Question

I'm not sure if this is a good issue statement for short case study. Thanks for the help!

An American multinational widely diversified media and entertainment organization, Disney Company which started their journey from 1923 are now recognized as one of the most successful enterprise in the century. Bob Iger who has lead the company with his magical, yet fundamental and strong business strategy to overcome the barriers that Disney faced in the last ten years in his career as a newly appointed CEO from 2005. One of the main issues that Disney faced entered from the mass diversification and acquisition while expanding their business firms into three main divisions, Walt Disney Parks and Resorts, Disney Media Networks, and Disney Consumer Products and Interactive Media. The main issue in this process was the inability to maintain a neutral and open behavior and lack of communication in team based works. Two external environmental factors involved in diversification process are analyzed in the report; political as in dealing with local government where Disney expands their theme park in other countries and technological factors that is required to produce content that satisfies customer demand as well as producing high quality content. Understanding these issues and implementing preventative tools will seize the misleading of the company for the next ten years. Other possible issues and external environment factors are considered as out of scope in this report.

Answer 1

A company of the size of Disney, which has diversified its operations in order to maximise its potential and create its own brand loyalty in the minds of the consumers across countries, will surely enjoying profits chiefly because of its proximity with then actual consumers; of its produce.

While internal factors or economies of scale and external economies of scale reduce costs and occur to Disney because of its sheer size and volume of business, yet the external factors or external economies of scale occur which may reduce its costs or increase its costs due to external factors, like better transport facilities , political conditions and so on—these are considered to occur to all firms in the industry and not just to one firm alone. Hence the benefits or the disturbances that theses economies bring are in effect shared by all firms in the industry.

However the scope of the case study is limited to two external factors 1.political 2. Technological .

Disney’s objective of expanding theme parks in other countries will obviously need the permission of the Central/Union government of the country as well as the local government. The park should probably be set up in an area as chosen and permitted by the local government (sometimes, as a protectionist measure for their own entertainment substitutes, theses governments might not be willing to give permission for the theme park to be constructed in the vicinity but would be given a far away place.) The park will need to meet the local construction rules as well as any other special rules specially ear marked for such multinational companies like Disney. Some countries may often impose certain environment related restrictions and safety measures regarding the construction and usage of the equipments in the theme parks. All these involve a huge investment for Disney and would also be a huge entrepreneurial risk since the revenue generated from such parks cannot be easily calculated. Such theme parks may be widely visited places in developed countries like France , Germany and so on but in case of developing countries like India, Srilanka and so on the such concepts are slowly gaining momentum and hence the break-even point for Disney to invest in such theme parks in such countries could arrive only at a later stage. It would be hence difficult for Disney to formulate different policies as per the different regulations of the various governments.

Hence its important that the company decide a policy of research on the social and economic environment of the country where it plans to set up its parks. The developed nations being capitalistic in nature are more receptive to such theme parks and their governments are having such investor friendly policies. While the developing nations are yet to provide flexible guidelines for such theme parks, in case of socialistic or communist countries like China might have different policies for such parks.

However the chief risk which the company would face is the change in policy as a result of change in governments.

The other factor is technological, as discussed, is the need to create content that is high in quality – satisfying to the brand image created by Disney throughout the years as well as that which is meeting the desire of the consumer of the various services of Disney especially since consumers have high expectations regarding the media and entertainment services of Disney.

The diversification of Disney into theme parks, media network and consumer products across the world is a huge entrepreneurial attempt to create a brand awareness about Disney across different countries—market segments in those countries and among various consumers in those segments—the size and composition of the population affect the acceptance of Disney products and services as a suitable forms of entertainment. However , the consumer demand differ between country to country and are largely affected by the prevailing local socio-economic and cultural conditions as well as the level of demonstration effect (or imitating of the other countries in matters of living).

This creates a certain gap or a road block for effective communication between the various departments of Disney , since the actual objective of proving quality entertainment could be effectively different for different consumer segments—what could be perceived as a great service or product by one segment in one country could be totally unacceptable form of entertainment in another country or maybe they have better substitutes or may be the cost of such theme parks and products is perceived as being higher in comparison to their own substitutes. This leads to miscommunications between Disney’s own departments and hence an in depth research of these issues and flexible and open policies of the company will help in seizing the misleading of the company.