Diversification is a business strategy that companies frequently utilize to expand their operation or build their reputation. As such, diversification is often driven by cut-throat competition in a particular market segment. Walt Disney had in the past attempted to diversify its operation through acquisition, differentiation, and introduction of interactive products in the entertainment industry. Recently, as part of its growth strategy, Walt Disney reorganized and reformed its structure and control systems to respond to industry shifts and to construct frameworks to better serve its global customers.
Problems with the Previous Strategy
The past diversification efforts had problems because they involved mergers with companies from diverse fields. The strategies like the acquisition of ABC companies did not actually add value to shareholders (Feldner & Meisenbach, 2007). When companies from disparate fields merge, there is no synergy created between them. The lack of synergies prevented Walt Disney from leveraging on the strengths of the merged company (Feldner & Meisenbach, 2007). As such, the diversification strategy ended up diluting Walt Disney as a brand. The previous diversification also failed to respond to industry shifts, especially challenges posed by Netflix, one of Walt Disney’s primary competitors. The media landscape is consistently changing and with the introduction of television streaming service, Walt Disney struggled with technology change and copping up with the demands of its customers.
Changes Made in Structure and Control Systems
Walt Disney initiated a change in structure and control systems with regard to four core areas. These included direct-to-consumer, parks and experiences, media networks, and studio entertainment (Walt Disney, 2018). Walt Disney made a change in its business structure, developed a new business unit, and expanded another as part of its diversification strategy. The company created a new unit called direct-to-costumer, a unit expected to oversee the streaming platform (Walt Disney, 2018). The creation of a modern unit also led to changes in the management structure as Kevin Mayer who previously served as the chief strategy officer was elevated to head the new direct-to-customer unit (Walt Disney, 2018). The reorganization in structures also promoted Walt Disney to expand the parks and resorts division to include consumer products and interactive media. The company also reorganized the sale of ads to other media companies like ESPN and ABC (Walt Disney, 2018). The reorganization equally targeted the studio entertainment in relation to apparel, digital games, and apps.
Effects of Changes on Performance
The ultimate goal of the changes and reorganization of structure and control systems was to position Walt Disney for the future and devise more effective frameworks to serve international customers. These changes also sought to increase the growth of the company and maximize stakeholder value (Walt Disney, 2018). The changes in structure and control systems will revamp the company’s retail and e-commerce operations to align with the present industry shifts occasioned by technology change and sophisticated customer demands. As such, Walt Disney will be able to share resources and the best practices to provide unique branded products and enhance the retail experiences. Merging the business units means that the company eradicates most of the behind-the-scenes development, redundant databases, and endless meetings (Walt Disney, 2018). The efficiency and performance will be enhanced because several staff will be able to compare the best industry practices when creating new products and services. As a result, Walt Disney will provide relevant and delightful products and services to its customers.
The decision by Walt Disney to diversify its operation through initiated structural changes aimed to position the company for eventual success. The success will be demonstrated through enhanced performance occasioned by new frameworks and models meant to better serve its global customers. Walt Disney introduced a direct-to-customer business unit, revamped its parks and experience, redefined ad selling, and improved studio entertainment. The reorganization will increase efficiency in implementing the industry’s best practices.
Feldner, S., & Meisenbach, R. (2007). Savedisney.com and activist challenges: A Habermasian perspective on corporate legitimacy. International Journal of Strategic Communication, 1(4), 207-226.
Walt Disney. (2018). The Walt Disney Company announces strategic reorganization. Walt Disney Company. Retrieved from https://thewaltdisneycompany.com/walt-disney-company-announces-strategic-reorganization/.