Week 15 - Case Study Analysis Presentation

Strategic Management

Final Case Study

Andrea Baril

Ashley Cleary

Sylvia LaBrie

Marie-Michele Lachance

05/03/2012

Overview Company Overview • The Founder • Growth

• Location Map • Walt Disney’s Division

Existing Mission

Proposed Mission and Vision

SWOT Analysis

External Audit • CPM • Positioning Map • EFE

Internal Audit • Organizational Chart • Financial Trends • Balance Sheet • Financial Ratios • IFE

Strategic Plan • SWOT Matrix • Space Matrix • IE Matrix • Grand Strategy Matrix • BCG

• Matrix Analysis • QSPM

Implementation • Assumptions • Projected Income Statement • Projected Balance Sheet

• Projected Ratios

Evaluation • Stock Price • Balance Scored Card • Strategies • Recommendations • Objectives

The founder

• Walt Disney was born on December 5, 1901 in Chicago • During the fall of 1918, Walt Disney attempted to enlist for

military service but he got rejected.

• He started a small company called Laugh-O-Grams, which eventually fell bankrupt.

• With his suitcase, and $20 Walt headed to Hollywood to start anew.

• After making a success of his "Alice Comedies," Walt became a recognized Hollywood figure.

• Disney took a deep interest in the establishment of California Institute of the Arts, a college-level professional school of all the creative and performing arts.

• Walt Disney passed away on December 15, 1966. • Urban legend maintains his corpse would be frozen and stored beneath the Pirates of the

Caribbean ride at Disneyland. . .

Walt, after the Studio had won 4 Academy Awards

Walt Disney 1901-1966

October 16, 1923:

This date is considered the start of the Disney Company first known as

The Disney Brothers Studio.

1928:

First Mickey Mouse cartoon, and the first appearance by Minnie Mouse.

1932:

Flowers and Trees, first full-color cartoon and first Academy Award

winner.

1939:

The Disney Studio begins its move to Burbank, California.

1940:

Walt Disney Productions issues its first stock.

History

1955:

Mickey Mouse Club debuts on television.

1971:

Walt Disney World Resort opens with the Magic Kingdom and two hotels near

Orlando, Florida.

1982:

EPCOT Center opens at Walt-Disney World Resort .

1983:

Tokyo Disneyland, the first international Disney theme park, opens in Japan.

1987:

The first Disney Store opens, in Glendale, California.

Growth

1989:

Disney-MGM Studios opens at Walt Disney World Resort.

1992:

Disneyland Paris opens.

1995:

Disney agrees to purchase 25 percent of the California Angels baseball

team, Disney agrees to purchase Capital Cities/ABC for $19 billion. The Disney Channel begins operation in the UK.

1996:

Disney Online launches Disney.com.

Radio Disney, a live 24-hour music-intensive radio network, debuts.

1998:

ESPN Magazine debuts, Disney’s Animal Kingdom opens at Walt Disney World Resort, Disney Magic cruise ship departs on its inaugural cruise.

Growth cont.

 Disney purchased Marvel Entertainment

 Gave a $0.35 dividend per share

 Roy Disney died at age 79

 He was a key person in Disney’s animation

legacy

 Received approval to build a theme park in

Shanghai

 Released the movie Up

2009

LOCATION MAP

Disney Resorts:

1. California

2. Florida

3. Tokyo

4. Hong Kong

5. Paris

Media Networks Park and Resorts

• ESPN

• Disney/ABC Television

Group

• ABC Entertainment Group

• ABC News

• ABC Owned Television

Stations Group

• ABC Family

• Disney Channels

Worldwide

• Hyperion Book s

• Disney Land Resorts

• Walt Disney World Resort

• Tokyo Disney Resort

• Disneyland Paris

• Hong Kong Disneyland

• Disney Cruise Line

• Disney Vacation Club

• Adventures by Disney

• Walt Disney Imagineering

Walt Disney Divisions

The Walt-Disney Studios Disney Consumer Products

• Walt-Disney Studios

Motion Pictures

• Marvel Studios

• Touchstone Pictures

• Disneynature

• Walt Disney Animation

Studios

• Pixar Animation Studios

• Disney Music Groups

• Disney Theatrical Group

• Disney Licensing

• Disney Publishing

Worldwide

• Disney Store

Disney Interactive Media

Group

• Disney Online

• Disney Games

Walt Disney Divisions Cont.

