This analysis revealed that the strength of the company lies in effective competition besides customer power. These external factors contribute to the company’s strength in the external working environment. The company offers services in entertainment and recreational parks. The reputable brand serves the company’s competitive and other external challenges. This Five Forces Analysis given by Michael E. Porter is used to identify the external factors that contribute to the growth and effectiveness of a corporation. Porter’s model helped to analyze the external factors underlying the corporation’s mass media, entertainment, resort, and parks services. The competitive environment was affected by the aggressive and intense rivalry of other firms. The most prominent competitor firms include Time Warner, Sony, Comcast, and CBS. Therefore, the company’s strategic policies must address the external factors affecting the firm’s business success to ensure long-term steady growth.
Effective managerial strategies are required to cope with the threats posed by these external factors analysis. Moreover, the corporation must incorporate innovative and latest trends in its services like Disneyland amusement park. This Porter’s model when applied to The Walt Disney Company exposed competitive concerns based on the external factors to be addressed by the company to achieve the desired goals.
Summary and Recommendation based on Porter’s Analysis
Summary
The Five Forces Analysis of the Walt Disney corporation exposed threats ranging from low to mild to strong forces. The aggressive rivalry and competition, buyers/customers’ bargaining strength, and the substitutional threats are significant threats to the company. However, the threat of suppliers and novel entrants does not pose a detrimental threat to the company but requires the adoption of strategic planning to address the challenges. The corporation’s services range from entertainment to mass media sectors including amusement parks besides resorts industry. This diverse range of services is not prone to disadvantages, mainly the competitive rivalry in the business market industry. The external factors which are responsible for shaping the working environment of the corporation are discussed below in detail. These factors are extracted by the application of Porter’s model:
- Aggressive competition and rivalry (Strong force)
- Buyers/Customers’ bargain power (Strong force)
- Suppliers’ bargain power (Weak force)
- Substitutes or Substitutional threat (Moderate force)
- Novel Entrants’ threat (Weak force)
Recommendations
The company must focus on strengthening its competitive milieu to bring down the threats of intense competition and customer strength as revealed by Porter’s Analysis. The Five Forces are shaping the external environment for a company’s business growth. Therefore, Disney should maintain its primary objective to further strengthen its brand’s strong image. This analysis unlocks the leadership’s goal to sustain long-term objectives and business competitiveness. The analysis has revealed that aggressive competition in the entertainment industry can threaten a company’s brand position as a global leader. Furthermore, addressing the potential threat of customers’ power to undermine the company must be addressed effectively by the adoption of effective strategic policies. The company must adhere to intensive growth and an effective competitive strategy to enhance its business activity. For instance, high-quality fantasy optimization in amusement parks can retain and sustain a strong customer base.
Aggressive competition and rivalry (Strong force)
Those external factors which are responsible for shaping the intensity of competition and rivalry are covered in detail in this section of the analysis. Theme parks, mass media corporations, and entertainment industries are not resistant to the prevalent rival industries in the business market. Moreover, innovative strategies can effectively address the rivalry forces along with aggressive advertisements to sustain the company’s presence in the public. The subsequent factors reveal the reasons for intensified competition between the industries.
- Numerous firms in the business (strong force)
- Intensified competition among industries (Strong force)
- Mild distinctions (Moderate force)
The rising competition reveals the fact that many industries are prevalent in the entertainment market. The analysis recommended that the firm must adopt the finest strategies to answer the threats of competition. Disney Studios face rivalry when other firms are providing high-quality movies as an alternative to Disney’s products. Consequently, this situation aggravates the competitive rivalry between the firms. In addition, mild distinctions between the services provided by these rival corporations exert a moderate threat to the company’s business growth. The company, therefore, experiences the intense force of competitional rivalry in the business market.
