A Case Study on Walt Disney Company:

The Entertainment King

Section II – Group III

FT152004 Apurv Mishra FT152072 Shivam Arora
FT152010 Deblina Majumder FT152086 Divyabala N
FT152027 Paul Gladstone FT152091 Katta P Siddhartha
FT152052 Prabin Mishra
Walt Disney (1923 -1967)
Roy Disney(1967- 1984)
Michael Eisner(1984- 2005)
Overview
• Walt Disney was founded in 1923 by Walter Elias Disney along with
elder brother Roy
• Walt was the creative one and Roy managed the finances
• Three brief periods in Walt Disney under the leadership of
▫ 1.) Walt Disney (1923 -1967)
▫ 2.) Roy Disney (1967 - 1984)
▫ 3.) Michael Eisner (since 1984)
• Major segments of the business
▫ 1.) Studio entertainment
▫ 2.) Media Networks
▫ 3.) Theme Parks and Resorts
▫ 4.) Consumer products
▫ 5.) Internet and Direct marketing
 Diversification

• Vertical
• Horizontal
• Geographic
• Product
Strategies in Eisner’s Period
• Revitalizing TV and movies
• Maximising Theme Park Profitability
• Co-ordination among businesses
• Expanding into new businesses , regions
and audiences
Critical Evaluation Of Eisner’ Strategy

• Indiscriminate expansion
• Inability to focus on their CORE competencies
(possibility of divesting in non-CORE)
• Inorganic growth
• Change management – “ABC” culture clash.
Current Challenges for Eisner
• Managing
▫ Synergies – managing conflicts between divisions,
diversifying into global markets, entering into new
types of entertainment
▫ Brand – dilution, protests from ethnic groups and
growing competition
▫ Creativity – traditional methods within groups,
effectiveness of gong groups
▫ Culture – Combativeness between creative and
strategic groups.
Financial Analysis
• Disney’ ROA has declined from 12&% in 1987 to
2% in 2000
▫ Hence, Total assets: 45.7B
▫ Debt/Equity : 0.43
• Operating margin declined from 25% to 13%.
• Post merger the D/A increased from 20%to 34%.
• ROE: slumped down from 26% to 4%
▫ The total S/E for Disney= $23000M

The merger led to the stock rise from $20 to $116.

Questions & Answers
• Invite questions from the audience
An analysis of the strategic challenges
Some historical clues…

 Founded by Walt Disney

 Established in 1923
 Headquartered in California, USA
 Currently world’s largest conglomerate in terms of
revenue.
 Walt Disney Vision

“To make people happy ”

 Walt Disney Mission Statement 2013

“The Walt Disney Company's objective is to be one of the

world's leading producers and providers of entertainment and
information, using its portfolio of brands to differentiate its
content, services and consumer products. The company's
primary financial goals are to maximize earnings and cash flow,
and to allocate capital toward growth initiatives that will drive
long-term shareholder value.”
 Walt Disney
Mission Statement’s Evaluation
 Product oriented Lack of 5 essential
statement components:
 Focus on what
products to sell 1. Customers
and what services 2. Technology
to offer rather 3. Philosophy
than on how to
satisfy customer 4. Concern for
needs public image
5. Employees
 Walt Disney
Recommended Vision

“To make entertainment the wheel of life”

 Walt Disney Recommended Mission Statement

“As the world’s leader in entertainment and

information we seek to create an engaged
and collaborative culture for our employees
in order to turn our customers‘ moments
into a unique experience, by providing
special services and innovative products
through movies, parks and the e-world. By
taking advantage of our diversified
portfolio to differentiate our content in all
segments, we aim to develop the most
profitable entertainment company
worldwide, which would yield increasing
profits to our shareholders.”
 Walt Disney
Overview
Segment Revenues ‘12 Revenues ‘13 Growth

Media Networks 19,436 mil. $ 20,356 mil. $ 5%

Parks & Resorts 12,920 mil. $ 14,087 mil. $ 9%

Walt Disney Studios 5,825 mil. $ 5,979 mil. $ 3%

Disney Consumer
3,252 mil. $ 3,555 mil. $ 9%
Products

Disney Interactive 845 mil. $ 1,064 mil. $ 26%

Disney - contribution of segments to
revenues

Media Networks 45%

Parks & Resorts 31%
Studio Entertainment 13%
Consumer Products 8%
Interactive 3%
 Walt Disney Organizational Structure
CEO
CEO
Chairman, Walt Disney
International
Executive Chairman, ESPN,
Inc.
Senior Executive Vice President,
General Counsel and Secretary,
The Walt Disney Company