"The mission of The Walt Disney Company is

to be one of the world's leading producers

and providers of entertainment and

information. Using our portfolio of brands to

differentiate our content, services and

consumer products, we seek to develop the

most creative, innovative and profitable

entertainment experiences and related

products in the world."

Mission Statement

Proposed Vision

Walt Disney strives to be the world’s

most famous entertainment

company by creating an amazing

experience for individual of all ages.

HISTORY

Proposed Mission

Our Mission is to be one of the world’s leading producer

and provider of entertainment and information, from

parks to network media, and website for all ages. We

seek to provide a great experience for our customers, as

well as for our employees. By using our unique portfolio to

differentiate our content, services and consumer

products, we seek to develop the most

creative, innovative and profitable entertainment

experiences, which would produce financial rewards to

our shareholders. In everything we do, we try to

contribute to our communities by giving them the best

experience.

SWOT

Analysis

 One of the most recognizable entertainment company in the

world

 Strong advertising

 Wide and unique portfolio

 Innovative entertainment business

 Strong customer service

 Strong Media Networks and Broadcasting division

 Disney owns a variety of companies, which allows them to

generate more profits from different industry such as Media

Networks and Broadcasting, Park and Resorts, Studio

Entertainment and Disney Consumer Products

 Disney is the largest worldwide licensor of character-based

merchandise and producer of children’s film-related products

based on retail sales

Strengths

 Disney sends a corrupted influence to children

 Jasmine was in a forbidden relationship with Aladdin

 Snow White lived alone with 7 men

 Pinocchio was a liar

 Robin Hood was a thief

 Tarzan walked without clothes on

 A stranger kissed sleeping beauty and she married him

 Cinderella lied and sneaked out at night to attend a party

 Coyote runs off cliffs and blows himself up

Weaknesses

 Studio Entertainment and Disney Consumer Products divisions

have been experiencing declining revenue for the last 3 years

 Disney as a narrow target market

 Disney as such a diversify product range that it can reduce

efficiency and lead to a lack of strategic focus

 High cost of entertainment production

 High employee turnover

 Poor working conditions in factories

 Walt Disney’s Park and Resorts are not easily accessible which

leads people to associate Disney World with a costly trip

Weaknesses

 Opportunity to renovate attractions in Park and Resorts Division

due to increase in profit

 Growth from cable and satellite operators creating even more

potential for Disney to make money with their network

 Prospect to build more theme park and resorts worldwide

 Openings in other areas of the travel business

 Opportunity to invest in building theme parks to satisfy the

increase in guest spending, theme park attendance, and hotel

occupancy

 Target new costumers group

Opportunities

 Lasting economic recession leading to slow growth rate

 High unemployment rate

 Park and Resorts Divisions’ success is unpredictable because of

exchange rate fluctuations; travel industry trends; amount of

available leisure time; oil and transportation prices; and

weather patterns and seasonality.

 Changes in technology leads customers to stream online

instead of buying DVD.

 Online streaming makes Disney vulnerable to piracy and

violation of its intellectual property.

 Retail distribution business are influenced by seasonal consumer

purchasing behavior and by the timing and performance of

animated theatrical release

 Increase in labor cost which will have a noticed impact in Walt-

Disney expenses due to their large amount of employee.

Threats

External Audit

Critical Success factors Weights Rating Weighted Score Rating Weighted Score Rating Weighted Score

0.0 to 1.0 1 to 4 1 to 4 1 to 4

0 0 0

Advertising 0.12 4 0.48 4 0.48 2 0.24

Market Share 0.11 3 0.33 4 0.44 2 0.22

Company Image 0.12 4 0.48 3 0.36 3 0.36

Financial Position 0.11 4 0.44 4 0.44 3 0.33

Management 0.09 3 0.27 3 0.27 3 0.27

Global Expansion 0.12 4 0.48 4 0.48 4 0.48

Consumer Loyalty 0.12 4 0.48 4 0.48 3 0.36

Production Capacity 0.12 3 0.36 3 0.36 2 0.24

Technology 0.09 3 0.27 4 0.36 3 0.27

Totals 1 3.59 3.67 2.77

CPM Media Network Segment

Positioning Map Media Network Segment

Positioning Map Park and Resorts Segment

EFE

Internal Audit

Disneyland will never be completed. It will continue to grow

as long as there is imagination left in the world.

