Introduction
Management strategies are intended to enable business entities to gain a competitive advantage and pursue higher profits while minimizing costs. In fact, different business entities will apply management strategies based on how they perceive their environment to include growth directions, acquisition decisions, hiring and so on. As such, a business strategy describes the methods that a company applies to seize available opportunities within its market. In evaluating strategy, it is important to consider three aspects. Firstly, evaluating strategy in terms of feasibility, acceptability, and suitability. Secondly, considering the role of organizational systems and structures. Finally, leadership since developing strategy involves significant organizational change as a determinant of success. Addressing these aspects ensures that the management strategy achieves its intended goals (Henry, 2011). The present analysis considers the management strategies inherent in Disney Company and how best to achieve goo d business results in the face of survival threats even as the company transitions into the future.
Problem Statement
Disney is facing a business crisis occasioned by suffering brands and products. In fact, some of its options for continued survival and success lies in reducing operational costs through retrenchment, stabilizing its market share, or growing to acquire a larger market share. As an entertainment conglomerate, the company is suffering from brand fatigue and ageing characters. Its popular brands that have been marketed for more than fifty years currently account for 80% of its sales revenue. Additionally, the company caters to the young population who transition to patronize its competition as they grow older. The market situation is exacerbated by its bad reputation of presenting low-quality production, poor performance, and weak storylines. To address these concerns, the company is considering growing to gain a larger market share. This entails acquiring Pixar Studios in a $7 billion deal while offering its CEO a management position and its creative team leeway to continue their operations at Disney. This consideration has been occasioned by Pixar’s continued success as a relative newcomer even as Disney continues to struggle in the market. In this respect, Disney is considering where or not it should acquire Pixar and its management team as part of the strategy for growth, gaining a larger market share and guaranteeing business success even as it transitions into the future.
Discussion
Circular strategy model
Disney has adopted a circular strategy model. It is aware that the entertainment industry is highly competitive with a need for expensive and innovative technologies. In fact, the industry spends considerable capitals to acquire technologies and personnel who offer a competitive advantage. The model places great importance to cost reduction even as the company acquires the capital for expansion. The model is constructed around the strategic themes of profitable growth, innovation and customers’ satisfaction (Mathis, Jackson & Valentine, 2013).
The model conceptualizes three approaches. Firstly, capital is allocated using a disciplined method that prioritizes growth needs. This includes allocating capital to areas that are projected to experience growth. Secondly, costs are reduced and revenue streams increased to ensure that the company becomes more profitable. Thirdly, resources are allocated research and development activities. Fourthly, the company is financially resilient and has access to large capitals and resource that offer a firm company foundation and a strong investment base. Finally, the company has entered into risk and revenue sharing agreements with some of their customers to ensure that risks are shared and the company is protected in case of any eventualities. This is especially true for its deals with production companies where it has options of continuing production and managing distribution as was the case for its deal with Pixar (Ahlstrom & Bruton, 2010; van der Pijl, 2015).
By applying the circular model, Disney has focused on three themes: customers, innovation, and growth. The customers are considered the core of the company. Emphasis is placed on ensuring that all their reasonable entertainment needs are met. Innovation is considered the company’s driver. In this case, innovation ensures that the company products remain unique and competitive. To encourage innovation, the company creates a conducive environment that challenges personnel, keeps them at par with industry advances, and makes them receptive to revolutionary ideas. It also disciplines them, encourages dynamism in embracing change, remaining undaunted in the face of failure, and keeps them in a constant state of curiosity (Hartel & Fujimoto, 2015). Profitability is the company’s focus since it understands that meeting its customers’ needs through developing portfolios that have high quality and competitively priced products and services will allow them to increase their market share. Of course, the company comprehends that growth must be profitable for it to have any value to entail keeping costs at competitive levels (Hill & Jones, 2010).
Horizontal diversification strategy
In addition to the circular strategy model, the company has applied a horizontal diversification strategy that involves the company growing while reducing the risks. In this case, the company’s divisions are all engaged in the entertainment industry and can use the same technologies. For that matter, there has been internal development of new products (such as animations) that support the existing core business of presenting entertainment solutions (Hitt, Ireland & Hoskisson, 2016).This strategy has offered the company an opportunity to achieve economies of scale and scope, and expand its products range while increasing geographical reach to include a global perspective. For instance, a film produced in Europe is easily marketed across the world by including translations and subtitles. However, the company faces the challenge of coordinating the various business divisions since their related nature makes their management complex and difficult. This is seen in the loss of creativity and inability to maintain customers even as they grow older (Hitt, Ireland & Hoskisson, 2016).
