Walt Disney Company Five Forces Analysis (Porter’s) & Recommendations - Panmore Institute (2023)

Walt Disney Company Five Forces Analysis (Porter’s) & Recommendations - Panmore Institute (1)

The Walt Disney Company uses its strong brand as an advantage to address competition and the related external factors specified in this Five Forces analysis of the global business. Michael E. Porter’s Five Forces Analysis model is a managerial tool for understanding the industry environment in terms of external factors that affect business performance. In this company analysis case of Disney, the external factors are in the mass media, amusement parks and resorts, and entertainment industries. These factors represent the industry environment where the conglomerate must address the effects of competition with large and aggressive firms. For example, the company competes against Sony, Viacom, Time Warner, CBS, and Comcast (owner of Universal Pictures). This Porter’s Five Forces analysis of Disney stresses the significance of the external environment in determining business success. The company must align its strategies with the intensities and characteristics of the competitive forces assessed in this external analysis.

The external factors and intensities of competitive forces determined in this Porter’s Five Forces analysis of The Walt Disney Company inform managerial efforts in improving the business. For example, the corporation’s expansion strategies for its Disneyland amusement park business must account for the current trends in the international industry environment, some of which are evaluated in this external analysis. Thus, this Five Forces analysis depicts competitive concerns in Disney’s business.

Summary & Recommendations: Five Forces Analysis of The Walt Disney Company

Summary. Competition, the bargaining power of customers, and the threat of substitution are the most significant external forces determined in this Porter’s Five Forces analysis of Disney. Nonetheless, the bargaining power of suppliers and the threat of new entry are strategic management issues in the global business environment. The external factors significant to Disney involve the activities of firms in the entertainment industry, the mass media industry, and the amusement parks and resorts industry. Given such scope of operations, various industry environments are considered in this external analysis. For example, the corresponding industry-specific degrees of competition are accounted for in evaluating the overall competition facing Disney. The relevant external factors and intensities of the five forces are determined in this Porter’s Five Forces analysis of The Walt Disney Company as follows:

(Video) The end of the line for Disney's corporate strategy?

  1. Competitive rivalry or competition (Strong force)
  2. Bargaining power of buyers or customers (Strong force)
  3. Bargaining power of suppliers (Weak force)
  4. Threat of substitutes or substitution (Moderate force)
  5. Threat of new entrants or new entry (Weak force)

Recommendations. Given that competition and customer power are the most significant strategic management concerns determined in this Five Forces analysis, it is recommended that Disney focus on developing competitive advantages to further strengthen its brand. This recommendation addresses the leadership objectives contained in Disney’s corporate vision and mission statements. The company has one of the world’s strongest brands, ensuring business competitiveness in the global entertainment, mass media and theme parks industries. However, aggressive competitors can reduce this relative brand value in the industry environment. Thus, strengthening the brand helps overcome the external factors linked to high-intensity competitive rivalry. This Porter’s Five Forces analysis of Disney also warrants strategies for customer retention to address the strong bargaining power of customers. For example, high quality attractions coupled with the company’s brand can optimize customer retention in the amusement park industry. Enhancing The Walt Disney Company’s generic competitive strategy and intensive growth strategies can effectively address such concerns in this component of the external analysis.

Competitive Rivalry or Competition against Disney (Strong Force)

In Porter’s Five Forces analysis framework, this component evaluates the external factors that maintain the intensity of competitive rivalry in the industry environment. This business analysis case of The Walt Disney Company considers how firms affect each other in the entertainment, theme parks, and mass media industries. The trends influencing business development in these global industries are also considered in this external analysis. For example, aggressive mass media marketing strategies are a factor in the company’s strategic planning and management. The strong force of competition facing Disney is based on the following external factors:

  • Many firms in the market (Strong force)
  • High aggressiveness of firms (Strong force)
  • Moderate differentiation (Moderate force)

The presence of many firms in the market is an external factor that directly translates to strong competition that The Walt Disney Company experiences. This Five Forces analysis also stresses firms’ aggressiveness as an external factor that strengthens the intensity of competition in the industry. For example, aggressive companies that produce high-quality animated films aggressively compete against Disney’s Pixar Animation Studios. This condition makes the industry environment competitive. Moreover, moderate differentiation contributes to competitive rivalry, although only moderately. Thus, this external analysis points to firm aggressiveness and population as the most significant strategic management issues with regard to the level of competition. The external factors in this component of Porter’s Five Forces analysis framework impose the strong force of competitive rivalry against The Walt Disney Company’s global business.

