Strategies Adopted By Walt Disney For Gaining Competitive Edge

Background of Walt Disney

The report aims at critically evaluating strategies adopted by a multi-national organization in gaining competitive edge. Business world is full of uncertainties and challenges and due to this; businesses are likely to face risks which cannot be measured or foreseen. The report examines a challenge that has affected the selected company and its operations. The report further includes in what way, the challenge is managed by the company with the help of its culture, leadership and human relations. Lastly, the report demonstrates the impact of organizational strategy in management of challenge and how this challenge impacted the organizational strategy in the long run. The multi-national organization chosen for the analysis is “Walt Disney”.

Walt Disney, commonly referred as “Disney,” is an American multinational corporation which operates in the media and entertainment sectors. The corporation was founded by Walt and Roy in the year 1923 and headquarter is situated in California. Initially, the company was named “Disney Brothers Cartoon Studio” when it was founded (Schickel 2019). The main product segment of the company includes: Parks and resorts, media networks, experiences, consumer products and studio entertainment. The product line of the company includes music, video, video games, web portals and amusement parks. Services offered by the company include streaming, television, radio, publishing and broadcasting.

Disney is a multi-national corporation and the main strategy of company’s operation is diversification. It has diversified its operations into five major divisions like consumer product, interactive media, parks and resorts, media networks and studio entertainment (Schickel 2019). The five business divisions focus on achieving the below mentioned strategies defined by Walt Disney.

The main strategy followed by the company’s core business units are common and are as follows:

• To create high-quality content according to customer demographics and preferences.
• To leverage technological advancements in its various business units to make the customer experience more memorable and thus retain consumers (Calandro 2019)
• To expand its business operations on global scale.

Porter’s Generic Competitive Strategy Model will be used to examine its core strategies in detail. The Walt Disney Corporation has a generic competitive advantage approach which utilizes the diversity of products in the media, entertainment and amusement park sectors. As per Porter’s model, a generic competitive strategy permits the firm to grow and retain its attractiveness in its targeted audience. Disney’s general competitive strategy rotates around discriminating its products from its rivals (Furrer 2016). The firm’s intense growth strategies, on the other hand, are concentrated on evolving different products which are in step with worldwide market trends. The business grows through innovation and originality, enabling it to strive against big companies. Viacom Inc., CBS Corporation, and Comcast Corporation, which owns Universal Pictures, Time Warner Inc., Sony Corporation, were amongst the corporation’s rivals. The Walt Disney Company’s general strategy and aggressive growth approaches are intended to handle such competitive situation (Furrer 2016). The entertainment giant manages difficulties in its industry environment through aligning its strategic objectives with competitive advantages.

The corporation’s general strategy emphasizes on obtaining competitive advantages through product development innovations. Disney’s intense strategies are executed with planned purposes in mind to reap the potential of such invention in terms of development. For example, the firm develops through presenting technically advanced products, like movies, to overseas customers. The Walt Disney Corporation’s generic competitive strategy and intense growth strategies are combined for product development (Havard 2021). 

Walt Disney’s core business units and generic competitive strategy

Product differentiation is the strategy used by the company in its every business unit for gaining competitive advantage in every sector it operates. Through this strategy, Disney offers unique products into several market segments and to diverse customer base. For example: its entertainment products are available and personalized for people of every age in the world (Menz et al., 2021). The main focus of entertainment products of Disney is family oriented programs.

Furthermore, uniqueness and quality its products and services in combination with innovation assists in differentiating its products and services from its rivals. The Walt Disney’s competitive strategy put emphasis on product-centric tactical priorities. Such an industry’s focus is compulsory to support creativities to distinguish the business from the competition through product development (Broekhuis 2020). The Walt Disney Corporation’s major severe growth strategy is product development. Introducing novel stuffs in the firm’s current marketplaces is fragment of this strategy. For instance, to upsurge profits from its target clients round the globe, the company releases innovative movies with related items.

Market development is another strategy adopted by Disney for gaining competitive edge. This intense strategy involves the company’s current products being launched to new marketplaces or market segments in order to expand the commerce (Mazzei and Noble 2017). Development is achieved, for instance, through beginning operations in new areas, including through introducing a new Disneyland amusement park for tapping into a local marketplace.

Figure: Porter’s generic model

Source: (Islami et al., 2020) 

The major challenge Disney is facing currently is closing of its theme parks due to pandemic. Theme parks are the second largest source of income generation for the company. Parks and resorts include around 29% of total revenue stream (Gabe 2021). The most capital-intensive segment of Disney is parks and resorts, which account for more than 70% of total yearly capital spending. Amusement parks, on-site hotel operations, and eating facilities are all included in Disney properties (Walt Disney Company 2022). Altogether, the resort has an occupancy rate of 83 percent.

