M

arket Analysis
of

ovie Studios
SBUS40650 Strategic Service
Performance Business
Simulation
Prof. Drs. R. Sybren Tijmstra
Lars van der Meulen MBA

MSc. in Management
14th August, 2015

We conrm that the work

submitted here is entirely our
own work, and that any work
of others which is included
has been properly referenced
and acknowledged according
to normal academic guide-
lines. All of the above
line
students have contributed in
the preparation of this assign-
ment.

Team F1
Alex Daniel #10362191
Debarun Das #14203640
Megan Noone #14202914
Brittany Wood #14202505
Jane Lawrence #14200448
Carlos Gutierrez #14200766
Excecutive
Summary
Disney is arguably the worlds most magical brand. Capturing childrens imaginations for
decades, it is the 11th most valuable brand in the world, with an impressive $179 billion portfolio
of Parks, Resorts, Cable Networks, Consumer Products and Studio Entertainment (Sylt, 2015).
Although Disney dominates many of these aforementioned markets, this project will focus on
one of their most profitable business unit; Studio Entertainment, within which lie the market
segments of Marvel, Disneynature, Pixar and Disney Animation Studios.
For each segment, revenue and cost reduction opportunities were first identified, along with
the respective attractiveness of each market. Following this, customer sensitivities and Critical
Success Factors (CSFs) of each segment were identified as well as their competitors. A strategic
positioning analysis was then conducted.
The report recommends that managerial improvements are made through operational
and cost focuses and continued investment in Critical Success factors (CSFs) Strategic
recommendations include an increased focus on Disneynatures market share, improving
stars through customer and cost focus, and maintain market share for cash cows. The report
concludes with lessons learned from the simulation experience and limitations of the report.
The Disney experience is more than just the magic, it is great business strategy, great
management and great market performance.
CONTENTS
INTRODUCTION 1
Company Overview 1
Figure 1: Disney's Market Share 1
Market Overview 1

MARVEL 2
Figure 2: Growth-Share Matrix 1

Revenue Opportunities 2
Cost Reduction Opportunities 2
Market Attractiveness 2
Customer Sensitivities 2
Critical Success Factors 3
Competitors 3

DISNEYNATURE 4
Figure 3: Marvel's Strategic Positioning 2

Revenue Opportunities 4
Cost Reduction Opportunities 4
Market Attractiveness 4
Customer Sensitivities 4
Critical Success Factors 4
Competitors 5

PIXAR 6
Figure 4: Disneynature's Strategic Positioning 5

Revenue Opportunities 6
Cost Reduction Opportunities 6
Market Attractiveness 6
Customer Sensitivities 6
Critical Success Factors 7
Competitors 7

WALT DISNEY 8
Figure 5: Pixar's Strategic Positioning 7

Revenue Opportunities 8
Cost Reduction Opportunities 8
Market Attractiveness 8
Customer Sensitivities 8
Critical Success Factors 9
Competitors 9