Business Unit
President, Disney Consumer
Products
Senior Vice President, Global
Security, The Walt Disney
Company
Corporate

Chairman, The Walt Disney

Executive Vice President, Corporate Strategy Studios
and Business Development, Executive Vice
President, Corporate Strategy and Business
Development
The Walt Disney Company

Executive Vice President, Corporate President, Disney Interactive

Real Estate, Alliances, and
Treasurer, The Walt Disney
Company
Co-Chairman, Disney Media
Networks Group and
Executive Vice President and Chief President, ESPN
Communications Officer, The Walt
Disney Company
Chairman, Walt Disney Parks
Executive Vice President and Chief and Resorts
Human Resources Officer, The Walt
Disney Company
Co-Chairman, Disney Media
Networks and President,
Senior Executive Vice President
and Chief Financial Officer, The
Disney•ABC Television Group
Walt Disney Company

Senior Vice President, Planning and

Control, The Walt Disney Company
 Walt Disney Objectives

• FINANCIAL • MARKETING

20% annual Family

growth in orientation :
earnings per appeal to kids
share and bring the
family together

Expand the
portfolio of Foster an
characters and engaged and
drive the collaborative
company into company culture
the e-world
• RESEARCH & • HUMAN
DEVELOPMENT RESOURCES
 Walt Disney
Corporate Strategies
PRODUCTS
Existing New
Market penetration New products

Existing • Targeted market segmentation • Related Diversification

through acquisitions • Diversification in branding
• Vertical & Horizontal integration
MARKETS
Market development Conglomerate diversification
New
• Foreign Outsourcing
• Direct Investment -
• Licensing
 Walt Disney
Grand Strategy
RAPID MARKET GROWTH

WEAK COMPETITIVE POSITION
 Market development
 Related Diversification
 Vertical Integration
 Horizontal Integration
 Market penetration
STRONG COMPETITIVE POSITION

SLOW MARKET GROWTH

 Walt Disney
PEST Analysis
POLITICAL
 The animation industry enjoys tax benefits.
 Political differences are an obstacle to International Trade.
 Tighter regulations regarding products safety.

ECONOMIC
 Global financial crisis slows down growth.
 Emerging markets such as India offer a cost advantage in terms of salaries
and the overall cost of production.
 Economic growth, per capita income and stage of economic development
among different countries needs to be considered.
 Walt Disney
PEST Analysis
SOCIAL
 Recent social trend in smartphones, tablets and apps.
 Different local cultures, as well as stories and history of the host place.
 Changes in customers preferences for entertainment.
 Significant role of kid’s and family’s entertainment.

TECHNOLOGICAL
 Technological advancements are having a profound effect on the
world’s media.
 Changes in technology affect demand for entertainment products as
well as the cost of production.
 Walt Disney
Porter’s 5 Forces Analysis
THREAT OF NEW ENTRANTS - (MEDIUM)
Even though there are major players, still smaller players with lower
structures can enter the market.

THREAT OF SUBSTITUTES - (HIGH)

Technological innovations & high competition in each segment,
generate many alternative choices for consumers.

BARGAIN POWER OF SUPPLIERS - (LOW)

Disney’s vertical integration reduces significantly their power.
BARGAIN POWER OF BUYERS - (HIGH)
Disney’s offerings are desires, rather than necessities. Therefore,
financial restricted consumers will not buy.

RIVALRY AMONG FIRMS - (HIGH)

Huge competition between companies within specific sectors.
( broadcast rights/local parks/viewing figures/box office/other brands)
 Brand Value

Listed 27th in the world’s 500 most valuable

brands*
• $ 20,548 millions brand value in 2013
• $ 23,580 millions brand value in 2014

*http://brandirectory.com/league_tables/table/global-500-2014
 Walt Disney
Financial State

Performance Indicators
Current Stock Price $ 80.07

Consolidated Revenues $ 45,041 millions

Net Income $ 6,136 millions

Return on Equity 14.41

Return on Invested Capital 11.24

Gross Profit Margin 21.29

Annual Dividend per Share $ 0.60 (2012)

