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Executive Summary As Disney plans its expansion into Mexico’s SVOD market, the company must first develop a competitor risk assessment of all competitors currently operating in Mexico as well as competitive strategy to ensure a successful entry. Through this analysis, their a target market size as well as pricing strategy have been created and suggested to Disney to utilize as their entry path in order to be a competitive force from the start. Through analysis of Mexico’s SVOD Founded in 1923, the Walt Disney Company is recognized as one of the world’s largest entertainment companies. Since its inception, Disney has grown at a rapid pace within the entertainment industry through the production of television programs, feature films as well as amusement parks. Throughout its growth, Disney has acquired a number of different brands including ESPN, ABC, Marvel Studios, Pixar, and Lucas Film Ltd (The Walt Disney Company, n.d.). In 2018, Disney to earn $59.4 billion in revenue and $13.1 billion in net income (The Walt Disney Company 2018). The focus of Disney’s global expansion is linked to their Direct-To-Consumer and International business segment. This segment of Disney in particular is where the company can truly leverage their brand recognition and content to globally expand into international markets through their recent acquisition of Hulu and launch of Disney+ streaming services. Currently, Hulu is not offered in locations outside of the United States and Disney+ will initially be exclusive to the United States as well. In order to compete with other streaming services such as Netflix, which operates in 190 countries, Disney must focus on the expansion of this business area to retain a respective market share (Brennan, 2018). The model for this business segment will strictly be buyer to consumer (B2C) as it relies on personal use of the technology. The target buyers for this business area will be anyone with internet connectivity. In order to subscribe and stream content, users must have access to a screened device as well as the ability to connect to the service’s website or application. In order to operate in a foreign country, Disney must ensure that they have the proper technological infrastructure in place. After initial examination of entry into SVOD markets in Indian and Mexico, it was determined that Disney should pursue the expansion of their streaming services in Mexico. Both countries would provide Disney with an ideal setting to launch as well have enough opportunities to succeed. However, through the PESTAL analysis of both countries, the threats were used as the deciding factor in the selection of Mexico as the target country. India’s threats in particular could make the launching of Disney+ and Hulu very difficult for Disney. Currently, Netflix is the leading streaming provider in Mexico and there are currently not many other major competitors. Disney will be able to compete with Netflix in Mexico through brand loyalty with content on Disney+ and through original content created by Hulu. They will also be able to instantly compete due to their subscription prices that fall lower for both streaming services compared to Netflix. The company will also be able to take advantage of this by bundling the two services as a subscription package. In order to ensure a smooth entry into Mexico’s market, Disney will implement a best-case competitive strategy to provide buyers with lower costs and a unique experience. As a result, Disney should expect to quickly build its user population in Mexico due to its content and subscription price. The model for this business segment will strictly be buyer to consumer (B2C) as it relies on personal use of the technology. The target buyers for this business area will be anyone with internet connectivity. In order to subscribe and stream content, users must have access to a screened device as well as the ability to connect to the service’s website or application. In order to operate in a foreign country, Disney must ensure that they have the proper technological infrastructure in place. Currently, Netflix is the leading streaming provider in Mexico and there are currently not many other major competitors. Disney will be able to compete with Netflix in Mexico through brand loyalty with content on Disney+ and through original content created by Hulu. They will also be able to instantly compete due to their subscription prices that fall lower for both streaming services compared to Netflix. The company will also be able to take advantage of this by bundling the two services as a subscription package. In order to ensure a smooth entry into Mexico’s market, Disney will implement a best-case competitive strategy to provide buyers with lower costs and a unique experience. As a result, Disney should expect to quickly build its user population in Mexico due to its content and subscription price.

SWOT and TOWS Strategies

tyler

Contents

Executive Summary i Introduction 1 Opportunity & Threat Factors 1 Strength & Opportunity Strategies 3 Strength & Threat Strategies 5 Weakness & Opportunity Strategies 5 Weakness & Threat Strategies 6 Conclusion 7 Appendix 1 Reference 1

