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A. SUMMARY
High economic intensity, such as high unemployment, recession, the slowdown in growth and
reduced customer costumer spending contributed to a 7% drop in revenues and a 46 % drop in
Walt Disney's profitability for the first quarter of 2009. The company has been inspiring and
have captured the attention of millions of customers for more than 8 decades by offering family
entertainment, theme parks, recreations, movies TV shows. Walt Disney created the Mickey
Mouse and Donald Duck characters that took the world as sheer entertainment.
Mr. Walt Disney and his brother Roy arrived in California in the midst of 1923 to sell their
cartoon known as Alice's Wonderland. A distributor contacted them for the distribution of Alice
Comedies in October 16, 1923 and that is how Disney Brothers Cartoon Studio came into being.
They never looked back after this event by creating many popular cartoons like Oswald the
Lucky Rabbit, Snow White and the Seven Dwarfs, Pinocchio and the very popular Fantasia.
After some time they changed the name of the company to the Walt Disney Studio.
The studio started reaching its heights by making the first ever live action film Treasure Island.
Then came Disney's most successful series the Mickey Mouse Club in 1955 and cartoons like
The Shaggy Dog, Zorro, Mary Poppins and Love Bug kept coming the entertaining millions.
Big day in the history was the opening of the Walt Disney World project in Orlando, Florida and
opening of Tokyo Disneyland in 1983. Soon after leaving network television the company
started its own cable network "The Disney Channel". Meanwhile they started many theme parks
globally. Filmmaking started hitting new heights with Hollywood studios in box-office gross.
Disney's animations started reaching new heights and greater audience with The Little Mermaid,
The Beauty and the Beast and Alladin. Many other TV series like Home Improvement and
Dinosaurs expanded Disney's television base. They also moved into publishing Books for
children after starting the new Disney Press. In 1992, Disneyland Paris opened in France.
They completed many projects throughout the 1990s. From acquiring Baseball team to acquiring
Capital Cities/ABC to opening 725 Disney stores from 2000 to 2007.
Now moving towards the issues of Walt Disney, firstly the structure of Walt Disney is SBU
based with SBUs like Disney Costumer products, Studio Entertainment, Parks and Resorts,
Media Networks and Broadcasting. Disney has a very inspiring and comprehensive mission
while they do not possess a formal vision statement lacking their strategic focus on what to
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achieve in the future. Disney's recent income statements and balance sheets indicated profit
decline from 2007 to 2008. Disney's Media Networks brings the most revenues for the company.
However, Studio Entertainment and Customer Products have experienced declining revenues.
In percentage terms the Disney revenues in 2008 could be split up in numbers like Media
Networks 43%, parks and Resorts 31%, Studio Entertainment 20% and Costumer Products 8%.
Disney owns the ABC Television Network, which includes ABC Entertainment, ABC Daytime,
ABC News, ABC Kids and many more. This segment grew probably because of the growth in
cable sector and satellite operations. Advertising on the network is another source of additional
revenue for Walt Disney. Video on Demand is a major industry expected to grow by 2010.
Disney owns and operates many parks and resorts globally. Disneyland Resort in California,
ESPN Zone facilities in many cities and 17 Hotels at the Walt Disney World Resort are a few
examples of Disney's largest network and expansion. Disney revenues increased 7% in 2008.
There was higher guest spending, theme park attendance and hotel occupancy in this sector.
Disneyland Resort Paris also experienced increased revenues due to the favorable impact of
foreign currency translation, i.e. weakening of the US$ against the Euro.
The Consumer products segment has many partners, manufacturers, publishers and retailers
worldwide who design, promote and sell a variety of products for Disney. Revenues from this
segment increased 26% also due to sales oat Disney Stores North America acquired by Walt
Disney. Disney in each segment has major competitors like Time Warner, which has five
divisions and CBS Corporation in Media Network Segment. They compete domestically and
globally. This global media industry is dominated by conglomerates of Disney and Time Warner.
The success of Studio Entertainment operations totally depends upon public taste and preference.
As such, few companies dominate the industry and control the production and distribution of
most of the movies, including Warner Brothers, Walt Disney, Twentieth Century Fox, Viacom
and others. Disney is also the largest worldwide licensor of character-based merchandise and
producer/distributor of children's film related products based on retail sales. Leading competitors
in this segment are Warner Brothers, Fox, Sony, Marvel and Nickelodeon. There are also many
risks involved in such diversified business that can affect the future operational plans of Disney.


