Answered: Examine Horizontal and Vertical…

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Examine Horizontal and Vertical (Forward) Integration as a with appropriate examples. You must discuss the example and explain the relevant outcomes achieved through the Integration.

Transcribed Image Text:How Disney Is Structured The Walt Disney Company owns a vast array of companies, and is the largest media conglomerate in the world, followed by News International. Beginning as a humble cartoon studio in 1923, and then very quickly increasing in size as it was tossed between major distributors of the time such as RKO Radio Pictures and Columbia, it rose to major prominence with the world's first animated feature film, Snow White and the Seven Dwarfs. Disney is a public limited company which is run by a board of twelve directors and eleven senior executive managers, and also has a board of executives for each of the company's divisions: Walt Disney Studios and Entertainment, Walt Disney Parks and Resorts, Disney Media Networks and Television, Disney Interactive Media, Disney Consumer Products, and Walt Disney International.Disney Media Networks and Television is the division which owns ESPN (Entertainment and Sports Programming Network) which is a global television network based around sports, and ABC (American Broadcasting Company). Disney bought both ESPN and ABC in 1996. As a conglomerate, it is able to have control over all aspects of what it produces. For instance, instead of having other companies licensed to sell Disney merchandise, it has complete control over this part of the business. Or if it were to release a film, it would be able to make the film in its own studios, advertise it through its own networks, and distribute it through its own distribution company. It has a complete monopoly over everything Disney, and no other companies could even consider making anything Disney related for fear of being sued. This gives Disney a huge amount of power. As a conglomerate, it also controls companies outside of Disney, such as ESPN and ABC, which means it has control over a wider audience. American television media is very much ruled by an oligopoly, with ABC, CBS, and NBC often being referred to as the 'Big Three' as they dominated the medium from the 1950s to the early 90s, before Fox arrived and began to dominate the ratings along side them. Having an oligopoly is beneficial to the companies in question as it means they have almost complete control over the market, as it makes it extremely difficult for any competitors to arise, unless they are backed by a particularly massive company. Disney's takeover of ESPN would be considered as horizontal integration, as the company doesn't form a part of the production process of any Disney productions. It's takeover of ABC would be considered as vertical integration, as the TV network forms a place where Disney can broadcast its productions. In 2005 Robert Iger became chief executive (CEO) of Disney, a year after his predecessor Michael Eisner was rallied against by Roy E. Disney (Walt's nephew and the longtime chairman of Disney Features) and Stanley Gold, resulting in 43% of Disney's shareholders withholding their vote to re-elect Eisner. Iger arrived with intentions for big changes in how the company was operated. He revitalized Disney by opting to pay greater attention to core assets such as its studios and theme parks. The changes resulted in a new kind of Disney evolving, with the hyper successful High School Musical film series arising, aiming the Disney brand at a slightly older pre-adolescent audience. The ousting of Michael Eisner highlights a major aspect of being a massive conglomerate public limited company such as Disney. Because of the company's vastness it has an array of executives, each with a huge amount of power. If an executive can get the support

Transcribed Image Text:means they have almost complete control over the market, as it makes it extremely difficult for any competitors to arise, unless they are backed by a particularly massive company. Disney's takeover of ESPN would be considered as horizontal integration, as the company doesn't form a part of the production process of any Disney productions. It's takeover of ABC would be considered as vertical integration, as the TV network forms a place where Disney can broadcast its productions. In 2005 Robert Iger became chief executive (CEO) of Disney, a year after his predecessor Michael Eisner was rallied against by Roy E. Disney (Walt's nephew and the longtime chairman of Disney Features) and Stanley Gold, resulting in 43% of Disney's shareholders withholding their vote to re-elect Eisner. Iger arrived with intentions for big changes in how the company was operated. He revitalized Disney by opting to pay greater attention to core assets such as its studios and theme parks. The changes resulted in a new kind of Disney evolving, with the hyper successful High School Musical film series arising, aiming the Disney brand at a slightly older pre-adolescent audience. The ousting of Michael Eisner highlights a major aspect of being a massive conglomerate public limited company such as Disney. Because of the company's vastness it has an array of executives, each with a huge amount of power. If an executive can get the support of the shareholders, then ultimately, he is more powerful than anyone else, creating what is almost like a democratic system more typically associated with the governing of nations. This can have major benefits to the company as it means that if it is being run poorly by someone, there is a good chance he will have his position taken from him by shareholders. It can also potentially cause problems though, as executives seeking power might try to rally together shareholders to oust someone of a higher profile in the company so as to take his place. The arrival of 3D cinema has been fully embraced by Disney and every film they produce is now in 3D. The technology is very beneficial to the company as it gives people an added reason for going to the cinema, especially as very few people currently have expensive 3D television sets. The other great beneft is that 3D films cannot be pirated. As a media company of such a high stature as Disney, it is also very important that they are ahead of the competition in terms of using new technology.

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