iger began negotiations with leadership of Pixar
Animation Studios, Steve Jobs and Ed Catmull, regarding possible merger. On
January 23, 2006, it was announced that Disney would purchase Pixar in an
all-stock transaction worth $7.4 billion. The deal was finalized on May 5; and
among noteworthy results was the transition of Pixar's CEO and 50.1%
shareholder, Steve Jobs, becoming Disney's largest individual shareholder at
7% and a member of Disney's Board of Directors. Ed Catmull took over as
President of Pixar Animation Studios. Former Executive Vice-President of
Pixar, John Lasseter, became Chief Creative Officer of Walt Disney Animation
Studios, its division DisneyToon Studios, and Pixar Animation Studios, as well
assuming the role of Principal Creative Advisor at Walt Disney Imagineering.

In April 2007, the Muppets Holding

Company, LLC was renamed The Muppets
Studio and placed under new leadership in
an effort by Iger to re-brand the division. The
re-branding was completed in September
2008, when control of The Muppets Studio
was transferred from Disney Consumer
Products to the Walt Disney Studios.
After a long time working in the company as
a senior executive and large shareholder,
Director Emeritus Roy E. Disney died from
stomach cancer on December 16, 2009. At
the time of his death, he owned roughly 1%
of all of Disney which amounted to 16 million
shares. He is seen to be the last member of
the Disney family to be actively involved in
the running of the company and working in
the company altogether.
On August 31, 2009, Disney announced a
deal to acquire Marvel Entertainment, Inc.
for $4.24 billion. The deal was finalized on
December 31, 2009 in which Disney
acquired
full
ownership
on
the
company. Disney has stated that their
acquisition of Marvel Entertainment will not
affect Marvel's products, neither will the
nature of any Marvel characters be
transformed.
In October 2009, Disney Channel president Rich Ross, hired by Iger,
replaced Dick Cook as chairman of the company and, in November, began
restructuring the company to focus more on family friendly products. Later in
January 2010, Disney decided to shut down Miramax after downsizing
Touchstone, but one month later, they instead began selling the Miramax
brand and its 700-title film library to Filmyard Holdings. On March
12, ImageMovers Digital, Robert Zemeckis's company which Disney had
bought in 2007, was shut down. In April 2010, Lyric Street, Disney's country
music label in Nashville, was shut down. In May 2010, the company sold
the Power Rangers brand, as well as its 700-episode library, back to Haim
Saban. In June, the company canceled Jerry Bruckheimer's film project Killing
Rommel. In January 2011, Disney Interactive Studios was downsized. In
November, two ABC stations were sold. [41] With the release of Tangled in
2010, Ed Catmull said that the "princess" genre of films was taking a hiatus
until "someone has a fresh take on it but we don't have any other musicals

or fairytales lined up." He explained that they were looking to get away from
the princess era due to the changes in audience composition and
preference. However in the Facebook page, Ed Catmull stated that this was
just a rumor.
In April 2011, Disney broke ground on Shanghai Disney Resort. Costing $4.4
billion, the resort is slated to open in 2015. Later, in August 2011, Bob Iger
stated
on
a
conference
call
that
after
the
success
of
the Pixar and Marvel purchases, he and the Walt Disney Company are
looking to "buy either new characters or businesses that are capable of
creating great characters and great stories." Later, in early February 2012,
Disney completed its acquisition of UTV Software Communications,
expanding their market further into India and Asia.
On

October
30,
2012,
Disney
announced
plans
to
acquire Lucasfilm,
along
with
plans to produce a seventh
instalment in
its Star
Wars franchise
for
2015. On
December 4, 2012, the DisneyLucasfilm merger was approved
by the Federal Trade Commission,
allowing the acquisition to be
finalized without dealing with antitrust problems. On December 21,
2012, the deal was completed with the acquisition value amounting to
approximately $4.06 billion, and thus Lucasfilm became a wholly owned
subsidiary of Disney (which coincidentally reunited Lucasfilm under the same
corporate umbrella with its former spin-off and new sibling, Pixar).
One of the reasons why Disney has a reputation of delivering a seamless
"magical" experience to its guests in all of its operations - theme parks,
hotels, restaurants, retail stores, etc. - is because it has one overriding vision
and
mission
for
all
of
its
business
operations.
"The mission of The Walt Disney Company is to be one of the world's leading
producers and providers of entertainment and information. Using our
portfolio of brands to differentiate our content, services and consumer
products, we seek to develop the most creative, innovative and profitable
entertainment experiences and related products in the world.

