SO Strategies

1

Acquire Pixar Animation in order to develop additional content; promote movie growth with Pixar, Marvel and Star Wars. [S3, S6, O5, O6, O7]

2

Hire creative employees that are diverse in their abilities, such as singing or acting as cartoon characters. [S3, S6, O2, O5, O6, O7]

3

Market and sell Disney products at other stores. Disney characters are highly recognized by many children and Disney could do well selling merchandise beyond their own stores. [S1, S4, S6, O9]

4

Build resorts that are more accessible due to increases in park spending, park attendance, and hotel occupancy, especially in China where there is much growth potential. [S1, S6, S7 O1]

ST Strategies

1

Increase service quality for all customers in order to form a more strong customer base. [S1, S6, S9, T1, T5]

2

Decrease cost for entertainment to attract more customers in every single age group. [S2, S4, S10, T2]

3

Lower park entrance prices and discounts on park hotels. [S4, S6, S7, T2]

4

Introduce movie rental website with low prices for the customers.[S3, S4, S6, S7, T2]

WO Strategies

1

Continue rereleasing classic movies into DVDs or streaming to keep Disney magic going. [W3, O2, O5]

2

Open parks in regions that are less expensive to save money while also expanding customer base globally. [W2, W4, O1, O4]

3

Design parks in a way that they incorporate a more modern strategy to provide balance and include all ages. [W3, W4, O1]

4

Create “block buster” movies that include a 3D option. [W2, W3, O2, O5, O6, O7]

WT Strategies

1

Expectation for Disney employees to provide best performance at all times and to deliver the best possible customer service. [W1, W5, T7]

2

Adopt entertainment that is more budget friendly instead of costly ones due to the increasing cost of business operations. [W7, W10, T2, T5]

3

Make parks more accessible. Some parks are not easily accessible, which can cause some of their customer base to think that their parks are a costly trip. [W3, W4, T2, T5]

4

Disney is a narrow target market. [W2, W9, T1]

The Walt Disney Company (Disney)

Division

Disney 2020 revenues for geographical location

Comcast 2020 revenues by geographical location

Division Market Growth Rate

Relative Market Share Position

Americas

$51,992

$80,327

-0.05

0.65

Europe

$7,333

$20,460

-0.04

0.36

Asia Pacific/Other

$6,063

$2,777

-0.20

2.18

The Walt Disney Company (Disney)

Division

Disney Division Revenues

Estimated IFE Score

Estimated EFE Score

Media Networks

$28,393

3.2

3.0

Parks, Experiences and Products

$16,502

2.2

2.9

Studio Entertainment

$9,636

2.2

2.1

Direct-to-Consumer & International

$10,857

3.1

3.5

Growing Disney +

Expanding into other Countries

Strengths

Weight

AS

TAS

AS  

TAS  

1

Strong brand name – market capital approximately $340 billion.

0.10

4

0.40

3

0.30

2

Strong cash balance – almost $18 billion at the fiscal year-end end of 2020 and over $5 billion for the 2019 year-end.

0.07

3

0.21

2

0.14

3

Creative Work Team – designers, artists, scriptwriters – before pandemic Disney had a great year in film with The Lion King, Toy Story and Avengers Endgame; as well as expansions in their parks.

0.06

3

0.18

4

0.24

4

Popular products among all business segments: media, parks and recs, Studio Entertainment & Consumer Products.

0.05

4

0.20

3

0.15

5

Negotiation skills – Established networks and excellent at negotiating deals to grow the business.

0.08

3

0.24

4

0.32

6

Commitment – maintaining safe, positive, fun, and inclusive experiences for their audiences.

0.05

3

0.15

4

0.20

7

Global reach – entertainment shows that transcend language and culture, 11 theme parks across world.

0.06

3

0.18

4

0.24

8

Prior to 2020, total revenue up 17% between 2018 and 2019. Revenue was down slightly during 2020 due to the pandemic.

0.03

2

0.06

1

0.03

9

Diversified platform of business segments, Media Networks (43% of revenue), Parks and Resorts (25%), Studio Entertainment (15%) and Consumer Products & Interactive Media (17%).

0.03

4

0.12

3

0.09

10

History of competent managers and leaders – history of large cash reserve balances.

