Procurement refers to the function of purchasing inputs such as raw materials, supplies, machinery, laboratory equipment, and buildings. The means by which Disney accumulates these inputs are very important when it comes to being efficient and effective. One way that Disney has added value in this area is by acquisitions. Disney has had a number of beneficial acquisitions, and rather than starting these projects from scratch, they simply acquired them. This means they did not have to buy raw materials in order to make a building since they just bought what was already established.
Every value activity embodies technology. Technology that is related to the product and its features supports the entire value chain, while other technology development is associated with particular primary or support activities. Disney’s approach to embrace technological change rather than keep its original tactics has proved beneficial to its overall company health. Not only have they been able to utilize technology in their product and service offerings, but also in their means of transportation, delivery, manufacturing, and other aspects of the value chain.
Human Resource Management:
Human resource management consists of activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel. It supports both individual primary and support activities and the entire value chain. Being a company essentially revolving around the creations of many different artists and contributors, successful human resource management is crucial. The human resources of the company are directly correlated to their profits. Essentially, Disney cannot be successful if they do not invest in their strategies of attracting the right types of employees. For example, without CEO Robert Iger, Disney would have not acquired Pixar and Marvel- two brands that benefited the Disney brand globally.
General Administration consists of a number of activities, including general management, planning, finance, accounting, legal, government affairs, quality management, and information systems. One of the most influential factors in this area of activity is the licensing that goes on within Disney. From selling licenses to sell products with Disney’s creations, to licensing intellectual property to a third party to operate the Tokyo Disney Resort in Japan, a huge amount of revenue can be recognized from licensing. Apart from that, normal company general administration activities such as finance and legal also add value to Disney simply by keeping the company running.
In conclusion, Disney adds unmeasurable value to itself by optimizing its strategies of all the primary activities. They also add value by improving their secondary activities and constantly evolving them. That is the key. Disney easily could have taken the approach to maintain its original strategies with the argument that it is a classic. However, it is their technology friendly approach and desire for growth that has allowed them to sustain their success.
b. What are the firm’s unique resources and capabilities?
Disney’s most unique resource is its brand recognition and reputation. According to the 10K, some revenues are generated from sponsorships and co-branding opportunities. The synergy among the varying subsidiaries is also a unique resource for Disney. For example, having over 100 Disney branded television channels, which are broadcast in 34 languages and 163 countries/territories can be very beneficial for them if they release a new movie. Another example would be how they use their theme parks to enhance the success of some of their movies.
Being such well-known and reputable company also makes them capable of opportunities that many other companies are not. For example, the acquisition of large companies such as Pixar would not even be a possibility for most. However, with the size of the company and their reputation, they are able to do so.
c. Perform a VRIN analysis
Resources are valuable when they enable a firm to formulate and implement strategies that improve its efficiency or effectiveness. Disney has many valuable resources. From products, to services, to intellectual property, to brand recognition, etc. Disney is no doubt a valuable company.
If competitors or potential competitors also possess the same valuable resource, it is not a source of competitive advantage because all of these firms have the capability to exploit the resource in the same way. Common strategies based on such a resource would give no one firm an advantage. For a resource to provide a competitive advantage, it must be uncommon, that is, rare relative to other competitors. Depending on which resource of Disney’s is being analyzed,
This is a key to value creation because it constrains competition. If a resource is inimitable, then any profits generated are more likely to be sustainable. The inimitable component of Disney that has sustained profits is its brand. This was something that Disney had to create, maintain, and enhance over a long period of time. It is too complex to be imitated. There is not another company that creates movies, has theme parks, cruises etc. Universal Studios can be seen as a close competitor, but there are so many differences between the two that saying there is a way to copy Disney is not very likely.
