Walt Disney is a company which has had the fortune to stay as amongst the most recognized brands throughout the world. Their business strategy has been simple -- focus on the making Disney a family brand, and grow exponentially in every aspect of the media and entertainment industry. Hence, the company began in the line of expanding their business vertically, thereby becoming a self sustained company and brand all over the world. To begin with, the company started with being an animation picture producing company. As its characters, Mickey Mouse and others grew famous and began to be recognized in every household with a child, so did the founders begin the expansion to other realms of the business. The movement into broadcast television networks, cable networks, television production and station operations was all a proof of the growing independence of Walt Disney, ensuring that its content reached out to all households. Further, the company diversified into producing live theatricals and music publication, spreading its reach far and wide, completely covering all aspects of the media and entertainment businesses. Opening up theme parks, hotels and resorts and cruise ships only came naturally as the company intercepted the huge demand of the kids to meet their favorite characters and live in the land of these characters. Over the years, the number of theme parks has increased and have been placed strategically all around the globe. Next, their corporate strategy began to include any new technological developments and trends and incorporating these into their business framework. With this came the acquisition of the Pixar, Marvel and Playdom. While Pixar and Marvel added to the company's existing set of skills when it came to animation and film production, Playdom added to the new aspect of business -- online gaming and apps. In order to reach to developing international markets, Disney also acquired UTV to spread its base in India.
Walt Disney has some really great businesses up its sleeve which are all set to keep the Company on a flying mode. The fact is that Disney is recognized as a children's brand with its famed characters forever entertaining the children and adults of all ages. Henceforth, it would be wise to say that Disney's business strategy has been quite impressive as in it has expanded in the entire media arena, be it the broadcast channels (video or radio) or books publishing for children. This has ensured that the company has the maximum presence within the media, hence enhancing and maintaining its popularity amongst kids. This also ensures that with the escalated knowledge of Disney's characters, all of the related businesses also benefit from the same. For instance, the toys manufacturing and the books publishing will all benefit from the huge fan following of the Disney characters. Further strengthening this particular arena is the company's acquisition of Marvel and Pixlar, which has ensured the expansion of its list of characters and increased the sale of its toys. With the Marvel characters (Iron Man, Avengers etc), the Walt Disney has only able to expand its popularity further, hugely benefitting its consumer products retailing business across the world. Further, the animated and motion picture production is on an all time hit, with Marvel adding more feathers to the already full Disney's kitty. Overall, when it comes to the core Walt Disney business, it is still going strong and with the help of associated businesses, it has ensured that the Disney stays on the forefront of the entertainment industry. Walt Disney's recent acquisition of Playdom, which is an online gaming and apps producing company, is in line with the recent developments in the gaming world. However, the acquisition is yet to show any major stronghold or promise in the field. In respect to the future of this acquisition, it may right to say that it would serve Walt Disney right to rid itself of this acquisition or simply let this one lie low and focus on being a family brand.
Moving further into the entertainment field, Disney has opened up a number of theme parks all across the world, all of which continue to earn huge revenues for the company. The future of these theme-based Disney parks is as bright today as it was in the past and the entire impetus of the same can be contributed to the huge fan base for all of the Walt Disney characters. The hotels, resorts and cruise ships opened on the similar lines too are an asset for the company, with a bright present and future.
In order to analyze Walt Disney's businesses' competitive strengths, it would suffice to first divide the businesses into various sections such as:
Media networks -- the Disney's media unit consists of ABC television network, domestic and international cable networks. In the domestic market, that is the US, the media units have been doing really great, even as the studios, ABC and other networks have been efficiently used to create high quality content, which is much in demand within the domestic markets. Apart from this, the local news brands and stations have always been on the top three of the list within the competition. According to a report by Neilson Media Research, the ABC network is subscribed and reaches to almost 99% of the US households. The total number of subscribers around the globe for the Walt Disney and ABC networks together make for more than 565 million subscribers. The recent acquisition of the UTV has expanded the media networks operations of the company to a new market in India. With Disney also providing alternate platform for viewership such as DVDs, video games and live internet streaming services and apps, it has shown its capability for future outlook and growth. Even as the comparison of balance sheet showcases, the total revenues from advertisement, affiliate fees and other related avenues has steadily increased from 2009 to 2011. Hence it may suffice to say that when it comes to its media operations, Disney has an extremely strong base which makes for its competitive strength.
Parks and resorts -- apart from the media division, Walt Disney's other major strength comes from its bulk of theme parks and resorts. These include the Disney Vacation Club, the Disneyland Resort in California, the Walt Disney World Resort in Orlando, the Aulani Disney Resort and Spa in Hawaii, and the Disney Cruise Line. Apart from these, the company has stakes in the Disneyland parks and resorts in Paris, Hong Kong and Shanghai as well. The majority of the revenues that Walt Disney earns are from the admission fees to these theme parks, along with the hotel room rents, rentals of the vacation properties, merchandise, food and beverage sales and the sale of the cruise vacations. Over the years, the company has steadily invested more and more into these theme parks, expanding further in order to ease the burden of the existing infrastructure. The company has also added more highlights investing billions into the development, maintenance and expansion of this particular business division. While the revenues have been steady from this particular division, it can be seen that there is no resplendent rise of revenues from 2009 to 2011, despite investing more into the infrastructure. This is mainly because even though the sales have risen, the operating costs too have risen along with it, thus nullifying the overall growth in this business. Nevertheless, this business division too forms for a major source of revenue for the company and would continue to do so in the future.