The theme park is experiencing a challenge as this segment caters to the mass audience; pandemic has affected its daily operations due to continuous closures. Crowds, as per health experts, could lead to “super spreading” incidents, enabling the infectious virus to spread widely. As a result, there were several shutdowns. Theme parks are still subject to rigorous public health regulations in several jurisdictions (particularly California). As a result, the pandemic had a strong influence on this industry. Theme parks globally recorded a 2.7 percent drop in lucrativeness between 2019 and 2020, with revenues down from 73.5 billion to 71.6 billion (CNBC news 2022). Though the majority of Disney’s theme parks remained open throughout the fourth quarter of fiscal year, the prolonged closure of Disneyland in the US caused noteworthy fiscal loss for the company.

Revenues dropped 40% to $11.7 billion, whereas adjusted net profit fell 94% to Eight cents, dropping from $1.34 in the previous quarter. Even while the revised profit was a refreshing experience for shareholders, those revenues fell short of expectations. Earnings of $12.39 billion were forecasted on Wall Street, with revised earnings per share of 63 cents (Disney Suffers Due to Theme Park Closures 2022). The theme park industry’s downfall was largely responsible, with a $3.5 billion reduction to operational income and a $2 billion loss.

Product differentiation strategy

Figure: Disney revenue during pandemic

Source: (CNBC news 2022)

The above negative financial report coincided with one of the company’s most difficult moments in its decades-long history. Disney is totally dependent on live shows as well as experiences for boosting its bottom line. However, these activities have stopped due to strike of pandemic. Theme parks are not just the business unit of Disney which has suffered loss, but theatrical film making industry is also hit by this pandemic (Williams 2021). Due to this, the blockbuster shows of Disney namely “Black widow” and “Eternals” have been delayed for premiering.

Figure: Loss of revenue in parks and resorts

Source: (Disney Suffers Due to Theme Park Closures 2022)

Other contemporary drivers of change that poses challenge for Disney are as follows:

Staffing: Theme parks are not the only sector facing concern employing labor. Employees have authority to negotiate better salaries and better-quality working conditions as companies revive due to unparalleled demand for employment.  However, numerous attractions and entertainment are still closed as amusement parks in the US are not capable to rehire workers rapidly and sufficiently to meet client anticipations (Williams 2021).

International travel: Though Disneyland is officially open; numerous international guests would be not capable to come due to constant travel limitations. Theme parks profit the most from foreign visitors, particularly in the main Orlando market, wherein Walt Disney World and Universal Orlando are losing out on high-spending South American and European tourists (Challenges still facing Disneyland and other California theme parks 2022). Closing the borders aggravate the staffing shortage through restricting the flow of overseas labor which many parks had previously hired.

Lack of new innovation in the park:  Disney and Universal are competitors and there has always a gap between the two. Pandemic has worsening this problem, as a year without profits has caused local parks to abandon plans for innovative attractions (Williams 2021). There are no new rides launched by Disney or any other entertainment to entice the visitors.

Analyzing how challenge was managed by the company with the help of leadership, culture and human relation aspect

The coronavirus pandemic caused havoc on the Walt Disney Company, closing its parks and postponing the release of its movies, decreasing revenues by nearly half in the most recent fiscal quarter.  However, due to its effective leadership strategies has helped the company survive this challenge. The pandemic has boosted the media consumption across the globe because people were locked down in their homes. This led to the boom of over the top (OTT) platform and the media segment of Disney had helped it recover major part of its loss incurred due to parks, products and experiences.

Bob Chapek is the CEO of Disney and practices visionary leadership. However, during this challenging phase, it has been observed that numerous companies and their leaders have opted for transformational leadership approach in order to remain productive and gain resilience in tough times. Transformational leadership was required inside the organization because it helped to encourage people with common objective, motivated members to attain a higher goal, to be innovative in order to remain ahead in the industry and also generate strategic move about in what way to reach towards the objectives. Transformational leadership proved very vital for Disney to reshape its operations and recover all the losses incurred (Zaman et al., 2020). Following actions have been undertaken by the leader of Disney to recover loses:

Market development strategy

Disney has announced a major realignment of its media and entertainment business, focusing the majority of its development plans and investments on its newly launched streaming service, Disney+. The studio’s bold decision to change the way “Mulan” would be released. The corporation shifted focus away from its profits and towards its streaming service by revealing the film’s premiere on Disney Plus, at a time while that has been the company’s single bright spot (Wasko 2016). As a result, Disney Plus has a global subscriber base of 54.5 million, as per the company’s quarterly incomes, which reflect the massive impact to the bottom line instigated through the closure of Disney’s amusement parks and other companies (Disney Plus 2022).

Furthermore, to boost its streaming sector and recover from loss incurred, Bob Chapek in his interview said that “Mulan” which is 200 million films will be made available on Disney+ on premium basis which will bypass theatres in United States. Also, Disney is expected to launch a novel general streaming entertainment service in many other nations. This will be called “Star” and it will premiere with entertainment from Disney assets like ABC, FX, Freeform, Searchlight, and 20th Century Studios (New York Times 2022).