(Video) Disney's Billion Dollar Business Strategy

Bargaining Power of The Walt Disney Company’s Customers (Strong Force)

The Porter’s Five Forces analysis framework considers the bargaining power of customers in affecting business strategies, such as pricing strategies. In Disney’s case, the external factors relevant to customers’ power pertain to their ability to choose between firms and products in the industry environment. For example, higher ease of changing brands corresponds to stronger customer power in affecting management practices in the multinational business. This external analysis identifies the following external factors and their intensities as contributors to the strong force of the bargaining power of The Walt Disney Company’s customers:

  • Low switching costs (Strong force)
  • Moderate price sensitivity (Moderate force)
  • Moderate ability to substitute (Moderate force)

Low switching costs make it easy for customers to switch or transfer from one provider to another. For example, customers can easily switch from Disney’s movies to movies from competing firms. In Michael Porter’s Five Forces Analysis framework, this external factor strengthens the bargaining power of customers in the company’s industry environment. On the other hand, customers’ moderate price sensitivity imposes a moderate force on the strategic success of The Walt Disney Company. Thus, pricing is a factor in the company’s management processes. Also in this external analysis, the moderate ability to substitute has a correspondingly moderate contribution to the intensity of customers’ power in the business environment. Therefore, this component of the Five Forces analysis underlines business strategies for retaining Disney’s customers amid competition in the global market.

Bargaining Power of Disney’s Suppliers (Weak Force)

Suppliers’ influence on firms and their external business environment is the focus in this component of Porter’s Five Forces analysis framework. For example, suppliers’ stability determines the stability of materials available for The Walt Disney Company’s multinational operations. The company needs to address suppliers’ influence in the industry environment, to maintain an effective supply chain and consistent operations. The weak bargaining power of Disney’s suppliers are based on the following external factors and their respective intensities:

(Video) Disney Marketing Formula @ Big Ideas Zurich 2018

  • Large population of suppliers (Weak force)
  • High overall supply (Weak force)
  • Moderate variety of suppliers (Moderate force)

In Michael Porter’s Five Forces Analysis framework, suppliers’ population is a determinant of suppliers’ influence in the industry environment. In this external analysis case, The Walt Disney Company deals with suppliers’ large population, which corresponds to the weak intensity of suppliers’ bargaining power. For example, a single supplier cannot easily affect the industry because there are many other suppliers available to support companies. Similarly, the external factor of high overall supply prevents suppliers from easily affecting the corporation’s strategic management success. On the other hand, moderate variety only moderately empowers some suppliers in imposing demands on The Walt Disney Company and other players in the amusement parks, mass media, and entertainment industries. Despite such weakness, suppliers’ bargaining power may change according to relevant trends, such as the ones outlined in the PESTEL/PESTLE analysis of Disney. These trends have the potential to disrupt the international business environment. The external factors in this component of the Five Forces analysis of Disney indicate suppliers’ weakness, although the situation could change based on trends in the industry environment.

Threat of Substitutes or Substitution (Moderate Force)

In Porter’s Five Forces analysis framework, substitution imposes pressure on firms in terms of pricing and revenues, market share, and other relevant factors. Disney’s global business is under constant pressure from potential substitutes. For example, the industry environment offers other entertainment activities that customers could choose instead of the company’s products. This external analysis indicates the significance of substitution in strategic management and planning. The moderate force of the threat of substitution facing The Walt Disney Company is a result of the following external factors and their corresponding intensities:

  • Moderate availability of substitutes (Moderate force)
  • Moderate substitute performance-to-price ratio (Moderate force)
  • Moderate variety of substitutes (Moderate force)

The moderate availability of substitutes is an external factor that moderately intensifies the threat of substitution in The Walt Disney Company’s global industry environment. Customers have a moderate number of substitute options. Also, in Michael Porter’s Five Forces analysis framework, substitutes’ moderate performance-to-price ratio leads to moderate customer satisfaction in using substitutes to products from companies like Disney. In addition, the moderate variety of substitutes supports the moderate intensity of this force in this external analysis. A higher variety would make it less likely for customers to move away from substitutes in the business environment. The Walt Disney Company’s management must apply strategies, such as strategies for high quality and performance, for attracting customers away from substitutes, considering the moderate threat of substitution determined in this component of the Five Forces analysis.