RECOMMENDATIONS 10
Figure 6: Walt Disney Animations Strategic Positioning 9

Managerial 10

Strategic 10

CONCLUSION 11 Simulation Lessons 11

Limitations of Report 11

REFERENCES 12
INTRODUCTION
The Walt Disney Companys most
significant business unit: Studio
Entertaintment.
Company Overview
The Walt Disney Company has a vast and
diversified portfolio comprising of many Strategic
business units; Media Networks, Parks and
Resorts, Consumer Products, Disney Interactive
and Studio Entertainment. Disney has captured
an impressive 47.15% of the Parks and Resorts
Market Share, and their Consumer Products have
31.39%. Although Disney Interactives market
share is quite low at 5%, their Media Networks have
achieved just over a fifth of the market (21.57%). (Statista, 2015).These are impressive figures given
Disneys studio entertainment 14% market share the elastic nature of the cinema ticket market that
may seem underwhelming in this segment, but effects all of their studio segments (McKenzie,
this figure masks an impressive business unit in 2008).
the challenging and competitive market of cinema
and entertainment (Figure 1). The four studio segments that will be discussed
in this report are Marvel, Disneynature, Pixar and
Disney Animation Studios. In terms of the BCG
Growth Share Matrix (Ghemawat, 2002), Pixar and
Marvel could be considered stars, as they have
a high market share in a fast growing industry.
Disneynature has not yet realised its potential and
is still in its early stages, and so could be considered
a question mark, and Disney Animation Studios
has a high market share in a slow growing market,
so it could be classed as a cash cow.
This report endeavours to provide an analysis
of each segment and assess both the managerial
processes and strategies that they are employing,
Figure 1: Disneys Market Share in the hope that this will cement and fortify Disneys
strong position in the Studio Entertainment
market.
Market Overview
So far this year, over $8 billion cinema tickets
have been sold worldwide, generating roughly
6,752,091,382 in ticket sales (The Numbers, 2015).
February and April of this year were also the
highest grossing months in cinema ticket sales of
all-time (Screen Vision, 2015).
Disneys movie production earnings have risen
13% in the last year (Yu, 2015). They also had
3 films in the top ten highest earnings in 2015,
outperforming all other studios (Motion Pictures
Association of America, 2015). They hold the title
of highest per film average revenue in the US
Figure 2: Growth Share Matrix. Source: Ghemawat, 2002 1
 Marvel is one of Disneys most successful segments, responsible for
such global blockbusters as The Avengers and Guardians of The
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Galaxy. Marvels target audience are 14-29 year old males (Reeves et
nimpelis quid quunt rest, cus nest, ut lat odi
al., 2014).
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date in generating profit from paying tenured actors high
Revenue consereptior
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Robert Downy Jr. earns
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Opportunities explaut
than solo eiciisi dellumquis
superhero movies. compared to Chris Hemsworth
From the many studios that Revenue opportunities for who only earned $1 million for
Disney have acquired, Marvel Marvel are very small due to both Avenger and Thor and Chris
Studios has been the largest, its already roaring success and Evans who earned $200,000
costing $4 billion in 2009 (Barnes continued significant revenue. (Baker-Whitelaw, 2014).
and Cieply, 2009). Marvel Studios Marvel Studios in future should
under the Disney franchise has Cost Reduction consider paying all the cast
made $7.1 billion worldwide equally when it comes to their
from its movies alone (Ge, 2014). Opportunities fixed salary and compensate
Marvel studios has contributed them for not paying higher by
$1.7 Billion to the revenues of Blockbuster film production
sharing a percentage of the
Studio Entertainment (Szalai, costs are always high. Marvels
profits their movies make.
2015). As such, it can be current expenses are not readily
considered to be a Star, with available. However, Guardian
both high growth as well as high of the Galaxy, which grossed Market
$772.8 million worldwide in
s h a r e in the market, and
thus, high future 2014, was claimed to be over Attractiveness
potential (Reeves et budget by $232 million. The
Marvels success gained pace
al., 2014). major expense was hiring 441
after the 2008 blockbuster Iron-
production staff from Britain
M a r v e l Man set the path for future
who were paid approximately
has been movies to thrive (Gibbs, 2014).
$21.5 million.
successful to As revenues are high for films
Another high expense is produced by Marvel, and with
consideration to film locations
and labour employed, Marvel
has a very large profit potential
and it is expected to grow in the
next five years. This is a very
attractive market for future
investors.