Disney’s organizational culture is innovative for staying ahead in the industry and it also fulfils its business strategy which is product differentiation. The company focuses on producing goods which incorporate cutting-edge technology and are in line with current trends in entertainment, media, and amusement parks. Walt Disney raised the benchmark for innovation by questioning the status quo on a constant schedule, resulting in a culture of constant improvement (Wills 2017). For example: Disney has incorporated latest technologies in its theme parks after re-opening to thrill and entice visitors. With the help of augmented reality and virtual reality is proving to be more appealing for generation z and millennial. Parks frequently compete in the United States for the right to progress entertainment centred on intellectual property presented in popular films and television shows. Walt Disney’s cartoon characters have regularly appeared in Disneyland’s shows, for instance.

Application of the Internet of Things with real-time data feeds to ensure security is another trend in theme park management. RFID-enabled bracelets have been used by several parks to track guest mobility on their grounds (Yang 2019). Long lines can indeed be accommodated using this technology by reallocating people.

To talk about human relation, Disney has addressed labour issues. In the United States, theme parks and amusement parks still require a lot of labour. The 458 parks in the United States employed 133,151 people. In 2022, many of these enterprises would pay low wages to unskilled workers. Disney’s major challenge today is to compensate its employees as per the industry standards (Wasko 2016). A ballot initiative in Florida recently enacted forcing amusement park employees to earn a $15 minimum wage. Parks would have to find a method to equilibrium the demand for unskilled workers with increasing housing costs in the surrounding areas (Wasko 2016).

Figure: Disney recovers loss

Walt Disney’s major challenge during pandemic

Source: (Statista 2022) 

As mentioned above, quality and innovation are among the major organizational strategy of Disney. Disney has incurred huge loss during pandemic and it posed a significant challenge for the firm to gain resiliency and its lost profit. For managing a challenge, every organization has to go through some changes to manage a challenge. The decision taken by leaders of Disney to transform experience of theme parks with technologies as well as diversify its operations to streaming platform during pandemic requires strategic planning. Change is inevitable and Disney had experienced numerous changes during pandemic. This could be achieved by implementing change model in the current organizational strategy.

The change model that best suits the scenario of Disney could be Kurt Lewin change model. The model consists of three steps namely: unfreeze, change and freeze.

Figure: Kurt-Lewin change model processes

Source: (Jayatilleke and Lai 2018) 

Unfreeze: Pandemic and other drivers of change have impacted the revenue stream of the company. Disney had to develop alternate strategies to regain its position in the market. In this regard, the management will have to explain employees about the prevailing challenges and convince them to leave their status quo. The main strategy of the company was to switch to streaming platform, provide quality to its customers and implement technologies after reopening of its theme parks to entice and attract more visitors (Hussain et al., 2018). Communication is the key factor at this stage. The leader should think about how to change the existing regulations, such as lifestyle and culture, so that everyone can accept the change successfully.

Change: This will involve changes that need to be done for addressing the challenge. In this regard, employees needs to be properly educated about the technological advancements that needs to be incorporated in theme parks, proper explanation of relying on streaming services and managing quality and innovation at the same time. Proper support and training will have to be provided to employees so that they do not resist (Jayatilleke and Lai 2018).

Freeze: This is the final stage where Disney will stabilize the change which has been made. For fulfilling the quality and innovation strategy of Disney, constant infrastructure development is required and investment in latest technologies will assist the company in coping with the challenge.

Hence, it can be states that organizational strategy of Disney if incorporated properly with other strategies, change management, culture and leadership, will assist the company in managing the change and help the company boost its bottom line by overcoming the challenge.

Closing the theme parks during pandemic was the biggest challenge faced by Disney. Parks now have opened but still it is not able to regain its lost customers due to certain restrictions. The challenge has acted as a barrier for global expansion of Disney’s business operations.

However, Disney’s ability to generate high quality content could be seen during the pandemic. Disney has developed content to address the needs of customers of every generation. The OTT platform and releasing of many movies at premium platforms have benefited the company and has helped in earning revenue even during the challenging phase. Theatres were closed during pandemic, due to which the company got more benefit in releasing its films on digital platforms and asking premium price from its customers.

Conclusion

Furthermore, leveraging technology in theme parks after re-opening was another major source to entice visitors and regain its lost customer base. Incorporation of technology like augmented reality, artificial intelligence, virtual reality and other has helped in boosting the quality of its products and services as well as maintaining the legacy of the company to be innovative in the long run (Transit 2019).

The challenge has caused significant loss for the company but it has also helped Disney to diversity its product segment and boost revenue to recover losses.

Conclusion

Disney is a multinational company which operates through various segments like entertainment, parks and resorts, streaming, digital media, consumer products and other. Pandemic has been marked as a period of tremendous loss for the company due to the closing of its parks and resorts in every part of the globe. However, it could be observed from the above discussion that having operations in diverse sectors has proved very beneficial for the firm. When one of its business units was suffering from huge loss, the company made strategic plans to earn revenue from other business units. Disney is among the finest example of innovation and leadership effectiveness, since, its strong organizational strategy, effective leadership and the capability to innovate has assisted the company to cope with the loss suffered during pandemic and other drivers of change. Hence, proper planning and strategic thinking has helped the business sustain a competitive advantage in the various industries it operates.  

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