Strategies on different levels
The Walt Disney Company’s strategies will be looked closer at in this chapter. The strategies will be separated into 3 different levels; global/general, corporate, and business. There will be no focus on functional level strategies.
When describing all the different levels, then general strategic initiatives on each levels will be described, mainly from their own statements in their annual report. Furthermore each level will be applied some specific frameworks;
The strategies on a global level will be analysed for general pressure on cost reduction and local preferences.
The strategies on a corporate level will be analysed for general changes and strategic moves according to Thompson, Strickland & Gamble (2005, p.142) on complementary strategic options.
The strategies on a business level will be analysed for wich of the five different generic strategies Walt Disney Pictures is using.
General and global strategies for The Walt Disney Company
The Walt Disney Company is aiming for the ability to charge higher prices as a result of their brand-value and differentiated experience, and cutting through a large crowd of products and capturing the customer’s attention as a result of their competitive advantages. Furthermore their sheer size makes them focus on continuously developing and improving their cost efficiency on a global basis.
On a global level, then The Walt Disney Company is facing very little pressure for local preferences. The local adjustments are mainly language barriers, since their target group to a large degree consists of small kids, then it is important to adapt the spoken language in their productions, or at least provide subtitles for the productions targeted the adult segments. Besides this, then is it hard to spot any larger focus on adaptation to local preferences.
If looking at the structure of the company, and the portfolio of business units, then they are to a high degree focused on being interlinked, and thereby being able to create synergies and cost reductions. The industry does not only allow it, but because of the fierce competition, it demands to have some focus on it, just to improve profit margins. In total it makes them able to pursuit a global strategy.
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Corporate strategies for Studio Entertainment segment
The Studio Entertainment segment has had volatile revenues through out the last many years. They are dependent on success of at least a few productions each year, and especially the Walt Disney Pictures productions will partly secure the next couple of years earnings before the effect of the product will wear of.
According to Walt Disney Company (2006) the Studio Entertainment segment has a high focus improving their returns at the moment. They seek to decrease the volatility around their hit-driven productions. To do that, they want to control the overall spending on each movie, lowering productions per year, and have a larger focus on quality instead of quantity. They have a larger focus on analysing their past earnings to see where they did wrong and where they have the highest earnings. This has resulted in a larger focus on creating and maintaining Disney branded titles, which historically have given a higher ROI than live-action films have.
The Disney branded titles have not only higher earnings, but the franchise potential gives large incentives towards this strategy. As an example can the Disney branded title of Hunchback of Notre Dame, which so far has earned $200 million in video sales, but also $160 million in merchandise earnings.
The Studio Entertainment segment has furthermore begun to use external investors for their live-action film productions. They have begun so finance up to 40% of the production and marketing costs, and is mainly focused on financing the more volatile productions. Sequels to already produced products, as for instance The Chronicles of Narnia, will not be financed through this strategy, since they represent a less volatile investment.
This form of strategies makes it possible to integrate outside partners, which could be useful in production and distribution of the products, and furthermore is makes them able to considerably lower their risks, but it also makes a cut in possible rewards.
When looking through Disney’s track records, then a thing about their way of expanding business and knowledge becomes apparent. They do it mainly through acquisition of other companies. Most up to date and significant is the acquisition of Pixar back in 2006. They needed the knowledge about 3D animation, since their core competencies only revolved around 2D animation. Another major company acquired for the Studio Entertainment is Miramax in 1996. Furthermore other segments of The Walt Disney Company have invested in computer, mobile, and TV game development companies, and other distribution and media channels around the world.
Furthermore there is a large focus on strategic alliances, and how they should keep the company flexible instead of tie them up for longer periods of time. An example could be the end of the 10 year agreement with McDonalds where they realised that the strategic alliance had kept them from exploiting their major brand franchise (Stanley 2005). They still form alliances with different companies, but not for longer periods of time, and normally no exclusivity agreements.
Business strategies for Walt Disney Pictures
Walt Disney Pictures, being the heart and soul of The Walt Disney Company, is a very important business unit. And in the recent years they have found out what happens if it is not maintained and developed in an orderly fashion. The lack of efficient and quality focused production have made their productions less valuable, and thereby creating fewer revenues. The Walt Disney Pictures have through the last decade not been able to create any sustainable productions (Grover 2000, Grover 1999). Now they will have a larger focus on creating a better quality, and hope that the Disney brand still can give the extra value, when it comes to penetrating a market with strong competition. They will in the future try to create a business unit that follows the global and general strategies for the whole company, through creating a differentiated experience and use their brands to continuously develop their brand library.
The business lack of competitiveness on 3D animation has recently been removed, with the acquisition of Pixar, a earlier business partner with Walt Disney Pictures.
According to Thompson, Strickland & Gamble (2005) there are five different generic strategies a business can go for in the market; broad low-cost provider, focused low-cost provider, broad differentiators, focused differentiators, and best-cost provider.
When looking into the core of the business unit and the general strategies on a corporate and global level, then the chosen generic strategy for Walt Disney pictures are most similar to those of broad differentiators, where the key factor of survival is separating the production from the crowd.