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The Walt Disney Company: Strategic Analysis
Introduction
The role of strategic management consists of three separate acts. They are developing, implementing, and evaluating cross-functional choices that allow a company to accomplish its goals. In a world as dynamic of modernity, strategic management is essential for businesses seeking success. With globalization at an all-time high, strategic management is imperative among a companys senior executives. Given that communication is the key to effective strategic management and empowering workers is a major advantage, it is advised that such managerial efforts are integrated throughout the organization. Thus, prosperous, structured, and professional businesses engage in strategic planning. A significant proportion of American businesses that fail each year have a lack of proper direction.
The Walt Disney Companys strategic analysis incorporates various strategic analysis tools to discern the areas for improvement and potential threats for the company. There is a clear indication that the company has received heavy damages from the COVID-19 pandemic as its theme parks were closed for a long period while the regulations diminishment did little to the preceding damages. Simultaneously, SWOT and PESTLE analyses are used for the identification of core areas of future development for the company. The analysis indicates that Disney needs to find a way to properly extrapolate money from its recent failing acquisitions, such as Fox Company. The analysis of strengths and weaknesses will be used for internal analysis, whereas opportunities, threats, and PESTLE will be utilized for external assessment.
Literature Review
One of the key strategies utilized by Disney is differentiation, which will be the prime focus of the given discussion. It is stated that product differentiation enables intensive growth for a large corporate enterprise, such as Disney (Williams, 2019). Evidence suggests that consumers valuations are drawn from independent and general distributions. The unit cost of production is increasing and convex in qualities (Barogozzi & Ma, 2018, p. 380). In other words, different products require a diverse set of distribution systems in order to preserve their unique elements, which were not fully practiced by Disney. According to Nakayama (2018), doing business on a global scale is altering the possible risks, introducing new possibilities, and posing a variety of business problems to adapt to the changing business environment. Enterprises must create long-term objectives to counteract environmental changes and devise flexible action plans to achieve organizational objectives (The Walt Disney Company, 2021). Strategy management tools and approaches aid organizational leadership in decision-making by examining the likelihood of adopting a strategic plan to fulfill competitive demands.
One should be aware that the company is known for its entertainment services worldwide. Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences, and Products comprise The Walt Disney Companys two business sectors (DPEP). Since early 2020, the globe has been influenced by the new coronavirus and its variations, and the pandemic still massively impacts the world economy (The Walt Disney Company, 2021). COVID-19 and the steps taken to prevent its spread have substantially affected the company. Most notably, the effect was seen in the Disney Parks, Experiences, and Products (DPEP) segment, where theme parks and resorts were shuttered, and cruise ship sailings and guided excursions were halted (The Walt Disney Company, 2021). Since May 2020, these activities have restarted at different sites, typically at a reduced capacity. The company has postponed, curtailed, or canceled several theatrical releases, and performances of stage plays have been halted as of March 2020. The production of stage plays resumed at a reduced capacity during the first quarter of fiscal 2021. Regarding COVID-19 regulations, theaters have been subject to capacity constraints and altering government directives or guidelines.
Major interruptions occurred in the creation and availability of material, such as the postponement of crucial live sports programming throughout fiscal 2020 and fiscal 2021 and the cessation of the majority of film and television production in March 2020. Although film and television production largely restarted in the fourth quarter of fiscal 2020, production operations continue to be disrupted depending on local conditions. Fewer theatrical releases and development delays have decreased the amount of film material available for sale in distribution windows after the theatrical release. The impact of these disruptions and the extent of their adverse impact on Disneys financial and operating results will be determined by the duration of such alterations. The latter changes will depend on the currently unknowable duration and severity of the impacts of COVID-19 and its variants and the impact of government actions imposed in response to COVID-19. In addition, a major factor will be the risk tolerance of individuals and companies regarding health matters in the future. In order to address government requirements and the safety of the workers, visitors, and talent, Disney has spent and will continue to incur significant expenditures.