Running Head: SWOT AND TOWS STRATEGIES i

SWOT AND TOWS STRATEGIES iv

Introduction In preparation for the company’s entry into Mexico’s SVOD market with both Disney+ and Hulu, Disney must develop strategies that address the company’s strengths, weaknesses, opportunities and threats. In order to achieve this the company must utilize the SWOT analysis of the company through the use of a TOWS matrix analysis as shown in Table 1. The results of this analysis have led to strategies that the company must use to address every aspect of the business. Opportunity & Threat Factors As Disney continues to develop its plan to expand its SVOD platforms, Disney+ and Hulu, there are multiple opportunity and threat factors that have been identified that the company should be aware of. The most notable opportunity for Disney, can be found within Mexico’s SVOD market projections; within the next four years, it is projected that Mexico’s SVOD industry will increase total revenue by $150 million as well as add 5.1 million subscribers (Statistica, 2018). Of the total subscribers in one of Latin America’s largest SVOD market, the majority of subscribers in Mexico range between the ages of 13-34 (eMarketer, 2018). This demographic will allow Disney to play into its biggest internal opportunity; exclusivity of globally known content. Currently Disney owns and operates Disney, Marvel, Lucas Film, and other major entertainment brands. Many of these brands produce blockbuster hits such as Avenger’s: Endgame and Star Wars: The Last Jedi. With the creation of Disney+, Disney will be the sole provider of all content created by its owned production companies. Additionally, unlike Netflix, Hulu combines the ability to view previously televised shows, original content as well as entertainment that is newly shown on network cable television. The final major opportunity Disney will be able to use to its advantage is the lack of streaming regulations created and enforced by the Mexican government. Currently there are no major restrictions on local or international streaming platforms. Inversely, there are several threats which Disney must constantly be aware of and mitigate as they begin to roll out Disney+ and Hulu to Mexico’s subscriber base. The largest threat to Disney in Mexico, as well as anywhere else, is the presence of local and global competitors. Although growing, Mexico’s SVOD market is already populated with many different forms of competition that have established themselves as a streaming provider. Netflix is the current leading provider in Mexico and currently retains the majority of the country’s subscribers. Additionally, they have established themselves as the primary leader in original content production by holding 74% of original content demand throughout Mexico (Parrot Analytics, 2019). They spend on original content at an extremely fast pace and plan to produce 50 new films and series in Mexico alone within the next year (Tillman, 2019). In addition to Netflix, Disney must be aware of other services such as Amazon Prime and Blim. The remaining threats that Disney faces are all related to the current state of Mexico’s economic environment. The country is often subject to forms of political corruption which negatively impact the economy and do not help make Mexico’s current low poverty line any better. Since the country is still developing, many families and citizens find themselves in poverty and are unable to buy luxury products such as SVOD services. Finally, the country is still not fully connected to the internet due to their growing digital infrastructure. Although these are major threats to streaming services, they are continuously reducing in severity due to sustained growth Mexico has been able to achieve over the last several years. As time continues to pass, Mexico will be able to continue to grow both its economy as well as digital infrastructure. Strength & Opportunity Strategies The primary way Disney and other companies that expand must capitalize on their opportunities are by being able to utilize their strengths to their advantage. The first strategy Disney should focus on is ensuring they are able to advertise the different content that will exclusively be available to subscribers through both Disney+ and Hulu. Currently, Disney is the primary leader in Mexico’s box office sales of all time. Through the releases of their content, especially Marvel, Disney currently is responsible for eight of the ten top grossing movies in Mexico, including the top with Avengers: Endgame generating $31.9 million opening and $76.8 million total sales (Box Office Mojo, 2019). The company should use the popularity of its movies to promote the content that will be exclusively available through Disney+. Due to the large amount of content through Disney+, Disney should try to use the streaming platform as their primary way to contend with international services such as Netflix. Additionally, Disney will be able to leverage the original content as well as the recently aired content at is only available through Hulu to draw more subscribers. Despite not being available in Mexico currently, Hulu original content is still able to generate a seven percent share in demand for original content amongst SVOD customers (Parrot Analytics, 2019). Currently only a small portion of Hulu’s shows are actually available to Mexico’s subscribers. Once the platform actually launches in the country, its array of original content as well as access to recently aired television programs will be able to generate a higher demand from the country’s SVOD subscriber base. Ultimately, the nature of the content that will be provided by Disney+ and Hulu will also cater to the country’s SVOD age demographic of 13-35 years old. The next major opportunity and strength strategy of the company will be to utilize the company’s ability to bundle the packages together. Despite the fact that Mexico’s economy is continually growing, the country still has a very low poverty line. In order to appeal to subscribers that are already customers of rival company as well as new subscribers, Disney must set a price point with different bundling options. Both Disney+ and Hulu will be offered at a lower price point than the company’s international competitors, however in order to add additional appeal to the Mexican subscriber base, Disney will be able to create bundle packages which offer subscribers the ability to have access to both services at a discounted price. An additional bundle strategy which Disney will be able to use is through the promotion and sales of their Disney World in Epcot. Adding an option which includes discounts to Disney’s Mexico Pavilion at Epcot will create additional appeal to families which are SVOD and attraction customers. Finally, since Disney has already expanded into Mexico through their amusement park business segment, they already will have a general idea of how to properly engage with the Mexican government to ensure a smooth entry for both Disney+ and Hulu. By already having engaged with the Mexican government, Disney will have an easier time with navigating through the correct political channels to ensure they avoid any corrupt figures. Combined with the fact that there are no major content restrictions that are imposed by the government, Disney should be able to easily work with Mexican government and quickly roll out Disney+ and Hulu.

