The Walt Disney Company (aka Disney) is one of the biggest entertainment companies in the world. It operates through four distinct business divisions such as Media Networks, Parks and Resorts, Studio Entertainment, and Direct to Consumer and International. Disney is best known for its iconic movie and series titles and fictional characters. The company was founded by Walter Elias Disney and his brother in 1923, which started off as an animated film production company. Over the decades, Disney expanded its business into multiple avenues, which has allowed the company to earn more revenue strengthen its presence in the entertainment industry. PenMyPaper here has discussed about the external and internal factors influencing the business venture of the company, by highlighting the strengths, weaknesses, opportunities and threats of Disney in details.
The key strength of Disney lies in its financial position. At present, Disney is the biggest entertainment conglomerate in the world, which has earned a revenue of USD 69.57 billion in the year 2019, which is a sharp increase from USD 59.43 billion in the previous year. The financial strength of the company comes from its diversified business portfolio. Disney operates with four different divisions, each of them in respective media and entertainment sector. The diversification has enabled the company to have cashflows from multiple sources. The strong financial position of the company has helped in its expansion, through strategic acquisitions of several companies such 21st Century Fox, Marvel, Lucas Films, etc.
The strength of Disney also comes from its brand image. Disney is one of the most valuable brands in the world, with a staggeringly high popularity. As of 2019, Disney was found to be the 7th most valuable brand, with a brand value of USD 61.3 billion. This indicates that any services or products by Disney is likely to be highly popular among the consumers. Moreover, the strong brand image also helps the firm to create a strong competitive advantage through differentiation. The same concept implies in the Apple competitive advantages.
Disney holds the ownership of some of the most iconic brands in the entertainment industry such as Mickey Mouse, Star Wars, ESPN, National Geographic, and many more. These brands allow Disney to create appealing entertainment contents which can attract a large number of consumers and can further help the company to earn more revenue.
The primary weakness of Disney is its dependence on the revenue generated from parks and resorts and media networks. As of 2019, the company generated USD 24.83 billion and 26.23 billion from Media Networks and Parks and Resorts, respectively, whereas it has only managed to earn USD 11.13 billion and USD 9.35 billion from Studio Entertainment and Direct to consumer and International, respectively. This indicates that the company is performing poorly in studio entertainment and direct to consumer and international divisions. It should also be noted that the streaming services of Disney under the direct to consumer segment, has performed poorly, despite the rising trend in subscription-based content streaming.
Disney suffers from high cost of production of its products and services. In order to produce the movies and series titles, Disney has to spend a significant amount of money, which can only be recovered from high economies of scale. In order to achieve decent profits, the company has to cater to a large customer base with its content.
The inorganic expansion, through the acquisition of other companies require massive investments and may take a long time to offer desired returns. This aggressive approach of expansion can bring potential financial risks for the company and any loss incurred will have a significant impact on the shareholder’s return. It can also reduce the profitability of the company due to high investments required in the acquisition process.
If you take the SWOT analysis example of Netflix, you will understand that it has customers of wide demographic, as it offers shows in variety of genres. In contrast, Disney bears the brand image of being a “kids’ company” and its content may not always appeal to the mature audience. This as a result limits the potential of the company to attract a wide range of customer demography.
Disney has potential opportunities in the video gaming industry. The rising popularity of video games and the increase in consumer expenditure on video game titles and content, can be leveraged by Disney. Considering the strong financial capacity, the company can build its own game development studio and create video game titles that can appeal to its existing customers. Moreover, Disney can use its own characters in the game to make them even more attractive.
Disney has recently entered the streaming service sector. Owing to the rising popularity of streaming content, Disney has significant growth opportunity in this industry. It must invest more on its streaming business and add new and more engaging content to win more subscribers. Following the acquisition of Marvel, Disney now holds the ownership of every marvel character, which can be used to develop new titles for Disney Plus. The also company has the opportunity to develop localized content in the international markets, in order to gain more competitive advantage.
The company relies heavily on technological advancements to offer entertainment to its consumers. Using varied research methodology we can draw out the fact that Disney has potential growth opportunities in the cloud gaming sector. The growing popularity of cloud gaming can be leveraged by the company by developing its own cloud gaming portal to compete with the likes of Google Stadia and PlayStation Now.
Finally, the company has the opportunity to diversify its genre of entertainment to attract a much wider range of demography, while shedding its “kids” only image. This as a result can help the company to become more successful in the entertainment sector.
Disney faces significant threats from other entertainment and media companies Comcast, Warner Brothers, etc. Each of these companies adopt aggressive marketing mix strategies to promote their titles and brands in order to appeal to a much larger customer base. The dominance and growth of these market players poses a serious threat to the business venture of the company.
As mentioned earlier, a large portion of the revenue of Disney comes from its parks and resorts division. However, with the global pandemic in 2020, the footfall into parks and resorts have reduced drastically, thereby reducing the revenue generation of the company. Moreover, the company was forced to lay off a several employees from its parks due to lack of revenue.
Apart from the parks and resorts segment, Disney relies heavily on its media and entertainment businesses. However, the growing trend of piracy using torrent and other means reduced the revenue generation of the company in certain markets. Moreover, since there is no real moderation or restriction in piracy of content, the companies like Disney are facing a tough challenge to convince people to consume their content legally.
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