- Walt Disney

Organizational Chart

Theme Parks & Resorts

International

ABC Television Group

Co-Head Interactive

Co-Head Interactive & Playdon

Human Resources

Motion Picture Distribution

Communication

Stategy and Business Development

Government Relations

Disney Consumer Products

ESPN & ABC Sports

ESPN & Disney Media Networks

CFO

Legal and Secretary

CID

Security

CEO

Financial Trends

Avg P/E

Price/

Sales

Price/

Book

Net Profit

Margin (%)

Book

Value/

Share

Debt/

Equity

Return on

Equity (%)

Return on

Assets (%)

Interest

Coverage

01-Oct-09 12.9 1.41 1.47 9.1 $18.55 0.38 9.8 5.2 9.6

01-Sep-08 14.2 1.69 1.85 11.7 $17.73 0.46 13.7 7.1 10.4

01-Sep-07 15 2.03 2.19 13.2 $15.67 0.5 15.2 7.7 10.4

01-Sep-06 16.9 1.87 1.98 9.8 $15.42 0.43 10.4 5.5 7.5

01-Oct-05 22.2 1.58 1.82 7.8 $13.06 0.49 9.4 4.6 6.3

01-Sep-04 21 1.52 1.7 7.6 $13.05 0.53 9 4.4 5.9

01-Sep-03 28.4 1.52 1.68 4.9 $11.82 0.57 5.6 2.7 3.4

01-Sep-02 33.4 1.2 1.29 4.9 $11.61 0.62 5.3 2.5 3

(in Millions, except per share data) 2009

Revenues $36,149.00

Costs and expenses $(30,452.00)

Restrucuring and impairment charges $(492.00)

Other income (expense) $342.00

Net interest expense $(466.00)

Equity in the income of investees $577.00

Income from continuing operations before income taxes and minority interests $5,658.00

Income taxs $(2,049.00)

Minority interests $(302.00)

Income from continuing operations $3,307.00

Discontinued operations, net of tax -

Net income $3,307.00

Diluted earnings per share:

Earnings per share, continuing operations $1.76

Earnings per share, discontinued operations

Earnings per share $1.76

Basic earnings per share

Earnings per share, continuing operations $1.78

Earnings per share, discontinued operations

Earnings per share $1.78

Weighted average number of common and common equivalent shares outstanding:

Diluted $1,875.00

Basic $1,856.00

Income Statement

Balance Sheet

Balance Sheet

Cont.

Selected Financial Ratios

2009 2008

Liquidity Ratios

Current Ratio 1.33 1.01

Quick Ratio 1.19 0.91

Leverage Ratios

Debt-to-Total Assets Ratio 1 1

Debt-to-equity Ratio 1.12 1.93

Long-term debt-to-equity Ratio 0.1 0.12

Times-Interest-earned Ratio -12.14 -14.13

Activity Ratios

Inventory Turns 28.44 33.67

Fixed Assets Turnover 1.11 1.2

Total Assets Turnover 0.57 0.61

Profitability Ratios

Gross Profit margins 1.84 1.8

Operating Profit Margin 0.16 0.2

Net Profit Margin 0.09 0.12

Return on Total Assets 0.05 0.07

Return on Stockholders equity 0.06 0.14

Earning per share 1.78 2.34

Price-earnings Ratio 15.31 12.61

Growth Rations (yearly)

Sales -4.48% 7.66%

Net Income -25.30% -5.55%

IFE

Strategic Formulation

“I do not like to repeat successes, I like to

go on to other things.”

Walt Disney

SWOT Matrix

Space Matrix

Results

Space Matrix Strategies:

Market Development

Market Penetration

Product Development

Forward Integration

Backward Integration

Horizontal Integration

Related Diversification

Unrelated Diversification

IE Matrix

Total EFE

Score

High 3-4

Medium

2-2.99

Low 1-

1.99

Strong 3-4 Weak 1-1.99

Total IFE Score

Average 2-2.99

Media Networks

Parks and Resorts

Studio Entertainment

Consumer Products

Interactive media

Strategies:

Market Development

Market Penetration

Product Development

Forward Integration

Backward Integration

Horizontal Integration

Related Diversification

Unrelated Diversification

Grand Strategy Matrix

BCG

Matrix Analysis

QSPM Matrix

QSPM Cont.

Implementation

“Disneyland will never be completed. It will

continue to grow as long as there is imagination

left in the world.”

Walt Disney

“Pixar is the most technically advanced creative

company; Apple is the most creatively advanced

technical company. “

Steve Jobs 2005-02-21

 Eliminate 10 billion out of the borrowings

from the retained earnings

 Finance 1 billion to buy a land in order to

open indoor resort in New York in the next

three years.

