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College of Business and Finance

Department of management and marketing

MAGT 561- - Strategic Management

First Semester 2016/2017

Assignment 2 -Case Study

  Submission 28th November 2016

Done by: Noor Mohammed Abdulla

ID:

Question 1: What is Walt Disney Company's corporate strategy?

Walt Disney is a standout amongst brands in each family. Disney is not only a brand with animations, it is a comprehensively entertainment company and diversified media, which incorporates media network, theme parks and resorts, studio entertainment, consumer products, and interactive media.

The first character was made by Disney In 1928 is Mickey Mouse was made by Disney which was the initial step of the success of Disney Organization. At that point in 1954, the first construction of Theme Park began, and this is the first other business Disney diversify to.

In 1971 Disney opened the Disney World Resort. Walt Disney has done a very good job on their entertainment businesses; they haven't only successfully diversified in to different entertainment industries but also expended internationally.

Disney builds a strong family brand in the entertainment industry

Disney is not simply an animation producing company; it incorporates media network, theme parks and resorts, studio entertainment, consumer products, and interactive media. It is exceptionally diversified in the entertainment industry. It's not only a brand for children, instant of children; the target customer is the whole family. The yearly released movie by Disney is highly demanded by younger children and family. The Disney Theme Park is considered a famous place for family with their children. Disney is concentrating on not delivering brand for children only but for every family.

International expansion and highly diversify strategy

The ambition that Disney wants to growth internationally is clear and it is growing. Disney has built a lot of different products in different industries, however, those segments are all somehow connected with each other.

 The Walt Disney was broadly diversified into theme parks, hotels and resorts, cruise ships, cable networks, broadcast television networks, television production, television station operations, live action and animated motion picture production and distribution, music publishing, live theatrical productions, children's book publishing, interactive media, and consumer products retailing.

The strategy of Disney Company was centered on:

1) Creating high quality family content;

2) Exploiting technological innovations to make entertainment experiences more valuables, and

3) International expansion.

Disney's corporate strategy also called for adequate capital to be assigned to its core theme parks and resorts business to sustain its advantage in the industry. Disney had also made much of its content available digitally; including its Watch ESPN services for Internet, smartphone, and table computers users.

Corporate Level Strategy: Diversification

Disney has proven its success and stability through the company\'s intense diversification strategy and should continue this acquisition process in both current and new markets

Question 2: Does Walt Disney's portfolio exhibit good strategic fit? What value chain match-ups do you see? What opportunities for skills transfer, cost sharing, or brand sharing do you see?

Walt Disney's portfolio exhibit good strategic fit except consumer products.  As mentioned above the “consumer products” side of the business is not an attractive venture. With Disney's hand in many “cookie jars” they have the potential to use many assets and skills in a broad range of ways.   Disney's Media Networks can advertise their theme parks, their studios can be used for movies, and technology researched by Studio Entertainment can certainly be shared across the board.  

How Disney uses its resources in building the success of shareholders in its five major business lines. You will see that while Disney's historical strengths continue to thrive, Disney is about to break out into the digital environment, with its assets fully engaged in converting customers to Disney interactive games, and a future building on “personalized, on-demand” entertainment.

• Branding is king – leveraging to the max

• Costs incurred long ago by the Studios to develop characters like Mickey Mouse  and Cinderella now continue to generate returns in hotels/cruise ships, gaming/video production, theme parks

• Gaining Expertise in technology – also to be shared, no borders, to catch up and potentially overtake competitors

• Assets are deployed across all business lines to drive shareholder value. Let's look at three examples.

The relative strengths of these strategic business units – history and future at Disney. The tremendous growth (from a very small base – 2%) in Interactive Revenues is a key strategy for Disney. The company has spent dollars in acquisitions in the arena to establish itself, and not get left behind. Those acquisitions appear to be paying off.

The assessment of the competitive value of strategic fit and the value chain match-ups for the Walt Disney Company's portfolio is shown in Figure 2.  The resource fit such as skills transfer, cost sharing, or brand sharing could also be done among the portfolios based on Figure 2.

Value Chain Activities

Inbound logistic Technology Operations Sales and Marketing Distribution Service

Media Network

Studio Entertainment

Parks and Resorts

Consumer Products

Interactive Media

Opportunity to combine purchasing activities and gain more leverage with suppliers and realize supply chain economics

Opportunity to share technology, transfer technical skills, combine R&D

Opportunity to combine sales and marketing activities, use common distribution channels, leverage use of common brand name, and/or combine after sales service

Opportunity to combine sales and marketing activities, use common distribution channels, leverage use of common brand name, and/or combine after sales service

Collaboration to create new competitive capabilities

Collaboration to create new competitive capabilities

No strategic-fit opportunity

Figure 2: Identifying the Competitive Advantage Potential of Cross-Business Strategic Fit: The Walt Disney Company

Question 3: What actions do you recommend that Walt Disney Company's management takes to improve the company and increase shareholder value? Your recommended actions must be supported with a convincing, analysis-based argument.