(Video) Disney+ Will Lose Money, Mediatech's Bibb Says

Threat of New Entrants or New Entry against Disney (Weak Force)

Porter’s Five Forces analysis framework identifies the threat of new entry as a competitive force in the industry environment. In this case, The Walt Disney Company’s strategic management needs to consider potential new entrants and their possible effects on the international business environment. For example, this external analysis points to large firms that could enter the entertainment industry and disrupt the success of long-established companies. The following external factors and their intensities are the basis of the weak threat of new entry against Disney:

  • Low switching cost (Strong force)
  • High capital cost (Weak force)
  • High cost of brand development (Weak force)

This component of Michael Porter’s Five Forces analysis framework determines that low switching costs makes it easy for customers to move away from The Walt Disney Company and toward new entrants, thereby imposing a strong force in the industry environment. However, high capital cost is an external factor that weakens the intensity of this force. For example, new firms need high capitalization to succeed in competing against established firms. In relation, the high cost of brand development is an entry barrier. New entrants find it difficult to compete based on brand, considering the company’s strong global brand (Read: SWOT Analysis of Disney). Thus, new entrants are a minor business strategic management issue in this external analysis. This Five Forces analysis of The Walt Disney Company determines that new entry is a weak and minor threat in the entertainment, amusement parks and resorts, and mass media industry environment.

References

FAQs

What is Porter's 5 Forces analysis example? ›

Examples: High barrier to entry and high exit barrier (for example, telecommunications, energy) High barrier to entry and low exit barrier (for example, consulting, education) Low barrier to entry and high exit barrier (for example, hotels, ironworks)

What is Porter's 5 forces model how different is it from a SWOT analysis? ›

Porter's 5 Forces is a comparative analysis strategy that analyzes competitive market forces within an industry. SWOT analysis looks at the strengths, weaknesses, opportunities, and threats of an individual or organization to analyze its internal potential.

What is the main goal of the Porter's 5 forces analysis? ›

The objective of Porter's Five Forces model is to assess the overall competitive landscape of a particular business sector. Each of these five forces corresponds to a key component of market intensity.

How do you use Porter's five forces model in analyzing any manufacturing industry? ›

Porter's Five Forces can help a business:
  1. Learn what industry they need to target.
  2. Determine which industries give the best or least chances of success.
  3. Understand the demand for their product .
  4. Recognize their risks.
  5. Recognize their opportunities.
  6. Learn how profits get distributed within an industry.

What are the 5 competitive strategies? ›

Here are five types of competitive strategy and an example for each:
  • Cost leadership. ...
  • Product differentiation. ...
  • Customer relationship management (CRM) ...
  • Cost focus. ...
  • Commitment to customers strategy.
16 Nov 2021

How does Porter's competitive forces model help companies develop competitive strategies using information systems? ›

Porter's competitive forces model helps companies determine what they should do to be more productive by comparing what their competitors are doing. It also brings the companies costs down and makes them more efficient as a business by using Information Systems.

Why Porters 5 forces is better than SWOT? ›

Both are strategic tools to assess the potential positioning within a market. While Porter's Five Forces is useful to address the state of competition within a market, the SWOT analysis helps address both internal and external factors affecting a company's competitiveness over time.

What are the five important forces that confront the company and determine its competitive intensity? ›

The model is more commonly referred to as the Porter's Five Forces Model, which includes the following five forces: intensity of rivalry, threat of potential new entrants, bargaining power of buyers, bargaining power of suppliers, and threat of substitute goods and/or services.

How can Porter's five forces be used to analysis the external environment? ›

Porter's Five Forces Framework Model analyses the competitive forces within the environment in which a company operates, to assess the potential for profitability in an industry. Porter consists of the threat of new entrants, the threat of substitute, buyer power, supplier power, and rivalry among existing competitors.