0.02

3

0.06

4

0.08

Growing Disney +

Expanding into other Countries

Weaknesses

Weight

AS

TAS

AS 

TAS  

1

High turnover among employees, especially during 2020 with layoff related to the parks shutdowns.

0.04

3

0.12

1

0.04

2

Many competitors in all of the business segments, Comcast is primary competitor.

0.07

0

0.00

0

0.00

3

Hard to come up with the next big idea to continue growing the business.

0.08

3

0.24

4

0.32

4

Limited expansion of additional amusement parks, additional work necessary in China and other countries.

0.06

3

0.18

4

0.24

5

Lots of money spent on training and then employees leave.

0.03

3

0.09

1

0.03

6

Overall cash increased by over 229% in 2020 due to additional borrowings taken on by Disney.

0.03

4

0.12

3

0.09

7

Earnings (loss) per share amount to a loss in 2020.

0.01

4

0.04

2

0.02

8

Heavy dependence on income from North America.

0.07

4

0.28

2

0.14

9

Size of Disney has become concern for government due to significant market concentration.

0.02

4

0.08

3

0.06

10

Year over year revenue from 2019 to 2020 was a steep decline of approximately 126% to a net loss in 2020, pandemic related.

0.04

4

0.16

3

0.12

Growing Disney +

Expanding into other Countries

Opportunities

Weight

AS

TAS

AS  

TAS  

1

Expand Chinese theme parks – initial opening of Shanghai Disney Resort had hotel occupancy rates at 95% and park had over one million visitors in first year. Expansion of park already in plans.

0.07

1

0.07

4

0.28

2

Streaming service expansion of their own Disney + and 60% majority stake in Hulu; video streaming services in the US is up 24.8% from 2015-2020.

0.10

4

0.40

1

0.10

3

Technology innovation – continue to explore ways to keep up with shifting consumer patterns.

0.03

4

0.12

3

0.09

4

Potential shift to streaming – virtual theme parks, theaters and tours.

0.02

4

0.08

3

0.06

5

Promote growth of movie production, especially the movies with Marvel, Pixar and Star Wars; average movie and video production in the US grew 1% from 2015-2020.

0.04

4

0.16

3

0.12

6

Expansion of movie production to new countries, especially the potential growth in China. The domestic production of feature films for the Chinese market has grown strongly from 838 films in 2015 to 1,082 in 2018. Movies are expected to fall to 900 in 2020 due to the COVID-19 pandemic, but expected to rise again after effects of pandemic.

0.05

4

0.20

3

0.15

7

Expand media for children’s viewing; overall streaming services are up, potential to create additional content for children.

0.06

4

0.24

3

0.18

8

Offer online social gaming platform for all ages, average industry growth 2015-2020 was 14.7%.

0.04

4

0.16

3

0.12

9

Expand consumer Disney related products; online children’s toy sales in the US was up 13.3% from 2014-2019.

0.02

2

0.04

4

0.08

10

Utilize Disney name to seek partnerships with Dish Network or other competitors to continue expanding streaming offerings to customers; rise in streaming services noted above.

0.02

4

0.08

2

0.04

Growing Disney +

Expanding into other Countries

Threats

Weight

AS

TAS

AS 

TAS  

1

Many companies compete directly with Disney – Comcast is a major competitor with approximately $24 billion more in market capital and approximately $29 billion more in revenue based on 2017 numbers. Increased competitive pressures may reduce revenues and increase costs.

0.10

4

0.40

2

0.20

zz2

Changes in economic conditions, both in the U.S. and globally – pandemic caused total revenue to fall short of expectations by nearly $600 million in third quarter 2020 and the company had to take a $5 billion impairment charge.

According to the QSPM analysis, it is determined that growing Disney+ through expansion and content is more attractive recommendation, with a range of 6.38 over 4.35. In addition, the cost of growing Disney+ will be a smaller investment than the high costs of expanding into other countries.

Recommendations

Below is a list of recommendations that Disney should implement over the next three years and their associated cost.

