The Walt Disney Company Strategies

Introduction

Strategic thinking is an integral part of strategic management for organizations, is a skill which managers must master and can be used to face difficult challenges. Strategic Thinking is a planning process that applies innovation, strategic planning and operational planning to develop business strategies for success. (Stanleigh, n.d.)

The key point of strategic thinking is to identify the challenges and work out suitable strategies. To take an advantage in the competition between organizations, both internal context and external environment of the organization must be considered. In this report, for internal audit Boston Matrix and stakeholder analysis are conducted to analyse the Disney company itself. PESTLE analysis and SWOT analysis are contributed to analyse the external environment for strategic selections.

Chapter 1 Introduction & Strategic Contexts

1. Mission and vision statement

The Walt Disney Company has the following for its mission statement: “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.”

1. Context and Overview

The Walt Disney Company is a worldwide entertainment company with four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products. The strategic objective of Disney is to focus on producing high-quality and creative content, fostering innovation and utilizing the latest technology to make customers’ experiences with Disney more memorable and accessible, expanding into overboard markets all over the world.

1. History, Present & Future of Disney

Walt Disney Company was founded in 1932 and headquartered in California, USA. On February 6, 1986, it officially changed its name to The Walt Disney Company. At that time, it was still just a cartoon studio and now Walt Disney Company has become one of the world's largest entertainment companies. Disney plans to launch two direct-to-consumer (DTC) services, one in 2018 and another one in late 2019, which are a DTC ESPN app and a Disney app respectively (Farrell, 2017). The company is constructing a new theme park based on Star Wars series which plans to open in 2019 at Disney Hollywood Studios (Baker, 2018).

1. Risk factors

Disney is facing lots of problems that can bring huge impacts on the company's development and performance. The issues that could affect Disney’s operations are as follows:

• New entertainment products of Disney may not meet the needs of consumers, especially the generation from millennium (Richwine and Venugopal, 2017). The fact that customers are no longer only satisfied with Disney's product itself, but also the services the company provides (Pinchain.com, 2016).
• The difficulty in protection of intellectual property rights. As Disney is a well-known brand, many companies might use Disney’s original context to make profit by increasing their product awareness in public. (Mattera, 2018)
• Since Disney is highly depend on the U.S. markets for its revenues, the different policies between the U.S. and other countries might increase the business risks which making the company vulnerable for economic and political uncertainties in the oversea market. (Mattera, 2018).

Chapter 2 Formulation of strategy

1. Internal Audit

1.1Portfolio Analysis (Boston Matrix)

The Walt Disney Company has four business segments: Parks and Resorts, Studio Entertainment, Media Networks and Consumer Products. Segments operating income between 2015 and 2017 is as follows:[pic 1]

According to the segment operating income, the BCG (Boston Consulting Group) Growth Share Matrix is as follows:

• Stars (Parks & Resorts)

Disney theme parks are regarded as “Stars” because both its market share and growth are high. The growth in operating income of this unit in year 2015 is $3,301, in year 2016 is $3,298, and in year 2017 is $3,774, which means that parks and resorts have accepted by the market rapidly. Therefore, parks and resorts are the part of “Growth” in the product life cycle.

• Cash Cows (Studio Entertainment and Media Networks)

1. Studio Entertainment

Walt Disney’s studio entertainment is considered as “Cash Cows” because they have successfully reached the maturity phase of the product life cycle with high yielding. The revenue of studio entertainment shows a decrease around 10% between 2016 and 2017. Moreover, Disney’s studio operating results will change as the time of releasing performance in the entertainment markets, which are mainly decided by holiday periods (Pinchain.com, 2016).

1. Media Networks

Media networks unit is considered as “Cash Cows” because this business has successfully reached the maturity phase of the product life cycle with high yielding, although there is a downward trend in the operating income over recent 3 years. In a multi-channel environment, Disney’s media network is still one of the market’s leaders with high market share (Kyle, 2018). Disney has the ownership of eight television stations, six of them are in the top ten household television markets in the U.S. The television stations derive most of their incomes from advertising sales (Reilly, 2016). All Disney’s television stations are associated with ABC and together reach 21% of the U. S’s television households (Nielsen Media Research, 2017).

The stations owned by Disney are as follows:

[pic 4]

• Dogs (Consumer Products)

Consumer products are “Dog”, as there is a considerable fall in operating income from 2015 to 2017, reached the phase of decline in product life cycle. And the growth of its business unit and the market share is negligible. Because of the consumer product business competes with all other retailers, it is hard to Disney to maintain their market share (Dedekind, 2016).

1.2 Stakeholder analysis

1. Employees

Black (2008) reviews have been involved a raising consciousness on the level of public policies about how employees are treated at work and how the nature of the workplace affects people’s healthy, and the level of performance. Disney’s International Labor Standards (ILS) Program intends to improve conditions of workplaces where produce Disney-branded products. (Mattera, 2018)

1. Customers

• For attracting new customers and maintaining existing customers Disney acquired Lucasfilm, the company has produced Star Wars series films in 2013. (Russell, 2012) In 2019, a new themed areas origin from Star Wars is planned to complete.
• For children, Disney began to develop English courses for Chinese children using Disney’s original content. There are 27 learning centers in China until 2010. (Garrahan and Saperstein, 2010)

Although Disney takes several actions to attract customers, its revenues for 2017 decreased $0.3 billion, to $46.8 billion (The Walt Disney Company 2017 Annual Report).

1. External Analysis

1. PESTLE Analysis

1. Political

Disney’s media networks are subject to a range of rules by the Federal Communications Commission (FCC) under federal regulations. The violation of FCC disciplines can lead to considerable monetary penalties, in some cases, rejection of license renewal or cancelation of a license. (Wallace, 2009) Changes in current laws or regulations, court action or changes in the context of the application would have an adverse influence on Disney’s operations.

1. Economic

Disney operates business internationally, under risks related to changes of foreign currency exchange rate. (Adinolfi, 2015) The effective income tax rate in 2017 was 32.1%, decreased around 2.1% compared to 2016, which was 34.2%, according to the Walt Disney Company Annual Report (2017). As the analysis of the report (2017), the decline in the effective income tax rate due to lower tax on foreign incomes and a growth in the profit related to qualified national production activities.

1. Social

Barber and Thesis (2015) suggested that the male and female characters in Disney films have reflected the changes of cultural perspective and social norms of gender roles. The major change of Disney has taken place in the portrayal of female characters throughout history can be seen from the difference between Snow White, a damsel with distress background, and Elsa, a figure of independence and free spirit.