 Invest 10 million for advertisement

 Spend 1 billion in each of the five existing

Park for renovation and new attractions.

= Total of 5 billion

Assumptions

Total Investment of 19.01 billion

Projected Income

Statement

Projected Balance Sheet Assets

Project Balance

Sheet Liabilities

Project Financial Ratios

Liquidity Ratios

Current Ratio 1.33 0.51

Quick Ratio 1.19 0.46

Leverage Ratios

Debt-to-Total Assets Ratio 1 0.86

Debt-to-equity Ratio 1.12 1.84

Long-term debt-to-equity Ratio 0.1 0.26

Times-Interest-earned Ratio -12.14 -12.14

Activity Ratios

Inventory Turns 28.44 40.39

Fixed Assets Turnover 1.11 1.11

Total Assets Turnover 0.57 0.62

Profitability Ratios

Gross Profit margins 1.84 1.84

Operating Profit Margin 0.16 0.16

Net Profit Margin 0.09 0.09

Return on Total Assets 0.05 0.06

Return on Stockholders equity 0.06 0.012

Earning per share 1.78 1.72

Price-earnings Ratio 15.31 14.27

Growth Rations (yearly)

Sales -4.48% 0.00%

Net Income -25.30% 0.00%

Evaluation

“You're dead if you aim only for

kids. Adults are only kids grown

up, anyway.”

Walt Disney

Stock Price Graph

Balanced Score Card

Area of Objectives Measure of Target Time Expectations Primary Responsibility

Customers

1. Costumer satisfaction Customer Survey

Webinar

Yearly Human Resources &

CEO

Representatives

1. Employee Conditions Employee Satisfaction Biannually CEO

2. Career Opportunity Lower employee turnover Biannually CEO

Community / Socially Responsible

1. Eco-Friendly Company Maintain clean environment in

resorts

Increase presence of recycling in

resorts

Limit food, paper and water

waste

Limit land destruction

Yearly CEO

Marketing Department

2. Ethical Company Increase in donations and

presence of charitable events

Yearly CEO

Marketing Department

Operations/Processes

1. Innovation Number of new products in each segment

Number of renovated products in

each segment

Yearly CEO Marketing Department

2. Brand expansion/ Accessibility Numbers of new resorts built Yearly CEO

Financial

1. Reduce cost of production Decrease in cost of Parks, Resorts

and other property

Yearly CFO

2. Increase profitability Increase Sales

Reduce Expenses

Quarterly CFO

 Use product development to renovate and

build new attractions in order to attract an

older target market.

 Use market development to build a new

theme park which will be more accessible to

the North East area.

Strategies

 Build an indoor theme Park and Resort in New

York.

 Improve advertising to promote

entertainment which target a more mature

audience.

 Remove the Interactive Media Segment.

 Remodel and build new attractions in every

Park and Resorts to stay appealing to our

customers.

Recommendations

In the next three years Walt Disney should..

Objectives

In the next year Walt Disney should…

 Improve advertising to promote

entertainment

 Remove the Interactive Media Segment

 Buy a land in New York City

Questions

Sources

““Home, The Walt Disney Company”, < http://thewaltdisneycompany.com/<ALDRIDGE, B. “Walt Disney”,

Brad Aldridge Productions, Berkley, CA, August 2002, http://www.justdisney.com/walt_disney/’>

“ Annual Reports, The Walt Disney Company”,

<http://thewaltdisneycompany.com/investors/financial-information/annual-report>

“ Who Owns the Media? Media Ownership Charts, Free Press”, Florence, MA,

<http://www.freepress.net/ownership/chart>

“ Investor Relations, The Walt Disney Company”, <http://thewaltdisneycompany.com/investors>

“ Walt Disney Company (DIS) News – The New York Times”

<http://topics.nytimes.com/top/news/business/companies/disney_walt_company/index.html>

“ Stock Quote for Walt Disney Co – MSN Money”, page generated 9:55PM,

<http://investing.money.msn.com/investments/stock-price?Symbol=dis&ocid=qbeb>

“ DIS: Summary for Walt Disney Company (The) Common – Yahoo! Finance”

<http://finance.yahoo.com/q?s=dis&ql=1>

“ Organizational Chart The Walt Disney Company – TheOfficialBoard”,

<http://www.theofficialboard.com/org-chart/walt-disney>

“ Disney Corporate Press Releases , The Walt Disney Company”,

<http://thewaltdisneycompany.com/disney-news/press-

releases?tid=All&field_press_release_date_value[value][year]=2009&title=&page=3>