Disney as a Business

Disney has grown exponentially over its history due to its acquisitions  of movie studios such as Pixar, Lucas Films, and Marvel. Each film studio acquisitions brought unique benefits, but the one thing they all brought to Disney is revenue. Disney acquired the rights to use these movie studios for their film making, but got the added benefit of having the rights to their characters and themes. Disney has mastered the art of acquiring companies so well that it has seen its market cap nearly triple over a decade to reach $90 billion.

One strategy that Disney uses is called horizontal integration. This means that Disney acquires a company that exists in the same value chain as itself. This strategy is most effective when:

• The organization operates in a competitive market. For example, the film market is general is highly competitive. Consumers have many choices when they go to the box office, so film makers are constantly under pressure to produce the next greatest film. When Disney can acquire other film studios, it gets a bigger market share in return.
• The organization possesses a skill or competency that Disney does not. For example, when Disney acquired Pixar, it gained access to 3D animation capabilities that it previously did not have. Additionally, when Disney acquired Marvel, it gained the capability to market to boys which was an area that it was previously lacking in.
• The organization has the resources to effectively manage the new company. In the case of Pixar, Lucas Films, and Marvel, Disney paid top dollar for these companies and has managed each of them quite efficiently.

Some benefits to Disney using this strategy include:

• Increased Differentiation- One great example of this is when Disney acquired Marvel. The company gained access to 5,000 additional characters. One could say that is differentiation taken to the max because it gave Disney opportunities to branch off in areas where it hadn’t previously had the capability to do so.
  
• Reduced Competition- Whenever Disney buys a competing company, it gains the right to not only use the products/characters in new ways, but also to gain the profits that result from whatever the newly acquired company produces.
• Access to New Markets- In addition to being able to appeal to boys with the Marvel acquisition, all the acquisitions gave Disney access to new markets both domestically and internationally.

Read on as we explore in further depth how Disney has successfully utilized the horizontal integration strategy.