Strength & Threat Strategies Some of the major threats that Disney will face while entering the Mexican SVOD market, will be able to be mitigated through the implementation of Disney’s strength. One of the largest threats will be for Disney to catch up to the pace that Netflix and other competitors are releasing original content. Netflix is the global leader in original content by SVOD providers, however it is extremely costly to produce content at such a high pace. While Netflix and other providers must solely rely on subscriptions as their primary revenue and funding source, Disney has an extremely large portfolio and multiple business segments which each generate a large amount of extra cash. As a result, Disney will have an easier time dealing with the financial impact that creating original content for Disney+ and Hulu will create than its competitors. Additionally, this will allow Disney to offer both of its streaming services for a lower price than its international competitors. By offering both services at the same price as the local competitors, Disney will have an easier time attracting new customers and will be able to mitigate the level of risk associated with entering an already populated market. The final major risk that Disney will be able to use its strengths to help mitigate is related to the political corruption in Mexico. Due to Disney’s prior relationships with the Mexican government when building and opening Disney Mexico Pavilion in Epcot, the company has already been able to go through the growing pains companies will initially face when entering a new country. Weakness & Opportunity Strategies One of Disney’s largest current weaknesses is the amount of original content their services have compared to their competitors. As the leader in original content production, Netflix has set the standard for the SVOD market as well as capitalized on creating new trends within content genres. For example, the company has recently expanded to creating original reality content which includes dating shows to further expand their target viewers. In Mexico specifically, Netflix will be filming 50 different series and movies in the current year. In order to capitalize on their entry into Mexico’s SVOD market, Disney cannot just rely on their brand loyalty as the sole attraction to gain subscribers. Instead, Disney must use their brand loyalty in combination with original content production. Hulu already has many original content series which are known globally, including The Handmaids Tale, however Disney should explore creating content specific to Mexico through Hulu to compete with the Netflix Mexican productions. Additionally, Disney should begin creating original series and movies for their Disney+ brands such as Marvel and Star Wars. Both of these would be a big draw to consumers that are fans of that content. In order to truly succeed and capitalize on their opportunities within original content, Disney must ensure that they do not identically mimic the strategies that their competitors such as Netflix follow. Instead, the company must implement a blend of what their competitors execute while also staying on the same level as Disney’s overall mission. As a result, the company should use Hulu as the platform that implements similar strategies as Netflix, while Disney+ creates original content under the company’s major brand labels. Weakness & Threat Strategies The final strategies that Disney must develop are those to mitigate the risks in both their weakness and threat areas. These strategies are the hardest for companies to create and overcome to the “most defensive position” in a TOWS analysis (Kendrick, n.d.). Disney’s largest threat is the presence that its competitors already have established in Mexico. In order to draw attention and take subscribers from them, Disney must ensure they quickly learn about Mexico’s market and consumer base. They must understand the demographics and how to best target the country’s generation X and millennial subscribers. However, in order to do so, the company must focus on a mix of original content and brand recognition. Additionally, since Disney is such a large family centric company, the company must be able to capitalize on Mexico’s family heavy culture. One potential strategy the company could implement is incorporating access to Mexico Pavilion at Epcot into their bundled packages with Disney+. One final aspect that Disney must immediately address is their content compatibility with foreign languages. Currently Disney+ and Hulu have only been present in the United States and the majority of content on each platform is in English. In order to truly appeal to Mexican subscribers, the company must launch an effort to provide subtitles for each of their shows. The company should also consider dubbing some of its content so it is spoken in Spanish as well to add additional appeal to potential subscribers. Conclusion The TOWS analysis conducted and shown in Table 1, display Disney’s strengths, weaknesses, opportunities and threats. In order to develop a cohesive market entry plan, the company must create strategies for each of the combinations of these areas. As a result, it has been determined that Disney must have a shared focus on capitalizing on their brand loyalty while also leading an effort to create more original content on both Disney+ and Hulu. Disney must also leverage their prior experience working with the Mexican government when opening Mexico Pavilion at Epcot to ensure they have a smooth entry into the country’s SVOD market. Finally, Disney must continue to offer each service at a lower price than their international competitors. By utilizing the strategies developed from the TOWS matrix analysis, Disney will be able to successfully enter Mexico’s SVOD market and begin to gain a hold on a large portion of the country’s market share.

