Exercise 5B Evaluating Disney's divisions in terms of Porter's strategies

Objective: Figure 5-3 and related text describe Porter's five generic strategies. Disney has five business
segments. With this exercise you will practice evaluating the degree to which the different segments or
divisions of a company use Porter's generic strategies.

Instructions

Step 1: Develop a 5 × 5 matrix, placing Disney's five divisions at the top and Porter's five strategies along the
left side of your sheet. In other words, at the top you will have the headings 1) Media Networks, 2) Parks &
Resorts, 3) Studio Entertainment, 4) Consumer Products and 5) Interactive Media, and on the left side of
your sheet you will note Type 1, Type 2, Type 3, Type 4 and Type 5, referring to Porter's basic strategy types
described in the chapter.

Step 2: Review the text explaining Porter's five strategies. Also review Disney's divisional information
provided in the company's Annual Report and Form 10K, as well as in the cohesion case.

Step 3: In each of the 25 cells of your 5 × 5 matrix write the word High, Medium or Low to indicate the
degree to which each Disney division uses or applies the respective Porter strategy.

Step 4: Write a one- to two-page executive summary that discloses your reasons for assigning the High,
Medium and Low options to each strategy, as well as your overall assessment of the effectiveness of
Disney's strategy, especially according to the indicators mentioned in the chapter for each of Porter's
strategies in terms of when it is most advisable to apply them.

Step 5: Add one more row at the bottom of your 5 × 5 matrix; in it you will indicate what grade you would
give each Disney segment for its overall strategy formulation and implementation efforts (A, B, C, D or F).

Media Networks

 Broadcast, distribution and advertising rates are determined primarily by the size and nature of the
audience, as well as the advertiser's total demand.
 There are channels designed for specific market segments (sports, children, general culture) with
various distribution channels.
 You have to fight with the competition for the most advertisers.
 Best-value leadership must be offered as it is primarily a large industry, the approach is only
applicable to small companies.
 There is a high interaction of all the elements of the value chain to offer the best product: you own the
production company, the film/broadcast house, the cable companies and the distribution
channels.This allows cost reduction for advertisers, and the best possible product due to highly
controlled production variables.
 The particular segmentation of the different media allows the creation and dissemination of highly
targeted and highly designed content under which advertisers lose their price sensitivity. This implies
high leadership in best value in combination with product differentiation.

Parks & Entertainment

 The main income comes from the sale of entrance tickets to the parks.
 Park and hotel occupancy depends on the seasonality of customer visits, mostly during the northern
summer months and the early weeks of early winter.
 A product is defined as a complete and lasting vacation experience by offering from transportation, to
food, entertainment and rest. There is extensive control of the value chain to create leadership in best
 value, but because of the experience, the trajectory, and the experience of the places, their
characters, the movies represented in the parks, we work in a wider range with differentiation.
 Customers are willing to be price insensitive in order to provide an experience their children will
remember for a lifetime.

Studio Entertainment

 As part of the film business, the organization has worked with a number of partnerships and
acquisitions to promote cost reduction.
 The company invests heavily in building consumer anticipation prior to the release of films and home
entertainment products.

 Some characteristics of the industry's products are very similar: price competition is very strong, there
is no strong differentiation that is valuable to the consumer (except for the final experience which is
relative to the consumer's perception).
 These characteristics allow us to define that the strategy mainly used is cost leadership because the
elements of the value chain seek mainly to reduce production costs, because there are few forms of
differentiation and there are a large number of buyers with great bargaining power (they can save or
sink a film, including through the use of social networks).

 Partnerships such as the one achieved with Sony Pictures and Marvel give rise to competitive
advantages that are difficult for other companies to imitate (although Fox has the filming rights to X-
Men and The Fantastic Four, both Marvel properties, it must pay such rights to Walt Disney, who will
receive such money whether Fox makes or loses money at the box office).

Consumer products

 Dedicated to the design, development, publication, promotion and sale, as well as licensing of a
series of products based on all the characters and intellectual property of the company and all its
divisions.
 Disney-branded stores are operated directly by the company.
 Sales are influenced by seasonality and by the releases of the organization's film titles.
 Advertising strategies that appeal to parents' feelings are used, especially with younger children.
 The production structure is external and is based on licensing.
 The publishing segment earns its profits per title sold.
 According to the information available and presented, it is stated that in the first place, the company
works with a leadership in low cost by offering a percentage of participation on unit sold with respect
to the risk of direct manufacturing. With this, there is a greater market penetration, and a greater
diffusion of the company's image.

Interactive Media.

 Development of games for social networks and mobile platforms as well as development of the
company's web content.

 Sales are seasonal depending on film releases, television releases and the holiday season of the
year.
 It is a support division for Studios Entertainment and Media Networks, mainly as secondary
promotional impulses to the products developed by them.
 As they are technological products that require high innovation, the strategy to be considered is
differentiation, in order to obtain a relevant experience for the consumer, taking into account the
segments to which the games are directed (children, teenagers) and that is why the information
obtained does not show
 The main strategy for this division is therefore low-cost leadership by launching products that can be
obtained by the segment, easily designed and consumed, even free of charge, to serve as advertising
support for more relevant products in other divisions.

For all divisions, this approach cannot be applied because it is designed for small-sized companies,
and the case at hand concerns a transnational corporation with several billion dollars in annual
revenues.