Harvard Case - Disney at the Crossroads of Disruptive Trends
"Disney at the Crossroads of Disruptive Trends" Harvard business case study is written by Richemn Mourad, Sami Uddin Ahmad, Fares Benouari, Arnaud Chevallier. It deals with the challenges in the field of Strategy. The case study is 15 page(s) long and it was first published on : Mar 17, 2020
At Fern Fort University, we recommend that Disney adopt a multi-pronged strategy to navigate the disruptive trends impacting its business. This strategy involves leveraging its core competencies in storytelling and entertainment while embracing digital transformation, innovation, and strategic partnerships to maintain its competitive advantage.
2. Background
The case study 'Disney at the Crossroads of Disruptive Trends' highlights the challenges faced by Disney in a rapidly evolving media landscape. The company's traditional business model, built around theme parks, movies, and television, is facing increasing competition from streaming services, online gaming, and the rise of new entertainment formats. The case explores how Disney is responding to these disruptions through initiatives like Disney+, ESPN+, and its foray into the metaverse.
The main protagonists of the case study are Bob Chapek, the CEO of Disney, and the company's leadership team, who are grappling with the need to adapt to the changing media landscape while preserving Disney's core values and brand image.
3. Analysis of the Case Study
To understand Disney's situation, we can apply several frameworks:
A. Porter's Five Forces:
- Threat of New Entrants: High, due to the low barriers to entry in the digital media space and the emergence of new streaming platforms.
- Bargaining Power of Buyers: Moderate, as consumers have more choices and can easily switch between platforms.
- Bargaining Power of Suppliers: Low, as Disney has significant leverage over content creators and distributors.
- Threat of Substitute Products: High, as consumers can access entertainment through various channels, including free streaming services, social media, and gaming.
- Rivalry Among Existing Competitors: Intense, with established players like Netflix, Amazon, and Apple competing fiercely in the streaming market.
B. SWOT Analysis:
Strengths:
- Strong brand recognition and loyal customer base
- Extensive intellectual property portfolio
- Expertise in storytelling and entertainment
- Global reach and established distribution channels
- Strong financial resources
Weaknesses:
- Reliance on traditional media formats
- High operating costs
- Potential for brand dilution through excessive expansion
- Limited experience in emerging technologies
Opportunities:
- Growth in streaming services and digital media
- Expansion into new markets and demographics
- Development of innovative content and experiences
- Leverage data analytics to personalize customer experiences
- Partnerships with technology companies and startups
Threats:
- Increasing competition from streaming services
- Piracy and copyright infringement
- Changing consumer preferences and habits
- Economic downturns and global uncertainties
- Technological advancements and disruptions
C. Value Chain Analysis:
Disney's value chain consists of:
- Inbound Logistics: Procurement of raw materials, content creation, and talent acquisition.
- Operations: Production of movies, television shows, theme park experiences, and other entertainment products.
- Outbound Logistics: Distribution of content through various channels, including theaters, television networks, streaming platforms, and theme parks.
- Marketing & Sales: Promotion of Disney's products and services through advertising, branding, and social media.
- Customer Service: Providing support and assistance to customers across all touchpoints.
D. Business Model Innovation:
Disney has successfully implemented business model innovation through its streaming services, Disney+ and ESPN+, which have disrupted the traditional cable television model. These platforms offer a direct-to-consumer experience, providing access to a vast library of content at a lower cost than traditional cable packages.
E. Digital Transformation:
Disney is actively embracing digital transformation through its investment in technology, data analytics, and artificial intelligence (AI). The company is using these tools to personalize customer experiences, improve content creation and distribution, and optimize operations.
F. Strategic Alliances:
Disney has formed strategic alliances with technology companies, such as Google and Apple, to expand its reach and access new technologies. These partnerships allow Disney to leverage external expertise and resources to accelerate its digital transformation.
4. Recommendations
1. Embrace Digital Transformation:
- Accelerate the development of Disney+ and ESPN+: Invest in content creation, user interface improvements, and international expansion.
- Explore new digital platforms: Experiment with emerging technologies like virtual reality (VR), augmented reality (AR), and the metaverse to create immersive entertainment experiences.
- Leverage data analytics: Utilize data to personalize content recommendations, optimize marketing campaigns, and improve customer service.
- Invest in AI and machine learning: Enhance content creation, automate processes, and personalize customer experiences.
2. Foster Innovation:
- Create a culture of innovation: Encourage experimentation, risk-taking, and collaboration across different departments.
- Invest in research and development: Explore new technologies and content formats, such as interactive storytelling, immersive experiences, and personalized entertainment.
- Partner with startups and technology companies: Access cutting-edge technologies and innovative ideas.
- Develop a robust intellectual property strategy: Protect Disney's valuable assets and leverage them for new revenue streams.
3. Expand Globally:
- Target emerging markets: Identify growth opportunities in regions like Asia, Africa, and Latin America.