Customer
Sensitivities
Marvel Studios mission for
success is to be attractive to
its customers, to resonate and
entertain, and continue to evolve
into the future (Disney Careers,
2015). In order to do this, Marvel
Figure 3: Marvels Strategic Positionig. Source: Arthur D. Little. need to focus on increasing
2
quality in terms of screenplays and quality
filming, which means quality skills employed. By
having a star-studded cast and correct promotion
of the films, Marvels marketing campaigns
will attract viewers. Finally, in order to create movie
excitement around the film while it is still in the genres,
cinemas, advertising will be important. Customer h o w e v e r
Sensitivities in prioritised order are: their superhero
films do not
Skills Investment generate much
profit (Statistic
Marketing Brain, 2015). With
Advertising Marvels elaborate
list of movies
lined up for the
Critical Success Factors coming year as
well as 4 movies
Based on the customer sensitivities discussed with an assembled
earlier, Marvel will have to make sure that these cast of high
sensitivities are carefully analysed in the coming profile celebrities
years to remain competitive. The success that scheduled to release
Marvel has gained will need to continue to be in the next 4 years
translated into future applications through might, this may put
ensuring that the highest quality writers, actors Marvel ahead of the
and directors are employed. Marvel is already pack (Fischer, 2014).
an established brand in the publics eye and will However, Warner Brothers
need to monitor their brand and solidify it in the may pose a threat for Marvel
long-term through excellent marketing campaigns with highly anticipated
and social media awareness. Lastly, advertising productions such as Suicide
through billboards and transport vehicles like Squad (Fisher, 2014);
buses/trains prior to the films release will keep attracting a large audience
Marvel fresh in the minds of viewers. with anticipation may draw
Top quality investment in people attention away from Marvels releases and
decrease their profit potential.
Monitoring & improvement of
marketing campaigns
Billboard and cinema Strategic Positioning
advertisements
Marvels strategic positioning, (see Figure 3)
Competitors demonstrates that Marvel is the clear market
leader in terms of attractiveness and competitive
Disneys Marvel Studios immediate competitors positioning. This is followed by Warner Brothers,
are 21st Century Fox, Sony and Warner Brothers. 21st Century Fox and Sony, who, despite large
Box office ratings from last year profits for the company revenues, is the least attractive market
Studios saw Sony with an enormous $8.06 billion, for the production of superhero films.
followed by Marvel with $1.7 billion , 21st Century
Fox with $1.5 billion, and finally Warner Brothers
with $1.3 billion (Szalai, 2015).
Despite earning the second highest revenue,
Marvel made only 2 movies, whereas the other
studios had at least 4-5 hit movies released that
year. Sonys large profit is attributed to its other
3