Applying balanced scorecard
Even as Disney evaluates its management strategies, it should apply a balanced scorecard in addressing the current problem. This is based on the awareness that a balanced scorecard is a business analytical tool for managing growth plans and objectives. In fact, it is a measure of whether the organizations goals have either been met or exceeded within the period under review. Its principal characteristic is that it applies both financial and non-financial approaches that explain the company’s results (Wang, 2014). It has four components in the form of customer satisfaction and appeal, organization learning and growth, internal business processes, and financials. Similar to other business analytics tools, applying a balanced scorecard in the case of Disney will be accompanied by both advantages and disadvantages. In this case, it presents three advantages. Firstly, it matches strategic actions to the desired outcome. Secondly, it evaluates both the immediate and near future to ensure that any action will achieve the desired short-term, medium-term, and long-term outcomes. Finally, the four components under review ensure that a comprehensive appraisal of the company’s performance is conducted. On the other hand, it presents three disadvantages. Firstly, it requires forethought and extensive planning before use. Secondly, it focuses on the four components while ignoring any other components that might have a bearing on the company’s performance. Thirdly, it takes up many resources since the framework must be tailored for the company to ensure that the results are a true reflection of the company performance (Fairhurst, 2015; Gendron, 2012). As a result, a balanced scorecard would offer an opportunity for Disney to manage change even as it presents both advantages and disadvantages.
Conclusion
The review makes it clear that understanding strategic management concepts is an important part of success within a competitive environment. This is particularly true for Disney that is facing a business crisis occasioned by suffering brands and products. In fact, the company is facing an uncertain future and its options for continued survival and success lie in reducing operational costs through retrenchment, stabilizing its market share, or growing to acquire a larger market share. The company’s management is considering the acquisition of Pixar Studios in a $7 billion deal. In addition, the analysis makes it clear that Disney applies the circular strategy model and horizontal diversification strategy to improve operations. The circular strategy model stresses on cost reduction and expansion while exploring the themes of profitability, innovation and customers’ satisfaction. The horizontal diversion strategy the focuses on profitable growth while reducing risks. The two strategies support Pixar’s acquisition since they focus on profitable growth. Still, the decision on whether to acquire Pixar must be guided by profitability and financial optimization concerns. It the company opts for the acquisition, then it must apply the three-step change management strategy. Also, it must tailor the four components of the balanced scorecard framework to ensure that management decisions translate into the four notational quadrants of customer satisfaction and appeal, organization learning and growth, internal business processes, and financials. With this approach, the Disney can be sure of achieving its business goals in a disciplined manner and report good business results in the face of survival threats even as the company transitions into the future.
Recommendations
The decision on whether or not Disney should acquire Pixar must be guided by profitability and financial optimization concerns along with circular strategy model and horizontal diversification strategy. Once it is determined that the acquisition makes financial sense, then it will be prudent for the company to manage the change. That is because the change would be based on the management strategies and must apply a three-plan approach that focuses on preparation for the change, defining the change, and implementing and sustaining the change. Firstly, preparing for the change would define the case for the change in terms of growth and profitability, appoint the change management team, and scope and sell the change to the company management. Secondly, defining the change would describe the change and develop the change implementation plan while managing all informal and formal communication requirements. Finally, implementing and sustaining the change would implement the change, sustain the effort, and ensure that the changes are entrenched (Henry, 2011; Hitt, Ireland & Hoskisson, 2016).Applying the three-step plan would ensure that Disney successfully acquires and integrates Pixar in its operations.
Other than the three-plan approach, the company should tailor the four components of the balanced scorecard framework to ensure that it is a true reflection of the company performance. This will ensure that the scorecard results translate the company strategy into the four notational quadrants of customer satisfaction and appeal, organisation learning and growth, internal business processes, and financials. It is notable that an effective scorecard design would match the four quadrants. Firstly, the customer satisfaction and appeal quadrant would engage the customers in collecting their opinion on Disney products and services, and how best they can be improved. This would include collecting perception on what would make them patronise Disney or switch to their competitors. Secondly, the organisation learning and growth quadrant would evaluate the changes that have taken place in the industry and how they have reflected on the company (Fairhurst, 2015; Gendron, 2012).
Thirdly, the internal business processes would review the management changes that have taken place in the company and how they affect performance. For instance, a rise in profitability immediately following the acquisition of Pixar can be attributed to the change. Finally, the financial results can show the most profitable operations and those that contribute to the loss. This information can be used to make changes in resource allocation. It is important to remember that these recommendations for applying the balanced scorecard framework are based on the understanding that Disney uses a unique business model. In addition, identifying the appropriate measures and performance drivers is difficult since the entertainment industry is dynamic and subject to regular changes even as new technologies are introduced. In fact, it is common for confusion to arise, particularly when determining actual and logically assumed relationships between the performance drivers. It would seem rational for a manager to assume that there is a causality between high customer satisfaction levels and good financial results even though the two are not automatically congruent since producing high-quality films cost more and can reduce profits even as it attracts more customers (Fairhurst, 2015; Gendron, 2012). Therefore, applying the recommendations that have been presented would enable the senior management team at Disney to develop an appropriate measure of the company’s performance even as it makes a decision on whether or not to acquire Pixar.
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