Strategic Business Diversification and Critical Thinking - The Case of Disney

Module One Assignment Application Critical thinking is important for business planning. Leaders and managers use critical thinking when they establish strategic plans for their company. Leaders utilize critical thinking to understand their market segment, product lines, and determine whether they should focus on their core competencies or diversify into related or unrelated business lines. Analysis A company that provides a timely example of the use of logical reasoning in business diversification is The Walt Disney Company (NYSE: DIS). A very successful instance when Disney deliberate diversified their business lines was when they diversified into the direct-to-consumer (DTC) media content business line in the US in 2019 by launching Disney+. The mission of The Walt Disney Company is to entertain, inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands, creative minds and innovative technologies that make ours the world’s premier entertainment company. The company was founded on 16 October 1923 and began using a multi-market segment business approach as early as 1928. The company began by licensing their intellectual property and, one year later, they founded the Mickey Mouse Club (MMC) to centralize merchandizing. Today, the Disney operates through two main business segments: Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP). The first of these segments, which is comprised of Disney's media and entertainment businesses, is further separated into three components: Linear Networks; Direct-to-Consumer; and Content Sales/Licensing and Other. Disney provides a breakdown of revenue and operating income for each of these segments. This organizational structure was established by a 1Q 2021 reorganization to emphasize their DMED, further developing a reorganization that occurred in March 2018. In its first years of operation, the Walt Disney Company learned that it must own its intellectual property to survive. Founded in 1923, by 1927 Disney learned that the company that it can make more money by licensing its intellectual property than just making cartoons. The company learned it must protect its intellectual property. It learned that having multiple revenue streams protected against the risk that audiences have a short attention span and diversifying its revenue streams by moving into related diverse business lines provides business longevity. To optimize their merchandising, Disney formed the Mickey Mouse Club in 1928 to centralize merchandising. In the 21st century, Disney pivoted its diversification strategy to DTC media content in competition with Netflix, Apple TV, and Hulu. Disney approached the transition methodically. They restructured twice in the last four years to optimize their business structure. They rolled out a trial DTC platform in the UK in 2015. They made enabling intellectual property purchases of information technology capability and media content. Disney understood having a substantial media content library was important to competing in this market and made several tactical content acquisitions before launching their DTC service in order to optimize their market placement. Disney+ has served numerous roles within the Disney diversification strategy during the pandemic. Disney+ revenue offset Disney's loses from park closures during the global pandemic. Without their diversification into DTC, the company would have experienced greater pressure on their market capital. Disney+ preserved their merchandising, enabled the roll out of new media production, including high budget films, and maintained the firm’s position in the public’s consciousness. The later was vital to support the reopening of Parks and Entertainment as the pandemic subsided sufÏciently for the resumption of those business lines. Conclusion The Walt Disney Company displayed logical reasoning in the roll out of the Disney+ platform. The company continues to demonstrate the core principles of pursuing diverse business lines based on its intellectual property. Disney’s DTC media content strategy was successful. Disney is well placed for follow on expansion this business line. Disney's decision to diversify into the direct-to-consumer market with its core intellectual property and strategic purchases (like ESPN+ and majority a share of Hulu) enabled Disney to achieve unexpected success through synergy within the market across platforms. Their partnership with Verizon upon initial launch provided placement advantage during market entry. Disney+ was well placed to take advantage of the global pandemic, which coincided with the Disney+ rolled out. Through Disney’s strategic planning and tactical execution that enabled Disney to optimize the roll out of Disney+.