Disney Case Study
This case was described about the Walt Disney Company’s history from 1923 to 2001 - Disney Case Study introduction. The company was declined after the dead of its founder Walter Elias Disney and resurgence under Michael Eisner, former Chief Executive Officers. Walt Disney Company (Walt Disney) was founded in 1923 known as Disney Brother Studio. Walt Disney has became a world leader in family entertainment. Today, the company is operating on a multinational level, and has over 58,000 employees world wide, and over 189,000 shareholders.
What are the factors that contributed to the company’s successes and failures on its way towards becoming the World’s largest family entertaining company? I would discuss the stated question by analyzing the Disney’s industry in relation to Porter’s Five-Forces Model. In addition, I would like to make a recommendation on the strategic changes and tactical changes that are needed to be made at the Walt Disney Company. Porter’s-Five-Forces Model focuses on the external environment that the company has to be able to cope with.
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The first force to be discussed is the threat of new entrants. Since the Disney Company has been able to find a very distinctive niche in the industry, the entrance barriers are relatively high. As Disney pretty much dominates the family entertainment market and it would be very difficult for such a new organization to develop brand recognition and product differentiation. In addition, extremely large amounts of capital investment are required for new entrants into the industry. The bargaining power of customers is high in the service and in the entertainment industry.
Since a large number of customers are needed to make Disney’s operations run smoothly, the customers have certain powers. For instance, if the price on a particular home video is too high, customers may be reluctant to spending the money needed to purchase the product. On the other hand the bargaining power of suppliers is moderate. As the Disney Company is operating in a highly differentiated and unique industry with high switching costs associated with operations, the suppliers are dominated by a few companies and is most probably very concentrated. Lastly, the threat of substitute products or services is moderate to low.
Obviously, other cartoon figures, theme parks, and movies can penetrate the market in which Disney is operating. However, it does not represent a significant threat. The Disney Company has already placed price ceilings on many of its product lines, and should be able to compete with new competitors. Given the five forces analysis above, I would like to summarize some of the changes that Disney could do in order to stay profitability of the company. First, Disney should focus on its organizational changes. The frequent changes of corporate officers should be stopped.
It is true that a new leader not requited from within the organization will bring with him/her new ideas and concepts. But, such a person also brings a foreign corporate culture to Disney’s organization. That fact may lead to communication, efficiency, and moral problems within the organization. Second, Disney’s market diversification is excellent, but what is the point of licensing product ideas? I believe that it would be more profitable for the company to produce, sell and market consumer products itself rather than to a large extent relying on licensing, and percentages of revenues.
Furthermore, Disney should always place a very specially emphasis on its theme park division and its film entertainment division Finally, efficiency has to increase in the theme parks and resort division. The asset turnover ratios are far too low in this division in comparison to the other divisions. Meanwhile, as the liquidity ratio appears to be a bit too low for the corporation, I would suggest the company to increase current asset requirements and keep current liabilities under strict control. Under no circumstances should the current liabilities be allowed to increase in a greater rate than the current assets.