Feb 5, 2019 in Informative

External Environment

Introduction

An entertainment segment is an important element for society. It helps a person to satisfy his/her spiritual, intellectual and physical needs, evaluate himself/herself as a person, analyze his/her role in different situations an social systems, as well as to be fulfilled with emotions and thrills. Therefore, entertainment acts as the leading motives more often. 

At present, the entertainment industry includes enterprises, organizations and institutions that main activity is related to the needs of people in entertainment. Thus, the entertainment industry companies are those companies that have clearly expressed entertaining activities. 

Macro-environment

In a board sense, a product of the entertainment industry is fun or the impression produced by entertainment and is the subject of the exchange on the entertainment market. In a narrow sense, they are goods and services sufficient to meet the needs of the process and for entertainment purposes. The need is a subject-object relation, in which subject and object of the needs are equivalent interdependent elements. The subject is an active source of needs who is a person that feels the need for entertainment. The object of needs is a carrier mismatch. 

The industry macro-environmental factors are the factors that influence the choice of the means to meet needs. These are the desire for entertainment complex, to get professional results like specialized enterprises or sports centers, as well as save time getting the Internet or amateur entertainment. It is also a prestige in a particular environment like closed chamber for the mass visitor entertainment facilities. 

Porter’s 5-Forces Analysis

In order to evaluate the strength of the five strengths affecting the strategic choices of all organizations of the field, it is relevant to apply the Porter model. It consists of the risk of the appearance of start-up companies and alternative products, negotiation leverage of suppliers and consumers, as well as rivalry (see Appendix A for more information about Porter’s 5-Forces Model).

Since the Walt Disney Company has managed to take a distinctive niche within the industry, the barriers to entry are relatively high. The company has been able to grow over a long period of time and create divisions with the development research, marketing and finance. The Walt Disney Company has already placed ceiling prices for many goods and services of their production lines, so it has enough strength to compete with new rivals. Based on past experience, the company is largely certain of what the target customer wants to acquire. The Walt Disney Company overlords the market for household show business, so a new organization will face barriers for the promotion of its brand and product differentiation, because the company covers a wide range of commodities and services. Being the market leader, the company is able to effectively save on scale of operations. In addition, the beginners require investing large investments to enter the market. Only very large companies can withstand such severe capital requirements. To say more, there are lots of adherents of the Disney brand among the clients of the market. It makes it difficult for the new entrants to struggle with the company. 

The threat of substitute product or services is moderate in the market. It is obvious that the other cartoon characters, theme parks and movies can penetrate the market in which the company operates, but it does not constitutes a serious threat. Although there are many different brands that use different strategies, prices vary quite strongly in this area. The company must be insured against the risk while updating their proposals. 

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Negotiation leverage of suppliers is moderate within the industry. As the Walt Disney Company works in a differentiated and unique field of high switching costs, only a few companies-suppliers are predominating there. The company is an important customer of many suppliers. Furthermore, the company size can be of a great advantage. It is able to order large amounts of unique products and it creates dependency relations in the industry. Suppliers often raise their prices because of the Walt Disney’s high cost of goods. 

Negotiation leverage of customers in the service industry and the entertainment industry is high. In order for the company’s operations proceeded smoothly, a large number of customers is required. This is why customers have certain powers. A design, price, a strategy or purchasing power have a strong influence there. For example, if the price of any home video is too high, customers may not want to spend money to buy the goods. The entertainment industry does not save consumers’ money. Conversely, it is arranged so as to make customers to spend more. Most of the Walt Disney Company range is focused on intangible return for the buyer’s money, particularly an unforgettable experience they receive when obtaining the services. In case some customers do not realize what exactly they get in return of it, it is likely an increase of the Negotiation leverage of customers.  

The Walt Disney Company has no analogues at present, as the company operates in several sectors. The brand is the basis of its activities. The company’s direct competitors are other large media conglomerates like Viacom, Time Warner, News Corporation (NWS) and Universal in all five areas. Among large studio-rivals are DreamWorks and the 20th Century Fox. The competitors of the market of parks and resorts are Blackstone Group, Six Flags Inc., Cedar Fair LP and Comsat Corporation. 

