GLOBAL BUSINESS STRATEGY: A CASE STUDY ON DISNEY CORPORATION
Introduction
This is a report on Disney Corporation and its global business strategy in the international market. The global business strategy of Disney will be investigated, and studied, in order to ferret out valuable lessons to be learned from the successes and failures of Disney expansions to the global market. Firstly, it will be discussed on the rationales of Disney expanding to international market. Then, the methods or strategies used by Disney in expanding to the foreign countries will be articulated. It can be seen that Disney is becoming more aggressive and comfortable to participate in the foreign expansion, in terms of ownership of the business venture to a foreign market. Then, based on the historical development of Disney Corporations in the global market, the rights and wrongs; or the successes and failures of Disney Corporation in the international market will be discussed. After discussing and studying the historical successes and failures of Disney Corporation in the global market, various lessons on managing business across the globe will be discussed. These lessons are worth being paid serious attentions by business managers wishing to expand their businesses to the global market in the future.
Reasons Disney Expand to Global Market
There are many reasons that Disney Corporation wish to expand to the global market. Consistent with the theory, to expand to international market is beneficial because it will enhance market share for Disney, enhance brand reputation for Disney, increase revenue, and generate growth for the business (Griffin et. al., 2007), tap into bigger market (in the international context), and to diversify the businesses geographically (Lasserre, 2003). All these are rationales leading Disney to expand to the international context. Besides, it is also reasonable to believe that Disney indeed wishes to expand to the international market to duplicate its success in the foreign countries. The existing market (i.e., in United States) may already saturated and offer limited growth opportunities for Disney (Britt, 1990). Thus, Disney may as well decide to expand to other countries to bring the business to greater heights.
Methods Employed to Conduct Global Business
There are many methods can be used to expand to global market; among these methods include licensing, franchising, contractual strategies, strategic partnership and direct or indirect exporting. There are different methods employed by Disney to expand to the international market. Firstly, Disney expanded to Japan through licensing – the very fact that the management of Disney will only provide consultancy and advisory roles – overseeing the Disney park construction and to receive royalty income from its partner in Japan (namely, Oriental Land Company). However, such method is regretted as Disney in Japan is proven a great success later. Then, in expanding to France, Disney decided to participate more fully in park’s ownership and profits – through a joint venture with other investors on the company’s stocks listed in European Stock Exchange. Under the joint venture, Disney owned only 49% of the venture to France. Besides, a partnership and collaboration with the French government is also performed, whereby Disney received several assistance and incentives provided by the French government in opening the Disney park in France. Similarly, equity partnership with the local government of Hong Kong is made in the venture into Disneyland Hong Kong. In this venture, Disney corporations hold an equity stake of only 43%. Overall, it can be seen that Disney is more comfortable to participate on deeply to global expansion and venture. At first, the company use licensing methods to expand to Japan, but the company later rely more on equity partnership and some sort of strategic alliances with the local governments to enter to different countries.
Right and Wrong Moves of Disney
A review of the historical development of Disney found that the company has both business success and failures in global market. At the early days, the company was correct to expand to the global market, as international expansion is rational, considering that Disney has a strong brand name and popular cartoon programs around the world. The company is famous, and thus, by leveraging on the business reputation, international expansions can be made easy. This is proven through the correct business judgment of expansion to Japan. However, the other business expansion, such as to Hong Kong and particularly to France, cannot be considered as a success. Nevertheless, in the following section, the mistakes of Disney will firstly be outlined.
Not taking sufficient portion of ownership in profitable business venture. On hindsight, it is found that Disney is not making correct decision in using licensing as the choice of expansion to Japan. This is because the Japan expansion is a proven success, and Disney can only profit from the royalty income from the business venture in Japan. However, it is also understood that this is because the company is making first time business venture to the international market. The management has little experiences, and perhaps confident to foreign business venture, and thus, choose licensing as the entry mode to Japan, as that methods is one of the lowest risk of all international expansion techniques.
Not conducting market research diligently. However, across the international expansion, it is found that Disney is not able to conduct the research properly before venturing into any foreign market, as the expectations and estimates on business ventures to other foreign nations, such as in France and China were wrong and inaccurate. Apparently, the company had not conduct market research properly – and often, not comprehends the local culture, consumer behaviors and consumption preferences. Thus, many times, the value proposition to the local consumers are not formulated in the best possible manner, to fulfill the needs and wants of the local consumers.
