Strategic Business Units and application in Disney
Strategic Business Units are the divisions that an organization creates to deal with specific issues affecting it in the market (Koontz & Weihrich, 2007). They are usually self-contained in that they operate independent of the other units in an organization.
The pooling of different sections of an organization allows SBUs to cut across diverse lines and geographical locations in order to serve specific market needs more efficiently (Koontz & Weihrich, 2007). For the SBUs to achieve their intended goals, they need to account for corporate responsibilities and the needs of the organization. This way, it becomes easier to allocate finances and resources and hold each unit accountable for its deeds.
The Walt Disney Company has four SBUs in its organizational structure (Banton, 2008). The four strategic business units found in Walt Disney are Disney consumer products which develops and sells Disney branded products, studio entertainment (which comprise of theater and music divisions), park and resorts (responsible for the operation of the holiday resorts and theme parks), and media and broadcasting (which gathers the entities entailed in the promotion and advertising of the brands through the media) (Banton, 2008). Walt Disney uses SBUs to independently reach its different segments in the market.
This is an indication of just how diversified the company is. This has ensured that the company reaches its different consumers in different geographical regions by pooling of resources from different units in a more efficient manner. As a result, Disney has managed to maintain its market share, consumers, competitive edge, and profits.
Vision and mission statements
A mission statement describes the fundamental purpose of the company. In this case, it tries to explain why the company exists (Ledgerwood, 2006). On the other hand, a vision statement focuses on the future of the organization as it tries to answer what it would like to achieve. In general, the difference between a vision and mission statement is that whereas the latter places more emphasis on the present state of an organization, the former emphasizes on the future of the organization.
Walt Disney Company operates using a mission statement without the inclusion of a vision statement across all its strategic business units. The reason why a company may choose to operate with a mission statement and not the vision statement is that a mission statement clarifies a company’s direction, purpose and values (Ledgerwood, 2006).
For example, Disney’s mission statement contains all these aspects as its direction is to develop the most innovative and creative experiences based on profitable entertainment (Branton, 2008). Its values are upheld on its usage of brand portfolio in the provision of its products and services. The direction of an organization defines its vision. Therefore, in one way or another, a mission statement contains a vision statement albeit indirectly.
Another useful aspect for using a mission statement is that it finds application in the process of strategic planning as it defines the values and specifies products of a company, services, target consumers, profitability, growth plans, geographical allocations, and its philosophy (David, 2009). This can be used to focus on the present and the future. Therefore, a company can operate without the inclusion of a vision statement as a mission statement is more powerful and acts as a directive to the company.
Some of Walt Disney’s strategic units have been involved in copyright infringement especially the media networks, broadcasting and consumer products units. For instance, the company has been in and out of lawsuits after some companies used the Disney consumer products or brands without consultation. According to Smoodin (1994), Disney is usually anxious and litigious when its copyrights are infringed.
For instance, when Ontario town in Canada planned to celebrate by erecting a statute that resembled the Milne character, Walt Disney warned that its copyrights had been violated (Smoodin, 1994). A deal had to be struck to solve the issue. In another incident in Florida, the Disney characters were used without proper license, prompting Walt Disney to sue the company as they believed that Mickey Mouse was part of its copyrights and the use of stakeholders finances had to be accounted for.
In 1989, Disney sued Motion pictures academy for using its characters in a production that was termed as awful (Smoodin, 1994). The motion picture academy had to apologize publicly to Walt Disney as this was a classic example of copyright infringement. The company also sued 500 vendors as defendants on the claim that they had sold fake movies.
The reason behind these lawsuits it to protect Walt Disney’s intellectual properties from companies willing to use them maliciously or by taking advantage of its brand name. The use of copyrights gives a company a competitive edge as it reduces the number of players in the market. Furthermore, a company is also able to control its products. This reduces competition encouraging innovation and creativity in the production sector. The company has also been able to make profits by selling its copyrighted products.
Selling or using of products and services that are not copyrighted implies that the owner of the intellectual property does not get proceeds from the sales made. In order to safeguard its key assets, Walt Disney has to cooperate with other players in the economy by ensuring that its products are copyrighted and the laws distributed to its collaborators. Walt Disney can also collaborate with other Hollywood companies to ensure that proper mechanisms are put into place to counter copyright infringements.
During the Great Depression it is claimed that individuals indulged in movies as a way of escaping from reality. The current economic downturn is affecting almost all strategic business units of Walt Disney. For example, before the 2008 market and financial crisis, the parks and the resorts were the largest contributor of the Disney’s growth.
However, the financial crisis has since reduced the disposable income of the consumers leading into inclination to the Disney theme park visitors (Branton, 2008). People can no longer afford the luxury of visiting the park as inflation has increased the cost of living and consumers have to live within their budgets.
Watching movies from networks and broadcasting channels owned by Disney has not been affected much as people continue to watch these movies. However, cinema halls have been adversely affected as the cost of living has doubled. For example, during the Great Depression the fuel price was not affected as is the case now. People are trying to minimize their electricity bills and the cost of fueling their cars to and fro the movie cinemas halls.
This will adversely affect the studio entertainment as the cost of fuel has limited consumers’ disposable income. Therefore entertainment expenses have increased (Branton, 2008) forcing them to turn to low cost entertainment. However, watching movies does not require a great or real deep economic crisis to act as a motivator. Based on scientific studies, people always want to be entertained when they are in bad moods or situations (Pincus-Roth, 2009).
People consume entertainment as part of their adaptive measures in mood management. Therefore, the current global recession is not likely to reduce the number of movie goers. Disney will continue to have more movie consumers but not around the cinemas. Since the company has initiated entertainment through the internet and the iPhones, the entertainment strategic unit will not be affected much by the recession.
Business strategic units are essential in operations of a company as they assist in developing a competitive edge within an organization. Walt Disney has been using SBUs to reach different segments of its target population (David, 2009). Intellectual property rights like copyrights reduce copyright infringements as they protect the owner from competitors and other users. It also gives a competitive edge to the company.
Through regulations, issues associated with copyrights can be minimised. People like entertainment as a part of mood management. Therefore, the current recession is less likely to affect the entertainment sector of Disney Company. However, its cinemas and park themes and resorts will be adversely affected as the cost of living; fuel, unemployment, and inflation have risen affecting the disposable income of the people.
Branton, M. (2008). Walt Disney Company-2007. 30-43. Upper Saddle River, NJ: Prentice Hall/Pearson
David, F.R. (2009). BUS 490: Strategic management concepts and cases: 2009 custom edition (12th ed.). Upper Saddle River, NJ: Prentice Hall/Pearson
Koontz, H., & Weihrich, H. (2007). Essentials of management: An international perspective. New Delhi: Tata McGraw-Hill.
Ledgerwood, J. (2006). Transforming microfinance institutions: Providing full financial services to the poor. Washington, DC: World Bank Pubns.
Pincus-Roth, Z. (April 12, 2009). “Hollywood tries to come up with its best recession fare”. Los- Angeles Times. Retrieved October 10, 2011,from http://articles.latimes.com/2009/apr/12/entertainment/ca-escape12
Smoodin, E. L. (1994). Disney discourse: Producing the magic kingdom. Newyork, NY: Routledge publishers.