 Market Share on
Studio Entertainment Industry

Globally Globally Globally

$ 5,03 billion $ 4,68 billion $ 3,68 billion
Overseas Overseas Overseas
$ 3,14 billion $ 3 billion $ 2,26 billion
U.S. U.S. U.S.
$ 1,89 billion $ 1,68 billion $ 1,42 billion
 Competitive Profile Matrix
WALT DISNEY WARNER BROS UNIVERSAL
CRITICAL RATING RATING RATING
SUCCESS WEIGHT SCORE SCORE SCORE
FACTORS 1-4 1-4 1-4

Advertising .12 4 .48 4 .48 3 .36

Market Share .10 3 .30 4 .40 2 .20

Financial
Position
.10 4 .40 3 .30 2 .20

Management .08 3 .24 3 .24 3 .24

Global
Expansion
.10 4 .40 4 .40 4 .40

Technology .15 3 .45 4 .60 3 .45

Customer’s
Loyalty
.10 3 .30 3 .30 2 .20

Brand
Awareness
.15 4 .60 4 .60 3 .45

Creativity .10 4 .40 4 .40 4 .40

TOTAL 1.00 3.57 3.72 2.90

 Walt Disney
SWOT Analysis

S Brand Reputation
W
•Highly Diversified Portfolio
•Strategic & Tactical
•High Cost of Operations
Acquisitions
•Concentration of Revenues In
•Global Expansion & Alliances
North America
•Economies of Scope
•Approaches Antitrust Law
•Top Management
Limits
•Loyal Customers
•Strong Financial Position

O •Benefits From IT Advances &

Mobile Gaming
•Build A More Eco-Friendly Image
• Further expansion in new
emerging economies
•Release of New Successful
Stories & Characters
•Financial Récession
•Increasing Piracy
T
•Strong Competition
•Continous Need For
Technological Update
•Change in Consumers
Preferences & Tastes
•Negative Publicity Due to
Unexpected Event
 External Factor Evaluation Matrix (EFE)
WEIGHTED
WEIGHT RATING
SCORE

OPPORTUNITIES
Benefits from it advances & mobile games .20 3 .60
Build a more eco-friendly image .05 3 .15
Further expansion in new
.15 2 .30
emerging economies (Russia, India)

Release of new successful stories and characters .05 4 .20

THREATS
Financial Recession .15 3 .45
Increasing Piracy .10 2 .20
Strong Competition .10 3 .30

Continuous need for technological update .10 3 .30

Change in consumer preferences and tastes .05 2 .10

Negative publicity due to unexpected event .05 3 .15

TOTAL
 Internal Factor Evaluation Matrix (IFE)
WEIGHT RATING WEIGHTED SCORE

STRENGTHS

Brand Reputation .15 4 .60

Highly Diversified Portfolio .15 4 .60

Strategic & Tactical

Acquisitions
.08 3 .24

Global Expansion & Alliances .05 3 .15

Economies of Scope .08 3 .24

Top Management .07 3 .21

Loyal Customers .10 4 .40

Strong Financial Position .05 3 .15

 Internal Factor Evaluation Matrix (IFE)
WEIGHT RATING WEIGHTED SCORE

WEAKNESSES

High Cost of Operations .15 2 .30

Concentration of Revenues in
Us & Canada
.08 2 .16

Approaches Antitrust Law

Limits
.04 1 .04

TOTAL
 Strengths Weaknesses
1. Brand Reputation
2. Highly Diversified Portfolio
3. Strategic & Tactical Acquisitions
1. High Cost of Operations
Walt Disney SWOT 4.
5.
Global Expansion & Alliances
Economies of Scope
2. Concetration of Revenues In North America
3. Approaches Antitrust Law Limits
Combined Strategies 6. Top Management
7. Loyal Customers
8. Strong Financial Position

Opportunities SO - Strategies WO - Strategies

1. Benefits From IT Advances & Mobile 2-1: Develop mobile game applications with
Gaming Disney characters
2. Build A More Eco-Friendly Image 1-2: Collaborating with WWF so as to
promote environmental issues 1-1: Digitalization of our operations in order to
3. Further expansion in new emerging
6-3: Build a multinational management low costs & utilize technology
economies (India, Russia)
team 2-3: Target India as possible expansion through
4. Release of New Successful Stories & consumer products
8-4: Consumer research on their
Characters
preferences nowadays