Studio entertainment -- this particular branch of the company is a little tricky to assimilate. While it is true that the movies produced by Disney, Pixar and Marvel are doing great at the box office, the balances sheet proves the unlikely opposite. The fact is that even as revenues from the films have been great, the production and advertising costs have been nullifying the effect. The only revenue, hence, earned is not from the movies at the box office, but rather from the sale of the DVDs, pay-per-view and Video-on-demand (VOD). This forms a miniscule part of the total Disney revenues, however. Individually, Pixar and Marvel production are a total hit. It can be said that much of the success of other business divisions can be attributed to the popularity of this particular division and its productions. However, if we consider the overall impact of this business division on the Disney's balance sheet, the effect is really small.
Consumer products -- Walt Disney, keeping in line with the growing popularity of its characters, developed its own line of branding and merchandising. This has grown into a full blown business division, with comic books publication, e-books, children's books, magazines, mobile phone and tablet apps etc all coming from their line of merchandise. One cannot, however, forget the importance of the character-based merchandise on the sales of the consumer products. Thus, most of the revenues earned by Disney come from licensing of the character-based merchandise such home décor items, toys, clothes, stationary, electronics and footwear, etc. Owing much to the success of the studio entertainment and animation division, this division looks all set to grow further, as the line of Disney, Pixar and Marvel characters grows.
Interactive media -- Out of all the business divisions developed by Walt Disney, this business division has not made any profit till date. While it may be apt to say that this division being comparatively new is yet to make any breakthrough, the fact is that this unit is a little out of league when it comes to Disney's business strategy. Disney's business strategy has always been linked with the Disney characters, maintaining itself as a family brand. However, adapting to developing online games, apps for tablets and mobile phones etc is going afar and stretching its limits. This is clearly not working out for the company. Past three years have consecutively given negative revenue, what with the sales not as high as the development costs.
4. Walt Disney's businesses have been developed vertically, as also mentioned above and this has given all of the Disney businesses an edge over its competitors. Not only do none of the businesses require any major dependence on outside facets, the interdependence between each of its businesses ensures that all the business units benefit. For instance, the animation and picture production unit ensures that the world becomes aware of the Disney characters (the list is expanding by the day with the addition of Pixlar and Marvel characters as well). Based on these characters, Disney had opened up a land of the Disney characters, namely the Disneyworld. This theme became so popular that Disney has now opened up theme parks all across the world, while even launching hotels, resorts and cruise liners on the similar themes. All this while, one cannot forget the attraction the character-based merchandise has for the kids and hence the licensing of the merchandise works its magic here. Therefore, it may be said that Disney portfolio does exhibit a strategic fit. Adding further to this is the fact that the value chain is completely aligned amongst the various business units in Walt Disney, thus ensuring that all units work well in unison with each other, promoting not just their own units, but all the rest as well. The only business unit which is yet to fit into the business profile is the interactive media unit. Its unison with the theme of Walt Disney is yet to work its magic and be recognized. The fact is that all of the business units have one common aspect -- brand sharing. This brand sharing is yet to be seen in the interactive media unit as this unit is yet to mark its presence and show brand awareness. Linking this interactive media platform with the studio entertainment unit might, however, show some improvement. By developing games based on the Marvel or Pixlar characters might provide the interactive media unit a better playground and demand for its products. The fact to recognize here is that the target audience for video games and apps are mostly adults, or students. Therefore, games developed on animation characters might not find much demand when compared to the gamed developed on characters meant for adults (such as Iron man, Hulk, Spiderman etc.).
5. To sum the company's financial performance in the years 2009-2011, below is a chart:
Disney Total Revenue (Earnings - Operating & selling costs & Depreciation) (In $ million)
Looking at the profits made by Walt Disney in the years 2009 to 2011, it can be deduced that the company is steadily increasing its revenues. The fact is that Disney's main source of its revenues are from the media networks and advertising business unit and considering the media ratings provided for these networks, Walt Disney is in for a smooth sail in this particular arena. However, with the operating costs increasing by the year (the costs rose from $8101 million in 2009 to $12915 million in 2011), the growth prospects in this unit are being receded. In order to hatch the majority of the revenues being earned, the company needs to work on minimizing the operating and selling costs. Similarly, while Parks and Resorts happen to the second next highest source of company revenues, the fact is that operating costs for these are mounting high and unless, these are curbed, any more growth in the revenues from Parks and Resorts will be neutralized.
6. It can be seen from the data provided that the shareholders have seen a steady rise the value of their shares with each passing year:
While in 2009, the shareholders basic value was 1.78, it increased to 2.07 in 2010, while rising further to 2.56 in 2011 -- this is a 43.8 percent rise in a span of three years. In order to continue with the same rise, while the company is steadily increasing its revenues, it needs to work on reducing the operating and selling costs. Further by focusing on either improving its interactive media unit or closing this unit, the company will automatically see a rise in its revenues, while reducing the overall operating costs. This will show in the balance sheet and enhance the shareholder value further. The fact is that Interactive Media division is showing consistent losses; even as the operating and selling costs are mounting high (it has risen from $959 million in 2010 to $1236 million in 2011). In terms of corporate strategy too, interactive media unit is not properly synced with the brand and hence cost and brand sharing aspects are not being utilized here. Unless strong steps are taken towards improving this particular unit, it would be wise for Disney to keep this unit on hold while focusing on the rest of the divisions.
