Name: Hanfeng Wang

MBA 485 – Section 3

Overall corporate strategy:
Walt Disney is a worldwide entertainment company, and it focuses on international
distribution oriented corporate strategy. The core corporate strategy is improving creativity,
innovation and differentiation of its products or services to ensure its competitive advantage.
Multiple level of horizontal and vertical integration and related diversification are conducive for
the Walt Disney’s corporate strategy. One strategy that Disney uses is horizontal integration, and
it aims to expand business and create a new target market. This means Disney acquires a
company that exists in the same value chain as itself. Another strategy is vertical integration.
Disney purchased distribution channels and platform to ensure forward vertical integration.
Disney store is another downstream vertical integration. The acquisition of ABC and Buena
Vista Home Video is the downstream vertical integration activity, which expands Disney’s
business and decreases costs. Disney does this to improve the delivery efficiency of product or
services, and transaction cost also be reduced. Backward vertical integration occurred when
Disney acquired the innovative technology and creative content or characters. Disney purchased
Pixar is the example of vertical integration, and it benefited from owning the world’s most
innovative animation studio at that time. The diversification strategy of Disney can be classified
as related. The reason is business activities of Disney are all related to its core animation
business. Disney expands from its core animation business into theme parks, resorts, and planned
residential communities. TV broadcasting and home video are also distributed to customers by
its channels. Toys or clothes related to its animation characters are sold to consumers. Purchasing
or developing the strategic assets it needed along the way is another business activity to increase
revenue.
Major corporate strategy moves:
Diversification is common in Disney. The moves of revitalizing TV and movie and to
maximizing theme park profitability are diversification strategy. Eisner and Wells decided to
rebuild the network television and movie business, and it turns out that these two businesses are
profitable. Eisner updated and expanded attraction of Disneyland, and he started globalization
strategy of Disneyland. This strategy has three motivations. At first, network television will
highlight the creativity and high quality of programming, and it demonstrates that Disney is
incentive and contemporary. Next, these two businesses will bring a stable revenue steam for
company to remedy the financial difficulties. At last, network television and movies will
strengthen the Disney’s culture and brand. It also transfers core competencies. Creative and
prominent animation is one of the special characters of Disney.
Another move is to purchase ABC television and all of its affiliate companies. It is a
downstream vertical integration. This activity gives Disney a huge advantage over its
competition. Disney completely control the entire distribution network and is able to promote its
product over any other. There are two motivations to do this. At first, this acquisition improves
the efficiency of Disney’s distribution channel, and it also decreases the transaction cost. Next, it
strengthens the innovation, creation and differentiation corporate strategy. The horizontal
integration of small movie companies is motivated by Disney wants to get more market share
and a broader target customer. Disney acquires small movie companies to make films that will
not receive a G rating. This allows a greater number of movies to be made. Merging with local
company to strat parks is another horizontal integration. 51% of Euro Disney park’s share are
sold to local company, and Disney has a 49% ownership stake. The motivation is to decrease the
risk and improve the local relevant.
Evaluation of current corporate strategy:
I think the most questionable move is Disney acquires small movie companies. The
motivation is these small movie companies will make and release more films that is not receive a
G rating. The core business of Disney is animation, and the target customers are children and
family. This move does not strengthen its core competencies or attraction for consumers. It also
does not fit with Disney’s competitive positioning and business level strategy. Disney’s
competitive position is innovative, creative and differentiative products and services. Disney
parks and resorts are one of Disney’s most profitable business units. Business moves should be
consistent with this units. I think merging with local company to start parks is most appropriate
moves. The target customers of Disney parks and resorts are children and family, and Disney
parks and resorts provide differentiative and creative products and services by joining local
culture. It is the most profitable business units in the company.
Discussion of value creation through corporate strategy:
The core corporate strategy of Disney is providing unique, innovative, creative and
differentiative products and services for consumers. Disney parks and resorts creates unique,
interactive experiences to differentiate itself with competitors by co-creating values with
customers. Disney’s animation characters and its relevant products are fresh and attractive for
customers. Disney’s movies, TV and other distribution channels are conducive to build and
strengthen its culture and brand.
Disney’s diversification strategy is important in its corporate strategy. Disney expands
from its core animation business into related business units to form an entire system of
entertainment. Business units strengthen and facilitates each other. Disney’s vertical and
horizontal integration ensures its value be delivered to customers efficiently and accurately. It
decreases cost and improve brand’s value. I think when Disney make animation characters, some
local culture or relevant factors are necessary to consider. It will give customers more unique,
creative and differentiative experience. Some horizontal integration decisions may not be
appropriate, like acquisition of small movie companies.