Let's Talk Disney: Cost Leadership; Sources of Cost Advantages; Cost Leadership and Sustained Competitive Advantage

 

The Walt Disney Company is such a popular and powerful brand, offering unique products that can only be obtained by purchasing directly from the supplier or an authorized merchandiser, has greatly affected the company's sustained competitive advantage in a good way. The Walt Disney Company only offers its popular and classic film and show catalog for streaming only on Disney +. It also gives exclusive access to Disney's feature films, HULU, ESPN+, and The National Geographic, all by signing up and paying for the subscription. Disney + also offers access to the entire Marvel, Pixar, and Star Wars catalog with subscription only available through Disney+. This gives the company a great cost advantage over its competitors (Amazon, Netflix, and Comcast) because their competitors cannot offer the services that Disney offers. The Walt Disney Company also has a cost advantage over smaller firms due to the size of the company, due to the significant economies of scale in its manufacturing, marketing, distribution, service, organizational culture, employee empowerment, and brand power. 

The Walt Disney Company's brand power and history allows the company to be a price maker and not depend on the market or outside forces to determine its pricing. This has a big impact on the company's cost leadership operations and this is in part due to management and employees. Other companies in the industry (e.g., Six Flags, Wet-N-Wild, Magic Springs, Dollywood, etc.) are price takers; meaning the price of their products or services is determined by the market and outside forces will determine its pricing. The company's cost leadership competitive strategy has helped reduce the threat of new entry because the company and other larger firms in the industry have created cost-based barriers to entry. Cost-based barriers to entry also reduce the threat of rivalry and this is true in Disney's case because of the uniqueness of the products offered. There is not a theme park (besides Universal Studios which is owned by Comcast) that can offer the products and services that the Walt Disney Company offers. Universal Studios are able to set their prices equal to the price of The Walt Disney Company because leadership, analyst, marketing, strategists and others in the company know that it would be rare for other competing firms to implement the same strategy or product differentiation. 

The Walt Disney Company's top threat as a substitute would be Comcast. Comcast is the owner of Universal Studios and Comcast is widely known as an Internet supplier and they offer their streaming services for those that pay for Comcast's services. The separator between the two companies is product differentiation. The Walt Disney Company offers the fairytale princess experience for children and lets not forget Mickey & Minnie Mouse, the Animal Kingdom for animal lovers, EPCOT for those that are into Sci-Fi and different cultures, MGM Studios for thrill seekers, and Marvel, Star Wars, and Pixar rides and entertainment. Universal Studios on the other hand offers everything Harry Potter, Universal Studios Halloween Horror Nights, Jurassic Park thrill rides, and Volcano Bay. So it all depends on what you and your family are seeking. The variance in taste or preference will determine which of the two that you will visit and this threat of substitution and rivalry could greatly affect The Walt Disney Company's cost leadership standing. 

The company's valuable cost leadership strategy helps to create and maintain its sustained competitive advantage because of the rarity of the products offered and the costs to imitate. 

1. How familiar are you with the history of Disney?

2. Have you ever been to a Disney theme park or Universal Studios? Please share your experience. 

3. Do you think Disney's history has sustained the company and increased its competitive advantage?        Do you think leadership has played a major role in reinvigorating the brand power of Disney?