Individual Case Analysis

Walt Disney Case Analysis

[Date]

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Walt Disney Case Analysis

Executive Summary

Walt Disney is might the only name that pops up in our mind when we talk about the world of

entertainment. Disney is one of the most valued and diversified organization of the world. Moreover, the

company upholds one of the greatest expansion and diversification strategy that post several strategic

issues to the organization. Disney is today a group worth $ 45B largely superior to other players in the

industry. Unfortunately not; although Disney has embraced a clear and concise corporate strategy which

has contributed to its prolonged success in increasing revenue, profits, market power and ultimately

creating shareholder value. However, Disney’s diversification efforts are not free from failures and were

far from Disney’s core competencies, organizational objectives and strategic goals. Disney has its hand

in so many different products and services. But unfortunately the increase of expansion (diversification)

causes a drop, and subsequent downward trend, in financial performance of Disney. Due to extensive

diversification Disney has been going through several issues such as it is at risk of losing its focus,

facing management difficulties, facing difficulties in managing creativity and innovation dissipated

profitability and business and structural complexity. While nearly all of Disney’s diversifications

demonstrate significant overlap with core competencies collectively held among business units, some

are in danger of departing from Disney’s original core values.

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Walt Disney Case Analysis

1. Although Disney is an enormously well-known brand; but we all might not know about its actual

degree of diversification. Disney is active in the mass media industry and its mission is to be the world’s

leading producers and providers of entertainment and information. Using their portfolio of brands to

differentiate content, services and consumer products, Disney always seek to develop the most creative,

innovative and profitable entertainment experiences and related products in the world. Walt Disney is

comprised of theme parks, media networks, resorts, consumer products, interactive media and studio

entertainment.

If we consider particulars; corporate strategy of Walt Disney is comprised of three major aspects

which include creation of high-quality family entertainment content, exploitation of technological means

via continuous innovation to deliver most memorable entertainment experiences and to expand and

diversify. The first aspect of corporate strategy indicates that Disney always endeavors to involve the

entire family through its entertainment content; and this is the reason of their ultimate success; that they

not only target kids but all family members. This family targeted orientation of Disney is evident from

their movies and TV shows. Likewise, exclusive Disney cruises, resorts, theme parks, interactive media

and live performance created by Disney are all focused towards offering high quality creative content

for whole family.

The acquisition of Marvel and Pixar by Disney reveals their quench for satisfying second aspects

of their corporate strategy. These acquisitions were envisioned to amplify the animation capabilities to

deliver more memorable entertainment experiences. Likewise, alliance with Playdom was to get modern

online gaming capacities that tends to enhance Disney’s interactive media efforts. Disney acquired UTV

as a result of its international expansion aspect. It is today a group worth $ 45B largely superior to other

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players in the industry. In a recent strategic move, Disney owns several channels and networks which

include ABC, ESPN, ABC Family, SOAPnet, and Toon Disney etc. International expansion strategy of

Disney is mainly focused on availing overseas opportunities in foreign business market. Disney showed

a remarkable growth and expansion between 2002 and 2012 i.e. the company made its Disney channel

broadcasted to over 100 countries while covering 75% viewers of Russia and China. This was

remarkable growth as compared to 2002 when the channel was only available in 19 countries. Moreover,

it expands in China dramatically by opening theme parks, resorts and studio entertainment.

Corporate strategy of Walt Disney also involve allocation of sufficient resources and capital to

its resorts and theme parks business to maintain its competitive edge in the industry. This intention is

clear in the last few years from its substantial expansion of California Adventure Park. Disney also

strives harder to collaborate its business units. For instance its top grossing movies are often filmed at its

own theme parks. It also made a large portion of its entertainment content to be digitally streamed

including services of WatchESPN, Disney e-books publication, and partnership between YouTube and

Disney.com.

2. The long-term attractiveness score of Walt Disney in the mass media industry is high due to its

well organized and highly diversified business portfolio. Every business unit of Disney ranging from

theme parks, media networks, resorts, consumer products, interactive media to studio entertainment is

highly profitable. Some business units of Disney have shown a faster growth and profitability rate. The

business unit that harvests the highest revenues is Media Network including channels such as A&E,

Lifetime and ESPN channels. The second most profitable business unit is resort and parks division.

Although the profits of Disney decline after the recession of 2008; but they rise again in 2010 and

sustained to be enduring; fruitful division for the portfolio since they are so pervasive. Detail analysis of

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industry attractiveness of Disney’s portfolio ranked the various business units of Walt Disney. Out of

10, Walt Disney could be rated as;

Media Networks: 8

Resorts & Parks: 7

Studio Entertainment: 6

Interactive Media: 3

Consumer Products: 6.5

On the basis of industry assessment average scores assigned to every business unit indicates that

approximately 80% of Disney’s units successfully passed the attractiveness assessment.

3. Walt Disney has numerous strengths which creates integration and success within its various

business units that are comprised of the organization. Studio entertainment and consumer products units

of Disney shares lively and tangible famous characters that gives fans a memorable experience that they

can only watch on a DVD. Likewise they also share real environments through Resorts and Parks; so

that the fans can interact with their favorite characters. On average the Disney’s competitive strengths

could be illustrated as follows;

Media Network is the largest of all circles in light of the fact that it creates the most noteworthy

rate of aggregate income of all business units. The second biggest circle is of Resorts and Parks, in as

these two units create the most of the revenues and are assigned more assets and have the best chance to

expand value to shareholder. Media Network Resorts and Parks and Studio entertainment have the most

noteworthy appeal and focused quality and eventually the highest competitive strength and

attractiveness. Studio entertainment is lower in industry attractiveness on the grounds that DVD deals

have diminished because of an ascent in less expensive options. Indeed, even with this lessening the unit

is still aggressive and gets a medium amount of assets. Consumer good is the fourth biggest circle, it

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gets a lower measure of resources than the units above it, while keeping up medium competitive strength

and normal aggressive attractiveness. Interactive Media is the smallest unit; therefore it is the most

reduced in engaging quality and attractiveness and has powerless focused quality and competitive

strength. In view of this information, Disney would be best encouraged to consider both industry

engaging quality/attractiveness and competitive strength while allocating investment and resource to its

.

