Sombillo, Pauline Beatrice I.

STRATMA K32

Individual Case Paper Walt Disney Company

1. What is Walt Disney Companys corporate strategy?
Walt Disneys generic strategy is broad differentiation. They do not only target the young
ones, but rather the whole family itself. Their products are broadly divided into five main
segments, which is also where they create and distribute entertainment; Media Networks, Parks
and Resorts, Walt Disney Studios, Disney Consumer Products, and Disney Interactive.
Furthermore, according to CEO Robert Iger, Walt Disneys business strategy is focused on three
aspects: producing quality content, improving entertainment experiences through technology
innovations, and expanding globally. Internationally, Disney uses transnational strategy in their
business operations. As much as possible, the company tries to maintain their global presence
while customizing few aspects of the business to better fit the country market. (e.g. customization
of TV shows in international Disney Channels)
In terms of acquisition strategy, CEO mentioned that they look out for companies that are
either underexploited, underused or can be used to enhance the company capabilities itself. For
instance, Disney has acquired Pixar, Marvel Comics, and Playdom to boost their animation and
gaming capabilities respectively. On the other hand, Disney focuses their international
expansions in exploiting opportunities in the emerging markets.
2. What is your assessment of the long-term attractiveness and competitive strength of
Walt Disney Companys different business units?
Walt Disney Companys different business units include Media Networks, Parks and Resorts,
Walt Disney Studios, Disney Consumer Products, and Disney Interactive. Long-term
attractiveness of the company can be determined through its opportunities and threats, as well as
quantitative analysis or assessment of industry attractiveness. Meanwhile, competitive strengths
can also be measured using quantitative analysis or assessment of competitive strength.
Media Networks

Parks and Resorts

Walt Disney
Studios

Opportunities
Make use of Mobile
Applications, Streaming
Devices and Social
Media
High barriers to entry
Technology
Advancement
Threat of substitutes are
minimal
Niche market for theme
parks and resorts
High Barriers to Entry
Advancing graphical
abilities
Technological
Innovation

Threats
Competition in the industry &
other entertainment outlets
Shift from traditional media
outlet
Weak economy
High Competition (in the US
market)

Weak economy
High Competition
Increasing Box Office prices
Shorter time in box office

Disney Consumer
Products

High supplier power

Disney Interactive

Growing Market
Social Media
Technological
Innovation
Media
Networks

Industry
Attractiveness
Measure

Impor
tance
Weigh
t

Weig
hted
Scor
e

0.10

Attra
ctive
ness
Ratin
g
9

Market size
and projected
growth rate
Intensity of
competition
Emerging
opportunities
and threats
Crossindustry
strategic fit
Resource
requirements
Seasonal and
cyclical
influences
Societal,
political,
regulatory,
and
environmenta
l factors
Industry
profitability
Industry
uncertainty
and business
risk
Overall
weighted
industry
attractiveness
scores

0.20

Parks &
Resorts
Weig
hted
Scor
e

0.90

Attra
ctive
ness
Ratin
g
8

1.80

0.15

0.20

Many available substitutes

High Competition
Low barriers to entry

Walt Disney
Studios

Disney
Consumer
Products
Attra Weigh
ctive
ted
ness
Score
Ratin
g
8
0.80

Weig
hted
Scor
e

0.80

Attra
ctive
ness
Ratin
g
8

1.60

1.80

1.35

1.20

1.20

1.80

1.60

0.10

10

1.00

0.80

0.05

0.45

0.05

0.45

0.10

0.05

1.00

Disney
Interactive
Attra
ctive
ness
Ratin
g
5

Weig
hted
Scor
e

1.40

1.00

1.05

0.90

1.40

1.40

0.80

0.70

0.80

0.50

0.35

0.35

0.35

0.25

0.45

0.40

0.40

0.30

0.90

0.80

0.90

0.80

0.40

0.40

0.40

0.35

0.40

0.20

9.05

7.9

0.80

7.4

0.50

4.85

Competitive
Strength
Measure
Relative
market share
Costs relative
to
competitors
costs
Ability to
match or beat
rivals on key
product
attributes
Ability to
benefit from
strategic fit
with sister
businesses
Bargaining
leverage with
suppliers/buy
ers; caliber of
alliances
Brand image
and reputation
Competitively
valuable
capabilities
Profitability
relative to
competitors
Overall
weighted
industry
attractivenes
s scores

