The Walt Disney Company is a global brand. The company is active in several business areas such as film and entertainment, operation of parks and resorts, and the running of media networks. The company is in the process of making acquisitions. In fact, the company’s expansion in the last ten years has come from the acquisition of various businesses aimed at strengthening the ability of the company to fulfill its mission. The latest acquisition by the company is the buying of Studio Ex (Takahashi, 2012). Studio Ex is a South Korean game maker that will help Disney to establish its presence in Asia and the gaming market (Takahashi, 2012). This acquisition shows that Disney is interested in developing a global presence and expanding its business in the gaming market. This move by Disney forms the basis of the analysis of Disney’s business strategy covered in this paper.
Strategic Choices Based on Porter’s Generic Strategies
All business decisions such as the acquisition of Studio Ex by Disney are part of an overall business strategy. According to Porter (1980), any business thinking about strategy must use a generic strategy in its thinking. Cost leadership, product differentiation, and focus are the three generic strategies.
Cost leadership is one of the two mass-market strategies (Porter, 1980). Companies operating under this strategy aim at offering goods of a given quality to the consumers at the lowest possible price (Porter, 1980). Cost leadership usually requires a combination of low margins made profitable with high volume sales. It also requires the producer to become an efficient operator in order to identify ways of lowering operating costs to bring down the price of the product.
Product differentiation is also an industry wide approach to business strategy (Porter, 1980). In this case, the company finds a unique element in its product, and uses it as a source of competitive advantage. For instance, some airlines offer no-frills services at low cost to a high number of passengers, while others aim at offering certain premium services to attract passengers who do not mind paying more to enjoy the services.
The third generic strategy is the focus strategy (Porter, 1980). Focus strategy involves the identification of a niche market, and then committing resources to serve the niche as effectively as possible. Focusing on a specific niche can make it possible to operate either as a low cost supplier, or as a premium service provider.
The acquisition of Studio Ex by Disney shows that in this particular case, Disney is pursuing a differentiation strategy. Studio Ex produces a specialized product. The games market in the world is a specialized niche. Some games attract a wide variety of casual users, but the best ones attract a selection of avid gamers. The company may also be pursuing a focus strategy targeting the high end gaming market (Takahashi, 2012). Some people are willing to spend a fortune on games. Therefore, Disney will have the capacity to serve this market through Studio Ex.
SWOT Review of the Strategic Choice
Disney’s strengths include its international image, and its reputation for innovation. The acquisition of Studio Ex will increase the presence of the company in Asia. This will increase the brand strength of the company. At the same time, the acquisition will increase Disney’s reputation as an innovative company. It will also increase the company’s ability to produce new products for the gaming market.
The weaknesses of the company are its large size, and its high sunk costs. The size of the company may lead Studio Ex to operate inefficiently of because of slow decision-making (Walker, Walker, & Schmitz, 2003). In addition, the acquisition of Studio Ex increases the overall number of employees working for Disney. The high sunk costs of the company may hinder its ability to leverage on the potential of studio Ex. Studio Ex is still young. It needs resources and space to grow. Disney may not afford to commit the resources required to maximize the output of Studio Ex.
The main opportunity that Studio Ex brings to Disney is the opportunity to join the lucrative gaming industry. The gaming market is growing across the world. Therefore, the acquisition of Studio Ex gives Disney the opportunity to become an influential player in the gaming market. Its location in South Korea also gives Disney the added advantage of operating from Asia. Asia is not just a gaming market, but also one of the most innovative regions when it comes to the development of games (BCG, 2010).
The threat posed by the acquisition of Studio Ex is that it exposes Disney to competition from established gaming companies such as the Sony Playstation Division. Disney does not have much experience in this industry and Studio Ex is a very young company.
Lessons from the Assignment
This assignment offered two lessons. The first lesson came from the opportunity to apply Porter’s generic strategies to a real life situation. The main lesson here was that the generic strategies have practical implications on the operations of organizations. The second lesson from the assignment came from the application of the SWOT analysis to the business strategy of an organization. The main point here is that a decision on strategy has several implications. There is need to consider all the angles before making any decision in regards to business strategy.
References
BCG. (2010). Creating People Advantage in 2010: How Companies can Adapt their HR Practices for Volatile Times. Boston, MA: The Boston Consulting Group.
Porter, M. E. (1980). Competitive Advantage: Techniques for Analyzing Industries and Competitors. New York, NY: Simon and Schuster.
Takahashi, D. (2012). Disney pushes into Asia with purchase of South Korea’s Studio Ex. Web.
Walker, D. M., Walker, T. D., & Schmitz, J. T. (2003). Doing Business Internationally: The Guide to Cross-Cultural Success. New York, NY: McGraw-Hill Professional.