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Walt disney Case Analysis
- 1. Strategic Management Fall 2013 BryanClaire Rebecca Craig Jeff Gloe Christina Orndorff 1
- 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. Walt Disney Company’sPortfolio • Media • Parks and Resorts • Studio • Consumer Products • Interactive Media 3
- 4. Media Industry Threats: • SocialMedia 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. 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. Studio Entertainment Threats: • Highcompetition • 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. Studio Entertainment (cont’d) Global BoxOffice - 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. Consumer Products Threats: • Consumerproducts industry is highly competitive • Weakened global economy has significantly impacted bottom lines • Technological impacts • Many available substitutes Opportunities: • High supplier power 8
- 9. Interactive Media Threats: • Lowbarriers to entry Opportunities: • Technology • Inexpensive for consumers in a weakened economy • Social Media • Growing market 9
- 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. 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. Competitive Strength Parks andResorts • 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. 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. 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. 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. High 9-Cell Industry Attractiveness/Business Strength Matrix IndustryAttractiveness Media Networks Studio Entertainment Parks and Resorts Interactive… Low Consumer Products Weak Strong Business Strength/Competitive Position 16
- 17. Strategic Fit: Howdo 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. Disney Growth byStrategic 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. Parks & Resorts:An example of Strategic Fit at Work in China… 19
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- 21. China and ThemeParks: What not to do 21
- 22. How Strategic FitInforms 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. 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. Another example of StrategicFit: 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. 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. Strategic Business UnitContribution 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. Strategic Business UnitContribution 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. 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. Interactive Media OperatingIncome • 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. Interactive Media SalesForecasts • 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
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Editor's Notes
- #6 According to a 2011 IAAPA U.S. survey of adults: 25 percent of Americans surveyed visited an amusement park within the last 12 months, with 43 percent of Americans indicating they plan to visit an amusement park within the next 12 months.64 percent of Americans reported that their last trip to an amusement park was a day trip and 27 percent say it was an overnight trip.28 percent of Americans said they would be interested in working for an amusement company.- See more at: http://www.iaapa.org/resources/by-park-type/amusement-parks-and-attractions/industry-statistics#sthash.115QNkuq.dpuf
- #11 -Media - Projected to grow 18.7% -Parks and Resorts –-Studio and Motion Picture Industry is expected to remain relatively stagnant over the next 5 years. -Consumer Products is a highly competitive industry. One reason for a significant weakness is due to a reduction in household residual income. Technology and the growth of non-traditional channels (warehouse clubs) are also a major challenge to the consumer products industry. -Interactive Media Projected to grow 105% between 2013 and 2017. Interactive Media has a large number of opportunities for growth due to improved and ever changing technology.
- #14 The studio entertainment business unit produces live-action and animated movies, as well as pay-per-view and DVD home entertainment in which,Over the last several years, disney acquired Pixar and marvel for use of their technology as well as charactersThis alone is s a huge advantage over competiors since, considering that just last week, the Marvel Movie Thor: The Dark Age, set a marvel record of $86 million on its opening weekend
- #17 The 9-cell industry atrractiveness, business strength matrix shows at a glance which of disney’s business units should have priority. The size of the circle shows the current financial value of each business unit and the blue shaded portion shows disney’s current market shareAs you can see in general, the more market share the larger the circle and parks and resorts is disney’s leading business unit.But The interactive media business unit seems promising. Disney currently has strong competitive position in the area that is getting more attractive as technology advances with a great amount of room for growth. Who knows, maybe in the future, visits to the parks will just be through interactive media.
- #18 In the slides that follow, how Disney leverages its corporate assets to build shareholder success is highlighted in each of its 5 major business lines. You will see that while Disney’s historical strengths continue to thrive, Disney is about to break out into the digital environment, with its assets fully engaged in converting customers to Disney interactive games, and a future building on “personalized, on-demand” entertainment.
- #19 We’ll discuss the relative strengths of these strategic business units – history and future at Disney. The tremendous growth (from a very small base – 2%) in Interactive Revenues is a key strategy for Disney. The company has spent dollars in acquisitions in the arena to establish itself, and not get left behind. Those acquisitions appear to be paying off.
- #20 Disney will be opening this new resort, with China as a partner, in 2015. Millions of people will be within a 3 hour drive of this park, but Mickey Mouse and Donald Duck are not part of the culture in China, and this presents a problem for Disney – how to get people to come? Tokyo Disneyland and Hong Kong Disneyland has given the company experience in the far east – so they will use these lessons to make a big splash in China.
- #21 The size of the Shanghai resort will be more like DisneyLand in California; not the size of Orlando’s Disney World. Disney will own 44% and the Chinese Government will own the rest.
- #22 China’s deserted, fake Disneyland was begun in the late 1990’s and never got off the ground. This was located on about 100 acres, and was never completed. Fields are going back to the farmers. Disputes with property owners doomed the developers to failure. Disney has much more experience than that – and knows how to roll this out – in a whole different technological era.
- #24 Classis Disney – they exploit every opportunity to cross-sell.
- #26 A final example of Strategic Fit of Disney products – Interactive Media – 26% growth in FY 13. This review sums it all up… brand marketing…. Family friendly….. Using technology developed by another company…
- #28 The Media Networks group drives the majority of the business and supports the marketing efforts of all the other SBUs. Media is by far the most important strategic unit of DisneyParks and resorts are a solid contributor to overall income. Their contribution has remained essentially flatStudio productions is showing year over year decline in operating income. This is in spite of a reduction in expenses for the division. Consumer products contribution remained flat year over yearInteractive Media is the problem child of the SBUs. Operating losses in the unit have increased 74mm year over year
- #29 The Media Networks group drives the majority of the business and supports the marketing efforts of all the other SBUs. Media is by far the most important strategic unit of DisneyParks and resorts are a solid contributor to overall income. Their contribution has remained essentially flatStudio productions is showing year over year decline in operating income. This is in spite of a reduction in expenses for the division. Consumer products contribution remained flat year over yearInteractive Media is the problem child of the SBUs. Operating losses in the unit have increased 74mm year over year