Walt Disney - Strategy Analysis
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…it was all started by a mouse
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LIFE AT 24 FRAMESPER SECOND.
Aditya Nair
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Overview
The Walt Disney Compnay, (NYSE : DIS)Founder 1923 – Walt and Roy DisneyHeadquartered – Burbank, CA, USA
Revenue – $ 38 Billion Employees – 145000Leader in AnimationFortune Rank : 57
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Various lines of business of Walt Disney
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USA CanadaEuropeBrazil Argentina
JapanTaiwanSingaporeChina India HK
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Walt Disney’s Key SBUs and its revenues
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– ABC Television Network– ABC Radio Networks– ESPN– Disney Channel– SoapNet– Toon Disney– Joint ventures – A&E TelevisionNetworks, Lifetime EntertainmentServices, The History Channel, E!Entertainment Television– ESPN, ABC, Disney, and family branded Internet Web sites
$ 17.16 Billion
Buena Vista Home Entertainment(BVHE) – Domestic and International– Buena Vista Music Group– Buena Vista Television– Walt Disney Theatrical– Movie banners: Walt Disney Pictures,Touchstone Pictures, Hollywood Pictures, Miramax, Pixar and Dimension
$ 6 .70 Billion
– The Disney Stores (TDS)– Disney Store Online– Disney Interactive– Disney Publishing Worldwide– Baby Einstein
$ 2.68 Billion
– Walt Disney World Resort (WDW) – fourtheme parks, two water parks, 25 hotels– Disney Cruise Line– Disneyland– Tokyo Disneyland– Honk Kong Disneyland– Disneyland Resort Paris– Walt Disney Imagineering
$ 10 .76 Billion
Source:corporate.disney.go.com
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1923-28 1928-34
1934-54
1955-71
1972-84
1984-2006
• The silent era • Kansas City, Missouri animator Walt Disney created a short film entitled Alice's Wonderland
• Walt and his brother Roy Disney moved to Los Angeles, California
• October 16, 1923 - the Disney Brothers Cartoon Studio
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1923-28
1928-34 1934-54
1955-71
1972-84
1984-2006
• Mickey Mouse and Silly Symphonies
• In 1928 - Walt Disney and Ub Iwerks created Mickey Mouse
• In 1929, DBCS was reincorporated as Walt Disney Productions, Ltd.
•In 1932, Disney signed an exclusive contract with Technicolor to produce cartoons in color
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1923-28
1928-34
1934-54 1955-71
1972-84
1984-2006
• 1934 - first feature-length animated film
• 1939 - Walt Disney Studio, CA
• 1940 – Disney Productions IPO
• Onset of World War II, box-office profits began to dry up
• 1950 – foray into television
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1923-28
1928-34
1934-54
1955-71 1972-84
1984-2006
• 1955 - Walt Disney opened Disneyland to the general public
• 1959 – Disney World, Orlando
• 1960’s - The long-running anthology series
• 1966 - Deaths of Walt and Roy Disney
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1923-28 1928-34
1934-54
1955-71
1972-84 1984-2006
• 1970’s – Opening of Walt Disney World
• 1979 – Disney studio produced science-fiction, The Black Hole, first to carry PG rating
• 1980 - Launch of Walt Disney Home video
• 1984 - Michael Eisner and Jeffrey Katzenberg from Paramount Pictures were brought on board
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1923-28 1928-34
1934-54
1955-71
1972-84
1984-2006
• 1980’s – Disney surived many takeover attempts
• 1993 – Disney acquired Mirmax Films
• 1996 - Merger with ABC, bought ESPN into its network
• 2005 - Michael Eisner replaced by Robert Iger as CEO
•2006 – Purchased Pixar Animation Studio
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SBU - Studio Entertainment• This segment includes –
1) Movies 2) Television animation programs 3) Musical recordings 4) Live stage plays and theatrical 5) Home video 6) Television distribution
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Banners under Studio
entertainment
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Porters 5 Force Model for our SBUBargaining Power of Suppliers: - dedicated, competitive, world-class Supplier base to collaborate with Disney’d Sourcing Professionals -Low bargaining power due to Disney’s big volume
Bargaining Power of Buyers: -Competitive products all compete on differentiation -Low switching costs
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Porters 5 Force Model (ctd…..)
