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4.15: Reading- Diversification Example

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    Disney

    Diversification: create new opportunities by creating new products that will be introduced in new markets

    Photo of Disneyland Toontown.
    Disneyland Toontown

    When you hear the word Disney, what comes to mind? Many people think of Disney movies such as Cinderella and Beauty and the Beast or theme parks like Disneyland and Disney World. Disney’s product portfolio also includes Marvel Comics, television network ABC, and cable sports channel ESPN. The company has pursued a diversification strategy, which means purchasing other companies that enable it to bring new products into new markets while remaining true to Disney’s origins.

    Today, 54% of Disney’s revenues—but only 32% of its profits—come from movies and parks.[1] Its most profitable growth comes from new products in new markets.

    Strategic Business Unity Percent of 2014 revenue Percent of 2014 profits
    Studio entertainment

    Films in theater, home and TV

    		 18% 12%
    Parks and resorts

    Theme parks, cruises

    		 36% 20%
    Media networks

    TV stations and advertising

    		 51% 56%
    Consumer products

    Licensing characters for products

    		 10% 10%
    Interactive

    Game platforms and games

    		 3% 1%

    An industry analyst explains:

    This wide diversification is what has allowed Disney to be so successful recently; Disney owns some of the biggest names in the entertainment world: ESPN, ABC, Disney theme parks, Disney cruise lines, and Pixar, just to name a few. Unlike many entertainment companies, Disney does not solely rely on films, TV, or parks; it is well diversified and relies on its wide reach to create one of the most recognized and popular brands in the world.[2]

    Disney’s diversification identifies new products and markets that are close enough to its core business that the company can leverage its internal strengths to create business growth. Following the acquisition of ABC, Barry Diller, the former head of QVC Inc. and the man credited with creating the Fox network, said, “Taking nothing away from the senior management at the other networks, this will be the only one where the senior executive is trained true in the creative process.”[3]

    1. http://cdn.media.ir.thewaltdisneycompany.com/2014/annual/10k-wrap-2014.pdf ↵
    2. seekingalpha.com/article/912781-disneys-diversification-is-key-to-growth ↵
    3. http://www.nytimes.com/1995/08/01/business/media-business-merger-walt-disney-acquire-abc-19-billion-deal-build-giant-for.html ↵

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