Revenue
Opportunities
Current revenue statistics and
market share for Disneynature
are unclear. However,
Disneynature productions are
some of the top grossing nature
motion pictures (The Walt Disney
Company, 2015). Earth, their
first film release and highest
profit earner, saw a worldwide
gross profit of $109 million, and
$32 million in the US (Box Office
Mojo, 2015). Their latest release
in 2014, Bears, only earned $18
million worldwide, $17million of
which was domestic earnings.
Despite the lack of information
on its total revenue or market
share, it can be assumed that
this is a new market which has
the potential to continue gaining
revenue. This is mostly due
to the demand for Consumer
Responsibility by the public,
the trend of conservation and
respect to nature and Disneys
endeavour to employ more
notable celebrity narrators,
such as Tina Fey (Disney Nature,
2015).
Cost Reduction
Opportunities
It is difficult to gather
information about costs and
expenses for the current market,
however, the budget for the
first film produced, Earth, was
reported to be about $30million.
Cost reduction for this market
4
Established in 2008, Disneynature is
Disneys newest segment, positioned
to provide children and teenagers with
educational nature productions.
would lie in outsourcing different profit due to customer demand,
components of the production early revenues and a scope to
to a cheaper company, or even cut costs with reorganisation of
local companies in the country the company.
of filming. Disneynature was
set up to not only excel in the
nature documentary market, but
Customer
also to have better presence in
conservation efforts. A tree was
Sensitivities
planted for every movie-goer for The target market of this
the premier of Earth, which was segment, while predominantly
a high cost for Disneynature but for children and teens with its
a gain in marketing and publicity G-rating, also contains nature
for the film (The Walt Disney documentary-lovers and those
Company, 2012). environmentally-aware (Barnes,
2009). As a result, customer
A relocation of the headquarters
focus for Disneynature lies in
might be a consideration for the
their mission, which is to share a
company who operate in Paris,
wide variety of wildlife stories on
France, (Disneynature, 2015) a
the big screen in order to engage,
very expensive city for labour
inspire, and entertain (The Walt
and daily activities. The company
Disney Company, 2015). The
produces two films a year and
films need to be educational
should costs exceed expected
(value add), high-quality in
profit, cutting the production to
production (skills investment of
one a year may prove an ideal
employees), with recognisable
strategic choice.
celebrities involved to generate
interest (marketing), and of a
Market subject nature that is relevant
for the viewer. Promoting the
Attractiveness film prior to its release on social
media is also important. In order
There is profit potential for
of most important, the customer
this market despite not yet
sensitivities are:
demonstrating major growth
in its sector, as the latest films Value Added
have not been earning as
much as earlier films. In terms Marketing
of Boston Consultings Group
Skills Investment
(BCG) Growth-Share Matrix, this
segment could be identified
as a potential question mark
(Ghemawat, 2002), since it would
Critical Success
be assumed to have low market Factors
share in the sector of nature
documentaries, but potential for Based on the above
sensitivities, the main success
factors lie in ensuring the content
of the productions are highly
educational, inspirational and
help make better understanding
of the world around. It is essential
that a proper marketing campaign
is undertaken by Disneynature,
especially in this new market, as
they have strong competition.
Ensuring that they reach the
target market, especially children
and teens who may not usually
choose to see a documentary, is
essential. Engagement on social
media network as well as further
promotional videos would help
in this market. Finally, ensuring
that the standard of the films are
aligned with the high standard Figure 4: Disneynatures Strategic Positionig. Source: Arthur D. Little.
of Disney. This will mean quality
footage, narrators, production,
editing and sound. The CSFs for
Disneynature are:
growing, attractive market for this segment.
Informative, educational,
environmental content
Strategic Positioning
Strong consumer interest
generated From the grid in Figure 4, we can see that
Disneynature has the strongest competitive
Quality of film production position. BBC Earth has a strong brand reputation,
making it a moderately attractive market. Despite
the highest grossing nature documentary, National
Competitors Geographics growth slowed subsequently, but
Disneynature have two main competitors: with releases in 3D recently, it could potentially
National Geographic and BBC Earth. National make a further profit in this market.
Geographics March of the Penguins (2005) was
the highest grossed nature documentary ever,
with $127 million worldwide and $77 million in the
US (Box Office Mojo, 2015). The company is also
releasing films in 3D (National Geographic, 2015),
which could be seen as a strategic ploy to gain
competitive advantage.
BBC Earths Planet Earth topped sales for
nature documentary in DVD sales of $3.2 million
in 2007 (Arnold, 2007). BBC Earths film Deep Blue
achieved success mostly in the UK, but with a
worldwide gross of $19 million (Box Office Mojo,
2015).
According to the online resource for box office
grossing, out of the top ten titles, Disneynature
produced six (Box Office Mojo, 2015), making it a
5
 Pixar was originally a competitor of Disney, until Disney acquired it
in 2006 (NBC, 2006). Since then, it has experienced great success
producing movies for children such as Toy Story 3 and Up.
Revenue
Opportunities
Since it was founded, Pixar
has been a market leader in
quality animation feature films.
Pixar has produced 15 movies
which had a value of $9.23
billion worldwide and averaged
$485 million for each film (The
Number, 2015). This represents
huge revenue opportunities
considering the average cost or
budget for the last 4 movies was
$196 million, while the average
revenues earned for the same 4
movies was $615.77 million.
6
While in the US, Pixars most
lucrative region or market,
average revenue of their four
most recent movies is $257.3
million. This demonstrates the
importance of the US market to
Pixar and Disney, accounting for
about 42% of average annual
revenue worldwide. Revenue
growth however has fluctuated
year on year depending on
the movies that Pixar released
during the year.
Using the Boston Consulting
Groups Share Matrix as an
indicator, we would define
Disneys Pixar studios as a
star (Ghemawat, 2002). Pixar
are among the market share
leaders and their product is
differentiated to others on
quality (Reeves et al., 2014).
Cost Reduction
Opportunities
It is difficult to define the
exact costs and expenses spent
on each movie, but Disney of
late, have been characterised
by spending extortionately on
producing their films, but this
tentpole strategy backfired on
them with the release of John
Carter, leading to a write down
of $200 million, and The Lone
Ranger, involving a write down
of $190 million (Entertainement
Weekly, 2015). But the same
cannot be said for their Pixar
segment as all 15 of their feature
films have made substantial
revenues.
Significant operating expenses
in this market include film cost
amortisation, which can be
categorised into production
costs and participations and
residual expenses amortisation,
distribution expenses and cost
of sales (Market Realist, 2015).
High costs are associated with
film production and often linked
with the film quality, but these
two are not explicitly mutual.
A more efficient staff might be
able to produce the same movie
for a reduced cost. Pixar needs
to take a holistic approach to IT
cost reduction by considering all
sources of cost and analyse their
drivers.
Market
Attractiveness
The studio animation market
is a very attractive one, with
huge revenues earned over
recent years, for example Pixar
accounted worldwide revenues
of $1.07 billion for the release
of Toy Story 3. This equated to
a gross income of $870 million
in 2010. Because of the rapid
advancements of technology
pertinent to the production
of animation, this industry is
one of the fastest growing.
The aggregated demand for
animated entertainment has
extended because of the increase
in broadcasting hours by cable
and increased attractiveness of
the internet (Reeves et al., 2014).
Customer
Sensitivities
Customers are responsive to a
plethora of sensitivities, but the
magnitude or volatility differs
depending on the criteria. Advertising is in the
form of online, social media and other traditional
mediums. Value added means improvement in
the quality of their productions, through better
writers, actors, performers or support staff. The
final customer sensitivity is marketing which
means knowing the target audience, what they
want and then effective communication. This is
something that Pixar have shown an abundance
of already in their films. Customer sensitivities are
ranked as:
Advertising
Value Added
Marketing
Competitors
The three main competitors to Pixar are
DreamWorks, Sony and Disney Animation. Sony
animation is a sub section of the Sony Pictures
Entertainment company, and since its founding
in 2003 they have produced 10 feature films in
the animation segment, and have grossed $2.223
billion worldwide (Statistic Brain, 2015. They have a
gross margin of about 70.7%, which is very similar
to Pixars gross margin of 68% (The Numbers, 2015).
DreamWorks Animation is the biggest competitor
to Pixar. Since it began, DreamWorks have grossed
$13.272 billion worldwide, and their gross margin
in this segment is 75% (NASDAQ, 2015). Disney
Animation Studios would have posed a threat, but
in 2006 Disney bought the much revered company.
This was a shrewd decision by Disney as it allowed
them to consolidate their dominant position in
the market and gave them access to proprietary
rendering technology that enhances the quality of
the movies (CNN, 2015).

