Case: Walt Disney

​STRATEGIC MANAGEMENT
MBA 703
FEU-Manila

Submitted by:
Georgette Ann Marie D. Gales

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Company Background

The Walt Disney Company (“Disney”) originated with its animated

characters and expanded into other adjacent businesses with the goal of bringing
happiness to families via several different, but related avenues. In October 1923,
Walter (“Walt”) and Roy Disney established the Disney Brothers Studio and
began creating animated films that would eventually be the foundation of Disney3
. In 1937, Disney created Snow White and the Seven Dwarfs. This film is the only
animated film to rank in the American Film Institute’s list of the 100 greatest
American Films of all time.4 In 1955, Disney opened its first theme park,
Disneyland, in Anaheim, California, that spanned over 160 acres. Opening day
was not without issues. The temperature was over 101 degrees, there was a
plumber’s strike, and the asphalt had been recently placed (which made the heels
of women shoes sink into the ground). Even with all the negative press on
opening day, Disneyland has still been one of the most successful, frequently
visited theme parks in history. The construction of Disneyland was personally
supervised by Walt.5 In December 1966, Walt Disney passed away from lung
cancer. Although he was an avid smoker, he was always careful not to smoke
around kids. Walt’s passing did not stop his brother Roy from continuing to build
on his brother’s dream. In 1971, Walt Disney World opened its doors in Florida.
Roy Disney passed away in late 1971. At that point, control of the company
passed to Donn Tatum, followed by Card Walker and then Ron Miller (Walt’s son
in law).6 Disney continued to expand by adding additional theme parks and media
assets. In April 1983, Disney launched The Disney Channel. The original intent

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was to be a premium channel that catered to children and teenagers during the day
and families in the evening.
The Disney channel, through the Mickey Mouse Club, is partially
responsible for the success of stars such as Britney Spears, Justin Timberlake and
Christina Aguilera. The Disney Empire was also expanding internationally. In
1983, Disney opened Tokyo Disney and in 1992 Euro Disney. Tokyo Disney,
located east of the city, has two theme parks and three Disney hotels. Euro Disney
has two theme parks and seven hotels. Today, Disney has over 11 Theme Parks
and approximately 44 hotels surrounding the properties. 72 In 1993, Disney
purchased Miramax Film Corporation from Harvey and Bob Weinstein for
approximately $70 million. 8 Miramax operated as a separate unit of Disney. The
Weinstein brothers continued to run Miramax under the supervision of Disney
executives. By 2005 Miramax was valued at over $2 billion, with an extensive
film library that included “Pulp Fiction” and “Shakespeare in Love”. The
relationship between Disney and the Weinstein brothers was filled with
disagreements, both financial and strategic. One of the more significant
disagreements came over the release of the controversial film “Fahrenheit 9/11”
that targeted President Bush during the terrorist attacks. Additionally, Disney
claimed the Weinstein brothers paid themselves excessive bonuses in years when
Miramax was not profitable. In 2005, the Weinstein brothers left Miramax to
pursue other interests. Eventually, in 2010, Miramax was sold to Tutor-Saliba
Corp.9 Another major Disney acquisition took place on July 31, 1995 with the
purchase of Capital Cities / ABC for $19 billion.10 This gave Disney access to
the television and cable networks of ABC and ESPN. In May 2006, Disney
purchased Pixar for $7.4 billion in a cash and stock transaction. 11 The
relationship between these two companies began in 1997 with an agreement to

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create five films including Cars, Finding Nemo and The Incredibles. The deal was
a mutually beneficial transaction as it combined the computer animation power of
Pixar with the marketing and distribution strength of Disney. Along with the Pixar
purchase, Steve Jobs, founder of Pixar and Apple, joined the Disney board of
directors.12 In 2009, Disney purchased Marvel Entertainment for about $4
billion. This purchase gave Disney access to several comic book characters, such
as Spider-man, X-Men, Captain America and Thor.
The Marvel purchase should prove to be lucrative as Disney presents the
various characters through its many systems. In October 2012, Disney acquired
Lucasfilm from George Lucas for $4 billion in cash and stock.13 Lucasfilm is
most well-known for blockbuster movie hits such as Star Wars and Indiana Jones.
Along with this purchase, Disney announced future Star Wars films that will be
released in 2015. The Star Wars franchise films have earned over $4.4 billion in
global box offices to date.