Driving Forces

The main forces that drive the industry to create the most amazing things ever are the consumers’ needs and requirements. They are considered the most important factor due to the orientation of the entertainment industry, which serves to a customer and his/her expectations. Thus, it is up to consumers’ behavior and reaction on a new launched product. Companies that operate within the industry always monitor it and establish future strategies based on this factor. 

Strategic Group Map

The current objectives of the company in international markets are to sell more to their customers, expand the market, continuously push the goods to track changes in the market, and always improve companies’ products or introduce new ones. 

The Walt Disney Company tries to capture as much of the market as it is possible with the help of its goods and services. The company achieves it through the expansion in the strategic locations of the world like Europe and Asia. The company is developing directions that correspond to different cultures to meet the desires and win the hearts of people from different countries. 

Continuous advertising is another strategy used by companies of the industry. As for the Disney, it never stops its progress but continues with it through a variety of means, forcing people always remember about itself. The management tries to use seasonable sales to adapt marketing to them. It tries to invest more in less profitable times of the year in order to always have a profit. The company never stands still as it always expands, modifies its ideas and creates new ways to bring the magic of its creations to consumers so they would want to experience it again and again. 

A strategic group map of the industry includes the product strategy, pricing strategy, distribution and promotion strategy. The Disney’s products include much more than material goods of service. It offers high quality and world-renowned brand. Disney also adds the characteristic features of the company to all of its products, which distinguishes its commodities from the rivals’ products. The Walt Disney Company cannot be characterized the one with low prices. Although, comparing to other goods and services, taking into account the quality of products, the company believes that the price is fair. Additionally, the company distributes its products around the world, looking for a market expansion. The key idea of Disney is to locate their main attractions, like parks and resorts, in places with high flow of people. It will allow more and more people to get familiar with the brand. When talking about the promotion strategy, Disney is very successful in it, especially in inactive seasons. The company is actively using strategies such as reduced prices for hotel rooms, free or discount tickets, various bonuses, and others. 

Key Success Factors

Entertainment is a special kind of leisure activity that involves physical, emotional or intellectual activity of the subject, aimed at getting pleasure and excitement. Entertainment procedure revenues outside of additional emotions, energy and distract from everyday thoughts and feelings. Key success factors of entertainment are fun and excitement that accompany the process of entertainment or are its results, regardless of the form in which it is presented. Availability of fun and excitement are the main inducement of entertainment. A form or a source of fun and excitement can be different whether it is in-line staking, a cinema or a watching a football game. The business is oriented on the creation of the conditions to meet the needs and interests of its consumers. 

Industry Profile and Attractiveness

When estimating the companies presented on the world-wide market, it is relevant to access them from the standpoint of consumers’ trust, respect, admiration and good attitude to the company. Thus, the first place was taken by BMW, while the second one was given to the Walt Disney Company in 2012. 

Although the hype around the Disney characters have abated and all the old characters have become really old as Mickey Mouse has already an age of above 80, the company continues to occupy a leading position is the film market. Thus, Studio Entertainment set a new record in the US box office fees, collected more than $1 billion for the first half of 2012. 

DreamWorks Studios, the creators of Shrek, Puss in Boots, Madagascar and full-length versions of Wallace and Gromit is the Disney’s serious competitor. However, cartoons created by DreamWorks Studios and Walt Disney Company are very different. DreamWorks mainly work with 3D-animation, oriented not only on children, but adolescents and adults, while Disney continues to produce beautiful fairy. At the same time, there is a fierce rivalry between the two companies at the market. To say more, DreamWorks Studios is becoming harder and harder to deal with the Walt Disney Company. The main company advantage is a merge of Disney with Pixar, which has become a combination of a tradition with an innovation. 

The entertainment industry companies are those companies that have clearly expressed entertaining activities. The industry macro-environmental factors are the desire for entertainment complex, to get professional results or time saving, as well as a prestige in a particular environment like closed chamber for the mass visitor entertainment facilities. 

