Strategic Management

Final Case Study

Andrea Baril

Ashley Cleary

Sylvia LaBrie

Marie-Michele Lachance

05/03/2012

OverviewCompany Overview• The Founder• Growth• Location Map• Walt Disney’s Division

Existing Mission

Proposed Mission and Vision

SWOT Analysis

External Audit• CPM• Positioning Map• EFE

Internal Audit• Organizational Chart• Financial Trends• Balance Sheet• Financial Ratios• IFE

Strategic Plan• SWOT Matrix• Space Matrix• IE Matrix• Grand Strategy Matrix• BCG• Matrix Analysis• QSPM

Implementation• Assumptions• Projected Income Statement• Projected Balance Sheet• Projected Ratios

Evaluation• Stock Price• Balance Scored Card• Strategies• Recommendations• Objectives

The founder

• Walt Disney was born on December 5, 1901 in Chicago • During the fall of 1918, Walt Disney attempted to enlist for

military service but he got rejected.• He started a small company called Laugh-O-Grams, which

eventually fell bankrupt.• With his suitcase, and $20 Walt headed to Hollywood to start

anew.• After making a success of his "Alice Comedies," Walt became

a recognized Hollywood figure.• Disney took a deep interest in the establishment of California

Institute of the Arts, a college-level professional school of all the creative and performing arts.

• Walt Disney passed away on December 15, 1966.• Urban legend maintains his corpse would be frozen and stored beneath the Pirates of the Caribbean ride at Disneyland. . .

Walt, after the Studio had won 4 Academy Awards

Walt Disney 1901-1966

October 16, 1923:

This date is considered the start of the Disney Company first known as

The Disney Brothers Studio.

1928:

First Mickey Mouse cartoon, and the first appearance by Minnie Mouse.

1932:

Flowers and Trees, first full-color cartoon and first Academy Award

winner.

1939:

The Disney Studio begins its move to Burbank, California. 

1940:

Walt Disney Productions issues its first stock.

History

1955:

Mickey Mouse Club debuts on television.

1971:

Walt Disney World Resort opens with the Magic Kingdom and two hotels

near Orlando, Florida. 

1982:

EPCOT Center opens at Walt-Disney World Resort .

1983:

Tokyo Disneyland, the first international Disney theme park, opens in

Japan.

1987:

The first Disney Store opens, in Glendale, California.

Growth

1989:Disney-MGM Studios opens at Walt Disney World Resort.1992:

Disneyland Paris opens.1995:

Disney agrees to purchase 25 percent of the California Angels baseball team, Disney agrees to purchase Capital Cities/ABC for $19 billion. The Disney Channel begins operation in the UK.1996:

Disney Online launches Disney.com. Radio Disney, a live 24-hour music-intensive radio network, debuts. 1998:

ESPN Magazine debuts, Disney’s Animal Kingdom opens at Walt Disney World Resort, Disney Magic cruise ship departs on its inaugural cruise.

  

Growth cont.

Disney purchased Marvel Entertainment Gave a $0.35 dividend per share Roy Disney died at age 79 He was a key person in Disney’s animation

legacy Received approval to build a theme park in

Shanghai Released the movie Up

2009

LOCATION MAP

Disney Resorts:1. California

2. Florida3. Tokyo

4. Hong Kong5. Paris

Media Networks Park and Resorts

• ESPN• Disney/ABC Television

Group• ABC Entertainment

Group• ABC News• ABC Owned Television

Stations Group• ABC Family• Disney Channels

Worldwide• Hyperion Book s

• Disney Land Resorts• Walt Disney World Resort• Tokyo Disney Resort• Disneyland Paris• Hong Kong Disneyland• Disney Cruise Line• Disney Vacation Club• Adventures by Disney• Walt Disney

Imagineering

Walt Disney Divisions

The Walt-Disney Studios Disney Consumer Products

• Walt-Disney Studios Motion Pictures

• Marvel Studios• Touchstone Pictures• Disneynature• Walt Disney Animation

Studios• Pixar Animation Studios• Disney Music Groups• Disney Theatrical Group

• Disney Licensing • Disney Publishing

Worldwide• Disney Store

Disney Interactive Media Group• Disney Online• Disney Games

Walt Disney Divisions Cont.

"The mission of The Walt Disney Company is to be one of the world's leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, we seek to develop the most creative, innovative and profitable entertainment experiences and related products in the world."