Internal Company Assessment
SWOT Analysis
SWOT analysis and benchmarking are strategic methods used for descriptive and qualitative analysis in public relations, marketing, advertising, and any other field requiring situational assessment approaches for strategic planning. Such an assessment involves an evaluation of the individuals performance, projects, organization, strategy, or business activitys strengths, weaknesses, opportunities, and threats (Gürel, 2017). A SWOT analysis examines strategic management from an external and internal perspective (Schooley, 2022). The SWOT analysis tool assists in evaluating organizational growth. When doing a SWOT analysis on a person, it is essential to identify the businesss shortcomings and strengths and determine the organizational growth path (Parsons, 2021). As a result, a company needs to take the initiative to approach the most effective ways to match and convert the organizations strengths, weaknesses, opportunities, and threats into positive professional growth and self-improvement. The SWOT analysis is shown in Table 1 below.
Table 1. SWOT
Strengths
All companies have operational segments that they perform more than capably. Disneys strengths are the positive components of the corporations collective portfolio that have made the company better in one way or another. One of the core strengths of Disney Corporation is the vast and diverse scope of assets and businesses. The company owns major entertainment companies in the US and worldwide, including theme parks. Its intellectual property is used along with the subsidiary companies such as Marvel, which allows the integration of original characters into multifaceted realities of numerous heroes. In addition to Disneys outstanding collection of fresh adaptations of ancient classics such as Robin Hood, Sleeping Beauty, Peter Pan, and Alice in Wonderland, the Company has developed a vast array of characters to appear in its feature films. The Walt Disney Companys extensive product line is its greatest competitive advantage.
The company offers outstanding customer service to its clients. Employees at Disney are held to the highest standards of customer service. Their level of customer care requires customers to seek it out actively. Ex-Disney customer service specialists and instructors have authored successful books on the subject and their experiences with the holy grail of customer satisfaction. Disney is strict on maintaining white, unstained, and ethically high moral values to keep up with the public image of the entertainment company that values every segment of its customers, especially children.
Weaknesses
Nevertheless, the company has several weaknesses that are difficult to overcome, including a high staff turnover rate. The Walt Disney Company has invested vast sums in employee training and development. It has not yet reduced its high rate of attrition. Inadequate financial planning In 2018, Walt Disney reported a loss of over $1 billion owing to its investments in Hulu and BAMtech streaming technologies. Disney agreed to purchase 21st Century Fox for $52.4 billion in 2019 but then boosted its price to $71.3 billion to ward off a competing approach from Comcast (James, 2019). The owner, Rupert Murdoch, sold Fox because the company could not compete with the digital streaming revolution. Disney failed to see the rationale, resulting in its billions invested in Fox. Fox cannot regain control because it cannot compete with streaming services such as Netflix.
Disneys lack of marketing and promotion may make them susceptible to competition. They only utilize advertisements when promoting a new movie or gadget. Aside from that, the majority of marketing is visual and involves cross-promotion. Inadequate product demand scaling is a weakness since Disney product designers have poor judgment for the next great idea, causing the company to miss out on several possibilities compared to its rivals (James, 2019). Businesses capitalize when there is a significant demand by creating a relevant marketing strategy. However, Walt Disney does not capitalize on these prospects.
External Company Assessment
Opportunities
The key opportunity for Disney is to expand and further develop its Disney Plus platform. Many children and adults who grew up during the Walt Disney period consider Disney the best corporation in the world. Disney is an ideal branding source that may be utilized as a substitute to advertise and market a business. Partnership with The Walt Disney Company is advantageous for any business. Disneys online streaming service: (Disney+) Disney is creating a new Direct-to-Consumer (DTC) service called Disney+, which will include all Disney, Marvel, Star Wars, and Pixar films. Disney+ debuted in the United States in late 2019 (Jackson, 2022). With its massive library of movies and television shows, the service may compete with Netflix. Additionally, Disney+s basic subscription plan begins at $6.99 per month, whereas Netflixs begins at $8.00 per month (Jackson, 2022). Overall, it benefits consumers since they will have more alternatives, and the increased competition may result in lower pricing.