Strategic Positioning
Critical Success Factors From Pixars strategic positioning (Figure 5), it is
clear that they are in a strong competitive position
Based on the aforementioned customer which is closely shadowed by Dreamworks.
sensitivities, Pixar Animation Studios could improve Both these companies have moderate to high
market share and profitability through greater market attractiveness, while Sony lags behind in
efficiency and enhanced target marketing. This a defendable position. it is clear that experience
includes improving the quality of the production and competency of Pixar and Dreamworks holds
through increased expenditure on value added, them above Sony in this market.
such as writers, producers and actors. To ensure
that Pixar stays relevant in the minds
of the customer, advertising will
create further awareness. Due to their
strong brand reputation and their
wealth of experience in animation,
target marketing is more important
than creating awareness. Advertising
will reinforce brand recognition,
while marketing will allow for the
improvement, understanding and
expansion of the potential customer
base. CSFs are ranked as:

Improving Production
Quality
Enhanced Target
Marketing
Figure 5: Pixars Strategic Positionig. Source: Arthur D.
Further Awareness Little. 7
 term cost reduction strategy
Disney Animation Studios is the most iconic (Strategic Financial Advisory
segment of Studio Entertainment, responsible Committee UB, 2015). By
acquiring Pixar, Disney not only
for the classic productions such as Snow gained a strong business unit,
but also a wealth of knowledge,
White and the Seven Dwarves, remaing one skills, technology and resources
of the worlds largest animation producers, and that can be availed of.