DISNEYS BUSINESS SEGMENTS

The Walt Disney Company, together with its subsidiaries and affiliates, is a leading
diversified and international family entertainment and media enterprise with five

business segments : media networks, parks and resorts, studio entertainment,

consumer products and interactive media.
1. Media Networks
Media Networks comprise a vast array of broadcast, cable, radio, publishing
and digital businesses across two divisions, the Disney Group and ESPN Inc.
The Disney Group is composed of The Walt Disney Companys global
entertainment and news television properties, owned television stations
group and radio business.

2. Park and Resorts

Walt Disney Parks
and Resorts is one of
the worlds leading
providers of family
travel and leisure
experiences,
giving
millions of guests
each year the chance
to spend time with
their families and
friends,
making
memories that last a
lifetime.

3. Studio Entertainment
The Studio Entertainment segment produces and
acquires live-action and animated motion pictures,
direct-to-video content, musical recordings, and live
stage plays.

4. Disney Consumer Products

Disney Consumer Products is the business segment of The Walt Disney
Company and its affiliates that delivers innovative and engaging product
experiences across thousands of categories from toys and apparel to books

and fine art. Disney Publishing Worldwide (DPW) is the publisher of children's
books, magazines, and digital products.
5. Disney Interactive
Disney Interactive is a highquality
interactive
entertainment across all
current
and
emerging
digital media platforms.
Products
and
content
released and operated by
Disney Interactive include
blockbuster
mobile
and
console games, and online
virtual worlds.

DIVERSIFICATION AT DISNEY
Entertainment and media conglomerate The Walt Disney Company has
much more than just animated films. One of
Disney's
main strengths is its diverse group of
income
streams. By creating highly diversified
operating segments, the company has set
itself
up for growth and opportunities for years
to
come while facing less risk from a single
segment declining.
The
company's
operations
include
five
segments: media (involving movie production, ESPN Network, Disney
Channel, ABC Family, and others), parks and resorts (including theme parks
and the Disney cruise line), studio entertainment (such as live
performances), consumer products (including licensing), and interactive
(involving all gaming).
Of Disney's $45.05 billion global revenue in 2013, only half came from the
company's most well-known segment, media. This revenue diversification
means that Disney faces less risk because of an economic or competitive
factor that decreases revenue for a single segment, and results in more
chances to expand in multiple markets.

Analyzing the segments

Media accounts for 49% of Disney's operating portfolio, which has come in
part from
the

and growing

company owning
diversified media
networks. For
instance,
Disney
purchased ESPN

(the
sports network, a big diversification from the classic Disney style of children
and family entertainment) and Lucas Films in the last few years. With the
purchase of Lucas Films, Disney is now taking advantage of the rights by
creating a new TV series based on the popular Star Wars movies that is likely
to bring a large revenue stream to the company over the next few years.
Parks and resorts is the next-largest segment for Disney, and one that has
shown to be a great profit booster for the company. The company reported a
7% overall revenue increase for 2013 year-over-year, while the parks and
resorts segment reported a 9% gain individually. Part of this success comes
from the company's ability to keep bringing families to the Disneyland and
Disneyworld resorts, both in the U.S. and abroad.
Another highlight is the company's cruise line segment. The cruise industry
has seen massive growth over the last few years, with a market of 20.3
million cruisers in 2013 alone. Disney is taking part in this growth, and with
travelers making arrangements sometimes as much as a year in advance
just to get their preferred spots on Disney cruises, it's clear that demand is
high. In the 2013 earnings release call, CEO Iger talked about this growing
demand and said that, while the company isn't planning to build a new ship
yet, it is continuing to increase routes and itineraries throughout the year to
allow for more passengers.

Interactive is the one area in which Disney has not seen growth in 2013, and
the only segment reporting a loss in 2013 at $87 million. The loss was steady
throughout the year as few games were released, and the one sub-segment
of growth came from Japanese mobile gaming. A little help came from the
release of Disney Infinity, a console game, in August. However, the company
is planning to release Fantasia: Music Evolved, another console game, this
year. This should bring a revenue payoff after Disney incurred an expense in
2013 for developing the game. The interactive segment exemplifies how
Disney's diversification works to decrease its risk. Even though this segment
dropped in 2013, the company as a whole was not majorly affected thanks to
its four other strong segments. Whether or not Disney is able to turn this
segment around will be something to watch in 2014, but that should not turn
investors away from this stock.
Disney is by far the largest player in the industry by revenue and market
cap, nearly twice as large as the next-largest company, Time Warner . The
other competitors in the industry include Twenty-First Century Fox ,
and DreamWorks Animation .

Company Name

Revenues Marke
P/E
Share
(ttm)
t Cap. Multipl Price
e

The Walt Disney Co.

