The Walt Disney Company has pursued a related diversification strategy by using its movies to
create franchises and platforms around its popular cartoon and action movie figures. It is the sec-
ond largest mass media producer after Comcast. While other more focused content providers such
as Discover Communications, CBS, and Viacom have seen decreasing revenues because of lower
ratings and TV ad weakness, Disney was strengthened through its other businesses based on its
diversification strategy. These other businesses include consumer products, interactive consumer
products, interactive parks and resorts, and studio entertainment parks. It also has strong cable and
TV franchises through ESPN and ABC. Although its ad revenues have decreased like other more
focused content producers and distributors, its other businesses are growing and allow it to
maintain higher earnings compared to other rival media producing firms.
Disney’s strategy is
successful because its
corporate strategy, com-
pared to its business-level
strategy, adds value
across its set of businesses
above what the individual
businesses could create indi-
vidually. In the literature this
is often known as synergy,
or in the more academic
literature it is known as econ-
omies of scope (which will
be defined more formally
later in the chapter). First,
Disney has a related set
of businesses in its studio
entertainment, consumer
products and interactive
media, media network
outlets, parks and resorts, and studio entertainment parks. Within its studio entertainment businesses,
Disney can share activities across its different production firms: Touchstone Pictures, Hollywood Pic-
tures, Dimension Films, Pixar Films, and Marvel Entertainment (a fairly recent acquisition). By sharing
activities among these semi-independent studios, it can learn faster and gain success by the knowl-
edge sharing and efficiencies associated with each studio’s expertise. The corporation also has broad
and deep knowledge about its customers which is a corporate-level capability in terms advertising
and marketing. This capability allows Disney to cross sell products highlighted in its movies through
its media distribution outlets, parks and resorts, as well as consumer product businesses.
Recently, Disney, for example, has been moving from its historical central focus on anima-
tion in movies such as Cinderella, The Jungle Book, and Beauty and the Beast, into the same titles
or stories using a live action approach. The recent release of Cinderella, a live action version of
the original 1950 animated classic, stays particularly close to the “fairy tale version of the script.”
This approach comes from its understanding of its customers and what they prefer. Other
approaches such as this can be found in Alice in Wonderland with Johnny Depp and Maleficent,
which was a slight twist on the original Sleeping Beauty, starring Angelina Jolie as the wicked
queen. The action versions of these two movies grossed $1.3 billion and $813 million globally,
respectively. Although Disney has had some relatively unsuccessful pictures, John Carter, The
Lone Ranger, and The Sorcerer’s Apprentice, its action movies based on its animated fairy tales
have been relatively more successful. Disney will be promoting Cinderella products in its stores
and in other focused retail outlets and will be advertising its products along with the direct con-
nections to Alice, Maleficent, and Frozen. All of these have been consumer product successes, and
Cinderella is likely to have the same appeal. Disney is also seeking to produce action movies such
as Beauty and the Beast, The Jungle Book, and others in the near future. All of these feed products
DISNEY ADDS VALUE USING A RELATED
DIVERSIFICATION STRATEGYCriEnglish.com