The Porter model consists of the risk of the appearance of start-up companies and alternative products, negotiation leverage of suppliers and consumers, as well as rivalry. The barriers to entry the industry are relatively high. Only very large companies can withstand such severe capital requirements. The new entrants are difficult to struggle with the Walt Disney Company. The threat of substitute product or services is moderate in the market. Negotiation leverage of suppliers is moderate within the industry. Negotiation leverage of customers in the service industry and the entertainment industry is high. The Walt Disney Company has no analogues at present, as the company operates in several sectors. The company’s direct competitors are other large media conglomerates like Viacom, Time Warner, News Corporation (NWS) and Universal in all five areas. Among large studio-rivals are DreamWorks and the 20th Century Fox. The competitors of the market of parks and resorts are Blackstone Group, Six Flags Inc., Cedar Fair LP and Comsat Corporation. 

A strategic group map of the industry includes the product strategy, pricing strategy, distribution and promotion strategy. Key success factors of entertainment are fun and excitement that accompany the process of entertainment or are its results, regardless of the form in which it is presented.

Company Situation

Introduction

The Walt Disney Company is one of the largest financial conglomerates in the world of entertainment. Founded as a small studio by the brothers Walter and Roy Disney on October 16, 1923, it is currently one of the major Hollywood studios, the owner of eleven theme parks and two water parks, as well as several broadcasting networks, which include the American Broadcasting Company (the ABC). 

The company head quarter and principal manufacturing facilities are located in the subdivision Walt Disney Studios in Burbank, California, the USA. The company is active in 172 countries and represents 1,300 radio and television channels broadcasting in 53 languages. It is one of the world’s largest licensors, as well as the largest publisher of children’s literature in the world. The company is on tops of the list of video distributors in Europe and Latin America.  

Since the founding date, the Disney Company and the structures included remain true to the guiding principle, which is to create exceptionally high-quality products in the field of entertainment, using the wealth of experience gained over many years of successful work. 

Today the company is comprised of the Disney’s such divisions as the Walt Disney Studios, the Disney Parks and Resorts and the Disney consumable commodities. The Walt Disney Studios is the foundation on which the Disney building has been erected. It distributes paintings studios like Walt Disney Pictures, Walt Disney Animation Studios, Pixar Animation Studios, Touchstone Pictures and Hollywood Pictures. The Disney Parks and Resorts are not just a house in which the Disney favorite characters live. It is the most desirable place for everyone who wishes to see the magic. Today it includes a cruise company the Disney Cruise Line and five entertainment resorts on three countries. They are Disneyland Resort in California, Walt Disney World Resort in Florida, Tokyo Disney Resort in Japan, Disneyland Resort Paris in France and Hong Kong Disneyland in Hong Kong. The division of the Disney consumable commodities includes clothes and toys, home furnishings and housewares, books and magazines, drinks and food, stationery, electronics and interactive games. Other businesses engaged in the Disney consumable commodities are the Disney Interactive Studios, which develops interactive entertainment like computer and video games. 

VRIO Analysis

Appendix B called Resource-based Analysis of the Walt Disney Company allows understanding what resources are the most useful and more value for the company. Thus, in terms of the value, all five resources like Media Network, Studio Entertainment, Parks and Resorts, Consumable Commodities and Interactive Media are valuable for the company as they are directly used to create, promote and sell the company’s goods and services. At the same time, Parks and Resorts and Consumable Commodities are defined as rare resources as they help to create the goods and serve as a complimentary and necessary feature to do so. Additionally, all five resources are costly to imitate and are exploited by the company. The reason all the company’s subdivisions are defined as costly to imitate is that each of the entity operates as a business that brings profit and goodwill to the parent company. 

Company Value Chain Analysis

In order to understand the Walt Disney Company process of usage of internal sources and combine them with the external ones for creating, promoting and selling its products, it is relevant to consider the value chain analysis (see the Walt Disney Company Value Chain Analysis in Appendix C). 

Thus, the company manages to use personal internal services to organize the company’s value chain needed for the distribution of the processes among five subdivisions. They are Media Network, Studio Entertainment, Parks and Resorts, Consumable Commodities and Interactive Media. At the same time, all the activity passes through the different stages of the company operation like inbound logistic, technology, operations, sales and marketing, distribution and service processes. 

