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Walt disney Case Analysis

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Walt disney Case Analysis

  1. 1. Strategic Management Fall 2013 Bryan Claire Rebecca Craig Jeff Gloe Christina Orndorff 1
  2. 2. Corporate Strategy Centered on: – Creating a high-quality family content – Exploiting technological innovation to make entertainment experiences more memorable – International expansion * Disney is employing both a growth and differentiation strategy 2
  3. 3. Walt Disney Company’s Portfolio • Media • Parks and Resorts • Studio • Consumer Products • Interactive Media 3
  4. 4. Media Industry Threats: • Social Media and video on mobile devices • User Generated Content • Fragmentation • Shift from traditional media outlets Opportunities: • Social Media • Combining social media with traditional media for expanded footprint 4
  5. 5. Parks and Resorts Threats: • High competition in U.S. Markets (Busch Entertainment) • Weak economy • High unemployment Opportunities: • High barriers to entry • Technology advancement • Threat of substitutes are minimal • Niche market for theme parks and resorts 5
  6. 6. Studio Entertainment Threats: • High competition • Weak economy • High unemployment • Social Media • Increasing box office prices • Shorter time in box office Opportunities: • High barriers to entry • Technology advancement • Low consumer bargaining power • Improved CGI and 3D capabilities • Social Media 6
  7. 7. Studio Entertainment (cont’d) Global Box Office - All Films (US$ Billions) US/Canada International $40 $32.6 $35 $34.7 $31.6 $27.7 $29.4 $30 $25 23.9 $20 18.8 21.0 22.4 (69%) 18.1 (66%) $15 (65%) (69%) (64%) $10 $5 9.6 10.6 10.6 10.2 10.8 2008 2009 2010 2011 2012 $0 7
  8. 8. Consumer Products Threats: • Consumer products industry is highly competitive • Weakened global economy has significantly impacted bottom lines • Technological impacts • Many available substitutes Opportunities: • High supplier power 8
  9. 9. Interactive Media Threats: • Low barriers to entry Opportunities: • Technology • Inexpensive for consumers in a weakened economy • Social Media • Growing market 9
  10. 10. Long-Term Attractiveness of Portfolio Media - Attractive Parks and Resorts – Attractive Studio/Motion Picture – Neither Attractive nor Unattractive Consumer Products – Unattractive Interactive Media – Attractive Overall the industries represented in Disney’s portfolio are attractive. 10
  11. 11. Competitive Strength Media Networks • Business unit operates domestic and international cable networks, ABC Television network, television production, U.S. domestic TV stations • Advancing in the global market with filmed entertainment • Most TV stations are number one in their market • Very strong news brands with 238 affiliates that reach 99% of U.S. households • Radio Disney is offered through multiple platforms including SiriusXM, iTunes, and mobile phones • Utilizing technology to reach viewers via apps for mobile devices and online viewing • Operating income increased 29% from 2009 to 2011 11
  12. 12. Competitive Strength Parks and Resorts • Disney has parks on both the west coast and east coast of the U.S., as well as a cruise line with ports on both U.S. coasts • Disney has ownership in other parks and resorts in the global market • Inclusive facilities so visitors never need to leave the area which results in high revenues due to hotel lodging and food sales • All parks and resorts tie back to the themes of popular movies produced by Disney • Disney has the capital resources to expand attractions when necessary • Two new cruise ships were deployed due to the existing fleet operating at full capacity 12
  13. 13. Competitive Strength Studio Entertainment • Business unit produces live-action and animated movies, pay-per-view and DVD home entertainment, and Disney on Ice performances • Pixar and Marvel were purchased by Disney for use of technology as well as character use • Disney knows exactly how many of each branded movies will be produced each year: one animated Pixar and Disney film, two Marvel films and six to eight live-action Disney films • Operating profits grew about 250% after acquisition of Marvel 13
  14. 14. Competitive Strength Consumer Products • Business unit includes Disney Stores and businesses focusing on merchandise licensing and children’s books and magazine publishing • Global with 208 Disney Stores in North America, 103 in Europe, and 46 in Japan • Publishing includes print format as well as electronic format that is viewed on mobile or tablet devices 14
  15. 15. Competitive Strength Interactive Media • Business unit produces video games for multiple devices as well as Disney’s websites • Acquired Playdom, Inc. which creates online games for social networking 15
  16. 16. High 9-Cell Industry Attractiveness/Business Strength Matrix Industry Attractiveness Media Networks Studio Entertainment Parks and Resorts Interactive… Low Consumer Products Weak Strong Business Strength/Competitive Position 16
  17. 17. Strategic Fit: How do Disney’s businesses build off each other’s successes? • Branding is king – leveraging to the max • Costs incurred long ago by the Studios to develop characters like Mickey Mouse and Cinderella now continue to generate returns in hotels/cruise ships, gaming/video production, theme parks • Gaining Expertise in technology – also to be shared, no borders, to catch up and potentially overtake competitors • Assets are deployed across all business lines to drive shareholder value. Let’s look at three examples.