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B. STRENGTHS-WEAKNESSES-OPPORTUNITES-THREATS (SWOT)
a) STRENGTHS
Disney Media Network with most revenue of 43% & operating income of 57%.
26% increase in revenue from consumer products.
Acquisition of Disney Stores North America.
Magic Kingdom at Disney World the most visited amusement park.
Largest Worldwide licensor of character based merchandise & product distributor of
children's film related products.
Vast & Diverse portfolio of products.
Acquisition of Pixar animation studios in 2006.
b) WEAKNESSES
No formal Vision statement.
A 5.5 % decrease in profits from 2007 to 2008.
A 26 % decrease in net income for the 3rd quarter (2009).
Movie Studio the worst performing division with $12 million losses.
Diversity in products leading to reduced strategic focus.
c) OPPORTUNITIES
Major growth potential in Video on Demand Industry up to $3.9 billion by 2010.
Transition of concept of theme parks from mass audience to more concentrated
perspective.
A 10 % increase in investment in theme parks & hotels to enhance attendance and
occupancy respectively.
Overhaul of attractions in theme parks and hotels due to increase in profits.
Can also target new consumer group.
d) THREATS
Unemployment, recession & reduced spending, contributing to 7% drop in revenue.
Threat of cannibalization of Disney's brands.
Presence of major competitors like Time Warner & CBS corporation in Media Network
industry.
Rapidly changing media & technology.
Increased difficulty in protection of intellectual property.


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C. PROBLEM STATEMENT

The problem currently Walt Disney has to avoid is the cannibalization of its brands as it is
already expanding globally in diversified businesses that result in the lack of strategic focus.
Other issues involve the major economic slowdown, changes in technology and consumer
preference, change is travel and tourism trends and high unemployment. Their income fell 26%
in the first quarter (2009). The Major segment of Walt Disney that requires a breakthrough is the
Movie Studio unit. So, Disney requires a clear strategic plan and hard decisions to stop letting
the revenues slip.

D. EXTERNAL FACTOR EVALUATION MATRIX (EFE)
Key External Factors Weight Rating Weighted
Score
Opportunities
1. Major growth potential in Video on Demand Industry up to $3.9
billion by 2010.

0.15 4 0.60
2. Transition of concept of theme parks from mass audience to more
concentrated perspective.

0.08 3 0.24
3. A 10 % increase in investment in theme parks & hotels to enhance
attendance and occupancy respectively.

0.1 2 0.2
4. Overhaul of attractions in theme parks and hotels due to increase in
profits.

5. Can also target new consumer group.

0.09


0.1
1


3
0.09


0.3
Threats
1. Unemployment, recession & reduced spending contributing to 7%
drop in revenue.

0.15 1 0.15
2. Threat of cannibalization of Disney's brands. 0.11 2 0.22
3. Presence of major competitors like Time Warner & CBS
corporation in Media Network industry.

0.1 3 0.3
4. Rapidly changing media & technology. 0.08 3 0.24
5. Increased difficulty in protection of intellectual property. 0.04 3 0.12
Total 1.00 2.46

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E. INTERNAL FACTOR EVALUATION MATRIX (IFE)

Key Internal Factors Weight Rating Weighted
Score
Strengths
1. Disney Media Network with most revenue of 43% & operating
income of 57%.

0.11 3 0.33
2. 26% increase in revenue from consumer products.

0.07 3 0.21
3. Acquisition of Disney Stores North America.


0.08 3 0.24
4. Magic Kingdom at Disney World the most visited amusement park.

0.1 4

0.4
5. Largest Worldwide licensor of character based merchandise &
product distributor of children's film related products.
0.14

4

0.56

6. Vast & Diverse portfolio of products. 0.07

3

0.21

7. Acquisition of Pixar animation studios in 2006. 0.05 3 0.15
Weaknesses
1. No formal Vision statement.

0.06 2 0.12
2. 5.5% decrease in profits from 2007 to 2008. 0.05 2 0.10
3. 26% decrease in net income for the 3rd quarter (2009).