The applied value chain analysis shows the ways how the company manages to support each of the subdivisions at the each stage of the technological process using its personal resources, as well as the cooperation between them and future prospects. 

Thus, the resources of Media Network, Studio entertainment and Interactive Media subdivisions are able to combine buying activity, obtain more driving force with the suppliers and implement supply chain process. Additionally, the same resources are used to for the exchange with technology, transfer technical professional knowledge. All five the company’s subdivisions coordinate with each other at different levels to establish a new competitive potential. At the final stages of the value chain Media Network, Studio Entertainment and Interactive Media shares their abilities to combine sales and marketing activities, use common distribution channels, leverage use of common brand name, and/or combine after sales service. The difference is that Parks and Resorts along with Consumable Commodities are more useful at the final stage of the value chain to deliver the product to customers and encourage them on the purchase, while the other three subdivisions are the tool to step the next stage. The value chain allows outlining that all the company’s subdivisions are the necessary part of the strategy campaign. At the same time, the analysis shows a paramount importance of Media Network, Studio Entertainment and Interactive Media subdivisions as they are initially engaged into the creation and production of a product itself, which is established due to the market requirements, as well as the diversity and capability of the subdivisions allowing them to take part in each of the value chains. 

Competitive Strength Assessment

The Walt Disney Company has very strong competitive advantages in the market, which makes it obtaining the leading positions in it. Thus, the company’s strong points include a competitive product portfolio, the Disney brand reputation, and competency in affiliation, along with a diversified business. The company performance allows it to acquire developed organizations and entities objected to the Walt Disney Company’s weak points within the industry. Additionally, one of the main benefits for the Walt Disney Company is the integration of various businesses. The Studio Entertainment subdivision splits major movie cartoon characters to the Consumable Commodities subdivision so the goods will be available for sale for all fans of the movies. Additionally, it splits to the Interactive Media for the promotion and sale of video games that have been designed on the basis of those movies. The Studio Entertainment subdivision also coordinates with the Parks and Resorts subdivision to develop backdrops devoted to cinemas and characters from Media Networks. The Walt Disney Company invests a lot into the media network that increase the company’s competitive advantage in this sector. It can be explained by the fact that the company manages to produce the most popular products to obtain a large share of the market. The competitive advantage of the Walt Disney Company’s various business subdivisions is represented in Appendix D called the Walt Disney Company Weighted Competitive Strength. Thus, the results of the analysis show the overall competitive advantageous scores for the various subdivisions, which are the next:

  1. Media Network:                 8.47
  2. Parks and Resorts:             7.25
  3. Studio Entertainment:        6.77
  4. Consumer Products:           6.47
  5. Interactive Media:              2.95

Business subdivisions competitive advantageous ratings above 6.7 are powerful market rivals within the industry, while entities with ratings below 3.3 have a competitively weak market position. 

The results of the ratings presented in Appendix D allow defining Media Network, Parks and Resorts, along with Studio Entertainment as powerful market rivals, while Consumable Commodities and Interactive Media refer to the moderate and weak market rivals accordingly. 

The Walt Disney Company is one of the largest financial conglomerates in the world of entertainment founded by the brothers Walter and Roy Disney on October 16, 1923. Today the company is comprised of the Disney’s such divisions as the Walt Disney Studios, the Disney Parks and Resorts and the Disney consumable commodities. 

The resources of Media Network, Studio entertainment and Interactive Media subdivisions are able to combine buying activity, obtain more driving force with the suppliers and implement supply chain process. The same resources are used to for the exchange with technology, transfer technical professional knowledge. All five the company’s subdivisions coordinate with each other at different levels to establish a new competitive potential. At the final stages of the value chain Media Network, Studio Entertainment and Interactive Media shares their abilities to combine sales and marketing activities, use common distribution channels, leverage use of common brand name, and/or combine after sales service.

Media Network, Parks and Resorts, along with Studio Entertainment are powerful market rivals, while Consumable Commodities and Interactive Media refer to the moderate and weak market rivals accordingly.

 

Appendix A

 

Appendix B

 

Appendix C

 

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