with recent success of Frozen (Clarke, 2015). Market

Revenue Opportunities
Walt Disney Animation Studios was founded in 1937 and have
been realising large revenues since the release of Snow White.
Earning $8million, it became the worlds highest grossing sound film
of its time, and, adjusting for inflation, one of the highest earning
films of all time (Box Office Mojo, 2015).
Disney continues to excel in this market today, with last years
Frozen earning over $1bn in ticket sales and the title of highest
grossing animated film (Clarke, 2015). The animation market
is estimated to be worth over $200 billion, and it is still growing
(Animation Ireland, 2012). Thirteen large animation
movies were released in 2014, which is an increase
of seven from 2003 (Verrier, 2013). Some fear that
the market is nearing saturation (Zahed, 2013), but as
studios compete for audiences, Disney still remains
one of the largest producers of animated films
(Digest, 2011).
Cost Reduction
Opportunities
Disney Animated movies cost in
the region of 100-200 million to
produce (Digest, 2011).
The company has helped reduce
production costs as they gradually
moved away from traditional 2D animation
(with the exception of The Princess and the
Frog), towards the more cost effective digital
2D, flash and cell action productions.
Although technology such as this has
reduced costs, strong scripts written by
talented screenwriters will ultimately
have a stronger impact on cost saving,
and hold the key to success (Clarke,
2015).
Pixar may also be crucial when it comes
to reducing costs. Resource sharing is a long
8
Attractiveness
The animation market
continues to be one of the
strongest performers in the
movie industry, reporting
consistent profits margins
(Zahed, 2013).
In this mature market,
Disneys animation studio could
be classified as a cash cow in
BCGs Growth Share Matrix.
(Ghemawat, 2002). Despite
the possibility of saturation
as animated films numbers
increase per annum, Frozens
unprecedented profit margins
show there is still huge potential
profit in this industry.
Another attraction of this
industry is longevity (Animation
Ireland, 2012). Programmes like
The Mickey Mouse Club, that
have not being produced for
over 20 years, are still earning
strong profit margins from
merchandise and licensing, as
characters are still well-loved,
current and recognisable.
Customer
Sensitivities
Disney animations target
audience was traditionally
children, but now reports show
that increasing numbers of 18-24
year olds are purchasing tickets
for animated films (Hugel, 2013).
Because of this, Disney has
focused on producing films with Relatable But global competitors are
a wider appeal, tweaking and Characters who becoming prevalent in the
adapting customer sensitivities. Challenge Stereotypes animated movie market, and
Customer sensitivities in order although, they are not top
of importance are:
Appealing Films competitors within the US
that Generate market, they could threaten
Skills Investment Buzz Disney elsewhere (Roxborough,
2015). Studio Ghibili who are
Marketing Complex Story often referred to as the Disney
Themes with a of Japan (Kenny, 2015) and
Advertising Social Influence Denstsu, have produced world
class animated films such as
Competitors the popular Spirited Away, that
Critical Success Originally, Disney dominated
earned $275million worldwide,
and yet, Disney have yet failed to
Factors the animation market, but now explore this market.