Threat of Substitute Products:-Non-existent
Threat of Potential New Entrants:-Economies of Scale-Strong and Well Established Brand Name-High Capital requirements-Low threat
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Porters 5 Force Model (ctd…..) Intensity of Rivalry between Firms in the Industry:
-High competitive in an Oligopoly (other leading firms Include News Corp., Time Warner Inc., Liberty Media
Interactive, Viacom, Sony Pictures)
-Strong brand identity and product differentiation
-Intensity of Rivalry is moderate
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Porters 5 Force Model (ctd…..) High Moderate Low
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of Substitutes
Threat of New Entry
Intensity of Rivalry Between Firms
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Porter’s 6th Force - Complementors
Complementors is a term used to describe businesses that directly sell a product or service that complement the product service of another company by adding value to mutual Customers
• For Disney’s Animation movies complementors can be
1) Video Games – EA Sports, Sega Games2) Comic Books – DC Comics
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Value ChainResources:
-Tangible: cutting edge technologies, media networks, studios, distribution channel
-Intangible: brand name / reputation for innovation
Core Competency: - Content Creation and Control(Animation and Motion
Pictures)
Competitive advantage:-Brand name
- Creating synergies between business - Creating shareholder value through diversification
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Strengths • Global Standardization• Target Customer: Children• Creative Process• Popular Brand Name• Diversification• Disruption
Weakness•High sunk cost• Excessive Research & Development• Constant Up gradation• High Investment• High Risk Factor
Opportunities• Merchandise• Global Localization: Think global, Act Local•Cheaper alternatives to soft toys• Disney Music Channel• Disney School of Management/Training Institute
Threats• Competitors: National, Regional & Global• Employee Retention• Highly Demanding in terms of Sales, Creativity and Innovation• Unprofitable or hasty acquisition• Brand Consistency• Product Differentiation
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Financial Analysis
Financial Overview for Walt Disney and its nearest competitor Time Warner for Year 2010
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Financial Analysis
The current ratio measures the company’s ability to pay its short-term obligations. The ratio is mostly used to give an idea of how well a company can pay back its short-term liabilities with its short-term assets. The Walt Disney Company current ratio of 1.11 is greater than 1, which means their assets can cover their liabilities. However, the Walt Disney Company is below both the Industry and its competitor, Time Warner Inc.
The quick ratio (acid test ratio) measures a company’s ability to meet its short-term obligations with its most liquid assets. The Walt Disney Company quick ratio is 1.01 versus Time Warner’s 1.28. This shows that Disney actually holds less inventory than Time Warner (9% versus 13%), and Disney’s quick ratio is actually less than the industry average as well.
Liquidity Ratios The Walt Disney Company Time Warner Inc. Industry Current Ratio 1.11 1.48 1.41 Quick Ratio 1.01 1.28 1.20
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5 Year Financial Analysis
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Strategic Challenges
Lack of coordination among businesses (Overlap began to emerge)
Lack of corporate synergy
Lack of creativity
Poor brand management
Diversification in different SBU’s
Allocation of resources to different SBU’s
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Future Recommendations Expand in Persian Gulf Countries which can be a lucrative market given their growing popularity as tourist hub
Since they are already into Animation they could also get into E-Learning, which would be the next big thing
They can start training institute to train world class animators
Disney loses huge chunk of revenue to piracy, they need to come up with something radical to curb piracy, like Apple did with iTunes
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Team Learnings From the strategic analysis of Walt Disney Company one can learn that:-
• Build your business around your core - competencies• Exploit the latest technology• Demand perfection, but play loose• Reinvent yourself when necessary• Identify how to anticipate the needs, wants, stereotypes, and emotions of your customers in order to exceed their service expectations
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Team Learnings (ctd..)• Bring "personality” to your organization by establishing a service theme and aligning your organizational resources to support it
• Improve the policies, tasks, and procedures within your organization to promote the delivery of quality service to your customers
• Create an environment that reflects your organization’s commitment to quality and encourages its delivery
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PGDM-B
Aditya Nair – 130