$45.05 B

$127.6 B

21.48

$72.61

Time Warner

$29.39 B

$56.84 B

15.31

$62.83

Twenty-First Century Fox

$28.73 B

$72.16 B

12.11

$31.24

$767.29 M

$2.83 B

N/A*

$33.74

DreamWorks

While Disney may seem to be the highest priced option based on

P/E multiples, consider the growth that accompanies this price. Disney was
able to produce revenue growth of over 7% in 2013, which compares to 0.2%
for Time Warner and -17% for Dreamworks. Or consider the broad amount of
revenue streams this price buys investors. The risk that is mitigated for
Disney with its five separate segments is something that Twenty-First
Century Fox will not be able to replicate with only two distinct segments,
media and satellite broadcasting (though the company does have plans to
build its first theme park in Malaysia in the coming years). Should an
economic shift happen within the media segment, such as competition from
China perhaps, Twenty-First Century Fox will face a much more challenging
landscape in regard to steady revenue.

Disneys diversification didnt start today. In 1928, its first cartoon was
released. One year later, it licensed a pencil tablet, then the Mickey Mous
Club (MMC) was formed as a vehicle for selling Disneys products under one
roof. Within a short time, the membership of the club grew to 1million
members. In 1949, the company diversified into music was was even said to
have produced training and educational films during the war. Diversification
produces synergy. Diversification strenghtens the existing business and the
entire new business created. According to Strickland et al (2010),
Diversification can be related or unrelated. It is related if the activities of the
businesses complement those of the firms present business in a way that
increases or adds to the competitive advantage. In order words, related
diversification leads to strategic fit which itself creates opportunities.
Opportunities to
a) Transfer technological know-how (that are competitively valuable) from
one business to another.
b) Lower cost by combining the performance of common value chain
activities
c) Leverage or exploit use of a well known brand
d) Get valuable resource strength and capabilities across business
But if the businesses being diversified into have no competitive and valuable
value chain
that fits with the value chain of the present businesses,
then
the
diversification is said to be unrelated as there is
no
strategic fit.
Walt
Disney understood the interrelation of new
industries to each other right from the
beginning, something that continues to be
the
source of competitive advantage to the
company till today. Encapsulated in the Magic of Disney, the story goes
thus.
Family take a trip to Disney, book into a hotel (owned by Disney) inside the
park.
While in the park, the family eats at Disney-owned restaurants, buy Disney
merchandise. It doesnt matter that they are paying higher for
accommodation and meals compared to other hotels.

Children meet the Disney characters

everywhere in the park which leaves a long
lasting emotional experience. The children
and their parents end up buying videos,
books, TV broadcast which they take home
with them. All of these make them look
forward to another visit to the Disney and
the circle continues. The integration of these
complementary businesses is the Magic of
Disney.
Ever since, Disney has expanded its
operations
to
cover
theatre,
radio,
publishing, online media etc. Until the early
1980s Disney focused on the family
creating entertainment for the home and the
family. As a result, they were clearly
differentiated in the market from their
competitors. All of that was to change
around 1984 when Michael Eisner took over
as CEO. Like Walt Disney, Eisner was an
innovative and intuitive leader and his era marked a turning point for the
company that was hemorrhaging for cash and that soon became the target
of takeover by several companies.
Eisners goal was to evolve a company that would grow by 20% a year. To
achieve this, Eisner followed these three principles which include keeping its
cost down so it doesnt erode its profit, operate the core business in a
profitable manner and find new businesses that could integrate with Disney
and guarantee an annual growth rate of 20% for the company (1). To achieve
a 20% growth rate, the business had to diversify, exploring synergies in new
industries, and overseas expansion. Overseas expansion is inevitable when
the local domestic market has reached a near saturation point.
Some of the early businesses Einser was to add to Disneys portfolio include
the Disney Store, Euro Disneyland and the purchase of KHJ-TV, Disneys first
broadcasting outlet. Also, the company established a major television
presence and increased the number of films released from 2 in 1984 to 15-18
yearly.