- Adapt content to local audiences: Tailor storytelling and themes to resonate with different cultures and demographics.
- Develop strategic partnerships: Collaborate with local companies to navigate regulatory hurdles and understand cultural nuances.
- Leverage Disney's global brand recognition: Build on its existing reputation to establish a strong presence in new markets.
4. Reinvent the Theme Park Experience:
- Integrate technology: Utilize VR, AR, and interactive elements to enhance theme park attractions.
- Develop unique experiences: Create immersive and personalized experiences that cater to different age groups and interests.
- Focus on sustainability: Implement environmentally friendly practices and promote responsible tourism.
- Leverage data analytics: Optimize operations, personalize guest experiences, and improve customer satisfaction.
5. Strengthen Corporate Governance:
- Ensure transparency and accountability: Implement robust governance structures and ethical practices.
- Focus on long-term value creation: Prioritize sustainable growth and shareholder value.
- Embrace diversity and inclusion: Foster a culture of respect and inclusivity across all levels of the organization.
- Maintain a strong brand image: Protect Disney's reputation and values in the face of changing consumer preferences.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations focus on leveraging Disney's core competencies in storytelling and entertainment while embracing new technologies and business models.
- External customers and internal clients: The recommendations prioritize customer satisfaction, employee engagement, and stakeholder value.
- Competitors: The recommendations address the competitive landscape by focusing on innovation, digital transformation, and global expansion.
- Attractiveness: The recommendations are expected to generate positive returns on investment and contribute to Disney's long-term growth.
6. Conclusion
Disney is at a crossroads, but by embracing digital transformation, fostering innovation, expanding globally, reinventing the theme park experience, and strengthening corporate governance, the company can navigate the disruptive trends and maintain its position as a global entertainment leader.
7. Discussion
Other alternatives not selected include:
- Mergers and acquisitions: Acquiring other media companies to expand its portfolio and gain access to new technologies.
- Divesting non-core assets: Selling off businesses that are not aligned with Disney's core competencies.
- Focusing solely on traditional media: Maintaining a focus on its existing business model and ignoring the emerging trends.
The risks associated with the recommendations include:
- Technological disruption: New technologies may emerge that render current strategies obsolete.
- Consumer preferences: Changing consumer habits may impact Disney's business model.
- Competition: Intense competition from other media companies may limit Disney's growth potential.
The key assumptions underlying the recommendations include:
- Continued growth in digital media: The streaming market will continue to expand and provide new opportunities for Disney.
- Consumer demand for high-quality entertainment: Consumers will continue to value Disney's storytelling and entertainment experiences.
- Disney's ability to adapt to change: The company will be able to successfully navigate the challenges and opportunities of the evolving media landscape.
8. Next Steps
The following timeline outlines key milestones for implementing the recommendations:
- Year 1: Launch new initiatives to accelerate digital transformation, including investments in technology, data analytics, and AI.
- Year 2: Expand Disney+ and ESPN+ globally, focusing on emerging markets and adapting content to local audiences.
- Year 3: Develop new theme park experiences that integrate technology and create immersive entertainment.
- Year 4: Strengthen corporate governance by implementing robust structures and ethical practices.
- Year 5: Continuously monitor the evolving media landscape and adapt strategies as needed.
By taking these steps, Disney can position itself for long-term success in the dynamic and disruptive media landscape.
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Case Description
Owing to its intangible nature and oligopolistic structure, the Media & Entertainment industry used to seem particularly difficulty to disrupt, and Disney was sitting right at the top. Yet, ten years after Netflix launched its online video streaming service, incumbents acknowledged that surviving the online revolution requires drastic changes. Until 2017, Disney had not taken the threat seriously. Its streaming strategy could be described as exploratory, at best: It had a 30% stake in Hulu, a third-party streaming platform jointly owned by media giants, and it sold its "old" content to Netflix. However, as Disney's cable partners (e.g., Comcast) started to lose millions of highly profitable subscribers, the company realized that its half-hearted approach to online streaming was a recipe for disaster. That year marked the turnaround of Disney's approach to streaming. First, it shocked the world in August, when it announced that it would gradually withdraw its movie content from Netflix. That same month, it revealed it had taken a controlling stake in BAMTech, a technology company providing streaming video technology. Finally, in December, it announced its intention to acquire 21st Century Fox in a deal that closed 15 months later, giving it a controlling stake in Hulu and greatly expanding Disney's already formidable content library. With the nomination of Kevin Mayer at the helm of DTCI in March 2018, Disney realized its intention to transition into a B2C company. However, it was going to be a long road for Mayer, who faced both external and internal challenges. The case explores Mayer's options to succeed in a rapidly evolving marketplace in which former partners and internet giants have become the competitors. It also examines how Mayer can position DTCI within Disney, addressing the complexities of collaborating with other business units and the potential cannibalization of the Media Networks division.
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