Explanations for Recommendations

1. Disney+ has been a lifeline for Disney, especially during the pandemic in 2020. This platform and streaming service should be expanded for both content and subscriptions in the United States as well as in other countries. Target countries to expand into could include Canada, Australia, New Zealand and through Europe. Additional movies and new content should be made available to keep the interest up in all areas. An estimated $2,250,000,000 is allocated for this recommendation.
2. Expanding Disney resorts and theme parks could provide new growth for the company, especially as the restrictions from the pandemic are lifted. The attendance for the parks continues to rise, so this is an area that could financially benefit the company. The Shanghai Disney Resort has been successful prior to the pandemic, and it is expected to return to the progress made pre-pandemic. Another theme park in Europe could be a target location. This is a more expensive recommendation; therefore, $6,550,000 has been estimated for this project over the next three years.
3. Creating a creative talent development and inclusion team would help bring people together to have them showcase their best ideas, creative talents and diverse stories. These ideas could potentially be implemented into television series, movies and theme parks. Offering a signing bonus for the best creative talent would help in securing the employees Disney chooses to hire. An estimated $150,000,000 has been allocated to search, find and secure through signing bonuses the best creative talent Disney can find.
4. Employee turnover and retaining talent has been a problem for Disney. Offering retention bonuses for employees to return after completing college or awarding employees for outstanding customer service could remedy this problem. An estimated $300,000,000 has been allocated for this bonus plan to help motivate and retain talented personnel.
5. Disney has many movie franchises, including Star Wars, Marvel and Pixar. Disney also has the capability to create new movies through animation of other family-friendly movies. Disney should continue to find ways to produce new content and make them available through movie theaters or offered through their Disney+ platform. An estimated $750,000,000 has been allocated for movie creation and development over the next three years.

Organizational Chart

The following description provides an existing and improved organizational chart for Disney. Information for the existing executive titles was found on the company website under executive leadership. This only represents a portion of an actual and proposed organizational chart for Disney.

Disney Existing Organizational Chart

Disney Proposed Organizational Chart

Disney’s existing organizational chart shows the tiered graph of leadership and current executive titles. The proposed change is focused on creating more clarity in Disney’s theme park divisions. The proposed organizational chart presents a change in theme park executive titles, by having a Chief Operating Officer of the Disney Parks Division report to the Disney Parks chairperson. Under the Chief Operating Officer in this proposed change, geographic distinctions are made clearer by having a president of each international park and a separate North American president, with two vice-presidents serving over the Florida and California parks. This structure can help create a clear strategy in building both domestic and international Disney Park divisions.The only associated cost with this new structure would be adding a Chief Operating Officer of Disney Parks. This change would aid in providing more organizational structure in executive titles that better reflect Disney’s continued goals in growing their theme parks. Implementing this change would create fresh perspectives and hold presidents over theme parks more accountable than the previous structure implemented by Disney.

Perceptual Map

The perceptual map clarifies Disney’s position among its competitors. Considering Disney’s location in the matrix, it is clear that it is positioned at an ideal place. Since customer satisfaction level is high despite the high prices, it is clear that the company is able to generate a lot of revenue (Malhotra & Bhattacharyya, 2019). Customers will not have a problem paying a slightly high price since they know that the company will offer them sufficient value in their subscription (Vernanda& Sari, 2020). However, it is recommended that the company should slightly reduce its price so that it is in line with that of Comcast. In addition, the company should put more effort into the identification of customer needs. Thesetwo recommendations will allow the company to introduce necessary changes that will promote customer satisfaction.

Firm Valuation

Below is Disney’s firm valuation.Valuation methods for Disney are detailed in the schedule below with input data from the annual report (The Walt Disney Company, n. d.).

The average cash value of Disney as calculated by the four methods above is approximately $103 billion. However, since Disney has such a loyal customer base, a history of positive growth and dedicated employees; as necessary, it is likely that management would be successful negotiating a higher cash value for the company in a negotiation process.

EPS/EBIT Analysis

Below is an analysis of the Earnings Per Share (EPS) and Earnings Before Interest and Taxes (EBIT). Dollars are in millions.

From the analysis, we can see that the best way to increase EPS is by financing the recommendations. However, companies do need to consider the trade-off between tax benefits and bankruptcy costs, especially since Disney borrowed approximately $11 billion in 2020 to be able to endure the financial impact of the pandemic. Disney has elected to finance the recommendations 50% through equity and 50% through debt. As noted in the schedules below, under normal income levels, the difference in EPS between financing at 50/50 is only $.03 less than fully funding through debt financing. This appears a more reasonable option, to make sure Disney can pay back the debt in the future.