What is the most important of Porter's five forces? ›

Regarded as the most expressive in Porter's 5 forces model, the rivalry between competitors is the major determining factor for market competitiveness.

Is Porter's five forces still relevant today? ›

Porter's five forces is a widely used framework for analyzing industries. It refers to the competitive influences shaping the corporate strategies that are likely to be successful. The framework has held up well over time and continues to be a staple of the coursework for business classes.

Which of the five competitive forces is strongest and why? ›

Porter's five-forces model of competition is useful for determining the nature and intensity of an industry's competition. Competitive pressures exist between each of the outer forces and the rivalry among competitors. The rivalry among competitors is the strongest of the five forces.

Which of Porter's Five Forces has the greatest influence on whether an industry would be profitable explain in brief? ›

Of Porter's Five Forces, competitive rivalry has the strongest influence on whether entering an industry would be profitable. When rivalry is high, there are many competitors, and those competitors have a high cost associated with exiting the industry.

How is 5 Force useful to the company? ›

A Five Forces analysis can help companies assess industry attractiveness, how trends will affect industry competition, which industries a company should compete in—and how companies can position themselves for success.

How does Porter's 5 forces help a business? ›

Porter's 5 Forces is an analytical model that helps marketers and business managers look at the 'balance of power' in a market between different organizations on a global level, and to analyze the attractiveness and potential profitability of an industry sector.

Why competitive strategy is important? ›

Having a competitive strategy is most important when a company has a competitive marketplace and several similar products are available for consumers. This strategy helps you create a defensive position in your industry, along with generating a superior return on investment.

What is your competitive advantage example? ›

For example, if a company advertises a product for a price that's lower than a similar product from a competitor, that company is likely to have a competitive advantage. The same is true if the advertised product costs more, but offers unique features that customers are willing to pay for.

What is Porter's strategy? ›

Porter called the generic strategies "Cost Leadership" (no frills), "Differentiation" (creating uniquely desirable products and services) and "Focus" (offering a specialized service in a niche market).

How do 5 forces affect the competition in an industry and the profit potential? ›

According to Porter, there are five forces that represent the key sources of competitive pressure within an industry They are:
  • Competitive Rivalry.
  • Supplier Power.
  • Buyer Power.
  • Threat of Substitution.
  • Threat of New Entry.

What is the purpose of Analysing the international market performance of existing and potential competitors and their products or services? ›

What is the point in doing a competitor analysis? The purpose of a competitor analysis is to understand your competitors' strengths and weaknesses in comparison to your own and to find a gap in the market.

What are some of the strengths of the five forces model? ›

Supplier Power: The power of suppliers to increase the cost of inputs. Buyer Power: The power of customers to reduce prices. Competitive Rivalry: The strength/power of competition in the industry. The Threat of Substitution: The extent to which different products and services can be used in place of your own.

What strategies can companies use to gain competitive advantage? ›

Building a Competitive Advantage

Michael Porter, the famous Harvard Business School professor, identified three strategies for establishing a competitive advantage: Cost Leadership, Differentiation, and Focus (which includes both Cost Focus and Differentiation Focus)[1].

What is the relationship between the competitive forces model and the value chain model? ›

It involves identifying and analyzing the five competitive forces, which determines the strengths and weaknesses. Porter's value chain model is a business model describing the activities involving in creating a product. It is a tool used for strategic management purposes.

Is Porters five forces the same as SWOT analysis? ›

Key Takeaways

Porter's 5 Forces is a comparative analysis strategy that analyzes competitive market forces within an industry. SWOT analysis looks at the strengths, weaknesses, opportunities, and threats of an individual or organization to analyze its internal potential.

What is Porter's 5 forces analysis example? ›

Examples: High barrier to entry and high exit barrier (for example, telecommunications, energy) High barrier to entry and low exit barrier (for example, consulting, education) Low barrier to entry and high exit barrier (for example, hotels, ironworks)

How do you analyze competitive advantage? ›

How to conduct a competitive analysis in 5 steps
  1. Identify your competitors. This sounds straightforward, but in fact there are different kinds of competitors to consider. ...
  2. Gather information about your competitors. ...
  3. Analyze your competitors' strengths and weaknesses. ...
  4. Determine your competitive advantage.

