Walt Disney Case Study

Walt Disney Case Study

Name:

Institution:

Walt Disney Case Study

Introduction

The Walt Disney has been a preeminent name in the family entertainment industry for more that nine decades now. Starting from a humble beginning in the 1920s, it has grown into the biggest entertainment corporation globally. The company started in 1923 when Mr. Walt Disney together with his brother Roy signed a contract with M.J Winker, a distributor to sell their Alice’s Wonderland. The founded the Alice Comedies in October 16, 1923, which bore the Disney Brothers Cartoon Studio. For years, the company continued to produce cartoons for family entertainment such as Oswald the Lucky Rabbit in 1937, Snow White and the Seven Dwarfs in 1937 and Fantasia in 1940 amongst others. In 1925, it changed its name to Walt Disney Studio and went ahead to produce the first cartoon with sound, Mickey Mouse in 1928. In 1950, it produced its first action film, Treasure Island and later on expanded to television that featured the Disneyland anthology series. Over the years, it continued to innovate and opened its first theme park, in Orlando Florida, in 1972. Since then, it has continued to grow and now has many theme parks worldwide (Banton, 2011).

At the time of this case study, 2011, Walt Disney was facing several issues concerning its family entertainment industry. One of the issues is stiff competition from other entertainment and tourism industries. Some of the issues that determine its profitability in parks and resorts are such as fluctuations in exchange rates, the trends in the travel industry, weather patterns and business cycles. Another crucial issue facing this company is uncertainties in the market especially due to rapidly evolving technology. Some of the weaknesses it is experiencing are expansion into geographical areas that for a long time have remained unexploited, the struggling global economy and having to expand its radio ability (Banton, 2011).

Current Mission, Vision, Goals and Strategies

Currently, Disney does not have any mission or vision statement (Banton, 2011). However, its goal is the creation of the world’s best quality entertainment for the whole family through the application of innovative technology to increase consumer experience in a unique way. Its focus is the creation of content that with high quality and ability to differentiate Disney from other entertainment competitors. It also focuses on deployment of innovative technologies for highlighting their content to gain a competitive advantage while maintaining a high customer experience. It also seeks to expand globally especially in the emerging markets.

Walt Disney organization operates under strategic business units, which are made up of five segments. These segments include media networks, parks and resorts, studio entertainment, consumer product and interactive media. Each of these SBU is charged with coming up with innovative products and services for its customers. Each operates independently, which allows the company to attain diversification (Banton, 2011).

Internal Analysis

From the internal analysis highlighted in IFEM matrix, it is clear that Disney is doing well in terms of profits. For instance, it recorded a growth of 296% in revenue and operating income in the Studio Entertainment, 11% increase in sales within Consumer Products and an overall 12% increase in revenues for the last three years. Financial ratios indicate a strong company considering the current ratio is 3.97 while the quick ratio is 2.5. This indicates that Disney is in a position to repay its debts from its assets. Based on the IFEM, the company has minor weaknesses in its financial factor considering it scored 2. Although the internal financial position looks strong according to the ratios, there are external factors influencing it negatively. One of these factors is the struggling worldwide economy after the 2008 recession. This has affected many companies both internally and financially.

On the other hand, marketing has scored a higher score of 3, which indicates the company is very strong in promotions. One of the reasons contributing to this score is the increasing roles in the entertainment and music industry. In terms of providing services, the company scored 2, which indicates minor weaknesses. These weaknesses are found in geographical areas where Disney has not tapped yet. For instance, provision of radio operations scored 1, which indicates the company is facing significant weaknesses in this sector (Hitt, Ireland & Hoskisson, 2013).

The management had a score of 4, which indicates major strengths. This is because the company is re-using its organization’s past portfolio. Additionally, it scored 3 on the issue of competition with Universal Studios Orlando, which indicates that Disney has a strong management. Furthermore, its workforce is also strong with a score of 3, which indicates strengths. This is because of a unionized workforce that remains strong and portrays a positive image about the company. However, the management is also facing slight weaknesses considering the decreasing revenues and operating income within the Studio Entertainment subunit.

Information systems scored 2, indicating the company is going through problems that are making it weak. One of the issue contributing to the weakness in this area is the increased pace of technological changes in media and entertainment. Being a large corporation, keeping up with the changing environment is difficult. This is yet another external factor affecting internal strength of the company. Disney does not have control over the advancement and evolution of technology. It can only adapt to meet new demands of customers. This is not always easy especially with large organizations. It required a lot of finances and time (Hitt, Ireland & Hoskisson, 2013).

To summarize, the internal factors of the organization are currently strong except that external factors are affecting it both negatively and positively. Firstly, the financial position of the company is very strong based on analysis of statements. However, it is affected by the struggling global economy following the 2008 recession. The company is also strong in terms of marketing and management that scored well in several areas such as unionization of workers and competition with Universal Studios. However, other factors such as information systems and service provision were weak. Some of the issues contributing were internal, such as lack of proper expansion. For information systems, the influencing factor is coming from rapid technological advancement, which is an external.

External Analysis

Any organization conducting business is not only influenced by internal factors, but also external ones, which a firm does not have control. For Disney, there are several external factors with some being favorable while others are not. One of the favorable factors is the expected growth in family entertainment industry. This offers Disney a better opportunity for expansion. Another factor coming from the industry is the storage of data electronically for protection. This has been very favorable considering it scored a rate of 3. In addition, the entertainment market within United States is expected to grow, which offers an extremely favorable environment for Disney. It also has a very favorable rate because of its name that can be utilized to venture into other areas of the travel industry (Hitt, Ireland & Hoskisson, 2013).

