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The Walt Disney Company - Strategic Analysis
Transcript of The Walt Disney Company - Strategic Analysis
• Actions and memories that connect us and tie us together
• The movies, theme parks, and consumer products
• All wins for The Walt Disney Company
Yet, to quote a line from Star Wars and Lucas films: "There is a great disturbance in the Force!"
• The disturbance is Disney’s Interactive Media business unit segment
• Since its launch in 2008, this business segment has not performed to expectations
• It has lost money each and every year
The Walt Disney Company
Largest entertainment company in the world
Revenue - $45 Billion
Net Income - $6.1 Billion
Market Capitalization - $125.6 Billion
Consist of Five Segments
Theme Parks and Resort
1923 - Walt and Roy Disney started Disney Brother Cartoon Studio, later changed to Walt Disney Studio (1926).
1928 - Mickey Mouse (originally named Mortimore Mouse) is born.
- "Steamboat Willie" with Mickey Mouse (first synchronized sound cartoon.
1937 - First animated film - Snow White and the Seven Dwarfs
1940 - Company public. "Pinochio" and "Fantasia"
1950 - "Cinderella" and "Treasure Island" (first all-live action feature)
1954 - Buena Vista Film Distribution Company, Inc founded.
1955 - Disneyland opens in California
1966 - Walt Disney dies of lung cancer.
1967 - Construction of Disney World Resorts in Florida begins.
1969 - "Herbie, the Love Bug"
1971 - Roy E. Disney dies.
1982 - "Tron"
1983 - Disney Channel begins, later renamed Walt Disney Pictures.
1984 - Touchstone founded, Michael Eisner becomes CEO
1987 - Euro Disney project starts.
1991 - "Beauty and the Beast" (first animated film to be nominated for Best Picture)
1993 - Anaheim Mighty Ducks plays first game.
1995 - "Toy Story"
1997 - Take control of Anaheim Angels
1998 - Disneyland Hong Kong announced
- Disney Cruise line set sail
2005 - Bob Iger replaces Michael Eisner as CEO
2006 - Purchased Pixar Animation Studio
2009 - Purchased Marvel
2012 - Puchased Lucasfims (Star Wars & Indiana Jones)
2013 - Hong Kong Disneyland opens
4% - 2014, 3% next 5 years every year
50% comes from emerging market
Unemployment to decrease by 9% unemployment in the next 5 years
Durable and non-durable spending going up by 9% next 10 years
Consumer spending up 5%, 2013
Wages and Salary
Global income in US, Japan, EU increasing 7-9 % next 5 - 7 years.
Go up globally 3.2% - 4.6% of GDP
Asia 6% up through 2018
Minimum Wage Legislation
Grow 8.3 billion by 2030
Disney is 23% of household
Market Stage and Size
8.7% Growth thru 2017
$2.2 Trillion from $1.6 Trillion
Media Network - gain 9%
Studio Entertianment - 3%
Consumer Product - 9%
Net profit margin 12.1% to 13.62% next 4 years
Licensing - 49.5% globally
Intensity of Competition and Demand Variability
Next 5 year increase by 4%
Tourism will grow 19% by 2018
Five Forces Analysis
Threat of New Entrants: Low
Economy of scale
Large customer based
Bargaining Power of Suppliers: Moderate to Low
Many international or domestic suppliers
Media consolidation gives Disney power
Five Forces Analysis
Bargaining Power of Buyers: Moderate to High
Low switching cost
Substitute Pressure: Moderate to High
Improvement to value chain channels
Different packages, tailor made to customer
Rivalry Among Competitors: High
Long term contract are needed
Most offer standardize product with little differentiation
Exit barriers are high
Market share is not expanding as fast
Value of Goodwill
Vast product & service mix
Diversified promotional channels
High cost structure
High risk in most business units
Large amount of capital needed for investment
Increase in mobile streaming
Retiring baby boomer
Piracy in movie and gaming industry
Products - print media
Print media, television shows, films, theme parks, cruises.
Brand strength and reputation allows for higher pricing than like products.