How do you plan to gain competitive advantage over your competitors? ›

  1. Charge More. While many businesses think of slashing their prices to stand out, there's value in going the other direction. ...
  2. Become an Online Influencer. ...
  3. Speak at Events in Your Industry. ...
  4. Create Your Own Data. ...
  5. Niche Down. ...
  6. Leverage New Technology. ...
  7. Delight Your Customers. ...
  8. Invest in Deeper Customer Relationships.

Which company uses Porter's five forces? ›

Key Takeaways. Apple, Inc. has grown to become one of the world's most valuable companies and respected brands. Porter's Five Forces Model can be applied to Apple to understand its position within its industry and how it compares to the competition.

What is the method of the five forces of competition Describe briefly the procedure? ›

5 Forces of Competition

Bargaining power of suppliers. Bargaining power of buyers. Threat of substitute products. Intensity of rivalry among competitors.

What are the key factors of competitive success? ›

Question 6: What Are the Key Factors for Competitive Success?
  • Specific strategy elements.
  • Product attributes.
  • Resources.
  • Competencies.
  • Competitive capabilities.

What are the limitations of Porters five forces model? ›

1) Limitation on the Composition

Porter's five forces only concentrate on the power of suppliers, power of consumers, substitution, and new competition. But other technological factors and business strategies that impact the company are not considered.

How can Porter's 5 forces model be used for analyzing the strength or weakness of any organization? ›

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry's weaknesses and strengths. Five Forces analysis is frequently used to identify an industry's structure to determine corporate strategy.

Which of Porter's five forces is the strongest? ›

According to Porter, Rivalry among competing firms is usually the most powerful of the five competitive forces.

How does Porter's competitive forces model help companies develop competitive strategies using information systems? ›

Porter's competitive forces model helps companies determine what they should do to be more productive by comparing what their competitors are doing. It also brings the companies costs down and makes them more efficient as a business by using Information Systems.

Why five forces analysis is important? ›

Michael Porter's Five Forces Model is a simple yet effective business analysis tool that is used to determine whether a strategy has the potential to be profitable in a company's competitive environment.

How can Porter's five forces be used to analysis the external environment? ›

Porter's Five Forces Framework Model analyses the competitive forces within the environment in which a company operates, to assess the potential for profitability in an industry. Porter consists of the threat of new entrants, the threat of substitute, buyer power, supplier power, and rivalry among existing competitors.

Do you think five forces model can be used in todays competitive world? ›

Porter's Five Forces cannot be considered as outdated. The basic idea that each company is operating in a network of Buyers, Suppliers, Substitutes, New Entrants and Competitors is still valid. The three new forces just influence each of the Five Forces.

What are the five forces that affect the industry structure? ›

Customers, suppliers, substitutes and potential entrants—collectively referred to as an extended rivalry—are competitors to companies within an industry. The five competitive forces jointly determine the strength of industry competition and profitability.

Is Porter's five forces still relevant today? ›

Porter's five forces is a widely used framework for analyzing industries. It refers to the competitive influences shaping the corporate strategies that are likely to be successful. The framework has held up well over time and continues to be a staple of the coursework for business classes.

Which of the following is a primary feature of the five forces model? ›

Which of the following is a primary feature of the five forces model? It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

What are examples of competitive forces? ›

They include: The threat of indirect competition—the availability of products that offer similar performance. The possibility of new entrants into the marketplace. Supplier pressure—where demand for inputs is high, suppliers can raise their prices.

What is an example of bargaining power of buyers? ›

The Bargaining Power Of Buyers Act As A Competitive Force

For instance, Booking, TripAdvisor and Agoda offer competing prices to travelers. As a customer, you're bound to pick the offer that gets you a cheaper price, better quality and more amenities.

How does Porter's 5 forces help a business? ›

Porter's Five Forces Model is an important tool for understanding the main competitive forces at work in an industry. This can help you to assess the attractiveness of an industry, and pinpoint areas where you can adjust your strategy to improve profitability.

What are the 5 forces in marketing? ›

Understanding Porter's Five Forces
  • Competitive rivalry.
  • The bargaining power of suppliers.
  • The bargaining power of customers.
  • The threat of new entrants.
  • The threat of substitute products or services.