Buyers/Customers’ bargain power (Strong force)
Buyers or customers affect the nosiness policies in shaping the prices and quality of services provided to the public. The customer’s bargaining power lies in the available alternatives at the customer’s end in relative products and services. Therefore, these available alternatives with ease of access to switch between industrial services contribute to the high bargaining power of customers. Therefore, the strategic management and policies must address these conditions accordingly. This Five Forces analysis has revealed the strong force of customer bargaining power acting externally to the business environment of Walt Disney. This external factor is based on the below-mentioned forces:
- Switching costs ease (Strong force)
- Modest sensitivity to price (Moderate force)
- Mild substitutional ability (Moderate force)
The first prevalent factor which contributes to the strong force of threat
prevalent to the Disney Corporation is the ease of switching costs from one brand to the other. This factor strengthens the bargaining power of buyers. Moreover, buyers’ mild sensitivity to the cost of the products exerts a moderate threat to the company’s business. Therefore, the company must devise policies that address the pricing of its products. Porter’s model further highlights that the mild availability of substitutes exerts a moderate threat of force on the corporation. These are the factors that contribute to the strong force of threat on customers’ end affecting the corporation’s business shown by Porter’s model.
Suppliers’ bargain power (Weak force)
This section of Porter’s analysis determines the bargaining power of suppliers. These suppliers affect the external business conditions. For instance, suppliers’ resistance to dynamic changes ensures continual supply to the company. Hence, the effectiveness and stable supply chain and operational efficiency depend on the suppliers. The Five Forces analysis reveals the weak forces of suppliers based on subsequent factors:
- Suppliers’ extensive availability (Weak force)
- Supplies bulkiness (Weak force)
- Suppliers’ mild diversity (Moderate force)
This analysis reveals that the availability of suppliers influences the overall business environment. The high availability of suppliers at the company’s disposal aids in the weak bargaining force of suppliers. In this way, the excess of suppliers’ availability makes the company resistant to their influence thus contributing to the weak force of threat. Moreover, the bulk availability of supplies doesn’t allow the company to disrupt the supply chain or operational effectiveness. Additionally, mild diversity in suppliers affects the company’s business policy in modest ways. Therefore, the overall effect of suppliers’ bargaining power is not intense. However, the company must advise prudent and robust strategic policies to strengthen the company’s strength against any unwanted outcome in the future.
Substitutes or Substitutional threat (Moderate force)
The analysis further reveals the substantial threat to the company’s
performance. These threats are relative to the pricing policy, market share along with the other variables. Porter’s analysis exposed the vulnerability of Disney Corporation to the threat of substitutes. For instance, customers can change their priority from Disney to any other entertainment provider due to their potential presence. Therefore, the company must execute an effective strategic management policy to minimize this threat. The following factors are responsible for the escalation of substitutional threats:
- Substitutional modest availability (Moderate force)
- The mild ratio of substitutes performance-to-price (Moderate force)
- Substitutional mild diversity (Moderate force)
The modest availability of substitutes poses another threat to the external factors prevalent in the business environment. The Walt Disney Corporation faces a moderate threat in this area due to the availability of other competing firms in the market. Moreover, the mild ratio of performance-to-price of substitute enables customer satisfaction for the use of other alternatives. Furthermore, the moderate diversity in the substitutes exerts pressure on the external business environment of the company. The company must undergo effective management and strategic policies like enhanced quality and improved performance to address the challenges posed by substitution and substitutional alternatives.
Novel Entrants’ threat (Weak force)
This Five Forces Analysis further exposes the underlying threat prevalent in the external factors of the company’s environment. In this segment, the threats of novel entrants are discussed in detail. The Walt Disney Company must consider the new entrants in the international business market. The potential of any large-scale intervention of a company in the entertainment business can disrupt Disney’s established business market share. The subsequent factors are responsible for shaping the weak threat prevailing in the business environment.
- Switching cost ease (Strong force)
- Intense cost of capital (Weak force)
- Costly development of Brand (Weak force)
This segment shows that the weak switching cost makes the company vulnerable to losing potential customers. This trend can impose a strong force of threat to the company’s established business. On the other hand, the intense capital costs could neutralize this threat. The intensified capitalization required to compete with the settled firms is not easy to manage. To add more, costly brand development is another edge to the already settled firms. New entrants would find it difficult to compete in terms of brand recognition. Consequently, new entrants do not pose a significant threat to the success of Wal Disney Corporation. This Poster’s Analysis revealed that the new entrants in the business are posing a feeble threat to the established and recognized corporation.
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