#1. In the business world, there are many methods to access companies’ performance. One of the most popular portfolio analysis methods, developed by the Boston Consulting Group, requires that firms classify all their products or services into a two-by-two matrix.
Stars: high-growth markets and high market share products. The company distributes films under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm, and Touchstone banners. This segment generated $9441 million, accounting for 17% of the company’s revenues and growth of 28% in 2016. We can say that Film Studios is a Star in the BCG matrix that will bring both growth and profits to Disney.
Cash Cows: low-growth markets but high market share products. Walt Disney Parks and Resorts is one of the world’s leading providers of family entertainment experiences. According to the fiscal 2016, the total consolidated revenues of Disney are $55,632 million, and Disney Parks and Resorts are $16,974 million, it’s about one third of total revenues. From the DIS’s Competition by Segment and its Market Share, Parks & Resorts include Cruise and Universal Theme Parks have the highest market share which is 25.09%. Thus, we can conclude the Cash Cow is Disney’s Parks and Resorts.
Question Marks: high-growth markets but low market shares. Disney interactive has product as Disney’s Internet, mobile app, social media and games. The interactive media industry has been evolving and is expected to grow in the future. It is an infrastructure based primarily on e-commerce and smartphones. Internet users are increasing worldwide every year, which means opportunities for the interactive media industry are expanding. Also, smart phone users are predicted to increase, it will contribute to the growth of interactive industry. Disney Consumer Products is a subsidiary segment with hundreds of categories from toys, books, clothing, etc. From the DIS’s Competition by Segment and its Market Share, Consumer Products have the market share of 10.94%, while Interactive media only have the market share of 1.24%. Hence, Consumer Products and Interactive Media count as Question Marks.
Dogs: low-growth markets and low market shares. In 2017, The company’s revenue declined 3% year-over-year (y-o-y) to $12.8 billion, primarily due to a seasonal fall in the company’s Studio revenues and a continued decline in the Media Network segment. Disney’s Media Networks revenue for the fourth quarter declined 3% y-o-y to $5.5 billion, while its segment operating income decreased 12% y-o-y to $1.5 billion. This was driven by a decline in both Broadcasting and Cable Networks. The TV industry will not be the mainstream as new generations spend less time watching TV and more time on the Internet. In the BCG matrix we consider TV Networks as Dog.
In recent years, the streaming service market has been expanding, and the creation of the “Disney+” has become an important step for Disney to enter the streaming service market. Disney Plus is an upcoming streaming service for almost everything it creates. The firm said, on average, investors are expecting Disney Plus to hit 7 million subscribers by the end of the year and for the service to grow to 17 million in 2020. Shares of Disney are up 23.6% year-to-date. We can assume Disney plus will become a Star in the near future.
#2. Walt Disney has a sustainable competitive advantage that leverages the uniqueness of the products offered by the entertainment, media and park industries. Their competitive strategy is based on making its products different from the competitors. Disney is one of the most recognizable companies in the world and has a mass amount of brand recognition. Their famous cartoon character Mickey Mouse has become the main symbol of the company.
First, they ensure their customer excellence by having a strong brand and excellent customer service. For example, Disney park employees can recognize if a tourist is lost, help tourist with almost everything they need, and know how to use sign language.
Secondly, they do well on operational excellence which are ensure good value to customers while earn profitability for themselves, develop strong and steady relationships with vendors. For people work in Disney parks, they’re called “cast members” instead of “employees”. They don’t wear “uniforms”, they wear “costumes”. This well-defined company culture ensures their operational excellence.
Thirdly, Disney achieve a sustainable competitive advantage through their unique merchandise and products. The biggest segment of Disney is Media Networks, which covers Disney’s business in the cable network, TV network, radio network and digital services. The media network department uses differentiated strategies to target segments of different audiences. Disney also have a lot of unique retail products such as toys, clothing, furniture, accessories, etc. At last, locational excellence is an important strategy for Disney. Disney’s theme parks are all in the big cities with large population.
#3. When it comes to growth strategies they’re using on Disney Plus, product development is Disney Plus’s primary growth strategy. This strategy involves offering new products in the company’s current or existing markets that they continue making their own series. The other strategy is market development. Disney confirmed that the new streaming service will be available in North America on November 12, 2019. It will roll out in Europe from late 2019 to early 2020. Asia-Pacific will get Disney Plus between fall 2019 and fall 2020, while Latin America sees the service arrive in fall 2020. This means Disney Plus will have a whole global market in two years.
#4. Doing a SWOT analysis is necessary before entering the market. Here is my analysis for Disney Plus:
Strengths: Disney Plus will undercut Netflix on price. Disney Plus will cost $5.99 per month in the US. That’s a decent amount under Netflix’s $8.99 per month basic plan. Even more, Disney will launch a package for $12.99 a month, including Disney+, ESPN+ and advertised Hulu stream. This bundle of ESPN+ and Hulu will reduce user churn. Disney has various original movies, cartoons and TV series with a huge fans base, and Disney Plus will be the only place to watch those. Disney’s current customer base reduces customer acquisition costs.
Weaknesses: Apple announced that Apple TV+ will be launched in more than 100 countries on November 1st, it’s 11 days advantage of Disney streaming. Their monthly subscription fee for Apple TV+ is lower than Disney+. Apple will also provide one-year free streaming services to users who purchase Apple devices to attract more subscribers and gain more advantages in streaming media competition. Recently, Disney has confirmed that there will be no R-rated or MA-rated fare on Disney Plus, it would be the first streaming service of this size to not have mature-rated content.
Opportunities: Disney Plus could expand overseas markets like what they do with the Disney Parks and Resorts. It will increase the sales of Disney related products because more people are watching their movies and cartoons. In addition, the launch of Disney Plus might attract more investors to invest in Disney, therefore, the company’s stock price will increase.
Threats: Netflix is still a giant in streaming media with a huge user base of 152 million, which is unmatched by other streaming media platforms in a short period of time. Disney is actually losing money in the process of building streaming service. Moreover, Disney might lose sales on the traditional disc because of Disney Plus.
#5. Disney’s TV Networks division has been experiencing user customer attrition. According to Disney’s 2018 financial report, ESPN Channel has a subscription volume of 86 million in the US, compared with 88 million subscriptions in FY2017, they lost 2 million US domestic subscribers in one year. In the same time, Netflix was doing their original content, attracted traditional TV audience into their own stream. It is a great strategy for Disney to enter the streaming service because it has become the most popular method for people to watch movies, original series, etc. As early as 2016, Disney intended to enter the streaming media industry. Disney invested $1 billion in a streaming company called BAMTech, which is considered to be the first step in Disney’s long-term battle into the streaming service business. In order to launch streaming service more quickly and maturely, Disney announced the acquisition of the 20th Century Fox, the deal was reached at $71.3 billion eventually. By 2018, Disney renamed BAMTech “Disney+”. Although there are weaknesses and threats, Disney Plus is needed in this network environment.
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