Theme Parks, Theme Stores, Retails Outlets, Living Rooms, On-line, Movie Theater
Critical to success of product launches
Advertising expense for 2012, 2011, and 2010 were $2.5 billion, $2.8 billion, and $2.6 billion
Net Working Capital
Current ratio of 1.2
Receivable turnover of 7.01
Inventory turnover 23.5
Positive cash flow in last 5 years
Profitability and Growth
Revenue - 8.3%
EPS - 18.5%
EBITDA - 14.2%
Fiscal Year 2010, 2011, 2012,
Minority Percentage (U.S. employees) 40% 39% 39%
Female Percentage (global employees) 52% 52% 51%
-Employee Survey Data
• 87% say they are proud to work for The Walt Disney Company
• 80% believe the business segment they work in develops creative products, services and content
• 70% believe that their business is leading the industry and is evolving and making the changes required to compete effectively in the marketplace.
• 80% believe their business segment is committed to creating and supporting a diverse workplace.
• 80% of employees across the globe find their jobs challenging and interesting.
• 77% understand how their jobs fit with the goals and strategies of their business segment
Strategic Fit Analysis
Market fit - “Appeared” to fit within the Disney market segment
Kids like movies – True
Kids like video games – True
Disney makes movies – True
Disney should make video games – True?
• Execution ok
• Geared towards younger audience, families and moms
• Like Pinocchio, users grow up and move away
• Change on the outside faster than that on the inside
Co-presidents running the division
Late last month reassignment of duties to focus one on operations and the other on strategy
MIS - First step
Licensing of the product with others –
Be good at creative content, let others execute
Partnership agreements with big players
Retain some of the current customers, considering that the customer has already enjoyed the Disney experience
Change in strategy and direction will allow a better, more focused experience for the overall Disney customer
Establishing a budget and overall time frame to divest the business segment
Capturing all of the costs is vitally important.
Understanding to the consequences of business decision making, both on good decisions and on bad.
Trying to pinch too many pennies can yield short-sided thought processes and results that eventually will cost more to remedy
Retaining the “A” players within this business segment where their talents and skills could still be of use once the interactive media business segments is shuttered
Nail down what people are essential to divesting the segment and doing so in a way that is organized and structured
Talent assessment is critical to retaining the right people
A short and long term plan should be developed, with short term being the first three months and the long term being year 2014 and into 2015
Teams should be formed with a respective lead for each
Frequency of communication and what the team’s decision levels and authority are should likewise be made upfront and clearly established
Specified and agreed upon toll gates are established to track progress and are used to determine if specific issues or teams are on time or behind schedule
All operations and functions cease for the Interactive Media Business by Q2 2015
Team formation and operational plan developed by Q1 2014
Operating expenses cut by 20%
Costs and expenses for divestment known and established Q1 2014
Costs and expenses captured and recorded timely and precisely
Additional contracted work captured and recorded – less than 25% SGA
Top team leaders and managers selected by January 2014
Talent inventory measured by end of Q2 2014
Outlay of separation packages no more than 10% of SGA expenses
Current Organization Structure
Divisional by product portfolio
Theme Parks and Resorts, Consumer Goods
Studio Entertainment, Network Media, Interactive Media
Mixed mechanistic and organic
Process based operations - Mechanistic
Knowledge based products - Organic
Non-standard customer service activities - Organic
Proposed Organizational Structure
Environment remains complex
Change rate remains dynamic
Corporate Social Responsibility
When thinking about Disney, you think about the parks, the rides, the families and fun.
Being a leader in corporate social responsibility is important to The Walt Disney Company.
Being such a diverse and expansive business, Disney protects, educates and informs its employees of what is expected of them and how to treat their guests and customers.
According to a recent article in Forbes, The Walt Disney Company was ranked as the top company relating to corporate social responsibility.
The Walt Disney Company rated number 2 of top 100 most reputable companies
Corporate Social Responsibility
Corporate Social Responsibility
“We aspire to inspire together. Each of our companies has a unique ability to harness the imagination in a way that inspires others, improves lives across the world and brings hope, laughter and smiles to those who need it most. Together as one team, we embrace the values that make The Walt Disney Company an extraordinary place to work”
Grand Strategy - Divestiture of the Interactive Media business unit segment