Not selecting a strategic partner in foreign business venture. It is found that Disney has been repeatedly making wrong business judgment call in the foreign countries. This is probably due to the reason that the management has little experiences in the local context. As such, it is crucial and viable if the management to form strategic alliances with other party from the local countries, top tap into in-depth knowledge on the business landscape, societal values and preferences, cultural aspects and other necessary information in the foreign environment (Mellahi et. al., 2005). Not incorporating the wisdom from a local strategic partner may be causing Disney a great deal of losses, and indeed was making the business expansion venture a risky one (due to unnecessary speculation or wrong assumptions by the management that comes primarily from United States).
It is also found that Disney is making correct judgment in certain times as well. For example, the company is fast to realize the different needs and expectations from the different customers around different regions of the world. For example, after realizing that people in China are not familiar with the western cartoon characters promoted by Disney, the company is fast to change the traditional Disney character, to replace with higher degree of Chinese elements and characters. Apart from that, the company is also correct in partnering with local animation companies in Japan. The end result of such partnership is development of programs well favored by the Japanese consumers.
Besides, the company is also formulating and executing the strategic direction of the firm rationally. Consistent with the business theory, the company should be able to enhance the growth rate and prospects of the company by expanding to fast growing countries, such as to China and India. It is reasonable to expect that as these emerging countries growth, the people from these countries will enjoy higher purchasing power (Morrison, 2006), and thus, demand more of Disney products. All these will definitely contribute positively to Disney profitability and expansion around the globe.
Lessons Learned from Disney
Many lessons can be learned from the Disney story. Firstly, it can be seen that even successful companies with long term profitable track records in United States, may face many hinders and barriers in profitable expansion to other foreign countries. Internal business management is never easy, as it is much more complicated and challenging. The management must be equipped with several experiences, expertise and with proper expectations and understandings on what is necessary for successful business venture to foreign market. Of particularly important are the different cultural aspects in the different nations around the world. For example, people from the east and the west have different culture, and they may response differently to a particular set of value offering. Thus, in many instances, the successes of any business in a country may not be duplicated to other part of the world. Adjustment and adaptation of the local context is often necessary, as the best practices in the domestic country may no longer stay effective in another country (Stonehouse et. al., 2004). Not only is that, it is also found that consumer behaviors, expectations and consumption habits may different greatly across borders (Roedl, 2006). Thus, in-depth and insightful market research is necessary, before expansion to any part of the world. Unless the management understand the market deeply, to make other assumptions or to speculate on estimates of the business ventures to a foreign countries can bring a lot of risks to the company. It is found that in the case of Disney, for example, a lot of risks and the key contributors of business failures come from inaccurate understandings on the business landscape of the international market. Not only is that, it is also learned that the entry mode will have huge impacts to the business prospects and profitability of any company. The different entry mode have different advantages or disadvantages, and management has to be clear on their choices, as these entry mode will have long term significant impacts to the financial position and competitiveness of the company in the future. Over the years, it can also be found that the company is getting the mantra and best philosophies of managing and expanding business globally. The company increasingly buys into the idea of ‘thinking global, acting local’ in the business expansion context (Gannon, 2002).
Conclusion
Overall, it can be seen that expanding to the global or international context is never something easy. To duplicate the success stories or business models (from the domestic country) to the other foreign countries or markets is often not feasible, as the business landscape and market situation in the foreign market may no longer be similar. Very often, the cultural differences and the local societal factors such as consumers’ preferences, expectations, purchasing behaviors, consumptions habits or attitudes may differ to that of the domestic country (Goss, 2003; Lam, 2010). Thus, the successful business model, or even the existing value propositions may not be portable or transferred directly or completely to the new market or country. This is the key issues in managing an international business, and experiences or expertise on the cultural uniqueness or societal differences in the different regions of the world should be studied and understood. Only when that is done, the value delivered to the people in other nations can be adjusted to suit the local context; to enhance the probability of success and profitable business venture to a foreign market, while at the similar time reducing the risk of business failures.
References
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