Walt Disney - An analysis of the strategic challenges

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- Analysis based on research around the entertainment industry, where the strategic challenges of Walt Disney Company are addressed.
- Development of strategic plan for Walt Disney

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Walt Disney - An analysis of the strategic challenges

  1. 1. An analysis of the strategic challenges
  2. 2. Some historical clues…  Founded by Walt Disney  Established in 1923  Headquartered in California, USA  Currently world’s largest conglomerate in terms of revenue.
  3. 3. Walt Disney Vision “To make people happy ”
  4. 4. 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.”
  5. 5. Walt Disney Mission Statement’s Evaluation  Product oriented statement  Focus on what products to sell and what services to offer rather than on how to satisfy customer needs Lack of 5 essential components: 1. Customers 2. Technology 3. Philosophy 4. Concern for public image 5. Employees
  6. 6. Walt Disney Recommended Vision “To make entertainment the wheel of life”
  7. 7. 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.”
  8. 8. 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 Products 3,252 mil. $ 3,555 mil. $ 9% Disney Interactive 845 mil. $ 1,064 mil. $ 26%
  9. 9. Disney - contribution of segments to revenues Media Networks 45% Parks & Resorts 31% Studio Entertainment 13% Consumer Products 8% Interactive 3%
  10. 10. Corporate CEO Chairman, Walt Disney International Senior Executive Vice President, General Counsel and Secretary, The Walt Disney Company Senior Vice President, Global Security, The Walt Disney Company Executive Vice President, Corporate Strategy and Business Development, Executive Vice President, Corporate Strategy and Business Development The Walt Disney Company Executive Vice President, Corporate Real Estate, Alliances, and Treasurer, The Walt Disney Company Executive Vice President and Chief Communications Officer, The Walt Disney Company Executive Vice President and Chief Human Resources Officer, The Walt Disney Company Senior Executive Vice President and Chief Financial Officer, The Walt Disney Company Senior Vice President, Planning and Control, The Walt Disney Company BusinessUnit CEO Executive Chairman, ESPN, Inc. President, Disney Consumer Products Chairman, The Walt Disney Studios President, Disney Interactive Co-Chairman, Disney Media Networks Group and President, ESPN Chairman, Walt Disney Parks and Resorts Co-Chairman, Disney Media Networks and President, Disney•ABC Television Group Walt Disney Organizational Structure
  11. 11. • HUMAN RESOURCES • RESEARCH & DEVELOPMENT • MARKETING• FINANCIAL 20% annual growth in earnings per share Family orientation : appeal to kids and bring the family together Foster an engaged and collaborative company culture Expand the portfolio of characters and drive the company into the e-world Walt Disney Objectives
  12. 12. Market penetration • Targeted market segmentation through acquisitions New products • Related Diversification • Diversification in branding • Vertical & Horizontal integration Market development • Foreign Outsourcing • Direct Investment • Licensing Conglomerate diversification - Existing New Existing New PRODUCTS MARKETS Walt Disney Corporate Strategies
  13. 13. RAPID MARKET GROWTH SLOW MARKET GROWTH Walt Disney Grand Strategy STRONG COMPETITIVE POSITIONWEAK COMPETITIVE POSITION  Market development  Related Diversification  Vertical Integration  Horizontal Integration  Market penetration
  14. 14. 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.
  15. 15. 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 PEST Analysis
  16. 16. 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) Walt Disney Porter’s 5 Forces Analysis
  17. 17. 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
  18. 18. 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)
  19. 19. Market Share on Studio Entertainment Industry Globally $ 5,03 billion Overseas $ 3,14 billion U.S. $ 1,89 billion Globally $ 4,68 billion Overseas $ 3 billion U.S. $ 1,68 billion Globally $ 3,68 billion Overseas $ 2,26 billion U.S. $ 1,42 billion
  20. 20. Competitive Profile Matrix WALT DISNEY WARNER BROS UNIVERSAL CRITICAL SUCCESS FACTORS WEIGHT RATING 1 - 4 SCORE RATING 1 - 4 SCORE RATING 1 - 4 SCORE 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
  21. 21. Brand Reputation •Highly Diversified Portfolio •Strategic & Tactical Acquisitions •Global Expansion & Alliances •Economies of Scope •Top Management •Loyal Customers •Strong Financial Position •High Cost of Operations •Concentration of Revenues In North America •Approaches Antitrust Law Limits •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 •Strong Competition •Continous Need For Technological Update •Change in Consumers Preferences & Tastes •Negative Publicity Due to Unexpected Event S W TO Walt Disney SWOT Analysis
  22. 22. External Factor Evaluation Matrix (EFE) WEIGHT RATING WEIGHTED SCORE OPPORTUNITIES Benefits from it advances & mobile games .20 3 .60 Build a more eco-friendly image .05 3 .15 Further expansion in new emerging economies (Russia, India) .15 2 .30 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
  23. 23. 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
  24. 24. 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
  25. 25. Strengths Weaknesses Walt Disney SWOT Combined Strategies 1. Brand Reputation 2. Highly Diversified Portfolio 3. Strategic & Tactical Acquisitions 4. Global Expansion & Alliances 5. Economies of Scope 6. Top Management 7. Loyal Customers 8. Strong Financial Position 1. High Cost of Operations 2. Concetration of Revenues In North America 3. Approaches Antitrust Law Limits Opportunities SO - Strategies WO - Strategies 1. Benefits From IT Advances & Mobile Gaming 2. Build A More Eco-Friendly Image 3. Further expansion in new emerging economies (India, Russia) 4. Release of New Successful Stories & Characters 2-1: Develop mobile game applications with Disney characters 1-2: Collaborating with WWF so as to promote environmental issues 6-3: Build a multinational management team 8-4: Consumer research on their preferences nowadays 1-1: Digitalization of our operations in order to low costs & utilize technology 2-3: Target India as possible expansion through consumer products Threats ST - Strategies WT - Strategies 1. Financial Récession 2. Increasing Piracy 3. Strong Competition 4. Continous Need For Technological Update 5. Change in Consumers Preferences & Tastes 6. Negative Publicity Due to Unexpected Event 7-1: Offer discounts to all members of Disney fun club 3,4-3: Expansion in Brazil market through alliances and synergies 8-4: Invest on R&D for one high tech department 6-5: Monthly consumer research via online polls 1-1: Re-edit and release in cinemas old classic Disney films 2-3,4: Take advantage of operations that take place in N. America by investing in Technology and R&D for that area
  26. 26. QUANTITATIVE STRATEGIC PLANNING MATRIX Expansion in Brazil market through alliances and synergies Develop mobile game applications with Disney 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
  27. 27. 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. Implementing Strategy
  28. 28. Evaluation of Strategy • 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 Mobile could drive total games software industry revenue to $100B by 2017 . • 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 Games dominate mobile app usage and revenue. source: www.digi-capital.com
  29. 29. source: www.digi-capital.com
  30. 30. Mobile Games Industry Descriptive Statistics source: www.digi-capital.com
  31. 31. 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.

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