The final requirement for a firm to be a source of sustainable competitive advantage is that there must be no strategically equivalent valuable resources that are themselves not rare or inimitable. The analysis of Disney being substitutable is difficult to analyze. With it being in the entertainment industry, it is unknown what the next big thing will be that could be a substitute. Disney has strived to diversify itself in order to compete with other industry competitors such as when Netflix got big or when online or on the go television was introduced.
d. Can they be imitated? What are the barriers to their imitation?
Imitation is a major contributor to the decline in success of a company. If everyone can do it and in some cases do it better, the original business may get overthrown by its competition. However, there are some barriers these copiers must overcome in order to imitate. Special laws and regulations have been created to help a company from being copied. Disney has utilized copyrights, trademarks, and intellectual property right laws to help in keeping their success within their hands.
Another way in which Disney has tailored to this world of copying and competition is by selling licenses to their products and brands. By doing this, they accept that others are going to try to make money off of their ideas. This way, they at least get licensing fees and a cut of the profits so to speak. The physical uniqueness, path dependency causal ambiguity, and social complexity that Disney has implemented in their efforts has also made it a very difficult company to be imitated.
e. Provide financial ratios if financial information is provided in your case
f. Does the firm have a competitive advantage?
Because Disney has such a variety of offerings across multiple industries and is so different than most companies, it is difficult to summarize whether or not they have a competitive advantage. However, it can be concluded that they have a competitive advantage in some areas, and in others not as much. For example, their theme parks are valuable, rare, inimitable, and arguably unsubstitutable. On the other hand, their television channels are valuable, not rare at all, very imitable, and now substitutable. Therefore, Disney is successful in obtaining competitive advantages in numerous areas, but there is always room for improvement in others.
g. If so, what is the firm’s competitive advantage and how can it sustain it? Is it durable?
The firm’s biggest competitive advantage is its branding. A company’s brand can be shot to the ground in one instant. One bad publicity moment or wrongdoing can discredit the entire company. So, their competitive advantage is definitely not durable. However, in order to sustain it, many things need to be done besides preventative negative branding. The one thing the company must to to sustain this advantage is work to evolve it and keep it going. There have been many obstacles that have hit Disney. The reason for their continued success has ridden in their ability to see these obstacles as challenges and opportunities to not just continue efforts but to grow and become even more successful.
h. If it does not have one, how can it build a competitive advantage in its industry?
Being that Disney does have a competitive advantage, it can build a competitive advantage in other areas in which they are not as successful. However, it is unlikely that they will be the best at everything, so this is not something that they should be too worried about.
i. Human capital: does the organization effectively attract, develop, and retain talent? Does the organization value diversity? Does the company have underutilized human capital?
Human capital is a heavy contributor to the success of a company. This is exemplified by the replacement of Walt Disney’s son-in-law with Michael Eisner due to ineffectiveness. Eisner was also later removed due to micromanaging and skirting board approval for numerous initiatives. In order to attract human capital, Disney has strived to “hire for attitude, train for skill”. They develop their human capital by encouraging widespread involvement, implementing mentoring and sponsoring programs (such as selling their intellectual property to the Japan Disney park), monitoring progress and tracking development, and evaluating their human capital. Having Walt Disney himself start the company from the ground up was probably the most valuable human capital that Disney can attribute its success to.
j. Social capital: does the organization have positive personal and professional relationships among employees and alliance partners? Is the company missing opportunities to forge strategic alliances?
The idea that “teamwork makes the dream work” really is true. Having other companies on Disney’s side and alliances with other companies opens up many opportunities for both parties. In the 10K, many efforts to have good relationships with employees by providing benefits are explained. For it is true, success in the business world depends on how well one can “combine and leverage resources” or “create unique bundles”—not just the output from one’s individual efforts.