Appendix Table 1: TOWS Matrix Analysis Opportunities Threats Will be the only streaming provider of all of its owned content Can package Hulu and Disney+ together as a bundle for a cheaper price to draw more customers No major government regulations regarding streaming content One of the largest Latin American streaming countries SVOD industry projected to increase revenue by $150 million by 2023 Competition such as Netflix and Amazon already have expanded to over 190 countries Political corruption very prominent Mexico has a very low poverty line Need to cater to Spanish language & culture Digital infrastructure/ connectivity to the internet still growing within the country Strengths S-O Strategies S-T Strategies Major brand recognition for the company as a whole as well as the entertainment brands owned (Marvel, Lucas Film Ltd., Pixar, etc.) Extremely large and diverse portfolio Prior experience with global expansion within other business segments Competitive edge for subscription prices of both Disney+ & Hulu Combine brand recognition and exclusivity of content as a selling point to subscriber base Bundle two individual streaming services to generate more interest in option that gives users more content for less Utilize established relationship with Mexican government (from Mexico’s Disney World) to ensure smooth entry into Mexican market More diversified revenue streams for the entire company will allow it to endure costs associated with original content better than Netflix Cheaper subscription prices will allow Disney to offer both services at price of local competitors and lower than international competitors Prior entry experience into Mexico for amusement park will prepare Disney to avoid political corruption Weaknesses W-O Strategies W-T Strategies Currently Disney+ & Hulu currently or will only operate within the United States Subscriptions to services are a luxury item Countries with negative economic conditions will boast less buyers Less amounts of original content available compared to Netflix & Amazon Make push to develop more original content on both platforms to broaden subscriber appeal Including original Mexican content Utilize already known Disney brands to create new content to compete with competitors and keep up with Hulu’s production Do not try to match competitors’ exact model (i.e. original unscripted shows), rely on Hulu’s access to reality network television shows Begin initiative to make all programming on both platforms available in Spanish Do not solely focus on original content like competitors currently are (project over 50 titles in next few years) Create family packages as well as packages that include perks to Mexico’s Disney World Reference

Box Office Mojo. (2019). Mexico All Time Openings. Retrieved from https://www.boxofficemojo.com/intl/mexico/opening/?sort=opening&order=DESC&p=.htm

Brennan, L. (2018 October 12). How Netflix Expanded to 190 Countries in 7 Years. Retrieved from https://hbr.org/2018/10/how-netflix-expanded-to-190-countries-in-7-years

eMarketer. (2018 July 26). Demographic Profile of Subscription-Video-on-Demand (SVOD) Viewers* in Mexico, Q2 2018. Retrieved from https://www.emarketer.com/chart/224655/demographic-profile-of-subscription-video-on-demand-svod-viewers-mexico-q2-2018-of-total

Kendrick, S. (n.d.). The TOWS Matrix: Putting a SWOT Analysis into Action. Retrieved from https://www.volunteerhub.com/blog/the-tows-matrix-putting-a-swot-analysis-into-action/

Statista. (2019). Video-on-Demand: Mexico. Retrieved from https://www.statista.com/outlook/201/117/video-on-demand/mexico

Tillman, L. (2019 March 19). Netflix, drawn to talent, boosts production in Mexico with 50 films and series. Los Angeles Times. Retrieved from https://www.latimes.com/business/hollywood/la-fi-ct-netflix-mexico-20190319-story.html

The Walt Disney Company. (2018 September 29). 10-K Form. Retrieved from https://www.thewaltdisneycompany.com/wp-content/uploads/2019/01/2018-Annual-Report.pdf The Walt Disney Company. (n.d.). ABOUT THE WALT DISNEY COMPANY. Retrieved from https://www.thewaltdisneycompany.com/about/