Mission Statement

Proposed Vision

Walt Disney strives to be the world’s most famous entertainment company by creating an amazing experience for individual of all ages.

HISTORY

Proposed Mission

Our Mission is to be one of the world’s leading producer and provider of entertainment and information, from parks to network media, and website for all ages. We seek to provide a great experience for our customers, as well as for our employees. By using our unique portfolio to differentiate our content, services and consumer products, we seek to develop the most creative, innovative and profitable entertainment experiences, which would produce financial rewards to our shareholders. In everything we do, we try to contribute to our communities by giving them the best experience.

SWOT Analysis

One of the most recognizable entertainment company in the world

Strong advertising Wide and unique portfolio Innovative entertainment business Strong customer service Strong Media Networks and Broadcasting division Disney owns a variety of companies, which allows them to

generate more profits from different industry such as Media Networks and Broadcasting, Park and Resorts, Studio Entertainment and Disney Consumer Products

Disney is the largest worldwide licensor of character-based merchandise and producer of children’s film-related products based on retail sales

Strengths

Disney sends a corrupted influence to children

Jasmine was in a forbidden relationship with Aladdin

Snow White lived alone with 7 men

Pinocchio was a liar

Robin Hood was a thief

Tarzan walked without clothes on

A stranger kissed sleeping beauty and she married him

Cinderella lied and sneaked out at night to attend a party

Coyote runs off cliffs and blows himself up

Weaknesses

Studio Entertainment and Disney Consumer Products divisions

have been experiencing declining revenue for the last 3 years

Disney as a narrow target market

Disney as such a diversify product range that it can reduce

efficiency and lead to a lack of strategic focus

High cost of entertainment production

High employee turnover

Poor working conditions in factories

Walt Disney’s Park and Resorts are not easily accessible which

leads people to associate Disney World with a costly trip

Weaknesses

Opportunity to renovate attractions in Park and Resorts

Division due to increase in profit

Growth from cable and satellite operators creating even more

potential for Disney to make money with their network

Prospect to build more theme park and resorts worldwide

Openings in other areas of the travel business

Opportunity to invest in building theme parks to satisfy the

increase in guest spending, theme park attendance, and hotel

occupancy

Target new costumers group

Opportunities

Lasting economic recession leading to slow growth rate High unemployment rate Park and Resorts Divisions’ success is unpredictable because

of exchange rate fluctuations; travel industry trends; amount of available leisure time; oil and transportation prices; and weather patterns and seasonality.

Changes in technology leads customers to stream online instead of buying DVD.

Online streaming makes Disney vulnerable to piracy and violation of its intellectual property.

Retail distribution business are influenced by seasonal consumer purchasing behavior and by the timing and performance of animated theatrical release

Increase in labor cost which will have a noticed impact in Walt-Disney expenses due to their large amount of employee.

Threats

External Audit

Critical Success factors Weights Rating Weighted Score Rating Weighted Score Rating Weighted Score  0.0 to 1.0 1 to 4   1 to 4   1 to 4  

      0   0   0

Advertising 0.12 4 0.48 4 0.48 2 0.24

Market Share 0.11 3 0.33 4 0.44 2 0.22

Company Image 0.12 4 0.48 3 0.36 3 0.36

Financial Position 0.11 4 0.44 4 0.44 3 0.33

Management 0.09 3 0.27 3 0.27 3 0.27

Global Expansion 0.12 4 0.48 4 0.48 4 0.48

Consumer Loyalty 0.12 4 0.48 4 0.48 3 0.36

Production Capacity 0.12 3 0.36 3 0.36 2 0.24

Technology 0.09 3 0.27 4 0.36 3 0.27

Totals 1   3.59   3.67   2.77

CPMMedia Network Segment

Positioning MapMedia Network Segment

Positioning MapPark and Resorts Segment

EFE

Internal Audit

Disneyland will never be completed. It will continue to grow as long as there is imagination left in the world.