Another opportunity could be seen in the potential of expanding the theme park segments global presence. Disney has theme parks outside of the United States in Tokyo, Hong Kong, Paris, and Shanghai. In the case of expansion, as of May 2020, Disney+ had 54.5 million customers globally, equating to around $3.7 billion in yearly income (The Walt Disney Company, 2021). If Disney concentrates on extending Disney+ into developed and emerging nations worldwide, the streaming service has the potential to become a $30 billion behemoth (The Walt Disney Company, 2021). It may expand the service by constructing additional Disney-themed amusement parks in emerging nations to capitalize on the rapidly expanding middle class and better economic climate.
Threats
Disney has invested heavily in its employees, staff development, and employee training. The average starting income provided by Disney is $15 per hour (The Walt Disney Company, 2021). Globally, salaries and earnings are always rising. As a result of the increase in salary salaries mandated by the countrys laws, Disney might wind up with smaller earnings when it comes to paying its international staff. With a steady rise in piracy, the increased acceptance of streaming services has resulted in bundling movies, television series, and other material. However, users are unwilling to pay for all the material a streaming service providers, such as Disney+. They are solely interested in their favorite shows, which has led to an upsurge in peer-to-peer piracy. The rise in piracy affects the income and profitability of Disney. Streaming services such as Disney+ have skyrocketed in popularity as the number of viewers has increased owing to recent occurrences forcing people to remain indoors. In an effort to profit from a high number of users, hackers have also focused on streaming services. The number of Disney+ user accounts that have been compromised has grown in recent years.
PESTLE
The Walt Disney Company stays aware of media, theme parks, and entertainment industry developments. These patterns identify opportunities and dangers, similar to those identified in a PESTLE study of international business. The PESTLE study examines a businesss most influential external elements (Political, Economic, Socioeconomic, Technological, Legal, and Environmental) (Perera, 2017). It can assist human resource professionals and senior managers with strategic decision-making in various situations. The PESTLE analysis instrument assesses the external elements representing opportunities or risks in the firms distant or macro-environment.
Political Factors
The political component of the PESTLE framework for analysis evaluates policies and government activities. In the business analysis of The Walt Disney Company, such distant or macro-environmental issues relate to the political atmosphere that affects merchandise commerce and entertainment availability. For instance, intellectual property rules affect international commerce. The following external issues impact Disneys strategic management in the entertainment, mass media, and amusement park industries, such as elevated protection of intellectual property, changing free trade practices, and political situations in stable key markets.
External factors that create growth opportunities include political support for stronger intellectual property (IP) protection. In the PESTLE analysis of The Walt Disney Company, the protection generates a more favorable industry environment that decreases intellectual property (IP) infractions against the worldwide firm (The Walt Disney Company, 2021). For instance, the business anticipates strengthening IP protection for its Marvel films and related items in several territories. On the other hand, changing free trade rules is an external force that threatens to destabilize Disneys business climate.
However, the external analysis also considers such adjustments as an opportunity for the firm to thrive by aligning its plans with the present growth prospects generated by new free trade regulations in the distant or macro-environment. These management considerations influence the implementation of Disneys generic strategy for competitive advantage and intensive growth strategies. The PESTLE research also analyzes the political stability of key markets as development potential. For example, Disney may continue to expand in the United States, Canada, and Europe with no governmental interference. Therefore, external political forces allow the conglomerate to boost its worldwide business performance.
Economic Aspects
The given section of the PESTLE framework evaluates the economic trends that shape the macro-economic environment. Considering the companys global scope, Disneys situation incorporates a variety of economic variables. Many pertinent economic external elements mirror the American industrial climate, the companys primary income source. For instance, most of the companys amusement park and resort earnings come from the American market. The strategic management success of The Walt Disney Company depends on the economic conditions caused by the following external factors rapid economic growth in emerging markets, rising amounts of discretionary income, and Chinese economic expansion slowing.