Threats ST - Strategies WT - Strategies

1. Financial Récession
7-1: Offer discounts to all members of
2. Increasing Piracy
Disney fun club
3. Strong Competition 1-1: Re-edit and release in cinemas old classic
3,4-3: Expansion in Brazil market through
4. Continous Need For Technological Disney films
alliances and synergies
Update 2-3,4: Take advantage of operations that take
8-4: Invest on R&D for one high tech
5. Change in Consumers Preferences & place in N. America by investing in Technology
department
Tastes and R&D for that area
6-5: Monthly consumer research via online
6. Negative Publicity Due to
polls
Unexpected Event
 Expansion in Brazil Develop mobile game
QUANTITATIVE STRATEGIC PLANNING MATRIX market through applications with Disney
alliances and synergies characters
Key Factors Weight AS TAS AS TAS
Opportunities
1. Mobile game sectors could grow at a compound annual growth rate of 23,6 % by 2017 0.20 1 0.20 4 0.80
2. Decrease in environmental impact by 50% 0.05 - - - -
3. Emerging markets offer a cost advantage in terms of salaries and cost of operations. 0.15 4 0.60 3 0.45
4. Extension of R&D efforts in order to release new successful stories and characters. 0.05 2 0.10 3 0.15
Threats
1. 12% decline in average total expenditures in entertainment in USA from 2008 to 2010. 0.15 2 0.30 3 0.45
2. Piracy costs in the US economy every year $ 250 billion. 0.10 - - - -
3. Walt Disney’s market share in Studio Entertainment segment is 16,62% 0.10 2 0.20 1 0.10
4. Continuous need for technological update 0.10 1 0.10 4 0.40
5. Change in consumer preferences and tastes 0.05 - - - -
6. Negative publicity due to unexpected event 0.05 - - - -
Subtotal 1.00
Strengths
1. 27th position in the rank of the Best Global Brands. 0.15 4 0.60 2 0.30
2. Highly diversified portfolio 0.15 4 0.60 3 0.45
3. Acquisition of Marvel, ABC, Pixar, Lucas Film, ESPN etc 0.08 3 0.24 2 0.16
4. Almost 30% of revenues from operations in Europe, Asia Pacific, Latin America and other 0.05 4 0.20 3 0.15
5. Economies of Scope 0.08 3 0.24 2 0.16
6. Top Management follows four core concepts (3Ds+B) from 1922 0.07 4 0.28 2 0.14
7. Customers’ loyalty 0.10 2 0.20 4 0.40
8. Strong financial position: $7,370m intangible assets and $27,324m goodwill for FY 2013 0.05 3 0.15 1 0.05
Weaknesses
1. High cost of operations: $35,591m FY 2013 when total revenues are $ 45,041m 0.15 1 0.15 4 0.60
2. Almost 70% of operations is concentrated in US and Canada. 0.08 2 0.16 1 0.08
3. United States Antitrust Law restricts the mergers and acquisitions of organizations 0.04 - - - -
Subtotal 1.00
SUM TOTAL ATTRACTIVENESS SCORE 4.32 4.84
 Implementing Strategy
Preparation of the appropriate budget.

Allocation of personnel.

Communication of the strategic vision, the

strategic themes and their role to the employees.

Use of presentations, workshops, meetings,

frequent updates.
 Evaluation of Strategy
Mobile could drive total games software industry revenue
to $100B by 2017 .
• Mobile/online games could grow to ~$60B revenue (23.6% CAGR
11-17F)
• Mobile/online games could take 60% games software market
share by 2017
• Total global games software revenue could grow to ~$100B
revenue by 2017

Games dominate mobile app usage and revenue.

• Games took 32% of 2013 mobile app usage (blended iOS/Android
tablet/smartphone) - 67% of tablet usage
• Games took 72% of 2013 mobile app revenue and ~40% of mobile
app downloads

source: www.digi-capital.com
source: www.digi-capital.com
 Mobile Games Industry
Descriptive Statistics

source: www.digi-capital.com
 Evaluation of Strategy
Rumelt’s Criteria
The recommended strategy is:
 consistent
It will be developed by the existing Interactive Department so that
interdepartmental disorder is avoided.
 consonant
It will be an adaptive response to the recent social trend for mobile
games applications.
 feasible
Disney’s financial state can support the recommended strategy
which will result in the company’s growth in the short-term.
 maintaining the competitive advantage
The company’s position in the market will be strengthened.