Disneys
expansion
and
diversification efforts was
driven purely by the
need
to
attain
an
economy of scope that
will give it the desired
market dominance as
well as the economies of
scale to bring down its
cost
of
business.
It
pursued this strategy
throughout
the
90
using
a
combination
of
diversification
into
areas that
were a natural extension of
their current business as well as such other areas where they had less
synergy but obviously had found potential opportunities. Both of these led to
the birth of Disney Cruises, Pleasure Island and the incorporation of theme
park management into its business model.
Despite the huge successes recorded, it was questionable whether the
diversification into some market or acquisition strategies pursued with some
companies such as ABC actually enhanced the shareholders value. The
presumption is that when two companies who are leaders in slightly different
fields combine, both would be better off by the synergy created between two
of them. But Disney and ABC are both leaders in providing entertainment
and both with extensive networks in creativity and production . When firms
cannot leverage on their strengths following an alliance, then they stand the
risk of diluting their brand to a point where they will not be able to make the
profits necessary to return good value to their shareholders.
Today Disney has grown beyond the traditional amusement parks, movies,
television shows, clubs, or books business. Its stable of businesses include
Disney Cruise Line, Resort Properties, Radio Broadcasting, Musical
Recordings and sale of animation art, Anaheim Mighty Ducks NHL franchise,
Interactive software and internet site, etc. Whether these businesses are
related or unrelated to Disneys core business is not an issue as long as it
produces synergy that strengthens Disneys position in the market and
creates value for its shareholders. Throughout its history, Disney has, with
minor exceptions, shown the true value to shareholders created by synergies
from thoughtful diversification . The companys corporate strategy identifies
the fact that while Disney may have some magical products (its core
products), its strength is not in the products themselves, but instead in the
way in which they interrelate and complement each other.

Disneys diversification efforts further increased the magic of Disney.

Television advertised the movies, which advertised the hard-goods and which
advertised the television shows. So instead of paying to advertise Disneys
products, people were charged to be exposed to advertisement.
When you consider its portfolio of businesses, it will be right to say that
Disney has pursued a combination of related and unrelated diversification.
Take for instance Resort properties. That is real estate. But Disney has used
this to make its customer live out the Disney experience right on Disneys
properties as opposed to going to a third party environment to watch Disney
Movies or lodged in a different hotel and visiting Disney park.

The Result:
Is the diversification strategy working for Disney? The simple answer is that
the numbers are there as proof. Since the coming of Eisner, revenues grew
from $1.6 billion in 1984 to $2.9billion in 1987 largely as the result of the
pursuit of diversification as a strategy for growth. One of Eisners greatest
achievement was how he placed creativity as Disneys most valuable asset
and supported this as a leader to get the best out of his core innovation
team

THE INDUSTRYS FIVE FORCES SCORE

Threat of New Entrants (and Entry Barriers)

It takes significant investment to enter the market.
Threats of new entry is medium because there are many industries
as competitors. Like today, there are some entertainment park offer
the same service and product like Disney , such as Universal Studio,
Dunia Fantasi and Everland. But we have to look again, that they are
not easily to enter the market. It has high capital requirements. They
need a big effort to attract the attention of the visitor. As we know,
Disney dominates the market , it already has their brand names and
customer loyalty. Besides, Disney got the biggest revenue among its
rivalry (Merlin Entertainment Group, Six Flags, Parque Reunidos) at
2010.

Bargaining Power of Buyers

Bargaining
power
of
buyers is low. They involve
customer into several segments
target market, so they can fit in
easily. The customers are also
influences by the product
design, brand strategy and also the
price. Walt Disney know how to
treat the customers in each
segments.
Buyers
are
end
consumers. Their power will keep
low as prices are controlled by theme parks.

of

Bargaining Power of Suppliers

Suppliers include equipment manufacturers, construction
companies and vendors. Bargaining power of suppliers is still medium
because there are a lot of different revenue streams, so it will highly
cost to change the suppliers continuously. Especially the
technology is capital intensive and require support and maintenance.
Whereas the bargaining power of suppliers of food, toys and clothing
vendors are low.

Threat of Substitutes
Threat of substitutes for Walt Disney is very low.
Substitutes such as museums and zoos do not match the theme park
experience. In addition, media networks also do not match anything to
be changed. Everyone loves watching television. But the threat of
substitutes of Disney Interactive is high because video games is easily
to change with other toys such as monopoly, ludo, etc. Studio
Entertainment is the most creative place which is highly to search the
substitute for it.

Degree of Rivalry
Rivalry among existing firms is few but they are large
players such as Universal Studio and Merlin Group (LegoLand,
Madamme Tussauds,etc). They have same segments in parks and
resorts. Warner Bross and Picture Inc. also compete with Media
Networks of Disney, even Disney Channel has lower ranking than
Warner Bross. Besides that, there is DOTA which is the most demand
video games nowadays compare to Disney Interactive

Competitive Advantage of Disney

1. Great brand identity
It gives Disney's parks an edge over its
competitors. Its ESPN business similarly enjoys a
brand moat and has few competitors. Best of breed
brands are a huge advantage.

2. Talented and committed management team

Disney has a talented and committed management team, with "skin
in the game," and that is an advantage.
3. Economic of scale
Disney has a media network and studio entertainment for movie making.