What business are you in?

Answering this famous question, posed by Harvard's Theodore Levitt in The Marketing Imagination (Marketing Myopia), correctly might open a whole new world of opportunity for your business and take it to undreamed of levels of success. Answering it incorrectly might cause your business to stagnate or even fail.

Below are two separate answers to the question "what business are you in?" The first is from Clearview Cinema Group, Inc. and the second is from The Walt Disney Company. Both were taken from documents that were filed with the Securities & Exchange Commission through their Edgar OnLine service.

Although it can be argued that both Clearview and Disney provide entertainment for consumers, look at the differences between how they answered the question "what business are you in?" Clearview took the narrow view and decided that it is only in the regional motion picture exhibition business, while Disney approached the subject broadly and decided that it is in the entertainment business.

Clearview's answer to this question has a bearing on how it will operate over the coming years. Its growth in sales and profits will be derived from either increasing viewership at its existing movie theaters, or its acquisition of new movie theaters. It would not appear that it is planning to grow by diversifying into other areas of the entertainment industry, such as video rental stores or theme parks.

Disney, on the other hand, is a diversified international entertainment company with many lines of business. Its future growth could also come from expanding its existing lines of business, or because it is an entertainment company, it could also branch out into new lines of business. Perhaps even movie theaters.

How Clearview and Disney answered the question, "what business are you in?" has laid the groundwork for any potential growth opportunities these two companies might pursue in the future.

Did either of these companies answer the question incorrectly? It's impossible to say. However, by looking at their respective industries, markets, customers and competitors, these companies have decided that their greatest opportunities for success lie within these businesses. Since Clearview is a much smaller business than Disney, it believes that it can achieve its growth objectives by concentrating solely on the movie theater business. Disney, on the other hand, is a much larger business that has to diversify in order to meet its growth objectives. After all, how many theme parks can it open or movies can it produce to keep its profits growing at 30% annually?

A general rule of thumb would be that the smaller your business, the more focused it should be on a single line of business. If Clearview had said that it was in the entertainment business, and wanted to undertake all of Disney's businesses, then investors would become very skeptical and believe that the company was spreading its resources too thinly.