0.1 1 0.10
4. Movie Studio the worst performing division with $12 million losses. 0.13 1 0.13
5. Diversity in products leading to reduced strategic focus. 0.04 2 0.08
Total 1.00 2.63







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F. COMPETITIVE PROFILE MATRIX (CPM)














Walt Disney CBS Time Warner
Critical Success
Factors
Weight Rating Score Rating Score Rating Score
Advertising

0.15 4 0.6 3 0.45 3 0.45
Market Share

0.2 3 0.6 1 0.2 2 0.4
Company Image

0.11 3 0.33 3 0.33 3 0.33
Expansion

0.09 3 0.27 2 0.18 2 0.18
Diversification

0.13 4 0.52 3 0.39 3 0.39
Market Capital

0.15 4 0.6 2 0.3 3 0.45
Revenues

0.17 2 0.34 4 0.68 3 0.51
Total 1.00 3.26 2.23 2.71
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G. STRENGTHS-WEAKNESSES-OPPORTUNITIES AND THREATS MATRIX
(SWOT)
STRENGTHS-S
1. Disney Media Network with
most revenue of 43% &
operating income of 57%.
2. 26% increase in revenue from
consumer products.
3. Acquisition of Disney Stores
North America.
4. Magic Kingdom at Disney
World the most visited
amusement park.
5. Largest Worldwide licensor of
character based merchandise &
product distributor of children's
film related products.
6. Vast & Diverse portfolio of
products.
7. Acquisition of Pixar animation
studios in 2006.
WEAKNESSES-W
1. No formal Vision statement.
2. 5.5% decrease in profits from
2007 to 2008.
3. 26% decrease in net income
for the 3rd quarter (2009).
4. Movie Studio the worst
performing division with $12
million losses.
5. Diversity in products leading
to reduced strategic focus.
OPPORTUNI TI ES-O
1. Major growth potential in
Video on Demand Industry
up to $3.9 billion by 2010.
2. Transition of concept of
theme parks from mass
audience to more
concentrated perspective.
3. 10% increase in investment
in theme parks & hotels to
enhance attendance and
occupancy respectively.
4. Overhaul of attractions in
theme parks and hotels due to
increase in profits.
5. Can also target new
consumer group.

SO STRATEGY
1. Investment to innovate attractions
in Theme Parks & Resorts.
(S4,O3)
2. Launch a new channel with
specific focus on Video On
Demand feature. (S1,O1)
WO STRATEGY
1. To create new hit movies using
the IMAX 3D latest trend
technology. (W4,O5)

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THREATS-T
1. Unemployment, recession &
reduced spending
contributing to 7% drop in
revenue.
2. Threat of cannibalization of
Disney's brands.
3. Presence of major
competitors like Time
Warner & CBS corporation
in Media Network industry.
4. Rapidly changing media
technology.
ST STRATEGY
1. Reduce entrance fees at Theme
parks and introduce discounts on
hotels. (S4,T1)

WT STRATEGY
1. Reduce non-performing
products to reduce
cannibalization & enhance
strategic focus. (W5,T2)
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H. STRATEGIC POSITION & ACTION EVALUATION MATRIX (SPACE)
Financial Position rating 1 (worst) to 6 (best) Ratings
1 Liquidity 4
2 Earnings per share 5
3 Working Capital 4
4 Return on Investment 5
Industry Position rating 1 (worst) to 6 (best) FP Total 18
1 Technology 5
2 Ease of Entry 5
3 Growth Potential 4
4 Financial Stability 4
Stability Position rating -1 (best) to -6 (worst) IP Total 18
1 Recession -5
2 Competitive Pressure -3
3 Price Range of Competing Products -3
4 Technological Changes -2
Competitive Position rating -1 (best) to -6 (worst) EP Total -13
1 Market Capitalization -1
2 Technological Know-How -3
3 Customer Loyalty -2
4 Competition's capacity utilization -4
CP Total -10

SP Average = -3.25, IP Average = +4.5
CP Average = -2.5, FP Average = +4.5
Directional Vector Coordinates: x-axis: -2.5+(+4.5) = +2
y-axis: -3.25+(+4.5) = +1.25








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I. INTERNAL-EXTERNAL (IE) MATRIX

Total IFE Weighted Scores

The internal and external intersection point lies in the (V) Quadrant Cell in Average category and
the best strategies for this quadrant are "hold and maintain strategies" i.e. market penetration and
product development. So, Walt Disney in the future should hold and maintain their position
using Market Penetration and Product Development strategies if they do not want their last
quarter revenues to drop. Although the estimations are based on approximation, but are not far
from the case.






