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Western Michigan University *

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Management

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Feb 20, 2024

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Term Project Chapter 1 Question 1 The main business model of The Walt Disney Company is media networks, parks and experiences, studio entertainment, and consumer products & interactive media. According to their 2020 Annual Report, which would be more reflective of the organization during “normal” operations, the company generated 37% of its revenue from media networks, 31% from parks and experiences, 17% from studio entertainment, and 15% from consumer products & interactive media. As discussed in chapter one, the competitive advantage this diversification and economy of both scope and scale the Walt Disney Company has leads to an increased value creation to share holders as the firm continues to grow and show profit. Looking at the AFI framework on page 22, The walt Disney company does well in its Analysis phase; continually innovating/avoiding stagnation internally while looking outwards at other players in each of their respective industry competitors appropriately, to thus have a response to the ever changing market conditions and demands. Chapter 1 Question 2 The Walt Disney Company's mission statement is "to entertain, inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands, creative minds and innovative technologies that make ours the world's premier entertainment company" (The Walt Disney Company, 2020). Although a specific vision statement is not published, its dedication to producing diverse and high-quality content suggests an overarching vision to remain a leader in the global entertainment industry. The company's values, known as the "Disney Compass," provide guidance for employees in their actions and decision-making. These values are optimism, innovation, quality, storytelling, integrity, and embracing change. The Disney Compass emphasizes the importance of creating a sense of community, fostering a spirit of collaboration, and nurturing a culture that prioritizes respect, inclusivity, and diversity (The Walt Disney Company, 2020). On page 16 of the text, the Stakeholder Impact Analysis is described, including the steps in identifying the wants, needs, claims, threats, and responsibilities to the firm’s stakeholders. The Walt Disney Company has done well in response in response to its stakeholders, changing with culture and growing around social trends in order to maintain that “Disney Compass” internally and sustainably in the eyes of its stakeholders. Chapter 2 Question 3 Over the years, The Walt Disney Company has changed its strategy a bunch of times. At first, they were all about making animated movies that everyone would love, like Snow White and the Seven Dwarfs, Fantasia, and Bambi. Then in the 1950s, they started focusing on TV production with shows like Disneyland and The Mickey Mouse Club, so they could reach more people and make more money. In the 1980s, they did something totally new by opening a theme park in Tokyo, which was super successful and led to more parks opening up all over the world. In the 1990s, they went on a shopping spree and bought up other media companies like ABC and ESPN, which helped them control how their content got distributed and reach even more people. Lately, they've been putting a lot of effort into building their own streaming service called Disney+. They're making tons of original content for it and even bought some more entertainment assets from 21st Century Fox to add to their library. Most of these strategic moves were totally on purpose, while others came about because of changes in the market and what people wanted. Given the size of The Walt Disney company, described on page 48 of the textbook, The top-down strategic planning frame work shows the way a firm can plan from their “values on down”, which as written above they managed to do repeated with historical and technological adaption to each media market. To consider this framework in the lens of post WWII, like many US corporations, the Walt Disney Company used their ability to strategically use their wealth of information throughout their value chain to stay both relevant and in a state of growth. Chapter 3.1 Question 4 There are several changes taking place in the macro-environment that could impact The Walt Disney Company's industry. The COVID-19 pandemic has had a significant negative impact on the travel and tourism industry, which includes Disney's theme parks and resorts. This has resulted in decreased revenue and profitability for the company. Additionally, there has been increased scrutiny on the media industry, particularly around issues of diversity and inclusion, which could impact the way that Disney creates and distributes content

