Introduction
According to Porter’s five generic strategies, companies can achieve competitive advantage through; focus strategy, cost leadership and differentiation strategy. Companies can gain competitive advantage by targeting market segments with broader opportunities for future expansion.
Walt Disney faces stiff competition from Universal Studios, Six Flags and SeaWorld. The microenvironment in this industry gives buyers a higher bargaining power because of the low switching cost. Thus, Walt Disney has to apply differential strategy in order to remain competitive and relevant. However, its rival Universal Studios uses customer focus strategy to penetrate into new markets and retain new and old customers.
Differentiation strategy
For Walt Disney to effectively apply differentiation strategy as one of Porters five generic strategies, it must possess the capability to develop unique products and services that are difficult to imitate. According to Porter generic model, customers must perceive Disney products as being more superior to those of their competitors. In order to achieve these goals, Disney must develop a unique brand name that is perceived by customers as having desired qualities.
Using this logic, we can conclude that Walt Disney uses differentiation strategy. First, the company focuses on consumer goods, Theme Parks and Resorts, Media Networks and Studio Entertainment. Walt Disney has succeeded in diversifying its products and services which has enabled the company to grow both horizontally and vertically. In fact, the company intends to differentiate its operations by opening new theme parks in China and Russian.
Disney also employs the focus strategy that concentrates on a particular market niche that has less competition. Walt Disney targets young children and their families by focusing on creating emotional connection between its theme parks and customers. This approach has enabled Disney to charge a premium price for superior qualities in its theme parks (David, 2015). The main advantage of Porters generic strategies is that a firm can be able to charge customers a premium price for its uniqueness.
Disney Parks also apply focus strategy in the sense that the company concentrates on young kids and their families. In fact, Goold & Luchs (2010, p.118) refer to Walt Disney as a ‘wholesome family entertainment’ company where no alcohol is sold. However, its chief competitor Universal Studio is more of ‘Disney big kids’ firm where alcohol is sold. Walt Disney has adopted generic strategy by diversifying its operations into different market segments.
Disney aligns itself with customer values and presents its brand name as a family friendly entertainment company. Moreover, the company has differentiated itself and adopted customer friendly practices in all its activities. The generic strategy is not risk-free.
In fact, Hitt, Ireland & Hoskisson (2009, p.113) postulate that customers might decide that the differences between differentiated products is too high and might opt for the cheaper product. In this case, Disney risks losing its market share to competitors that can offer customers a combination of products that are consistency with their taste and preference.
Another disadvantage of generic strategy is that Walt Disney might lose its means of differentiation that customers are willing to pay. In this case, a rival company might have the capability to imitate a product that is perceived by customers as equivalent to Disney’s products. The competitor might offer the same product at a lower price than Walt Disney. For instance, if Universal Studios gains the capability to develop a powerful brand name and offer the same quality as Disney, customers might perceive Universal Studio as offering the same product at a much lower price.
In summary, In order to remain competitive, Disney continuously reinvest in its operations to create unique features that differentiate its product with that of its competitors.
References
David, F.R. (2015) strategic management concepts (15th Ed.). Saddle River, NJ: Pearson Education, p.155-178.
Goold, M., & Luchs, K. (2010). Managing the multibusiness company: strategic issues for diversified groups. London New York: Routledge, p.116-125.
Hitt, M., Ireland, R., & Hoskisson, R. (2009). Strategic management: competitiveness and globalization: concepts. Mason, OH: South-Western Cengage Learning,p. 113-115.