Media
Networks

Parks &
Resorts

Walt Disney
Studios

Import
ance
Weight

Attra
ctive
ness
Ratin
g

Weig
hted
Scor
e

Attra
ctive
ness
Ratin
g

Weig
hted
Scor
e

Attra
ctive
ness
Ratin
g

Weig
hted
Scor
e

0.10

0.80

0.80

0.80

0.15

1.20

1.05

1.20

0.15

1.35

1.20

0.15

1.35

1.35

0.05

0.40

0.15

10

1.50

0.15

0.10

1.00

Disney
Consumer
Products
Attra Weigh
ctive ted
ness
Score
Ratin
g

Disney
Interactive
Attra
ctive
ness
Ratin
g

Weig
hted
Scor
e

0.50

0.40

1.05

0.75

1.35

1.05

0.75

1.20

1.20

1.05

0.40

0.40

0.40

0.30

1.35

1.35

1.35

1.05

1.20

1.20

1.20

1.05

1.20

0.80

0.80

0.90

0.70

0.70

8.60

8.15

8.40

7.30

6.20

Media Network operates on both domestic and international networks, ABC Television
Network, Television Production and US Domestic TV stations. Most of these networks are either
number one or number two in the market. Also, these media networks, cable, TV and radio are
highly profitable because Disney brand is a reputable brand, they have high quality outputs and
they are accessible via multiple platforms (e.g. Radio Disney is offered through SiriusXM, iTunes
and mobile phones).

Disney Parks and Resorts, which are highly tied to their popular characters and movies,
are accessible in almost all parts of the world, including US, Europe and Asia. These features are
what keep the business unit profitable that is why it is relatively easy for the company to expand
and innovate in order to adapt to changing consumer demand and preferences.
In terms of Walt Disney Studios, the past years have been very good for the business unit
especially when it comes to their motion pictures productions. This is attributable to their
acquisition of Pixar and Marvel because technological sharing is being implemented, thus
lowering the cost. The business unit is also concise and decisive on how many films to produce in
a year, all of which are almost always translated to high box office and distribution sales.
Disney consumer products competitive strengths include Disney Stores, and other
business units focusing on merchandise licensing and childrens book and magazine publishing.
These are made accessible globally via Disney stores with 208 branches in North America, 103 in
Europe and 46 in Japan.
Lastly, Disney Interactive produces video games for multiple devices like game consoles,
mobile phones and their various websites across all business units. Furthermore, they recently
acquired Playdom to help them improve their development capabilities, especially in terms of
social media.
Using a nine-cell matrix, the weighted scores of industry attractiveness and competitive
strength can be plotted to evaluate Disneys diversified business line up.
6.7
HIGH
Indu
stry
Attra
ctive
ness

Media Networks
Parks & Resorts
Walt Disney Studios
Disney Consumer
Products

MEDIU
M
3.3

Disney Interactive

LOW
STRONG
6.7

AVERAGE

WEAK
3.3

Competitive Strength
Resource Allocation:
High priority for resource allocation
Medium priority for resource allocation
Low priority for resource allocation
Overall, the long-term attractiveness and competitive strength of Walt Disney Companys
different business units are high and strong. Media Network is the top performer across all
business units, while Disney Interactive performs the lowest. They should build and grow their
Media Network, as they are highly capable of creating huge advantages for the company as a
whole. They should invest more in their Disney Interactive because it shows huge potential,
especially after the company acquired Playdom.