in the future. On a positive note, there has been a growing trend towards streaming services and digital content, which Disney has been able to capitalize on with the launch of Disney+. As discussed on chapter 103 of the text, The Walt Disney Company had been negatively affected by industry convergence, with the change in how a huge swath of their market interacts with its media. The advent of the internet disrupted its working model (along with every other traditional media institution), but to the credit of the strategic management at Disney at the turn of the 20 th century, it managed to weather the changing tides to its betterment, even compared to other huge legacy media organizations. Chapter 3.2 Question 5 Applying the five forces model to The Walt Disney Company's industry: threat of new entrants: The entertainment industry has relatively low barriers to entry, which means that new competitors could emerge at any time. However, Disney's strong brand reputation, extensive resources, and large customer base make it difficult for new entrants to gain significant market share. Threat of substitutes: The entertainment industry is highly diverse, with many different types of content available to consumers. This means that there are many substitutes for Disney's offerings, such as other movies, TV shows, and theme parks. However, Disney's strong brand and unique content make it difficult for substitutes to fully replace their offerings. Bargaining power of buyers: Consumers have significant bargaining power in the entertainment industry, as they can choose from a wide variety of content providers. However, Disney's strong brand reputation and high-quality content make it a popular choice for many consumers, giving the company some bargaining power as well. Bargaining power of suppliers: Disney's suppliers, such as actors, writers, and production companies, have some bargaining power as they are essential to creating the content that Disney distributes. However, Disney's extensive resources and reputation as a major player in the industry give them bargaining power as well. Intensity of competitive rivalry: The entertainment industry is highly competitive, with many major players vying for market share. However, Disney's strong brand, extensive resources, and unique content give them a competitive advantage over many of their rivals. Overall, the five forces model suggests that the entertainment industry is highly competitive, but that Disney's strong brand, extensive resources, and unique content give them a competitive advantage over many of their rivals. Looking at page 91 from the text, a graphic of the continuum of of industry competitive structures from perfect competition to a monopoly, Disney benefits from falling on the consolidated side of the spectrum, allowing for it to maintain its brand and stop or hinder new entrants from gaining a foothold in media market. Chapter 4.1 Question 6. The Walt Disney has managed to balance their valuable tangible and intangible resources to an impressive degree. The firm’s main tangible asset are Theme parks and resorts, Walt Disney World Resort, Disneyland Resort, Disneyland Paris, Hong Kong Disneyland Resort, and Shanghai Disney Resort. Similarly, Disney operates a line of cruise ships: the Disney Cruise Line fleet. Following that, the slew of television networks: ABC, ESPN, Disney Channel, and Freeform. From there and continuing to grow comes their in- house studios; Walt Disney Studios, Pixar Animation Studios, Marvel Studios, and Lucasfilm as of writing this with the organization still actively acquiring other firms in the space. Finally retail stores, with “The Disney Store” locations worldwide. Moving to intangible assets, Disney as a brand is one of the most recognizable in the world. Specifically, Disney has extensive intellectual property: Disney's portfolio of characters, movies, and franchises such as Mickey Mouse, Frozen, Star Wars, and Marvel Cinematic Universe. Following that is brand equity: The Walt Disney brand, which is globally recognized and associated with quality family entertainment in cultured throughout the world. It also utilizes licensing agreements: revenue generated from licensing Disney's intellectual property for consumer products, merchandise, and media content. More recently in the digital space, it has created a vast distribution and content partnership network: Agreements with various streaming platforms, cable networks, and broadcasters. Internally, it has great pride in its stakeholder image; with talent from Disney being almost pedigreed: Creative and executive personnel responsible for generating and managing Disney's content and business strategies. Referencing page 139 in the text, Disney has done well to keep its’ competitive advantage through the dynamic capabilities’ perspective, leveraging and modifying its vast resource base in a way that allows it to keep this pace of evolution and adaptation in a market as constantly changing as pop culture is today.