  18. 18. Disney Growth by Strategic Business Unit FYE 9-28-2013 Revenue % 45% Growth % 31% 26% 13% 8% 9% 9% 5% 3% 2% Media Networks and Resorts Parks Studio Entert'mnt Consumer ProductsInteractive 18
  19. 19. Parks & Resorts: An example of Strategic Fit at Work in China… 19
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  21. 21. China and Theme Parks: What not to do 21
  22. 22. How Strategic Fit Informs Disney’s Shanghai Plan (http://skift.com/2013/11/08/how-disney-plans-to-build-a-brand-in-china-before-shanghai-park-opening) There are risks: “Disney still has a far way before Mickey’s famous ears are recognizable by every child and parent in China”. Disney CEO Robert Iger addressed the issue during the company’s 4th quarter call on Nov 7, 2013. He cited the synergies of the Disney empire in addressing these risks: LEVERAGING MEDIA In CHINA: • Relying more on its mobile and online platforms than TV due to national restrictions. • The company is planning to increase marketing once park attractions based on cultural or media interests are announced. Chinese culture will be wedded to Mickey. 22
  23. 23. Disney’s Shanghai Plan, cont’d (http://skift.com/2013/11/08/how-disney-plans-to-build-a-brand-in-china-before-shanghai-park-opening) RETAIL: will also help Disney build a buzz before the 2015 opening . “We’re also opening or developing our first big store in China and that is actually in Shanghai, which will be used before it opens sort of a quasi visitor center to let people know more about the park itself,” said Iger. “Once the park opens we actually believe that we’ll have a significant halo effect on the brand. There will be a lot more interest in and appreciation of Disney stories and characters.” DISNEY’S CRUISE LINE: represents another opportunity for tapping into the Chinese market. Iger says the company currently has no plans of adding to its fleet or expanding itineraries; however, it could become an option when Asia opens up to the family cruise business. 23
  24. 24. Another example of Strategic Fit: Consumer Products (9% growth) In August 2013, Disney Introduced its latest “COLLECTION” – Disney Fairytales Designer Collection. “Limited to an edition of 6,000 of each of the five couples globally, each Doll Set retails for $129.95”. And what else? Apparel and home décor, of course…. 24
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  26. 26. Delivering on Strategy: Financial Performance • Disney’s mission focuses heavily on financial performance: “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.” -thewaltdisneycompany.com/investors 43,000 EPS Trend 2010-2012 Net Income Trend 2010 - 2012 Revenue Trend 2010 - 2012 7,000 $3.50 6,000 $3.00 5,000 $2.50 4,000 $2.00 3,000 $1.50 2,000 $1.00 36,000 1,000 $0.50 35,000 0 $0.00 42,278 42,000 40,893 41,000 $MM 40,000 39,000 38,063 38,000 37,000 2010 2011 2012 2010 2011 2012 2010 2011 2012 26
