The Walt Disney Company: Its Diversification Strategy in 2012

Introduction

The Walt Disney Co. is basically an enigma where the company has shown the most minimal of signs where it has shown any signs of slowing down. The company has been quite successful with its diversification strategy and has looked to lower the risk of failure by being part of various industries. The company has operated in several industries of media and entertainment simultaneously. Disney has also been dominant and successful with its association in sports channels such as ABC and ESPN.

The company has also centered around its corporate strategy where the focus of the company has been on creating a high quality family content, exploration of technological innovations and finally expansion in international markets. The company Walt Disney in spites all the efforts entered the last quarter of 2012 where the third quarter in spite having record setting, it also had various issues.

The organization in the third quarter invested $15 billion in capital within the business during past 5 years which also included 43% investment in $4.5 billion theme park in China, construction of two new 340 meter ships as part of Disney Cruise Line and also it acquired Marvel and Pillar.

Moreover, the company has been funding quite aggressively in the share buyback plan that was placed with respect to the cash reserves. Finally, the company has been attaining sufficient returns on the capital invested and in some other businesses. The CEO Iger and the management of Walt Disney have planned to evaluate the current corporate diversification strategy of the company.

Discussion

Walt Disney has been one of the most successful brands where it has diversified in media and entertainment industry. The company has followed the strategy of being able to focus on creating high quality content, innovation and finally expansion in new markets.The OP margins has shown the profitability  where the current fiscal year profits 2010-2011 where the company profitability has increased the expansion and it has increased the profitability for 17.67% in 2010 and it has increased to 19.03% in 2011.

The current ratio shows a company’s ability to pay current liabilities using assets that can be converted to cash in the near term. Ratio should be higher than 1.0; a ratio of 2 or higher are better. As for the Walt Disney Company, the current ratios are 1.11 and 1.14 for the year 2010 and 2011 respectively which showed that the ability of the Walt Disney Company to pay its current liabilities using the assets it have.

SWOT Analysis

Strengths:

The major strengths for Walt Disney have been its strong diversification strategy. Furthermore, the responsiveness to the markets is something that the management prides on. It is more focused on brining in the brand recognition strategy that has helped the firm attain profitable outcome. The financial stability of the company has also been quite a successful tool for the organization. Furthermore, the creativity and the strong leadership of the company are considered to be the success of the organization.

Weaknesses:

The major weakness for the company has been the constant up gradation. Furthermore, the high sunk cost of the company has been again something that the company needs to work in order to overcome the weakness. The limited availability in countries such as India and China needs to be worked on so that the sales can be increased accordingly. Therefore, the weaknesses have to assess in order to overcome the weaknesses.

Opportunities:

The opportunities for Walt Disney moving ahead in the future are to focus on extended diversification protocol. In addition to this, the international growth and new market attainment is necessary for the organisation where they can increase the future direction of the company. The franchise system will also be an opportunity for Walt Disney in the future. Finally, the financial stability through asset management can also increase the market credibility for Walt Disney.

Threats:

The major threat for Walt Disney is all about competition from various competitors in different industries. The economic recession or the economic downturn has also affected the sales for the company. The IP protection is also a threat for the organization and finally the uncontrollable changes in the tourism industry is again a threat.

Recommendations

The different type of innovative leveraging of the Disney brand has represented the SBU structure which has maintain the values for the compatible with either their respective entertainment niche also the informational divisions. Another major example, the traditional SBU structure has been growing quite considerably with the Pixar entertainment. Therefore, it has been focused on directing the sales and support ventures for the organization.

Theme park in India

The recommendations based on the current situation, Walt Disney has to focus on the initiatives on two different aspects. For instance, the SBU must need to continue the strength the operations by eventually identifying the new and diverse opportunities in the current target market. This recommendation is basically focused on the skill set of the management and the innovation element.

Along with this, the company should look to open a theme park in India which is a big market and it shall increase the sales and revenues for the company also. Therefore, the first and the most obvious recommendation for the company moving ahead in the future will be to work on opening a theme park for the local Indian market. Furthermore, it should also look to open a Disney land in the similar theme as it is in the United States.  The focus of the theme park should be on attracting the youngsters of Indian market.

Franchise System:

Another recommendation for the Walt Disney Company shall be to offer franchise system to the entrepreneurs in different countries. For instance, the franchise system shall increase the presence of Walt Disney in other parts of the world. Along with this, it also offers easy expansion capital for the company where the management will be able to attain profits without risk taking; therefore, the idea of franchise will increase sales and global presence simultaneously.

In addition to this, they can adapt to culturally indifferent customers where maintaining the rules and regulations of the foreign market. Finally, a plan Disney will continue is to build their strategies for reaching their global markets by following the standards of those countries and paying the taxes of those countries. Therefore, the second recommended strategy for the company shall be to introduce franchise system.

Financial Stability:

The company Walt Disney has to focus on attracting more financial stability in the coming time. For instance, the financial competency of 2013 first quarter indicates that 5% increase in revenue is expected where it is particularly focused on 7%. The company has been generating revenues which are a balanced among the five business segments with the leading of market share of 45.1% of the Disney revenue which has increased in last 4 years.

Along with this, the parks and report revenue or income to be generated is about 18%, the consumer products will generate an income of 9% whereas the interactive media shall reduce the revenue by 2%. Therefore, it can be said that the financial stability is quite strategically aligned with the overall financial stability that shall increase the sales for Walt Disney.

References

Bohas, A. (2015). Transnational Firms and the Knowledge Structure: The Case of the Walt Disney Company. Global Society, 29(1), 23-41.

Chrisman, J. J., & Su, E. Y. (2017, January). How Does Diversification Strategy Differ among Different Types of Family Firms?. In Academy of Management Proceedings (Vol. 2017, No. 1, p. 14781). Academy of Management.

Voigt, K. I., Buliga, O., & Michl, K. (2017). Making People Happy: The Case of the Walt Disney Company. In Business Model Pioneers (pp. 113-126). Springer, Cham.