3. Does Walt Disney Companys portfolio exhibit good strategy fit? What value chain
match ups do you see? What opportunities for skills transfer, cost sharing, and
brand sharing do you see?

Media
Networks
Walt
Disney
Studios
Parks and
Resorts
Disney
Consumer
Products
Disney
Interactive

Value Chain Activities

Operations Sales and
Marketing

Purchases
from
Suppliers

Technology

Distributio
n

Services

Legend:
1. Combine purchasing activities; gain more leverage with suppliers; realize supply chain
economics
2. Share technology; transfer technical skills; combine Research and Development
3. Combine sales and marketing activities; use common distribution channels; leverage use
of common brand name; combine after sales service
4. Collaborate to create new competitive capabilities
Overall, Disney exhibits a good strategy fit, as presented in the numerous value chain match ups
in between the companys business segments.
4. What is your assessment of Walt Disney Companys financial and operating
performance in fiscal years 2009-2011? What is your assessment of the financial
strength of Disney based on the 2010-2011 financial data?
Table 1: Compound Average Growth Rates (CAGR) and Share on Total Revenues and Income of
the Walt Disneys Business Units

Table 2: Year-on-Year Growth and Share on Total Revenue of Income Sheet Items

Table 3: Key Financial Ratios

The first table shows that the Media Network contributes more to the revenue while
the Disney Interactive contributes less, which is not that bothersome because the CAGR for 2
years is 17.4%, which is the largest for all segments. Meanwhile, in terms of operating income/
loss, the primary driver of growth is the Walt Disney Studios segment (88%). This means that the
segment is very efficient in handling their operations as seen from the income reaped from 20092010, from $175M to $693M. The second table, on the other hand, shows that net income grew
faster than revenues, meaning, the company is operationally efficient in terms of reducing its cost.
This is also seen in the declining share on total revenue of cost and expenses from 2009-2011.
Lastly, some key financial ratios are also generated to support the financial performance of
Disney. Despite having increased borrowings (as shown in LT Debt to Capital ratio and Financial
Leverage), the company maintained to be liquid as seen in the current ratio. The DuPont Analysis
shows that the company has been improving in terms of operational efficiency (Net Profit
Margin), asset use efficiency (Total Asset Turnover) and equity multiplier (Financial Leverage),
that is why, Return on Equity improved from 10.96% to 13.33%.
5. What actions do you recommend that Walt Disney Companys management take to
improve the company and shareholder value? Your recommended actions must be
supported with a convincing, analysis based argument.
Disney can focus their succeeding plans of action in the strategies presented in the TOWS Matrix
below:
STRENGTHS
1.
4.
5.
6.

1. Strong diversification of business units

2. Responsiveness to markets
3. Brand Recognition
4. Creative Process

WEAKNESSES
1.
3.
4.

OPPORTUNITIES

1. Large R&D costs

2. High Risk Factor
3. Constant up graduation
4. High sunk costs
THREATS

1. 1. Growth through further diversification

1. 1. Economic downturn
2. Improve Media network shares
2. 2. Changes in technology & consumer consumption
. 3. 3. International growth
3. 3. Protection of brand and intellectual property
4. Changes in technology and consumer
4 4. Changes in travel and tourism
consumption
SO Strategies

WO Strategies

S2O2. Create a customized/ targeted media

advertising plan for all segments
S3O3. Research one new market and expand to
developing third world countries
S4O4. Use technology to up their creative
processes

W1O3. Develop research plan on emerging

markets with low R&D costs
W4O3. Target new markets and develop
expansion plans around consumer products

ST Strategies

WT Strategies

S3T3. Further strengthen documentation and

W1T1. Use time of economic downturn to

Trademark / IP Protection Plan

S2T4. Create and bank marketing and
advertising strategies to use during peak and
off peak periods for Parks and Resorts

conduct R&D
W4T2. Digitize content to utilize technology
and lower cost
W1T2. Focus on high tech segment and focus
content and R&D there