4. Generally, there is no doubt that Walt Disney’s diverse business portfolio exhibits good strategic

fit. Most of the accomplishment of Disney stems from authentic ventures, which made dependable

connections between devotees of characters like Cinderella and Mickey Mouse which has permitted the

organization to break into such a variety of business units at the same time, exploiting a decent and solid

fan base. Detailed examination however shows that, the consumer products unit is right now not to a

great degree effective or as beneficial as Disney might desire for it to be. In spite of the fact that this is

the situation, since Disney has broadened its portfolio so well, there are various open doors for the

organization to share branding and cost, and exchange knowledge over the different specialty units to

make more match-ups for value chain. The Studio Entertainment, Interactive Media and Media Network

can all offer innovation, knowledge and technology of how to utilize it, and join innovative work assets

so as to be more effective. Resorts & Parks and Consumer Products divisions of the business show

chances to for marketing strategies and joint sales for an improved and unified approach of brand

sharing and can hence utilize more regular systems of distribution among any business units.

5. (See Appendix 1) The overall profit margin demonstrates that Disney made 12 cents of each

dollar of income made in 2011 and 2010. This is an incredible seeing that Disney made a great many

dollars between these two years. Likewise, Disney has a high ROA and the pattern moves upward every

year which is something to be thankful for. Return on Equity measures the arrival stockholders procure

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on their capital interest in the organization. The pattern ought to increment with time and an arrival

between 12%-15% is viewed as normal. Current ratio measures the organization’s transient health and

its liquidity level. Having a ratio somewhere around 1 and 2 is charming, thusly Disney has a perfect

current ratio. Total debt to asset ratio tells the rate of aggregate resources that were financed by debt. It

is better for an organization to have a lower of this ratio. 40-60% is a perfect proportion implying that

Disney has a premium debt to asset ratio and has plentiful chance to keep on developing the

organization.

For inventory turnover ratio; Disney had a low number, yet for their situation this is not a

negative characteristic. Stock turnover is less critical to Disney in light of the fact that they are a

entertainment organization and retail deals represent a little piece of administrations advertised.

Operating net revenue measures the measure of income left over in the wake of paying variable

expenses before intrigues and duties. The pattern ought to expand upward and it is ideal to have a higher

proportion. Disney has a proportion of 19. Working capital recognizes the measure of money accessible

for an organization to spend on its everyday operations. Having a bigger sum is better in light of the fact

that the organization has the capacity use inward store and not depending on acquiring more value

capital. The pattern ought to increment. Disney has a decent working capital.

Appendix II demonstrates the relative commitment of each key business unit at The Walt Disney

Company. As portrayed the Media Network is the driving business unit of the organization. It is in

charge of very nearly have of the organization’s income. Media is the most critical key unit as it helps

the showcasing endeavors of all different specialty units. It has demonstrated growth every year.

Resorts and parks are likewise essential as it makes up a generous measure of income and has the

biggest room for development and growth. Studio entertainment has added to total income however has

seen a decrease in income in the recent years, even regardless of cost diminishes to its unit. Consumer

products have demonstrated increments in incomes, yet at the same time remains need brightness in

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adding to the total operating income. Moreover, Interactive media has been working at a loss for a

continuous loss of three years. Therefore, something needs to happen in this unit to turn things around.

6. Walt Disney is recommended to improve the stockholder value. It can be achieved through

consistent international expansion while exploring untapped markets. The profit margin ratio of Disney

increases by 1.53% and return on assets increased by 1.06% in 2011 which shows that the company has

strong skills in allocating its resources. Moreover, there are enormous opportunities for Disney to

expand in more unexploited domestic and international regions and can exploit their competitive edge

of having no significant rivals. However it should be careful while allocating resources; as it may lose

competitive advantage due to its lack of focus as of over diversification.

The business unit of studio entertainment also reflect declining operating income that posts

potential threats of losses for Disney. Likewise, interactive media and media network call for

innovation and increased business attractiveness. Disney should must continue to reinforce its current

business positions and operation by focusing particularly on its R&D by identifying new open doors for

development and growth in their present target market. There is additionally chances for growth

through further enhancement of business units. The latest changes in purchase patterns and innovative

development leaves opportunity to disregard and grow certain units of consumer products, interactive

media, and studio entertainment to better use assets and resources and see a more noteworthy rate of

revenues from these regions.

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Appendices

Appendix I Financial Ratios

Ratios 2011 2010

Profit Margin Ratio 12.86% 11.33%

ROA (Return on Assets) 7.29% 6.23%

ROE( Return on Equity) 13.33% 10.96%

Current Ratio 1.13% 1.11%

Debt to asset Ratio 45% 43%

Inventory Turnover Ratio 0.36% 0.36%

Operating Income 19.03% 17.67%

Working Capital 1,669 million 1,225 million

Appendix II Revenues

Business Units Revenues in Million $ (2011) %

Media Network 18,714 45.76

Resorts & Parks 11,797 28.85

Studio Entertainment 6,351 15.53

Consumer Products 3,049 7.46

Interactive Media 982 2.40

Total 40,983 100

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