Critical success
factors for Strategic
animated movies
have changed
Positioning
and evolved Disney Animation
over the years. Studios strategic
However, recent positioning (Figure
studies show 6) show that they
that story and hold a strong
social influence position, with
is very important, Dreamworks taking
while films up a favourable
with complex position. Both
story plots also these companies
outperform possess moderate/
those with high market
s i m p l e r attractiveness,
storylines while 20th Century
(Kaufman and Figure 6: Walt Disney Animation Strategic Positionig Fox is moderately
Simonton, 2014). Source: Arthur D. Little. attractive. Studio Ghibli have the
Animated films lowest attraction and weakest
also need to create interest and market position, but this is
its top competitors include relative to these animation
buzz and persuade new viewers
Dreamworks, Universal, Sony, power houses.
to buy tickets. This appeal has
20th Century Fox, Lionsgate
now extended beyond children
Entertainment and Warner Bros.
to adults. This is naturally more
achievable if the story has a Dreamworks, who solely
unique selling point (Konnikova, produce animation movies are
2015). regarded as one of Disneys
biggest rivals (Feinberg, 2013).
The most critical success factor
Fox has also become an unlikely
however in animated films, is
competitor with its Ice Age
the ability to identify with the
movies that earned $383.26
characters while challenging
million worldwide (Statista,
stereotypes (Konnikova, 2015).
2014).
The ranked CSFs are:
9
 RECOMMENDATIONS
Managerial Improvements
1. Operational Focus 1. Increase Market Share for Disneynature
Disney is a company that relies heavily on for it to become a Star as a medium term
structured processes and information technology. objective
For that reason it is recommended that Disney:
Share processes and allow economies
of scale in Pixar and Animation studios to
reduce and increase capital to focus for new
projects.
IT Governance: Employ a framework that
guarantees the correct use of IT which will
eliminate bottlenecks, create a more efficient
product development while focusing on the
quality of the technological infrastructure.
2. Cost Focus
Funding strategy: As Disney is a cash rich
company that holds a lot of tangible assets,it
would be advisable to utilise interest deduction
(Investopedia, 2008). By borrowing funds they
can realise the interest payments before taxation,
thus lowering their tax bill and enhancing Disneys
Return on Capital Employed
Tax Awareness: avail of tax schemes that
are present in many different countries
around the world. Disney have been proficient
in this regard in the past with the Pirates of the
Caribbean, where they were able to write off 20%
of their production costs.
3. Continue Investing in CSFs
During this report, the main success factors
identified overall for the different business units
were:
Added value
Marketing
Quality
Technology
It is important for Disney to continue heavily
investing in these areas. This will allow the company
to continue attracting new customers, secure
financial expansion, meet customer demands and
expectations in quality and content, and reduce
the competitive gap with their main competitors.
10
Strategic Improvements
Disneynature CSFs include marketing, meaning
that it is highly sensitive for customers. Applying
a dedicated marketing campaign accompanied
with an awareness programme in schools and
universities is crucial. By looking into expanding
into the education sector with a target audience
of 5-15 year olds, more people will be involved and
willing to enjoy Disneynature films.
2. Improve Stars by focusing on customer
orientation and cost efficiency
Cost efficiency: Vertical integration inside
Pixar and shared processes and knowledge
among other companies together with an effective
IT Governance strategy. It could also investigate
the possibility of lowering actors wages in Marvel
studios to reduce filming costs.
Customer orientation: Initiate a new
advertising strategy programme to attract
people from different ages to the animation
movies as advertising is a high customer sensitivity.
Marvel should extend their storylines and focus
on assembled casts, learning from the success of
the Avengers and Guardians of the Galaxy.
3. Ensure Market Share of Cash Cows is a
long term strategy
To do this, it is necessary to:
Acquire competition or share ownership
with competition. This has proven to be a
very successful strategy in past mergers.
Identify future trends in consumer behavior
to identify new movie projects
Continue working with sequels as previously
discussed is a safe bet for the company
Employ Total quality management to
ensure process improvement by aiming in
quality and consumer satisfaction
Share a process framework with Pixar to
allow synergy and cost reduction
CONCLUSION
Disney has experienced phenomenal success. Studio Entertainment is a global unit
with strong brand management, and due to their dedication to a kaizen approach, they
are excelling in their endeavours to become market leaders across their segments.
Simulation Lessons
1. Identify Clear, Realistic, Strategic Goals for
Market Share
Strategic goals aid businesses to achieve their
desired market share. Broadly speaking, Disney
publicly have said their goal is to be one of the
worlds leading producers and providers of
entertainment and information, using its portfolio
of brands to differentiate its content, services and
consumer products (The Walt Disney Company,
2015). Financially, they seek to maximise earnings
and cash flow, and to allocate capital toward growth
initiatives that will drive long-term shareholder
value. These goals may not be specific but they
drive their market performance and competitive
behaviour.
2. Investment is Key
In order to achieve success, adequate
investment is important. During the simulation,
we learned that the conservative approach is not
always wise. While economising can sometimes
be appropriate, for companies like Disney, their
success was achieved through large investments
in mergers, new technology and skills.
3. Consider using Benchmarking
Benchmarking is defined as the process of devising
business knowledge through the comparison and
analysis of information from competitors in order
to achieve quality decision-making (Prasnikar et
al., 2005). Benchmarking can be performed with
competitive advantages, strategies, processes
and business performance (Prasnikar et al., 2005).
From our analysis, however, Disney have one of
the strongest strategic positioning in every studio
entertainment segment.
4. Divest in Low Market Attractiveness
Sometimes, instead of attempting to salvage
market share, it is necessary to divest a business
unit in order to invest in a more promising
market. This would occur if it is neither part of the
core business strategy, nor more valuable to the
company with than without (Mankins et al., 2008).
Since the segments discussed are not unattractive
or no longer competitive, divesting a franchise is
not applicable.
Limitations of Report
This report has been prepared with the Business
Simulation experience in mind. Despite Disney
publishing their financial records online, there
was a limited amount of information available
on specific market share for the four business
segments. Therefore, this report required
assumptions to be made based on revenues from
profitable films produced by each studio.
Due to the limiting nature of the information
about Customer Sensitivities, CSFs, and the
films produced, prioritisation of the important
and pertinent factors was necessary to give an
appropriate overview of the Walt Disney Company
and their achievements in studio entertainment to
date.
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