Mouse gets the fox: Disney and 21st Century Fox Merger

Summary 

This case study will tell us about the merger of Walt Disney and 21^st Century Fox, under industry based strategic analysis we will use porter five forces we will come to about the company various threats and challenges. This will make company able to make appropriate strategy to tackles the same. After reading this case study one will know about the company resources before and after the merger with Fox. Resource based strategic analysis will cover all resources tangible and intangible, VRIO, how company will protect its resources and is there any place for resources exploitation. This case study will also tell us about the important of constantly review VRIO and analysis the VRIO table for the company. We will also cover recommendation that will make company more strong in this competitive market.

Introduction

Technology plays important role in the growth and development of any organization globally, with these advance and innovative technologies companies can perform outstanding and cover large number of customers and demography. Its impact of the internal and external structure of the businesses as well. External and internal factors have strength to direct the company in a specific direction. Analysis model such as porter five forces and VRIO can be used to analyse these external and internal factor of company. Disney started their company with the concept of animated character and expanded afterwards into other businesses with the aim of bring happiness to the families through many similar projects. In 1923, Walter(“Walt”) and Ray Disney established Disney Brothers Studio and started making animated films that created foundation of the company till now. They are having competitive advantage as their products is unique that they are offered in the entertainment industries, mass media, and amusement park industries.

Industry-based Strategic Analysis

Industry based strategic analysis make company enable to develop its competitive strategy to gain advantages over its competitors. The depth understanding of competitive forces for company will make them able to highlight their critical strength and weaknesses. The success story of Disney tells us about their understanding towards the external and internal factors of the company by using proper analysing model such as SWOT analysis and Porter Five Forces. These are the best analysing model in their class for the companies to know their actually place in the market.

Company can use porter five forces before making any change in their mission and vision statement because by using this model company will know the buyer power, supplier power, threats of new entrants, threat of substitutes and competitor’s rivalry. In addition to this, SWOT analysis effectively tells about weaknesses and threats of the company that is external factors will give more flexibility to the strategy makers.

Industry Analysis | Porter’s Five Forces | Competition. (2020).

 2.1 Buyer Power

 The threat of new entrants

Disney is famous already in market and leading entertainment industry so the risk of new entrant is low. They invested highly in the industry that why they are dominating the area and this is not possible for new entrant. Moreover, they need time to make their reputation, trust and image.

Bargaining power of the suppliers

Disney’s supplier power is moderate, for Disney the suppliers are companies in media and technologies they have other suppliers and vendors as well. Their suppliers are Hulu, Tumblr, Imax, Nokia, and ESPN. These suppliers are having good hold in market and they have brand name as well in their area or domain, so for Disney it is difficult to switch from one suppliers to another because there is not option for new suppliers.

Threats of substitute products or services

Disney have low risk of substitute products, because company understand the needs of its valued customers and provide them the good quality entertainment in good price that makes difficult to replace Disney. There are many option for buyer as they can buy from other media companies, but they will not get the same quality experience that Disney offers.

Porter’s Five Forces of Walt Disney Company|Porter Analysis. (2020).

Bargaining power of the buyers

The buyers bargaining power is low, as Disney is established and having good reputation in the market. The brand name of Disney is well known in the world and company providing unique experience that make them able to have reliable, loyal and wealthy customers. Even if the price of any products increase in the Disney then even customers continue to spend and purchase that products, there is not any significant decline in the number of buyers.

Rivalry among existing firms

Disney getting tough competition with the rivals that means competitive rivalry is high. Company faces high competition by other providers in the media and entertainment industry. Even though company have good reputation and having large share of the market by its entertainment media. The lead competitors of the company are 21^st century Fox, CBS, and the Time Warner company continue giving challenge to Disney.

Table for above analysis

The below table show and analysis the Porter’s Five Forces analysis for the company and will brief idea about the company position.

Forces	Potential impact on Disney’s Market
Threats of New Entrant	Low
Bargaining power of the suppliers	Moderate
Threats of substitute products or services	Low
Bargaining power of the buyers	Low
Competition Rivalry	High

The Porter five forces analysis shows that company have high potential and opportunities with the merger of Fox. The low threat from new entrant, bargaining power of buyers and substitute of products give company more strength to enjoy its dominance and popularity among the world. Low buyers power shows that the company have loyal customers because of high quality experience that Disney providing. Porter Fives forces analysis shows high rivalry challenge to the Disney that cause this merger, as company have to work with its competitors as a partner or come up with the collaboration to tackles this challenge. Moreover, moderate supplier power means there is an limitation of suppliers for company and they have to work on it to find more suppliers or make their own supply chain.

3. Resource-based Strategic Analysis

The resource based strategic analysis is a framework that used to cause strategic resources that a company can use to get sustainable competitive advantages. With the merger of Disney and

Fox there will be significant changes in the company internal business environment. VROI analysis model will be used to analysis the resources and capabilities that give company a place where it will outstand others in the competition. This merger will also create an innovative environment where company can develop quality products with low cost, as Fox having their resources and asset as well.