In the PESTLE paradigm, rapid economic growth represents an opportunity for corporate expansion. The external element has a greater impact on Disney in emerging markets. For instance, the corporation might anticipate a substantial increase in income from entertainment and mass media items in growing Asian nations. The Walt Disney Companys SWOT analysis identifies the external element as an opportunity in the worldwide industrial environment. Increasing disposable income levels enable more clients to purchase the companys items. In the context of the external appraisal of Disney, the pattern of the Chinese economys decreasing development is a threat notwithstanding these prospects. China remains a significant contributor to the corporations distant or macro-environment growth. Consequently, the external economic variables provide difficulties in controlling corporate growth based on the strategic relevance of growing markets.
Social and Sociocultural Factors
The social component of the PESTLE architecture focuses on societal trends that impact Disneys distant or macro-environment via consumer and employee behavior. In the case study of a companys analysis, customer attitudes regarding items such as films, television shows, video games, and amusement parks are examined. For instance, strategies must handle the habits and expectations of global corporate clients. The Walt Disney Company faces the following sociocultural external variables due to its status in numerous industry environments: positive sentiments regarding leisure, increasing internet use, and increasing multiculturalism.
Disney deliberately expands its foreign company by capitalizing on positive leisure attitudes. The external sociocultural aspect improves customers possibility to purchase the companys leisure and recreation items. In addition, the PESTLE research identifies growing online activity as a potential growth opportunity for the Walt Disney Company. For instance, more online product accessibility can increase the companys online transaction revenues. Increasing cultural variety, on the other side, challenges the appeal of Disneys goods, such as movies and television programs. However, the external analysis views the same social external factor as a chance for the firm to develop its goods to represent the cultural variety of its target consumers. Globally, these social distant or macro-environmental elements can aid the companys growth through strategic management that adapts the firm to customer behavior shifts.
Technological Aspects
Technology availability is among the distant or macro-environmental elements that govern company capabilities and constraints. The section of the PESTLE analysis of Disney considers the technology utilized in entertainment and mass media creation and those used to construct Disneyland theme parks and resorts. For instance, the effects of digital technology on film production are among the aspects that enable the organization to function in the worldwide business climate. The external technical elements impacting many of The Walt Disney Companys strategy and organizational efforts include a high rate of R&D in the sector, increasing usage of mobile devices, and the increasing prevalence of augmented reality.
The high research and development (R&D) rate is an external technological element that signifies a rapid technological improvement in the mass media and entertainment sectors. For instance, firms such as Disney are increasing their usage of powerful computer-generated imagery to produce superior and more competitive goods. In the context of the PESTLE study, the technological development represents a danger that intensifies competitiveness. Nonetheless, the same distant or macro-environmental aspect presents a chance for The Walt Disney Company to expand by deliberately boosting its R&D pace to meet or surpass that of competitors. In the external research, increasing mobile device usage is a potential opportunity. Mobile devices are a fast expanding revenue channel for Disneys global company. Additionally, the growing popularity of augmented reality presents a potential for the firm to improve its performance. Disneys strategic management may address the external aspect by incorporating technology into goods such as video games. Thus, the external technical variables in the section of The Walt Disney Companys PESTLE study provide development potential inside the industrial environment.
Ecological/Environmental Factors
The natural environment presents constraints, risks, and possibilities, stressing businesses reliance on external ecological variables. In the PESTLE analysis of The Walt Disney Company, the appropriate global industrial environment includes resource availability and climatic and meteorological variables that influence amusement parks and resorts, film production, and merchandise creation. The following ecological external elements present Disneys management with strategic challenges: variable and deteriorating cyclical weather, the availability of renewable energy sources increasing, and boosting business support for sustainability.