Vision and Mission Statement

Disney’s vision is “to make people happy.” the ​Company wants to
entertain, inform and inspire people around the globe through the power of
unparalleled storytelling, reflecting the iconic brands, creative minds and
innovative technologies that make ours the world's premier entertainment
company.

Organizational Structure
Disney operates using a strategic business unit (SBU) organizational
structure that consists of five diverse, but all family entertainment segments: (1)
media networks disney’s largest SBU in both revenues and operating income,

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 accounting for 45 percent of all revenues in 2012 (2) parks and resorts, (3) studio
entertainment, (4) consumer products. The president, chief executive officer, and
director of Walt Disney is Robert Iger. There is no chief operations officer (COO)
in the Disney hierarchy, but Andy Bird, chairman of Walt Disney international,
functions like a COO.

SEGMENTS

Media Networks Parks and Resorts Studio Consumer Products

Entertainment
● Disney ABC ● Walt Disney World ● Disney Hard
Television ● Tokyo Disney ● Walt Disney Lines
● ESPN Inc. ● Disneyland Paris Pictures ● Disney Soft
● Walt Disney ● Hongkong ● Miramax Lines
Internet Disneyland Films ● Disney Toys
Group ● Disney Cruise Line ● Buena Vista ● Disney
● ABC owned ● Disney vacation Homes Publishing
Television Club Entertainment ● Disney Press
● ABC Radio ● Buena Vista ● Disney Editions
Theatrical
Productions

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 ● Walt Disney
Records
● Buena Vista
Records
● Hollywood
Records
● Lyric Studios
● Pixar Studios

Finance
Income Statement Disney’s 2012, has 17.4 percent increase in net income.
Balance Sheets Disney’s 2012 notes that Disney has $2.45 billion of “projects in
progress.” Also, note the $25 billion in goodwill, fully one-third of total assets,
which is not a good thing. Long-term debt is staying about the same at $10
billion, which is a lot of debt to service.

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 Competition
Disney competes directly with nBc Universal, Paramount Pictures, time
Warner, cBS corp., news corp., carnival corp., and royal caribbean and indirectly
with all family entertainment oriented businesses globally. In essence, all hotels,
restaurants, water parks, and attractions anywhere near Disney’s 14 theme parks,
are rival businesses, such as Sea World, Marineland, and Silver Springs in
Florida. there is a large, new (china state run) theme park scheduled to open in
2014 right beside the Disney theme park (also slated for opening in 2014) in
Shanghai, china, so that will be a major competitor

Internal Factor Evaluation

Key Internal Strengths Weight Rating Weighted Score

1 Strong Diversification 0.15 4 0.60

2 Responsiveness to Markets 0.12 4 0.48

3 Brand Recognition 0.12 3 0.36

4 Creative Process 0.12 3 0.36

Key Internal Weaknesses Weight Rating Weighted Score

1 Large R&D costs 0.15 1 0.15

2 High Risk Factor 0.12 2 0.24

3 Constant up Gradation 0.12 1 0.12

4 High sunk costs 0.10 2 0.20

TOTAL 1 2.51

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 The scores above 2.5 show a strong internal position. An internal factor
could be included twice in the IFE Matrix if the factor is both strength and
weakness. In the case of Walt Disney the total weighted score is near average
2.51, which means that the company is reacting strong internally.

External Factor Evaluation

Key External Opportunities Weight Rating Weighted Score

1 Growth through diversification 0.12 4 0.48

2 Increase Media Networks and 0.15 3 0.45

Broadcasting Market share

3 International growth/ New markets 0.12 4 0.48

4 Changes in technology and consumer 0.15 3 0.45

consumptions

Key External Threats Weight Rating Weighted Score

1 Economic Recession 0.12 4 0.48

2 Changes in technology and consumer 0.15 3 0.45

consumptions

3 Uncontrollable changes in travel and 0.09 2 0.18

tourism

4 Intellectual property (protection of) 0.1 2 0.2

TOTAL 1 3.17

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 The average weighted score for EFE matrix is 2.5 any company total
weighted score fall below 2.5 considered as weak. The company's total weighted
score higher than 2.5 is considered strong in position and their reacting
immediately to the changes of their environment externally..