What are the key factors of competitive success? ›

Question 6: What Are the Key Factors for Competitive Success?
  • Specific strategy elements.
  • Product attributes.
  • Resources.
  • Competencies.
  • Competitive capabilities.

Which of the five competitive forces is strongest and why? ›

Porter's five-forces model of competition is useful for determining the nature and intensity of an industry's competition. Competitive pressures exist between each of the outer forces and the rivalry among competitors. The rivalry among competitors is the strongest of the five forces.

What is the importance of the competitive forces model in an organization? ›

The model helps a company understand the risks in the industry it is operating in and decide how it wants to execute its strategies in response to competition.

What increases buyers bargaining power? ›

Buyer Power – Determining Factors

If buyers are more concentrated than sellers – if there are few buyers and many sellers – then buyer power is high. Whereas, if switching costs – the cost of switching from one seller's product to another seller's product – are low, the bargain power of buyers is high.

How can bargaining power of buyer be overcome? ›

Here are some recommendations that can help:
  1. Offering differentiated value: Of course, customer retention always starts with a good product. ...
  2. Increasing switching costs: Creating an environment that your buyers would miss if they switched to a different vendor.
17 Aug 2018

Why is bargaining power of buyers important? ›

The presence of powerful buyers reduces the profit potential in a given industry. Buyers increase competition within an industry by forcing down prices, bargaining for improved quality or more services, and playing competitors against one another.

What are some of the strengths of the five forces model? ›

Supplier Power: The power of suppliers to increase the cost of inputs. Buyer Power: The power of customers to reduce prices. Competitive Rivalry: The strength/power of competition in the industry. The Threat of Substitution: The extent to which different products and services can be used in place of your own.

Is Porter's five forces still relevant today? ›

Porter's five forces is a widely used framework for analyzing industries. It refers to the competitive influences shaping the corporate strategies that are likely to be successful. The framework has held up well over time and continues to be a staple of the coursework for business classes.

How does Porter's competitive forces model help companies develop competitive strategies using information systems? ›

Porter's competitive forces model helps companies determine what they should do to be more productive by comparing what their competitors are doing. It also brings the companies costs down and makes them more efficient as a business by using Information Systems.

How can Porter's five forces be used to analysis the external environment? ›

Porter's Five Forces Framework Model analyses the competitive forces within the environment in which a company operates, to assess the potential for profitability in an industry. Porter consists of the threat of new entrants, the threat of substitute, buyer power, supplier power, and rivalry among existing competitors.

What is Porter's theory? ›

Porter's theory is that power leads to profits. The wider the moat, the greater the market share, the greater a company's ability to squeeze profits from competitors, suppliers, and customers.

Which of the following is a primary feature of the five forces model? ›

Which of the following is a primary feature of the five forces model? It views competition within an industry broadly to include forces such as buyers, suppliers, and the threat of substitutes.

Videos

1. THE STEPDAD | Disney Christmas Advert 2021 | Official Disney UK
(Disney UK)
2. Bob Iger in conversation with Brian Grazer at Live Talks Los Angeles
(LiveTalksLA)
3. THE CORONER #3 - The Lion King (Xmas episode)
(Chronik Fiction)
4. Beauty and the Beast - Be Our Guest [High Quality]
(disneysongsnet)
5. Au cœur de l'Histoire: Les mystères de Walt Disney (Franck Ferrand)
(Europe 1)
6. Hades - Part 6
(OmuJie)
Top Articles
Latest Posts
Article information

Author: Delena Feil

Last Updated: 03/13/2023

Views: 5912

Rating: 4.4 / 5 (45 voted)

Reviews: 92% of readers found this page helpful

Author information

Name: Delena Feil

Birthday: 1998-08-29

Address: 747 Lubowitz Run, Sidmouth, HI 90646-5543

Phone: +99513241752844

Job: Design Supervisor

Hobby: Digital arts, Lacemaking, Air sports, Running, Scouting, Shooting, Puzzles

Introduction: My name is Delena Feil, I am a clean, splendid, calm, fancy, jolly, bright, faithful person who loves writing and wants to share my knowledge and understanding with you.