Walt Disney Company recommended strategies are composed of initiatives on two separate fronts. First strategy is to continue to strengthen operations by identifying new opportunities in the current target markets such the new attractions that are being planned for the theme parks.

However, the most striking example of innovative ideas is Disney's real estate venture that takes their “magic” to a whole new level. In this case, Disney successfully

leveraged its incredible brand recognition in the real estate market by creating communities with their image marketing theme coupled with their branding, and consequentially adding value to the consumer. The initial phase of this project was a success, selling over 6,000 homes at a premium, and further communities are now in the works (Reso, 2010).

This type of innovative leveraging of the Disney brand represents the second strategy recommendation. Both, must maintain Disney's values and be fully compatible with either their entertainment niche or also possibly along the informational divisions. Another example that falls within the traditional SBU structure with regards to growth through acquisition that has proven successful is Disney's acquisition of Pixar Entertainment (La Monica, 2006). This move was completely in line with Disney's strong roots in animation and not only acted to benefit that individual SBU, but also strengthened the brand as a whole. Also, they now have veteran innovator in the form of Steve Jobs on the board since Jobs was the CEO of Pixar.

Strategic Initiatives

Walt Disney is known for innovative ideas and excellence in the entertainment industry. Planning long-term success that Disney has endured takes creativity and drive to be the best.   Disney\'s determination and planning for success is evident in their strategic and financial planning.   From their exponential growth from the 1920s to the massive organization they are today it is obvious that they focus time and resources into planning and risk taking.   For even though planning is a priority with every new adventure there is risk.   As well as Disney has done over the decades, the risk of plans failing is still as imminent as the first Mickey Mouse cartoon.   With the long term success of the organization, the Disney Company has not waived from the direction of innovative planning.

The Walt Disney strategic plan that was ingenuity for their company established an increase in their weak earnings per share (EPS).   The increase was $0.83 per share or 32%.  In the year before, $0.63 was the EPS; there was a goal that Disney wanted to meet and increasing their shareholder's capital developing the ability to expand the organization.

Time Value of Money is an initial building block for financial planning, and Walt Disney must have a comprehensive consideration of this perception to accomplish financial safety through this strategic initiative.   Disney set goals that would quantify their cash amounts; there are five variables used to interrelate in any given circumstances.   Existing and forthcoming value, number of compounding phases, periodic payments including interest rate; the amounts are the variables that are the degree, which influences the cost for Walt Disney's initiative. By means of analyzing only the simple elements of time assessment of money Walt Disney can calculate to and measure the upcoming value and change for inflation. Subsequently the past two years of financial earnings, revenue has risen 10% from 2012 to 2013.

Growth in the theme park industry is a challenge in today\'s market. Theme parks will not grow if they don\'t diversify their resources. The Walt Disney Corporation is a nationwide multi-varied entertainment company which is a household name to millions of people throughout North America. Michael Eisner who is Disney\'s chairman and chief executive officer knows that his company will have to diversify in order to meet his targeted growth rate of 20%. Eisner wants to follow one of Walt Disney\'s famous quotes which is \"We cannot hit a homerun with the bases loaded every time we go to the plate. We also know the only way we can even get to first base is by constantly going to bat and continuing to swing\" In order for Disney to meet this 20% target Eisner knows he will need to look at new industries and overseas expansion to be successful.

Since the Walt Disney Company is reaching a saturation point in domestic markets the corporation has recruited several notable executives and officers to fill its key management positions. Out of these positions only one of the ten corporate officers and three of the four group executives are Disney veterans. Eisner is hoping that with some new blood the company may generate new ideas to meet its corporate objectives which are:

1) To sustain Disney as the world\'s premier entertainment company;

2) To maximize shareholder wealth through a target annual growth rate of 20 percent and a 20 percent or greater return on stockholders equity;

3) To maintain the basic integrity of the Disney name and consumer franchise; and

4) To accomplish the above while preserving basic Disney values in terms of quality, fairness, creativity, entrepreneurialism, and teamwork.

 If the objectives are accomplished Eisner feels that Walt Disney can continue the process of being the number one leader in the field of family and entertainment. Their mission is to be the world's leading producer and provider of family entertainment and Eisner is steadily directed and loyal in his commitment to providing quality family entertainment.

References:

Arthur A  Thompson, 2014, Crafting and Executing Strategy, Nineteenth Edition, Mcgraw Hill, 2014

Blatstein, I.M. (2012). Strategic Planning: Predicting or Shaping the Future? Organization Development Journal, Vol. 30 Issues 2, pp. 32.

David M. Kroenke, (2014) Management Information System Using MIS Sixth Edition, Pearson

Porter, M. E (1990)The Competitive Advantage of Nation, Harvard Business Review, April 1990

Porter, M. E (1996). What Is a Strategy? Harvard Business Review, November-December 1996, pp.45-59.

Porter, M. E. (2001). Strategy and the Internet. Harvard Business Review, Vol. 79, No.3, pp.62-74.

Porter, M. E., and V. E. Millar (1985). How information gives you competitive advantage.

Harvard BusinessReview, Vol. 63, No. 4, pp.149-158.of Michael Porter, [Online

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