Chapter 4.2 Question 7 7. Based on the VRIO analysis frame work laid out on page 129 of the textbook, several resources help sustain Disney's competitive advantage, such as its intellectual property, brand equity, theme parks, and talented workforce. These resources, combined with the company's strong organization and ability to adapt to changing market conditions, contribute to Disney's continued success and competitive position in the global entertainment market. Value: Disney's intellectual property, brand equity, and diverse business segments create value for customers by offering unique and high-quality entertainment experiences. These assets differentiate Disney from its competitors and allow it to generate revenue from various channels. Rarity: Disney's extensive portfolio of iconic characters and franchises, such as Mickey Mouse, Frozen, Star Wars, and Marvel, is rare and difficult to replicate. Its globally recognized brand and world-class theme parks also contribute to its rarity. Imitability: Disney's combination of creative talent, technological innovation, and strong distribution channels is hard to imitate. Competitors face significant challenges in replicating Disney's success in storytelling, brand recognition, and the ability to leverage its IP across multiple platforms. Organization: Disney is well-organized to exploit its valuable, rare, and hard-to imitate resources. It has a robust corporate structure, with specialized business segments that work cohesively to optimize its assets. The company also fosters a culture of innovation, storytelling, and collaboration, which enables it to remain agile and competitive in the fast-paced entertainment industry, as well as capture value in that same ever-changing industry. Chapter 4 Question 8 The Walt Disney Company's core competencies that contribute to its competitive advantage are those that they’ve honed and developed alongside their continual success. These can broadly be broken down into storytelling and content creation, brand management and IP monetization. Disney is renowned for its unparalleled storytelling and ability to create memorable characters and stories that resonate with audiences worldwide. The company's expertise in animation, live-action films, and television programming enables it to produce diverse, high-quality content across its brands, such as Disney, Pixar, Marvel, and Star Wars. Disney's ability to leverage its iconic brands and intellectual property across multiple platforms and business segments is a core competency. The company skillfully monetizes its IP through theme parks, resorts, consumer products, licensing agreements, and direct-to-consumer streaming services, generating significant revenue, and maintaining a strong brand presence. Synergy across business segments: Disney's strategic integration of its business segments, including media networks, parks and resorts, studio entertainment, and direct-to-consumer streaming services, creates a synergy that allows the company to maximize the value of its assets. This cross- utilization of resources strengthens Disney's competitive advantage and enhances its market position. These core competencies differentiate Disney from its competitors and form the foundation of its sustained competitive advantage in the global entertainment industry.

Chapter 5 Question 9 The Walt Disney Company appears to be focused on a combination of accounting profitability, shareholder value creation, and economic value creation. The company's focus on revenue growth, diversification, and long- term strategic planning supports these three objectives. Accounting profitability: Disney's financial performance, as reported on Yahoo Finance, shows a focus on accounting profitability. For instance, their revenue and net income figures are key indicators of their financial success (Yahoo Finance, 2023). Shareholder value creation: The company's commitment to delivering long-term shareholder value is evident in their investor relations materials, such as annual reports and SEC filings. In their 10-K report, Disney states that its "primary financial goals are to maximize earnings and cash flow and allocate capital toward growth initiatives that will drive long-term shareholder value" (The Walt Disney Company, 2021). Economic value creation: Disney's focus on innovation, quality, and diverse content across its business segments contributes to economic value creation/The company's investments in direct-to-consumer streaming services, such as Disney+, Hulu, and ESPN+, reflect its efforts to adapt to changing consumer preferences and create new revenue streams (The Walt Disney Company, 2023). In conclusion, while accounting profitability and economic value creation are important, Disney's primary objective of long-term shareholder value demonstrates its commitment to maximizing returns for its investors through strategic growth and diversification. Comparing this external data to the textbook, in chapter 5 page 164, the explanation of Share Holder Value Creation over the long-term fits well here, as with the vast size, history and legacy of the Walt Disney Company. The concept of the efficient- market hypothesis seems to fit well here, from the same page in the text as the entirety of the firm’s history of performance and those speculating the future of performance, that price is imbedded in the market price of the firm. Chapter 6 Question 10 Yes, The Walt Disney Company has differentiated products and services, which are mainly based on their unique intellectual property, storytelling, and brand recognition. Intellectual Property: Disney owns an extensive portfolio of characters, movies, and franchises, such as Mickey Mouse, Frozen, Star Wars, and Marvel Cinematic Universe (The Walt Disney Company, 2023). This diverse range of intellectual property enables Disney to create differentiated content that appeals to a wide audience. Storytelling: Disney is renowned for its unparalleled storytelling and ability to create memorable characters and stories that resonate with audiences worldwide. The company's expertise in animation, live-action films, and television programming sets it apart from competitors in the entertainment industry (The Walt Disney Company, 2023). Brand Recognition: The Walt Disney brand is globally recognized and associated with quality family entertainment. This strong