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J. QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)
Alternative Strategies
Key Internal Factors




Weight
Launch a new channel
with specific focus on
Video On Demand feature
Create new hit
movies using the
IMAX 3D latest
trend technology
Strengths AS TAS AS TAS
8. Disney Media Network with most
revenue of 43% & operating income of
57%.
0.11
4 0.44 4 0.44
9. 26% increase in revenue from consumer
products.
0.07
3 0.21 2 0.14
10. Acquisition of Disney Stores North
America.
0.08
- -
11. Magic Kingdom at Disney World the
most visited amusement park.
0.1
- -
12. Largest Worldwide licensor of character
based merchandise & product distributor
of children's film related products.
0.14

- 2 0.28
13. Vast & Diverse portfolio of products. 0.07

2 0.14 2 0.14
7. Acquisition of Pixar animation studios in
2006.
0.05
- 4 0.20
Weaknesses

6. No formal Vision statement. 0.06
- -
7. 5.5% decrease in profits from 2007 to
2008.
0.05
3 0.15 3 0.15
8. 26% decrease in net income for the 3rd
quarter (2009).
0.1
1 0.1 1 0.1
9. Movie Studio the worst performing
division with $12 million losses.
0.13
1 0.13
3

0.39
5. Diversity in products leading to reduced
strategic focus.
0.04
1 0.04 -

1.00


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Alternative Strategies
Key External Factors




Weight
Launch a new channel
with specific focus on
Video On Demand feature
Create new hit
movies using the
IMAX 3D latest
trend technology
Opportunities AS TAS AS TAS
6. Major growth potential in Video on
Demand Industry up to $3.9 billion by
2010.
0.15
4 0.6 -
7. Transition of concept of theme parks from
mass audience to more concentrated
perspective.
0.08
- -
8. 10% increase in investment in theme parks
& hotels to enhance attendance and
occupancy respectively.
0.1
- -
9. Overhaul of attractions in theme parks and
hotels due to increase in profits.
0.09

- -
5. Can also target new consumer group. 0.1
3 0.3 3 0.3
Threats

5. Unemployment, recession & reduced
spending contributing to 7% drop in
revenue.
0.15
2 0.3 2 0.3
6. Threat of cannibalization of Disney's
brands.
0.11
1 0.11 -
7. Presence of major competitors like Time
Warner & CBS corporation in Media
Network industry.
0.1
1 0.1 -
8. Rapidly changing media & technology. 0.08
3 0.24 2 0.16
5. Increased difficulty in protection of
intellectual property.
0.04
- -
TOTAL
1.00 2.86 2.6
QSPM indicates that the first alternative strategy is the comparatively more viable to execute as
determined by the total scores. The strategy is to Launch a new channel with specific focus on
Video On Demand feature. As this industry is the most growth oriented $3.9 Billion by 2010 and
holds vital importance resulted in a higher score for this strategy.
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K. CONCLUSION
It is quite clear from the above analysis on the Walt Disney company that they lack a strategic
focus with so many diversifications. Adapting to changing trends and continuously meeting
expectations of their consumers in various parts globally with different cultures is not a piece of
cake for any large organization of such magnitude. But for any organization that has lasted 8
decades could carry on and prevent slipping of revenues if they open themselves to change and
concentration on markets. It was apparent from the results of above analyses that ever-changing
Walt Disney has to make another change in strategy to retain its position in the global market.

L. ANNEXURE

PRO-FORMA INCOME STATEMENT:



Disney Inc. Consolidated Income Statement (in millions)
%age of Sales Increase Forecasted for
year 2009
15.00%
Income Statement & Projected Statement for the Year 2009 Tax Rate 36.00%
Cost and Expenses %age of Sales 80.00%
2006 2007 2008 2009
Sales 33,747 35,510 37,843 43,519
Cost and Expenses 28,392 28,681 30,439 34,816
Other Expenses 88 1,004 59 68
Net Interest Expenses 592 593 524 603
Equity in the income of investees 473 485 581 668
Taxable I ncome Before I ncome
Taxes and Minority I nterests
5,324 7,725 7,402 8,702
Income Taxes 1,837 2,874 2,673 3,133
Minority Interests 183 177 302 347
Net I ncome 3,374 4,687 4,427 5,222
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ASSUMPTIONS:
The above is a pro-forma income statement projection for the year 2009. A 15 % increase in
sales is assumed to cost of goods sold to be 80% of sales and 36% tax rate. Retained earnings
and dividend ratio has not been used because no such sort of policy was discussed in the case.
Increase in sales can still render the first three quarters of declining profit to be changed into
increased profit in the last quarter of the year. Simple financial terms have been used to elucidate
that increasing net income figure. All the above figures used are in millions.