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The Walt Disney Company founded in 1922 started out with 2 employees from an animation studio. It has become a leader in family entertainment. The company has around 58000 employees worldwide and 189000 shareholders. It has become a media conglomerate with Motion Picture and Video Production (Walt Disney Picture, Touch Stone Pictures), Television Broadcasting Network (ABC), Cable Networks (ESPN, ESPN2), Amusement Parks (Disney World), Resorts (Disney World), Professional Sports (Angels). (The Walt Disney Company -- A case study) We shall take a look at how the company achieved its profits, its market penetration, and its product implementation. The 5 techniques used are LE PEST, SWOT, Porters 5 Forces, Stakeholders Analysis and Business Life Cycles.
LE PEST Analysis:
LE PEST stands for political, economic, social and technological trends. The activity is essentially a brain storming session on each of these aspects. This comes into focus when a company considers the marketing environment before it begins any process. Under political factors, the stability of the political environment, the government policy concerning the tax laws, the marketing ethics and the economy are noted. Under economic factors, the per capita income, the GDP, and the interest rate which come under the marketing economy are considered. The socio-cultural factors take into account the religious factors, the reception to foreign goods and services, the longevity of the population, their wealth and spending factor, the language barriers in a particular economy etc. (Le PEST Analysis)
The technological factors considered are if there is importance given to quality, if the economy allows for innovation of new products, and if new technology results in new consumers in all areas of service. Disney has successfully implemented the LE PEST strategy in its marketing business. Under political factors, Disney has safely re-created its magic in countries where there is political stability. Further, the tax benefits provided to it in developed countries, the liberal economy, and public funding. Disney's capital requirement is $3.6 billion in its European theme park. The government policy towards it is also favorable. The French government invested $1.2 billion or 40% in Euro Disneyland, provided public transportation facilities, and provided a large tax relief of 18.6% on the cost of the goods sold. Thus, Disney is in a safe environment far away from law and order clashes that occur.
Under economic factors, Disney found that consumption became serious with today's consumer. People were not only willing to spend just entering the world of Disney but also for its souvenirs, shopping malls and the like. It also found that the bargaining power of the people has increased. Since a large number of people are necessary to make the operations smoother, Disney has given the consumers some power. As per a study conducted, Disney found that the consumer would spend upto a maximum of $33 on the entrance fee. Since the economic factors are good, Disney's current ratio was 0.98 in 1990. Its total revenue in 2000 was 25,402,000,000. The per capita income of the people in U.S. has increased as also the interest rate.
Disney generates 35% of its annual $1.2 billion net income from worldwide theme parks. It has built these theme parks in relatively stable economies such as Japan, France and lately the Euro Disney. However, it is to be noted that after 9/11, its stock price fell down by almost 20% to $16.98. It has since risen following a recovery in the economy. One of the key factors under economy is the trend after 5-10 years. Disney has capitalized on it by researching that its holding such as theme parks, cinema and its characters will continue to have the same fame on a long-term basis, thus terming it as "future orientation." The socio-cultural environment has aided Disney in its profit making. Market research showed that children were the biggest consumers. In countries like U.S. And continents as Europe, children have a greater say in the decision making process. The original part of the theme parks, the Magic Kingdom and the California park was aimed at children. With increased demographics, Disney decided to also concentrate on grownups with its theme travel, mass media, and Internet.
Thus, it targeted all age groups in society. It also made all its venues accessible to everyone, like day care centers, kennels, wheelchairs and even attractions for the blind. Disney has developed a "clean fun family" image that it wants to retain. It is noted that Disney has made its holdings in areas where there is no language barrier, no social customs that pose a hurdle etc. Technology is the forefront of Disney's creations. It has designed the EPCOT center, with its simulations of the Future World aimed at technocrats. The spectacles in the Disney environments are not merely static attractions, but technology has been improved to make it "happening." U.S., Europe and Japan economies give emphasis to technology and innovations. The cost and quality is a major factor for Disney. Most of the major fantasies of Middle East, Africa and Asia find its way in Disney motion pictures. Disney tapped the technological environment from the 1930's, and after the 1980's, it collaborated with Hollywood studios like Universal and Warner Bros, with software leaders like Microsoft to bring the customers technical hi-fi.
The SWOT analysis is an effective tool to identify one's Strengths, Weaknesses, Opportunities and Threats. Strengths refer to the advantages one possesses, the resources one has, what one can offer to get a profit. Weaknesses are the points one should avoid, what one does badly and where one needs to improve. Opportunities can be changes in technology, markets, government policy, social patterns or lifestyle changes that one can make use of to achieve a goal. Threats are the obstacles that may come in one's path, the competition one faces in the field, any unfavorable changes that can threaten one's growth etc.
Disney's main strength is its resources, capital formation, experience in the business, its low-cost strategy. Moreover, the company has developed over the years, a goodwill in the form of "brand name." It has been able to diversify its operations and products to counter its decreasing sales in product lines. Diversification now includes not only theme parks but travel cruises, movies, copyrights over its characters, media etc. Further, it has in the recent years entered into Home Video, Films, Merchandise, Radio Broadcasting and Television. It has also expanded its global operations from USA, Japan and Europe. Its major strength is its internal resources that are its employees who are satisfied and innovative. Due to its low-cost strategy, the company can control costs and deliver quality goods and services. (The Walt Disney Company- A Case Study)
But Disney also has its weaknesses, the important ones being a large workforce, frequent change in its top management and high overhead expenses. Its 58000 employees can result in communication problems, bureaucracy, and the general issues, which contend a normal office. Its workforce will only increase since its operations keep expanding. However, Disney's corporate structure does not change in proportion with this workforce, which poses a problem. Change also leads to resistance and high overhead expenses to take care of its large fixed assets. Various opportunities are present to Disney that seems favorable. These are external opportunities like positive government attitude towards its plans, and a favorable entertainment industry that is ready for innovations and strategies to consolidate its position. Also, competition to Disney is not much since its operations involve high cost and risk taking. Legal and legislative forces like the French Government's positive contribution to it are also an advantage. (The Walt Disney Company- A Case Study)
Finally, the threats to Disney include over saturated markets, political and economic factors around the world wide that may change, and foreign competition. As the products and services from the entertainment industry starts to flood the market, competition rises, and only the powerful companies will survive. It is possible that some of its divisions may not be able to face competition from media giants like Turner Broadcasting Corporation. Global political events and economic changes can also be a threat. Disney lost major revenue in 1991 since travel had decreased due to the Gulf War. If there are depressions in the economy, Disney will face losses. The SWOT technique thus gives an idea of Disney's area of profit making as well as its probable losses.
Porter's Five Forces Analysis:
We shall now turn to Porter's Five Forces. The Porters model is based on the corporate strategy that an organization should meet the opportunities and threats in the external environment. Porter identified 5 forces that affected every market and industry. These are directly related to competition and hence affect the profitability of a company. The five competitive forces are Threats from new entrants, bargaining power of suppliers, bargaining power of consumers, Competition from within the industry, and Threats of substitutes. The suppliers' bargaining power would be high when the market is dominated by a few large suppliers, when there are no substitutes for the…[continue]
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