SWOT and TOWS ANALYSIS

SWOT analysis stands For Strength, Weakness, Opportunity and Threat

for a particular organization which can help in formulating a strategy for its
business and can also help in analyzing its internal environment Strengths,
weakness and for external environment Opportunities and Threats

STRENGTHS WEAKNESSES

Strong Diversification Large R&D costs

Responsiveness to Markets High Risk Factor

Brand Recognition Constant up Gradation

Creative Process High sunk costs

OPPORTUNITIES THREATS

Growth through diversification Economic Recession

Increase Media Networks and Changes in technology and consumer

Broadcasting Market share consumptions

International growth/ New markets Uncontrollable changes in travel and

tourism

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Changes in technology and consumer Intellectual property (protection of)
consumptions

Strength and Opportunity Strategy

SO1 Create a customized targeted media advertising plan for all segments
(S2, O2)
SO2 Expand Hongkong Disneyland and research one new market (S3, O3)
SO3 R&D to storytelling to kids using technology (S4, O4)
Weakness and Opportunity Strategies
WO1 Develop and research plan around emerging markets with low R&D
costs.(W1, O1)
WO2 Target 3 new markets and develop expansion plans around
consumer products. (W4,O3)
WO3 Consumer research around the use of technology and needs. (W2,
O4)
Strength and Threat Strategies
ST1 Digitalize content to utilize technology and lower costs (S2, S4, T1)
ST2 Document and create IP protection plan (S2, T4)
ST3 Create and bank marketing strategies and promotions to use during
adverse conditions or slow periods for parks and resorts. (S2, T3)
Weakness and Threat Strategies
WT1 Digitalize content to utilize technology and lower costs. (W4, T1)
WT2 Focus on one high tech segment and focus content and R&d there.
(W1, T4)

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Recommendations
Market Penetration
● Target market segmentation through acquisitions
Advantage: ​Quick diffusion and adoption of your product in the marketplace
incentives to be efficient, discouragement of competition, and creation of
goodwill.
Disadvantage:Saturated market

Product Development- to renovate and build new attractions in order to attract an

older target market
● Related Diversification
● Diversification in Branding
● Vertical and Horizontal Integration
Advantage: keep in pace and seize opportunities
Disadvantage: Riskiness, extra cost, evolving markets and competition

Market Development- build a new theme park which will be more accessible to
the North East Area.
● Foreign Outsourcing
● Direct Investment
● Licensing
Advantage: Gaining new customers, increase revenue and company growth
Disadvantage: Risk associated with such a strategy. Under such a strategy a
company will engage upon entering new markets for its products. Entering into
unknown territory is always risky and this strategy has the added risk of cost
associated with it. And also needs a large amount of funds.

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 Walt Disney should build an indoor theme park and resort to New York,
Improve their advertising to promote entertainment which targets a more mature
audience. And remodel and build new attractions in every Park and Resorts to
stay appealing to our customers.

Action Timeline Responsible

Promotion Quarterly Marketing, Operations,

Finance/Accounting

New Attractions Annually Operations, Finance,

R&D

Technology Innovations Quarterly R&D, IT, Operations,

Finance

Conclusion
As Disney moves forward into a future of advancing technology and
globalization, the company has some decisions to make. Its strategic goals have
been to fully develop and monetize its franchises and increase its presence
internationally. Its presence is a dominant force in the United States, but how can
its success translate overseas? Walt Disney was never afraid to dream big; but as
the margin of error continues to narrow in a technologically advancing society,
how can Disney continue to adapt? Strategic planning is needed, implement
strategies that will help lower the costs and to maintain competitive advantage.
And balance approach to innovation and cost-savings.

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