Week 15 - Case Study Analysis Presentation

Week 11 Research Project (Case Study Part 3)

Brian Cooke

Wilmington University

BBM 402 – Strategic Management

03/22/2020

1. Porter’s Five Force Model

I. The Threat of New Entrants: Developing a brand like that of Disney Corporation demands considerable investment and long-term commitment. Disney Corporation has invested in both human resources and infrastructure to run the brand. Although small retailers are trying to compete with big brands, they are facing intense competition and are struggling to gain a more significant market share.

II. Suppliers’ Bargaining Power: The suppliers of Disney Co. have moderate bargaining power. The suppliers of the company include media partners, technology companies, and other influential vendors. The suppliers are also well-established brands like Philips, Nokia, ESPN, and IMAX, and they also have strong bargaining power. Thus, switching to other suppliers is difficult because additional options do not have a big brand than the existing ones. Additionally, smaller brands can be changed without a significant impact on Disney Corporation.

III. Buyers’ Bargaining Power: The buyers’ bargaining power is weak because of the unique experience and popularity of the brand in the marketplace. The brand has loyal customers who are enticed by the unique experience delivered by Walt Disney Company. The company has raised the admission fee for theme parks with no reasonable loss in customer loyalty. The business has focused on quality and reliable services for a long time. The customers have always been ready to spend more to have a fascinating experience at Disney. The combination of these factors reduces the bargaining power of the customers.

IV. The Threat of Substitutes: The unique brand and the excellent image presented by Disney has kept the threat of new substitutes low. The enterprise also boasts of a more significant influence than it has over its competitors. The smaller theme parks and similar firms do not stand a chance to beat Disney. Disney is part of the culture of many customers of Disney. The big brand and image cancel the threats of substitutes.

V. The Rivalry Between the Existing Enterprises: The current brands in similar industries, for example, entertainment and media, have a great rivalry. Other brands rival Disney in the marketplace. The renowned rivals include Fox Studios, Universal, and other providers of amusement and theme parks. In these industries, the bigger the brand, the higher the popularity of the brand, and the greater the customer loyalty.

Figure 1: Shows Walt Disney’s Five Force Model

2. VRIO Framework

a) Valuable: Disney Company has spent a considerable amount of funds to create their brand. Since the acquisition of Pixar in 2006, the revenues have amplified 404% until 2018 (Do Patrocínio, de Almeida Souza, Santos, & Martins, 2018). Additionally, Disney earned 38% of box office sales in 2018. The move to acquire the brands have given Disney the most significant market share in the industry of entertainment.

b) Rarity: the brand that Disney has is rare, and other businesses that attempt to match it can never succeed. They can also not manufacture similar products because the product demands massive investment in technology.

c) Imitability: the content created by Disney belongs to Disney alone, and any corporate trying to match the content has not been successful. The quality of Star Wars, Lion King, Avengers, and other materials from Disney are not imitable by other firms. The ability of Disney to exploit their different brands has led other companies such as WB to try creating similar products. However, exhaust their energy and resources but end up unsuccessful.

d) Organization: Organization is a critical resource for Disney. Apart from making unique content using their diverse brands, they are incorporating their content to the amusement parks, establishing this brand as the most organized in the market. Figure 1 illustrates Disney’s VRIO framework.

Figure 2: Shows Walt Disney’s VRIO Framework

3. SWOT Analysis

a) Strengths: Disney’s reliability, proficient team, high brand profile, substantial cash flow, and strong negotiation skills have been the strength that other firms have been unable to match. These factors have enabled the company to continue growing and maintain a significant lead in the worldwide market.

b) Weaknesses: the weaknesses include sky-high attribution rate, vulnerability to competition, poor planning of finances, and insufficient scale of demand. These weaknesses inhibit the quicker growth of the company. Limited diversification is a strategic factor that inhibits new investments in industries with high growth potential.

c) Opportunities: The opportunities for Walt Disney Corporation include core competencies, Gear up for marketing, and the big and famous brand. If managers can address the strategic factors related to growth, the companies can gain penetration in the markets.

d) Threats: The threats to the growth of Walt Disney Corporation include better technology and products by competitors, the high toll of expenses, and isolation in America. The SWOT analysis is illustrated in the chart below.

Figure 3: Shows Walt Disney’s SWOT Analysis

4.Vertical Integration

ESPN delivers movies and talk shows related to the sport that are all created from within the company. ESPN Films, which is a subordinate of ESPN, creates many outstanding products that are aired in ESPN. This subsidiary firm ensures that ESPN sustains itself, rather than buying programs from other producers. Vertical integration is where an enterprise moves down the value chain for a buyer’s business (Iger, 2015). The company has exploited vertical integration by controlling at least three hundred retail shops that sell characters and movies produced by the firm itself. By doing this, the profits that would be earned, if they sold their merchandise to other companies, return to the company. Figure 4 presents vertical integration.

Figure 4: Represents Vertical Integration

5. Walt Disney Financials

The figure below shows Walt Disney’s financials in the year ended in 2019.

Period Ending:	Dec 28, 2019	Sep 28, 2019	Jun 29, 2019	Mar 30, 2019
Total Revenue	20858	19100	20245	14922
Gross Profit	7842	7278	7426	6546
Operating Income	2691	1460	2245	7339
Net Income	2107	1054	1760	5452

Figure 5: Illustrates Walt Disney Financials for the Year Ended 2019

6. Financial Analysis

In December 2019, Disney revenues were $20.8 billion, an increase of 36% compared to 2018. The net income decreased to $2.13 billion, representing a reduction of 23. Revenues Direct-to-Consumer and international proportion rose from $918 to $3.98 billion. The Studio entertainment net income increased from $1.8 billion to $3.7 billion, while the media network produced a 24% increase to $7.3 billion.

Moreover, the Asia Pacific fragment rose from $1.02 billion to $2.1 billion. The information represents the performance and financial position of the company. The comparison was presented through the eleven critical financial ratios. Disney’s financial ratios were contrasted with the median values of the eleven ratios of companies in similar industries and with quartiles of ratios of other companies. The deviation of the financial ratios from the median values did not exceed 5% of the range between the quartile values close to the ration value and the median.

References

Do Patrocínio, R. F., de Almeida Souza, J. L., Santos, C. T. O., & Martins, K. S. (2018). The vision of the Disney World: an experience marketing study at The Walt Disney Company. Archives of Business Research, 6(9).

Iger, R. A. (2015). The Walt Disney Company Fiscal Year 2015 Annual Financial Report and Shareholder Letter. Anaheim, CA: The Walt Disney Company. Accessed May 30, 2017.