- Walt Disney

Organizational Chart

Theme Parks & ResortsInternationalABC Television GroupCo-Head InteractiveCo-Head Interactive & PlaydonHuman ResourcesMotion Picture DistributionCommunicationStategy and Business DevelopmentGovernment RelationsDisney Consumer ProductsESPN & ABC SportsESPN & Disney Media NetworksCFOLegal and SecretaryCIDSecurity

CEO

Financial Trends

  Avg P/EPrice/ Sales

Price/ Book

Net Profit Margin (%)

Book Value/ Share

Debt/ Equity

Return on Equity (%)

Return on Assets (%)

Interest Coverage

01-Oct-09 12.9 1.41 1.47 9.1 $18.55 0.38 9.8 5.2 9.6

01-Sep-08 14.2 1.69 1.85 11.7 $17.73 0.46 13.7 7.1 10.4

01-Sep-07 15 2.03 2.19 13.2 $15.67 0.5 15.2 7.7 10.4

01-Sep-06 16.9 1.87 1.98 9.8 $15.42 0.43 10.4 5.5 7.5

01-Oct-05 22.2 1.58 1.82 7.8 $13.06 0.49 9.4 4.6 6.3

01-Sep-04 21 1.52 1.7 7.6 $13.05 0.53 9 4.4 5.9

01-Sep-03 28.4 1.52 1.68 4.9 $11.82 0.57 5.6 2.7 3.4

01-Sep-02 33.4 1.2 1.29 4.9 $11.61 0.62 5.3 2.5 3

(in Millions, except per share data) 2009

Revenues $36,149.00

Costs and expenses $(30,452.00)

Restrucuring and impairment charges $(492.00)

Other income (expense) $342.00

Net interest expense $(466.00)

Equity in the income of investees $577.00

Income from continuing operations before income taxes and minority interests $5,658.00

Income taxs $(2,049.00)

Minority interests $(302.00)

Income from continuing operations $3,307.00

Discontinued operations, net of tax -

Net income $3,307.00

Diluted earnings per share:

Earnings per share, continuing operations $1.76

Earnings per share, discontinued operations

Earnings per share $1.76

Basic earnings per share

Earnings per share, continuing operations $1.78

Earnings per share, discontinued operations

Earnings per share $1.78

Weighted average number of common and common equivalent shares outstanding:

Diluted $1,875.00

Basic $1,856.00

Income Statement

Balance Sheet

ASSETS

Balance Sheet Cont.

Liabilities

Selected Financial Ratios

  2009 2008

Liquidity Ratios

Current Ratio 1.33 1.01

Quick Ratio 1.19 0.91

Leverage Ratios

Debt-to-Total Assets Ratio 1 1

Debt-to-equity Ratio 1.12 1.93

Long-term debt-to-equity Ratio 0.1 0.12

Times-Interest-earned Ratio -12.14 -14.13

Activity Ratios

Inventory Turns 28.44 33.67

Fixed Assets Turnover 1.11 1.2

Total Assets Turnover 0.57 0.61

Profitability Ratios

Gross Profit margins 1.84 1.8

Operating Profit Margin 0.16 0.2

Net Profit Margin 0.09 0.12

Return on Total Assets 0.05 0.07

Return on Stockholders equity 0.06 0.14

Earning per share 1.78 2.34

Price-earnings Ratio 15.31 12.61

Growth Rations (yearly)

Sales -4.48% 7.66%

Net Income -25.30% -5.55%

IFE

Strategic Formulation

“I do not like to repeat successes, I like to go on to other things.”

Walt Disney

SWOT Matrix

Space Matrix Results

Space MatrixStrategies:Market DevelopmentMarket PenetrationProduct DevelopmentForward IntegrationBackward IntegrationHorizontal IntegrationRelated DiversificationUnrelated Diversification

IE Matrix

Total EFE Score

High 3-4

Medium 2-2.99

Low 1-1.99

Strong 3-4 Weak 1-1.99Total IFE ScoreAverage 2-2.99

Media Networks 

Parks and Resorts 

Studio Entertainment 

Consumer Products 

Interactive media 

Strategies:Market DevelopmentMarket PenetrationProduct DevelopmentForward IntegrationBackward IntegrationHorizontal IntegrationRelated DiversificationUnrelated Diversification

Grand Strategy Matrix

BCG

Matrix Analysis

QSPM Matrix

QSPM Cont.

Implementation

“Disneyland will never be completed. It will continue to grow as long as there is imagination left in the world.”

Walt Disney

“Pixar is the most technically advanced creative company; Apple is the most creatively advanced technical company. “

Steve Jobs 2005-02-21

Eliminate 10 billion out of the borrowings from the retained earnings

Finance 1 billion to buy a land in order to open indoor resort in New York in the next three years.