  27. 27. Strategic Business Unit Contribution 2011 Amounts in $MM USD MEDIA Operating Expense Selling & General Expense Depreciation & Amortization Other OPERATING INCOME STUDIO 18,714 Revenue PARKS & RESORTS 11,797 10,376 2010 CONSUMER INTERACTIVE MEDIA MEDIA PARKS & RESORTS STUDIO CONSUMER INTERACTIVE MEDIA 6,351 3,049 982 17,162 10,761 6,701 2,678 761 7,383 3,136 1,334 732 9,888 6,787 3,469 1,236 581 2,539 1,696 2,465 794 504 2,358 1,517 2,450 687 371 237 1,165 132 105 54 222 1,139 89 78 43 1,318 693 677 (234) (584) 6,146 (438) 1,553 618 816 (308) Total Operating Income from SBUs 8,825 7586 CONTRIBUTION 2011 2010 70% 68% 18% 17% 7% 9% 9% 9% -3% -3% MEDIA PARKS & RESORTS STUDIO CONSUMER INTERACTIVE MEDIA 5,132 • Media by far the strongest strategic unit • Parks & Resorts, Studio and Consumer are all effectively leveraging the Media / Broadcast unit • Disney has not effectively capitalized on Interactive Media. Why? 27
  28. 28. Strategic Business Unit Contribution The roll out of the “Disney Infinity” game has had a massive impact http://thewaltdisneycompany.com/sites/default/files/reports/q4-fy13-earnings.pdf 28
  29. 29. Interactive Media Sales • Disney’s fiscal year runs October – September • Anticipated holiday sales of “Infinity” may take unit to profitability Interactive Media Revenue Trend $MM 2010 2011 2012 2013 761 982 845 1,064 Interactive Media Revenue Trend 1200 1000 800 600 400 200 0 2010 2011 2012 2013 29
  30. 30. Interactive Media Operating Income • Disney is erasing the huge operating losses in the division slowly • Infinity’s Q4 release led to the first profitable quarter in years for the division 2010 -234 Operating Losses 2011 2012 -308 -216 2013 -87 Operating Losses Last 4 Years $MM 0 -100 2010 2011 2012 2013 -200 -300 -400 30
  31. 31. Interactive Media Sales Forecasts • Currently not providing guidance • Key Factors for Sales: • Holiday Season for “Infinity” • Leveraging the Lucas Arts and Marvel intellectual properties • New Platforms: Playstation 4 and Xbox One 31
  32. 32. References http://www.iaapa.org/resources/by-park-type/amusement-parks-and-attractions/industry-statistics http://www.mpaa.org/Resources/92be6469-1d3c-4955-b572-1d3f40f80787.pdf http://stateofthemedia.org/2013 http://www.disneyabctv.com/division/index_stations.shtml http://www.ibisworld.com/Common/MediaCenter/Fastest%20Growing%20Industries.pdf http://www.joystiq.com/2013/08/07/disney-interactive-loses-58-million-in-q3/ http://www.nintendolife.com/news/2013/11/disney_interactive_sees_big_financial_boost_in_q4 http://www.gamasutra.com/view/news/32919/Disney_Interactive_Losses_Up_Slightly_On_Continuing_Playdom_Acquisitio n_Costs.phphttp://www.iaapa.org/resources/by-park-type/amusement-parks-and-attractions/industry-statistics http://www.mpaa.org/Resources/92be6469-1d3c-4955-b572-1d3f40f80787.pdf http://stateofthemedia.org/2013 http://www.disneyabctv.com/division/index_stations.shtml http://www.ibisworld.com/Common/MediaCenter/Fastest%20Growing%20Industries.pdf http://www.forbes.com/sites/scottmendelson/2013/11/10/weekend-box-office-analysis-thor-2-sets-marvel-record-withmighty-86-million/ 32

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