The Walt Disney Company is one of the best-known entertainment companies in the world. The company commands a global presence with its powerful brands that include Disneyland Theme Parks, the Walt Disney Studio, and the ABC Television Network. The company has expanded its presence across the world and across the entertainment industry by acquiring established concerns that add strategic value to its vision (Takahashi, 2012). One of the high profile acquisitions was Pixar, an animation giant. Recently, Disney acquired Studio Ex to have a presence in the gaming market (Takahashi, 2012). From an investor’s perspective, these acquisitions have not always translated to higher returns. The strong brand of the company is not equivalent to good returns. This paper examines the strategic position of the Walt Disney Company within the entertainment industry as a means of determining whether it is prudent to invest in the company.
Entertainment Industry Analysis
The entertainment industry is very diverse. The players in the industry range from those seeking to reach the mass market through television to some subscription-only options available online. The digital era is making it possible for people to access entertainment on multiple platforms. There is growth in both the preparation technologies such as 3D cameras and in access technologies.
The essential elements of entertainment have remained the same over time. Some people prefer to access entertainment in groups such as in movie theatres or in parks. Others prefer private entertainment leading to the increase in personalized forms of entertainment such as the DVDs (Pratali, 2003).
The delivery technologies have grown too. 3D theatres and television sets are transforming the experience of viewers in new ways. Mobile applications that allow users to access entertainment on demand are on the increase. People can store thousands of music files in iPods and in their mobile phones for personal consumption.
A new trend that is changing the way children experience childhood is the growth in gaming. Gaming is an essential aspect of the development of young people today (Pratali, 2003). The improvements in gaming technologies such as the use of 3D graphics and very high processing power are behind the success of gaming devices such as the Sony Playstation.
The conclusion of this analysis is that the entertainment industry is growing rapidly because of the advances in animation and computing technologies. The industry will continue to grow in new and unpredictable ways. The trends that exist favor companies that have long-term commitment, backed by good decision-making. Any company that plans to survive in the entertainment industry must have a plan to make huge investments to take advantage of new opportunities. At the same time, the company must have a plan to recover its investment quickly before the technologies become obsolete.
Walt Disney’s Strategic Positioning
Based on the SWOT analysis of the Walt Disney Company, the main issues that give the company a strong footing in the entertainment industry is the diversified portfolio of the company. The company has a presence in all major entertainment sectors. It runs television stations, it creates films, it makes music, and it is entering the gaming market. Secondly, the company has a very strong brand name across the world (Goldman & Nieuwenhuizen, 2006). The most popular cartoon character in the world, Mickey Mouse, is a household name in all the countries of the world. The Disneyland theme parks are tourist attractions. They attract people from all countries. In addition to these two issues, the company has a very strong culture of innovation. It is in the nature of the company to act creatively and to produce entertainment content that attracts and retains customers throughout the world.
The main concerns bedeviling the company are its increasing size, the strength of competitors and its high sunk costs. The company’s growth in the last decade came through the acquisition of ongoing concerns. From a strategic point, the mergers and acquisitions are increasing the competitive advantage of the Walt Disney Company (Porter, 1980). However, the increasing size of the company brings new challenges such as cultural differences, the need for changes in management styles, and the disappearance of the corporate culture (BCG, 2010).
The second issue that the Walt Disney Company will need to keep an eye on is the growing number of competitors. The traditional competitors of the company are big organizations working in one of the areas that Walt Disney operates. A new source of competition is smaller companies and individuals with access to basic technologies for packaging entertainment materials (Pratali, 2003). It is possible for an individual to shoot a video via a phone and edit it using freeware video editing software and thereafter to upload it on YouTube as entertainment material. The combined power of low cost producers of entertainment materials erodes the market share of the big players. The final concern surrounding the company is the high sunk cost in its balance sheet caused by the acquisitions made in recent years. It is eroding the company’s capacity to turn a profit.
In the overall analysis, Disney is still a safe company for serious investors. It is resilient, and it has interests in almost all sectors of the entertainment industry. The entertainment industry is growing, and the company is expanding to take advantage of emerging entertainment needs. Investing in the company is a good strategic decision.
BCG. (2010). Creating People Advantage in 2010: How Companies can Adapt their HR Practices for Volatile Times. Boston, MA: The Boston Consulting Group.
Goldman, G., & Nieuwenhuizen, C. (2006). Strategy: Sustaining Competitive Advantage in a Globalised Context. Cape Town: Juta and Co Ltd.
Porter, M. E. (1980). Competitive Advantage: Techniques for Analyzing Industries and Competitors. New York, NY: Simon and Schuster.
Pratali, P. (2003). Strategic Management of Technological Innovations in the Small to Medium Enterprise. European Journal of Innovation Management, 6(1) , 18-31.
Takahashi, D. (2012). Disney pushes into Asia with purchase of South Korea’s Studio Ex. Web.