Changing and deteriorating cyclical weather is a macro-environmental element that poses a danger to the functioning of Disneys theme parks and resorts. In contrast, the rising availability of renewable energy presents a chance to enhance worldwide commerce. For instance, Disney may enhance its brand image by expanding its sustainable energy use. The external ecological element depends on accessible energy generation and storage methods in the distant region. The PESTLE research identifies the expanding industry support for sustainability as a potential opportunity. Through sustainable initiatives, Disney has the chance to enhance its corporate image and operational efficiency significantly. Publicizing such measures to the target market might also assist in managing client expectations. The external aspect impacts The Walt Disney Companys corporate social responsibility approach, which considers ecological challenges. The component of Disneys PESTLE research identifies the potential for business growth in the industry by addressing the external variables.
Legal Aspects
In the legal component of the PESTLE study, legal considerations pertaining to the firm and its industrial environment are analyzed. In the case of The Walt Disney Company, these external variables are based on the legislative frameworks that establish the distant environment for leisure and recreation. The companys management must handle legislation depending on the macro-environments diverse countries and regions. For instance, American and European rules in the mass media and entertainment sectors are considered strategic influencers in the external examination. Consequently, the element of the PESTLE research identifies the following external legal considerations that put restrictions and limitations on Disneys global business: enhancing consumer rights protection in underdeveloped markets and enhancing intellectual property safeguards.
The rising adoption of stringent environmental protection legislation is pertinent to the aspect. This external aspect mostly affects Disneys operation of amusement parks, theme parks, and resorts, which have a considerable environmental impact. For instance, creating a new park or resort alters the ecosystem of the place. In addition to mitigating the negative effects of such developments, regulatory constraints impose a restricted business environment on The Walt Disney Company. Additionally, the external research considers enhanced legal protection for consumer rights. The protection affords the strategic chance to increase customer satisfaction, a success indicator for global business management. In addition, expanding protections for intellectual property rights is an external legal factor that makes Disneys industry environment more favorable for businesses that profit from intellectual properties, such as the companys patents and copyrights for its trademarks, movies, and movies characters, and merchandise. The component of the PESTLE study illustrates the distant or macro-environment, which reinforces the need for initiatives to increase business sustainability, customer experience, and intellectual property use.
Conclusion and Recommendations
In conclusion, Disney is massive in its scope of goods and services provided. Nevertheless, the company boasts high employee attrition despite heavy investments in the training programs for its employees. The given aspect should be addressed along with the considerations for Disneys intrusion into the Chinese market. The expansion was supposed to add Chinese customers to the bigger pool of Disney fans, but it is difficult to sustain a safe business model due to the diminishment in the growth rate within the country. The majority of internal and external factors indicate the prevalence of opportunities for developing a larger customer base. The development in these areas will allow the company to increase all of its product lines. On the basis of the analysis provided above, the companys strategic options include the following:
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Disney should revise its human resource management in accordance with its core objectives by attracting talent with less political agenda.
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Disney should work on its employee retention methods since the existing workforce is not stable or loyal.
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Disney should gradually proceed with its differentiation strategy by ensuring that each new product is launched and sustained to maximize its long-term performance.
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Disney should continue using its industry leadership to penetrate the markets of its competitors to capture some of its market shares.
References
Barogozzi, F., & Ma, C. A. (2018). Product differentiation with multiple qualities. International Journal of Industrial Organization, 61, 380-412.
Gürel, E. (2017). Swot analysis: A theoretical review. Journal of International Social Research, 10(51), 994-1006.
Jackson, K. (2022). Disney plus vs. Netflix: How do they compare? CNET.
James, E. (2019). Heres what Disney owns after the massive Disney/Fox merger. VOX.
Nakayama, T. (2018). Empirical study on the application of strategic management tools and techniques in the Japanese companies. European Journal of Business and Management, 10(10), 134-143.
Parsons, N. (2021). What is a SWOT analysis and how to do it right? Live Plan.
Perera, R. (2017). The PESTLE analysis. Nerdynaut.
Schooley, S. (2022). SWOT analysis: What it is and when to use it? Business News Daily.
The Walt Disney Company. (2021). Annual Report [PDF document].
Williams, A. (2019). Disneys generic competitive strategy & intensive growth strategies. Panmore Institute.
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