brand equity allows the company to differentiate its products and services from competitors and maintain a loyal customer base (The Walt Disney Company, 2023). Disney's differentiated products and services are evident in various segments of its business, such as theme parks and resorts, media networks, studio entertainment, and direct-to-consumer streaming services. These differentiators enable the company to maintain a competitive advantage in the global entertainment market. Looking at Chapter 5, page 199 in the textbook, the book touches on the need for an organization, in order to keep a differentiated competitive edge, the specific differentiators that Disney has under its massive IP library, along with it growing into nearly every emerging media market, The Walt Disney Company is attempting to retain its position at least, ideally further diversifying the media/services offered, following an economy of scope model. Chapter 6 Question 11 The Walt Disney Company does not primarily focus on a cost-leadership position in its business. Instead, the company emphasizes creating unique and high-quality products and services based on its strong brand recognition, intellectual property, and storytelling capabilities. Disney's strategy involves differentiation and offering premium experiences to its customers. For example, its theme parks and resorts are known for their immersive experiences, attention to detail, and exceptional customer service, often resulting in higher prices compared to competitors. Similarly, Disney's movies and television content are produced with high production values and strong storytelling, which allows the company to command a premium in the market. While cost control and operational efficiency are important for any business, Disney's primary competitive advantage lies in its differentiated offerings and strong brand rather than cost-leadership. Looking at the diagram on page 205 of the text, it depicts the relation between Economies of Scale, Minimum Efficient Scale, Diseconomies of Scale. The size and operation of Disney’s cost when graphed by Per-Unit-Cost and Output, Product/services Disney offers seems to fall within the spectrum where the more production per unit, the lower the cost. This with its ability to utilize economies of scope, has much more incentive to strategize in a differentiated technique. As described in cheaper 6 from the course textbook on page 198, the dogear presents a 4 quadrant, known as the Strategic Position an competitive Scope: Generic Business Strategies Outside of the Differentiation quadrant of which I stated as the model that Disney: Cost Leadership, Focus Cost Leadership, and focused differentiation. At first, I thought Disney may fall in the focused Cost Leadership quadrant, but due to their activities in so many different markets simultaneously I found the top right quadrant was most logical to be placed here. Chapter 6 Question 12 12. Based on the preceding answers, The Walt Disney Company is primarily employing a differentiation strategy. This strategy is built on leveraging the company's unique intellectual property, storytelling capabilities, strong brand recognition, and synergy across business segments. The firm is leveraging the appropriate value and cost drivers for its differentiation strategy, as evidenced by its continuous innovation, investments in high-quality content, and strategic expansion of its direct-to-consumer streaming services. Additionally, Disney's focus on providing premium experiences in its theme parks and resorts, along with its ability to monetize its intellectual property through various channels, further supports its differentiation strategy. Disney's competitive advantage lies in its differentiated offerings rather than cost leadership, which allows the company to command premium pricing and generate strong revenue. By focusing on its core competencies, such as storytelling, brand management, and cross-segment synergy, Disney is well-positioned to maintain its competitive advantage and continue creating value for its customers and shareholders. According to page 198 in the textbook, it explains the other possible competitive slope analysis. One such is the for a firm to be classified as a Cost Leadership model, which would not make sense for Disney as its sheer size makes a differentiation strategy much more appropriate than driving to change the pecking order through Cost Leadership strategy, especially when the share of the markets they operate in generally already have the power and size to innovate without a need to take any sort of “loss leader” prices to entice potential end users. Chapter 7.1 Question 13 1. What is the firm’s innovation strategy? Does it rely on incremental or radical innovations? Disruptive or architectural? What are the competitive implication of the Disney is a well-rounded firm in its own

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