Invest 10 million for advertisement Spend 1 billion in each of the five

existing Park for renovation and new attractions.

= Total of 5 billion

Assumptions

Total Investment of 19.01 billion

Projected Income Statement

Projected Balance SheetAssets

Project Balance Sheet

Liabilities

Project Financial Ratios

Liquidity Ratios

Current Ratio 1.33 0.51

Quick Ratio 1.19 0.46

Leverage Ratios

Debt-to-Total Assets Ratio 1 0.86

Debt-to-equity Ratio 1.12 1.84

Long-term debt-to-equity Ratio 0.1 0.26

Times-Interest-earned Ratio -12.14 -12.14

Activity Ratios

Inventory Turns 28.44 40.39

Fixed Assets Turnover 1.11 1.11

Total Assets Turnover 0.57 0.62

Profitability Ratios

Gross Profit margins 1.84 1.84

Operating Profit Margin 0.16 0.16

Net Profit Margin 0.09 0.09

Return on Total Assets 0.05 0.06

Return on Stockholders equity 0.06 0.012

Earning per share 1.78 1.72

Price-earnings Ratio 15.31 14.27

Growth Rations (yearly)

Sales -4.48% 0.00%

Net Income -25.30% 0.00%

Evaluation

“You're dead if you aim only for kids. Adults are only kids grown up, anyway.”

Walt Disney

Stock Price Graph

Balanced Score CardArea of Objectives Measure of Target Time Expectations Primary Responsibility

Customers

1. Costumer satisfaction Customer SurveyWebinar

Yearly Human Resources &CEO

Representatives

1. Employee Conditions Employee Satisfaction Biannually CEO

2. Career Opportunity Lower employee turnover Biannually CEO

Community / Socially Responsible

1. Eco-Friendly Company Maintain clean environment in resorts

Increase presence of recycling in resorts

Limit food, paper and water waste

Limit land destruction

Yearly CEO Marketing Department

2. Ethical Company Increase in donations and presence of charitable events

Yearly CEO Marketing Department

Operations/Processes

1. Innovation Number of new products in each segment

Number of renovated products in each segment

Yearly CEOMarketing Department

2. Brand expansion/ Accessibility

Numbers of new resorts built Yearly CEO

Financial

1. Reduce cost of production Decrease in cost of Parks, Resorts and other property

Yearly CFO

2. Increase profitability Increase Sales Reduce Expenses

Quarterly CFO

Use product development to renovate and

build new attractions in order to attract an

older target market.

Use market development to build a new

theme park which will be more accessible to

the North East area.

Strategies

Build an indoor theme Park and Resort in New

York.

Improve advertising to promote

entertainment which target a more mature

audience.

Remove the Interactive Media Segment.

Remodel and build new attractions in every

Park and Resorts to stay appealing to our

customers.

Recommendations

In the next three years Walt Disney should..

Objectives

In the next year Walt Disney should…

Improve advertising to promote

entertainment

Remove the Interactive Media Segment

Buy a land in New York City

Questions

Sources

““Home, The Walt Disney Company”, < http://thewaltdisneycompany.com/<ALDRIDGE, B. “Walt Disney”, Brad Aldridge Productions, Berkley, CA, August 2002, http://www.justdisney.com/walt_disney/’> “ Annual Reports, The Walt Disney Company”, <http://thewaltdisneycompany.com/investors/financial-information/annual-report> “ Who Owns the Media? Media Ownership Charts, Free Press”, Florence, MA, <http://www.freepress.net/ownership/chart> “ Investor Relations, The Walt Disney Company”, <http://thewaltdisneycompany.com/investors> “ Walt Disney Company (DIS) News – The New York Times” <http://topics.nytimes.com/top/news/business/companies/disney_walt_company/index.html> “ Stock Quote for Walt Disney Co – MSN Money”, page generated 9:55PM, <http://investing.money.msn.com/investments/stock-price?Symbol=dis&ocid=qbeb> “ DIS: Summary for Walt Disney Company (The) Common – Yahoo! Finance” <http://finance.yahoo.com/q?s=dis&ql=1> “ Organizational Chart The Walt Disney Company – TheOfficialBoard”, <http://www.theofficialboard.com/org-chart/walt-disney> “ Disney Corporate Press Releases , The Walt Disney Company”, <http://thewaltdisneycompany.com/disney-news/press-releases?tid=All&field_press_release_date_value[value][year]=2009&title=&page=3>