3.1 Identify Resources (tangible & Intangible)

Disney have many tangible resources that make them able to perform good globally. They are having park and resort which are providing sustainable and large income every year. Company revenue increased yearly $14.08 million in 2013 and $15.09 million in 2014. Capital is one of the most crucial tangible resources that is a key to success of any company and Disney is doing good in terms of capital. Their tangible resources also include, media network, that covers cable networks, broadcast television networks, radio network and digital operations. Media network give 46% revenues in 2011. Company main revenue is coming from their cable network and broadcasting driven by ESPN, ABC Television and worldwide Disney channels. They are also getting higher advertisement rates in NFL, college football, NASCAR and MLB.

Company Intangible resources includes resources such as their reputation, culture, technologies, innovation etc. Disney is famous for its technologies in animation, films and TV series they are making. This high end work is not possible without employee’s skills (intangible resources). Company constantly developing their technology to bring their work in a level where it is difficult for anyone to match. Not only in films they are also using technology in their parks and resorts to provide best customers experiences for example the introduction of magic band, as small bracelet with RFID chip connected with the credit cards, hotel room and park tickets. Reputation Disney was ranked 2^nd in the world most reputation companies in 2016, because of it good corporate citizen and ethical practices.

ANON (2020), Privacy Policy - Consent - University of Richmond. (2020).

3.2 Identify valuable, rare and costly to imitate resources

Valuable: Disney spending lots of investment in their projects to gain the most recognizable brands in the world. Company having costly infrastructural framework which is not possible for new entrant in the market. Their investment and resources like park, resort, media network is valuable and good source of income to make them global player. According to the CNBC article, Disney merger with Pixar’s increased their revenue 404% in 2006 whereas in 2018 company had 38% of box office sales. Rarity: Brands that Disney owns is crucial, and the other firms can try to match the content but they cant copy it make company in a Rare place where they are leading from other in their domain. Imitability: There are only one Star Wars or Toy Story or Avengers that Disney owns, other firms tried to create substitute but it hasn’t worked out well. According to the Harvard Business Review tells about how Disney found its back to success. The merger of Disney and Fox is rare both having valuable assets and resources.

Disney and the VRIO Framework (Brand Equity) – Chapter 5 Post. (2020).

 3.3 Find out if your company is organized to exploit these resources

According to the Disney’s CEO Bob Iger, companies is looking for to start their own streaming services and the idea of purchasing Fox’s asset after acquiring the streaming company BAMTech, company will exploits Fox cable network for Disney employees. With the merger Disney look forward to maximise its profits and want to expand its services. Disney acquisition with Fox will give them access to exploits highly viewed channels of FOX such as National Geographic and FX will also boost Disney’s advertising portfolio by making them favourite for advertisers. 

The Disney-Fox Merger And Its Ramification - Corporate/Commercial Law - India. (2020).

3.4 Protect the resources

Companies merger came with many challenges and consideration, the most crucial one is protecting companies interest and resources. Disney will always try to protect the resources of both side as their management understand the value of resources. This practise will let remain the company on higher position in front of their competitors. Merger complements and enhance Disney by providing capability to entertain consumers around the world. Disney gets Fox’s films and television studios, cable entertainment network and International TV businesses. Also get popular entertainment properties such as X-Men, Avatar, The Simpsons, FX Network, national Geographic in its portfolio. By protecting merger resources and by using their skills Disney can dominate the entertainment industry.

Size, F., Size, F., Size, F., & WIRE, B. (2020).

3.5 Constantly review VRIO resources and capabilities

It is important to constantly review valuable, Rare and Immitigable (VRIO) resources and capabilities for Disney as the value of the resources can change over time so they must be review constantly by experts to get competitive advantages. With the merger company gets edge in many areas that competitors also want to get by replicating the resources. By using VRIO analysis Disney can use merger resources effectively and maintain its place on top in front of its competitors.

Jurevicius, O. (2020).

3.6 VRIO Analysis Table

Resources & Capabilities	Valuable (V)	Rare (R)	Costly to imitate(I)	Organized to Capture Value (O)
Media & Network	Yes	Yes	Not Really	Yes
Park & Resort	Yes	Yes	Yes	Yes
Studio Entertainment	Yes	Yes	Yes	Yes
Consumer Products	Yes	Yes	Not Really	Yes
Disney Interactive	Yes	Not Really	Yes	Yes

 Recommendation

1.     Disney must have to do big investments in the development of innovation and technology platform as it will provide flexibility to the company for upcoming and existing projects.
2. They must have to build good relationship with the suppliers, so they will always have the supply of necessary material for their productions.
3. Company must think out of the box and invest to make their own raw material supply chain. Making their own supply chain will make them able to fulfil their requirement and also give them capability to sell their services to other companies working in the same domain. By doing the same they can control the price and also dominate the industry for long run.
4. Company must consider its resources before and after merger with any company and use them effectively without exploiting them to gain maximum profits and become global players.
5. Disney must consider Corporate Social responsibility and start strengthen their CSR practices. They can invest in medical and education sector because children follow Disney passionately.