Write a 3 page executive summary

In order for Disney to expand to Mexico, our group has had to look at a multitude of factors, from opportunities, risks, threats, marketing plans, pricing strategies, and risk mitigation strategies to name a few. Based on all of our groups research, we determined that expanding to Mexico is financially viable. In this section we will start with initial start up costs that Disney will have to incur in year 0. After year 0, we will discuss total operation cost factors and potential revenue Disney expects in the first year. Finally, we will discuss total subscribership and expected revenues starting in year 1.

So what startup costs will Disney have to incur in year 0? The Costs of Goods Sold (COGS) refers to the direct costs it takes to produce goods sold by a company (Hayes, 2019). This includes costs like labor costs, materials etc. Per our group’s Income Statement, we have determined our COGS to be $286,434.

Followed by COGS, we will look at Operating costs, which include translation for programming, advertising, research and development (includes maintenance and improvements), selling, general and administrative (Disney’s Income Statement). Operating expenses will be expenses every year our firm is in operation. Our first expense-translations for programming will include services like dubbing, subtitles and experienced translations services. Our Income statement has valued this cost at $100,000 per year. Keep in mind translation costs could vary depending on the number of new content Disney produces in a given year. Disney’s next operational cost is advertising. Using a combination of television adverting, web advertising and social media advertising (Group 1 Week 9 Paper), costs are estimated at $400,000. This price is much lower than Netflix’s $2 billion dollars advertising budget, but Disney will have the option of lowering or escalating their advertising budget as needed. Furthermore, with our main brand recognition, having a lower advertising budget would be wise. Next on the Operational cost list is research and development. These costs include creating a friendly and usable user interface, maintenance and creating fixes to bugs as they occur. R&D funds creating a user friendly interface is vital for Disney to succeed regardless of what country Disney decides to expand to (Karn, 2014). R&D will be estimated at $200,000. Our last operational cost category is selling, general and administrative costs, which include employee salaries, and other administrative costs, which we have totaled at $1,270,000. Total Operational costs will be $1,970,000.

Within year 0, we are estimating $0 revenue, because year 0 will be dedicated to building up our SVOD service. So our total expenses will be total cost revenue+ Operational costs, which puts us at $2,256, 434. However, given Disney’s other Lines of Business revenue streams, they will be able to absorb these start up costs.

In Year 1, our group will also assume operational expenses will be the same; and there will be $0 dollars in cost of revenue. So our total operational costs for year 1 would be $1,970,000. As mentioned earlier, some of these operational costs will fluctuate year to year, given circumstances.

Now we will discuss subscribership goals, and potential revenues from those goals. Since we are proposing several different options, which will include getting Disney+ and HULU separately at $4.99 each or getting both SVOD services for a total of $7.99 total; our group is expecting different levels of interest depending on the type of customer. We are predicting, more potential customers will aim towards our bundled SVOD service package of HULU and Disney+, given its’ value. Our group is expecting a total of 38,000,000 subscribers total, within the first year (Disney’s Income Statement). We break up our plan into 3 categories- 1. Customers who only sign up for Disney+, 2. Customers that only sign up for HULU, and 3. Customers that sign up for the bundled package. Our group has estimated that HULU and Disney+ separately will get 9,000,000 subscribers each. Disney’s Income statement also estimates they will have 20,000,000 subscribers for their bundled Disney+ and HULU package. So Disney is expecting a Net Income of $151,634,000. As per Groups 1’s previous paper, we expect subscribership to grow after year 1, as our original content expands, raising revenues. Disney’s breakeven point will be less than a year.

Major Risk Factors Regarding Projections and Assumptions

Our operating expense variables will be fairly stable in year 1 and beyond; however, operating expenses will change from year to year depending on Disney’s needs. For example after the first year, If Disney finds that they need to increase their advertising budget or R&D budget, they will have room to do so, given revenue streams are accurately described as in the previous section suggests. Overall, operational costs will be low risk and can be managed as issues arise. Furthermore, Disney will be able to cover costs from other Lines of Business as needed.

Since Disney is already entering a market that is Netflix centric; they will have to prove their value and worth in the Mexican market. Disney’s major risk factor, is subscribership not reaching our intended goals. For example, if subscribership is significantly underwhelming, Disney may not be able to justify startup costs (year 0)+ Year1 costs; If subscribership is at what Group 1 predicted or higher, than Disney will be in a good position. If subscribership starts out low and slow going, Disney should consider- is our platform/interface user-friendly and easy to use; do we need to be more active in advertising etc.? In other words the number of subscribers is key to Disney’s success, especially given the already high demand for Netflix in Mexico.

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