Having social networks that involve closure and bridging relationships are also beneficial to the company as a whole. These types of relationships can sometimes overcome barriers of collaboration. Effective collaboration involves overcoming four barriers: the not-invented-here barrier, the hoarding barrier, the search barrier, and the transfer barrier. One of the best ways to get over these barriers is by the unification lever. This is the method of making people more willing to collaborate by crafting compelling common goals, articulating a strong value of cross-company teamwork, and encouraging collaboration in order to send strong signals to lift people’s sights beyond their narrow interests toward a common goal. Disney clearly has company-wide common goals that can be achieved when everyone comes together. Other ways that Disney continues to overcome collaboration barriers is by implementing the people lever, network lever, and by cultivating T-Shape Management.
k. Technology: does the organization effectively use technology to transfer best practices across the organization, codify knowledge, and develop dynamic capabilities for competitive advantage?
When it comes to technology, Disney is very effective when it comes to using technology to transfer best practices across the organization, codify knowledge, and develop dynamic capabilities for competitive advantage. This is in part due to their strategy of embracing the change that comes with technology rather than seeing it as a threat or and end. In codifying knowledge, there are two different types of knowledge: tacit (embedded in personal experience) and codified (knowledge that can be documented, widely distributed, and easily replicated). A challenge of knowledge-intensive organizations is to capture and codify the knowledge and experience that, in effect, resides in the heads of their employees. This is a difficult task but with the company being so tacit knowledge driven due to the creativity that is what Disney is, it must be done and done well. Being dynamic when it comes to technology is also crucial. The 10K reads:
The Company’s businesses throughout the world are affected by its ability to exploit and protect against
infringement of its intellectual property, including trademarks, trade names, copyrights, patents and trade
secrets. Important intellectual property includes rights in the content of motion pictures, television programs,
electronic games, sound recordings, character likenesses, theme park attractions, books and magazines. Risks
related to the protection and exploitation of intellectual property
Developing dynamic capabilities is the only avenue providing firms with the ability to reconfigure their knowledge and activities to achieve a sustainable competitive advantage, so it is obvious that Disney is doing this well. Dynamic capabilities include the ability to challenge the conventional wisdom within a firm’s industry and market, learning and innovating, adapting to a changing world, and adopting new ways to serve the evolving needs of the market. If one were to look at the evolution of Disney and its capability to innovate and evolve and embrace technological change, one could say that Disney is very dynamic.
l. Does the firm have intellectual assets it can legally protect?
According to the 10K:
Important intellectual property includes rights in the content of motion pictures, television programs, electronic games, sound recordings, character likenesses, theme park attractions, books and magazines. The Company also licenses our intellectual property to a third party to operate the Tokyo Disney Resort in Japan, as well as recognizes revenue associated with the licensing of intellectual property. The businesses in the Studio Entertainment segment generate revenue from distribution of films in the theatrical, home entertainment and television markets, stage play ticket sales, distribution of recorded music and licensing of Company intellectual property for use in live entertainment productions.
As can be seen, Disney is highly reliant on their intellectual property for success, so there are many steps in place to protect these assets legally. In fact, without that ability, Disney would more than likely have not succeeded.
m. Has the company developed knowledge-management systems to capture what it learns?
Disney has data systems that maintain information not only on what it learns, but also personal information on employees. It is actually one of their risks discussed on their 10K:
Data maintained in digital form is subject to the risk of intrusion, tampering and theft. We develop and maintain systems in an effort to prevent intrusion, tampering and theft, but the development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Accordingly, despite our efforts, the possibility of intrusion, tampering and theft cannot be eliminated entirely, and risks associated with each of these remain.
Although they are at a large risk with their digital means of storing data, it is useful when they can share company information and processes in order to develop a knowledge-management systems to capture what it learns.
C. Strategy of the company:
1. Business-level strategy: ( Chapter 5)
a. What is the firm’s generic business-level strategy?
b. How do the functional-level decisions and strategies contribute to its business-level strategy?
c. How do its resources and competencies contribute to its generic business strategy?
2. Corporate-level strategy: ( Chapter 6)
a. What is the firm’s corporate-level strategy? Related vs. Unrelated