Projected Financial Statements

The projected financial statements were developed from the income statement and balance sheet information provided in Disney’s 2020 annual report (The Walt Disney Company, n. d.). With the previously mentioned recommendations in mind, below are the projected financial statements for the new three years. Dollars are in millions.

As noted above there is a modest increase in net income over the next three years. After the loss during 2020, this is a positive step forward for the company.

As noted on the balance sheet as compared to fiscal year end 2020, cash increased as well as long-term debt and common stock. The debt will be able to be paid back on time over the next three years, as the recommendations have improved revenue flow as well as having sufficient cash available to make the payments.

Projected Financial Ratios

The quick ratio and current ratios show in the years 2019 and 2020 are less than 2. This is an indication that the company has not been able to meet its short-term obligations effectively in the past. This will slightly improve in the years 2021, 2022 and 2023, since the projected ratios are higher. The leverage ratios shows that most of the company’s activities are financed by non-owner funds, a state which is projected to persist. The company’s profit margin and assets turnover are however, higher, which is an indication of efficiency in using assets to generate sales. These are projected to be better in the year 2021 onwards.

Retained Earnings Table

Below is a projected Retained Earnings Table for the next three years, using the recommendations. Dollars are in millions.

As per the projection, the company is expecting to grow its net profit margins consistently in the coming three years. This is an indication of a projected efficiency in usage of assets to generate sales, while minimizing costs (Dowdell, Klamm& Andersen,2020).  Accordingly, the company will be able to report a consistent growth on its retained earnings in the coming three years. The growth in retained earnings will improve the net value of the firm and equity value (Karaömer&Özbirecikli, 2019). Consequently, the firm will be less leveraged, as most of its activities will be financed through owners’ funds. Disney has made the decision to stop making dividend payments. It is projected that this will begin again during 2023 to positively influence both new investors and current shareholders.

Executive Summary

Walt Disney is an American entertainment company incorporated in 1923. The company has existed under different names since it was started, but was finally named after Walt Disney, after the death of Walt Disney, one of the founding brothers. Initially, the company started as a cartoon making entertainment firm. However, it has diversified into film making as well. The company has grown to be one of the most competitive entertainment industries in the world. Other competitors include Comcast and Viacom CBS. The company’s financial ratios analysis indicates that it was also affected during the Covid-19 pandemic. The statement indicates that it increased its borrowings to bolster the influence of the same. Therefore, it has experienced a decrease in profit margin from 40% in 2019 to 33% in 2020. However, the management feels that the company is still strong and will improve its profitability going into the future. Its EFL matrix score is 2.43 revealing that the company has many opportunities to expand and form partnership with other established organization since it has created a name for itself in the market. However, the company also experiences threats in the environment such as competition that should be handled through effective strategic recommendations to open up new opportunities and enhance growth. Nonetheless, changes in economic conditions and fluctuations in the exchange rates for the currencies at international platform also affect its profitability.

The analysis of the strategic position and action evaluation indicates that the company falls in the average quadrant in the SPACE matrix. Thus, it is an indication that an organization is in its best position to use its internal and external opportunities to overcome internal weaknesses and to avoid external threats to its operations. According to Boston Consultation Group Matrix, Disney is in the cash cow quadrant, which suggests that the organization is milked of all the profits. The Internal External Matrix indicates that Disney operates in four market divisions, which include media, park experience, studio Entertainment as well as Direct to Consumer International. The matrix determines that the sector that makes the largest contributions is the media networks. Quantitative Strategic Planning matrix determines that growing the Disney+ through content creation is the most feasible recommendation. The cost of the growth is less than investment to expansion to other countries. The recommendations are made on the fact that additional movies and new content will keep interest up in all areas. The expansion of Disney resort and theme parks will provide new growth for the firm, especially with the increasing pandemic restrictions.

The proposed leadership structure at Disney creates clarity. For instance, it show change in theme park executive management by creating the position of the chief executive officer of the park. The geographic distinctions under the park CEO are made clearer by creation the post of a president of every international park. For instance, North America has two presidents working in Florida and California. The perceptual map considers Disney’s position at an ideal place. The customer satisfaction is increased irrespective of the high prices offered by the firm. Disney Company is valuated highly in the market. It has established strong brand and market name. Thus, it is likely to negotiate higher cash value in the negotiation process. The financial projection of the firm indicates that the debt incurred due to pandemic in 2020, will be repaid in the next three years.

0.15

4

0.60

2

0.30