The other factor that has remained favorable for Disney is the competitive edge. For declining revenues in the studio, it scored 3, which indicates it is extremely strong. Protection of intellectual property is also highly favorable considering the company will not lose information to other competitors. The growing media networks are also favorable since it could increase revenue through advertising. On the other hand, the company is facing a hostile competition when it comes to the growing sports programming and sports broadcasting which could affect the market share.

The final external factor affecting Disney is the economy of the whole world. By the acquisition of Lucasfilm, Disney is a position to develop new content that could sell well since there is reduced competition. This is an extremely favorable factor considering it had a rating of 4. However, the current changes in the global economy present the company with a hostile environment. Many countries have been left struggling to stabilize after the global recession that hit in 2008 (Hitt, Ireland & Hoskisson, 2013).

In summary, there are external factors that have presented Disney with a favorable environment while some have made it hostile. The favorable factors include the expected growth in the entertainment industry globally, protection of intellectual property, the utilization of Disney brand in the travel business, growing entertainment market in united states,  growth of media networks and acquisition of Lucasfilm. The factors affecting Disney negatively include the global economy, changing seasons, growth in sports programming and competition in the sports broadcasting. Overall, the company is positioned strongly within the external factors.

The I/E Matrix

From The I/E matrix, Disney is within cell five, the one at the center. In this cell, it indicates that the company has balanced between external and internal factors on an overall basis considering all the subdivisions. Within this cell, the best strategic direction is holding and maintaining. However, this does not mean the company should adopt a defensive strategy. Rather, being aggressive is a better way of defending. Within this direction, the company can adopt two strategies, which include market penetration and product development. Therefore, Disney should be seeking to penetrate the untapped market and develop new products to offer more to its clients. However, this will be dependent on the financial position of the company

The Space Matrix

From the space matrix, it is clear that Disney has higher financial and industry strengths compared to competitive advantage and environmental stability. As such, it is positioned within the aggressive quadrant, meaning it should be highly proactive in its strategies. The company should focus on prospector strategies that seek to expand the market share. The best strategies for expanding the market share are new product development and market penetration (Kasi, 2010).

New product development allows the company to offer its clients unique experiences that have not been offered by other competing firms. Considering its financial and industry strengths, Disney should use the new products for market penetration. By providing its products and services at a cheaper price compared to other firms, it will be in a better position to increase its market share. Market penetration allows many consumers to get the products at an affordable price; hence, its demand increases (Hitt, Ireland & Hoskisson, 2013).

Recommended Strategic Vision

As the company seeks to expand its market share through new product development and market penetration strategies, it needs to consider eliminating and liquidating obsolete assets and replace them with new advanced technology that can help in exploiting the growing worldwide entertainment especially within the emerging markets that possess the greatest potential.

Recommendations: Strategies (short term and long term)

One of the functional strategies that Disney can adopt is to come up with accessories or products that are easily marketable to any customer group based in past portfolio. An example can be baby products that have safety precautionary. Considering it would be based on past cartoon characters such as Mickey Mouse, which are baby-appropriate, major retail outlets would in retail shops. This would help in multiplying the sales to an international level based on a positive response. This strategy is within management on the issue of reutilizing the organization’s past portfolio (1 year).

One of the business/corporate strategies that Disney should adopt is taking advantage of the increasing roles in the market by hiring more experts to meet customer needs. This is because there are many numerous breaks within the entertainment industry, as well as a wide range of customers to consider hence the need to acquire a diversified mix of actors and musicians to appeal to all customer categories (Kasi, 2010). There should be about 20 employees for each consumer groups, mostly depending on age. In addition, the hired personnel, especially the most popular should be involved in advertising the company. This should be combined with new content that appeals to various customer needs, (4 years).

The other B/C strategy is getting rid of the old and obsolete equipment to acquire modern and up-to-date technology that meets customer needs by delivering high quality services. Although this will require a heavy initial investment of cash, it will eliminate the maintenance costs associated with old equipment in the long term since new one will be cheaper to handle and maintain. This should involve acquiring new equipment first, training the employees and then putting it to use to serve customers, (1 year).

The next strategy is increasing more satellites and boosters to increase geographical area coverage by reaching the signals to places that are not covered. Currently, Disney is faced by a challenge because of lack of connectivity to remote areas (Kasi, 2010). Therefore, this strategy should be aiming to gain more viewers on its broadcast business as well as customer loyalty. Through such satellites and signal, it can reach its advertisements to a bigger audience, (2 years).

Another B/C strategy would be increasing shares at a reduced price to attract more shareholders, thereby reducing competition within the sports broadcasting business. Doubling the number of shares and offering them at half price creates an offer mood that pulls more shareholders without losing control of the firm, (1 year).

Finally, Disney should expand its sports programming facilities to reduce the continued growth that is posing a stiffer competition. With increasing sports market, failing to expand would mean losing market share to competitors. Currently, sports programming is gaining more ground in many regions and there are many firms taking advantage of this. It Disney fails in doing the same, it fails in changing according to the market demands, (1 year).

Although the above strategies are recommended, there is one, which is not recommended is harvest any of the sources of income of the company (Kasi, 2010). Although many companies use this strategy, Disney should diversify and develop more products or innovate. This is because majority of their businesses provide a name that creates a positive image. Instead of losing, Disney could diversify. Another strategy that is not recommended is retrenching 50% of workers. This would send a negative image to the consumers especially considering the current unemployment rates.

References:

Banton, M. (2011). The Walt Disney Company – 2011. Retrieved from http://www.disney.com

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Competitiveness & globalization: concepts and cases. Hoboken N.J: Cengage Learning.

Kasi. (2010). Strategic Position and Action Evaluation (SPACE) Matrix. Retrieved from http://www.mba-tutorials.com/strategy/1151-strategic-position-and-action-evaluation-space-matrix.html