Walt Disney Marwa a Hamid

1. Company’s history, development and growth The founders are the American Walt Disney and his brother Roy, both produced the first two Mickey Cartoons and the third one which had achieved success because it was produced at a time where sound was introduced in films. Disney had adopted a growth strategy, it started by a vertical forward integration when Roy Disney established a profitable filmdistribution subsidiary, which gave the company control over its film releases and reduced distribution costs. Disney kept on growing; it introduced True-life adventure films and Live-action films. Further unrelated diversification strategy can be noticed when Disney took the motion picture industry to Television, he started the Wonderful World of Disney and the developed the Mickey Mouse Club television show. Following the diversification approach, Disney had built the Disneyland amusement park that was financed by borrowing money against his life insurance policy and to fully finance financ e Disney land, he brought in three investors, Walt Disney Production, the American broadcasting company and Western Printing and Lithographing Company. In October 1965, Disney had built the Walt Disney World, the Yesterday and tomorrow cities in central Florida. Going through Disney’s history, I believe he had adopted an aggressive marketing strategy, in the early years in was financially strong and had achieved competitive advantages in a growing industry; it was in an excellent position to use its internal strength to take advantage of the external opportunities, to overcome internal weakness and to avoid external threats. Disney was keen to reflect his values through the corporate culture he had fostered in the theme parks. Having the employees cheerful and smiling all the time matches with the environment of an amusement park. Every employee had to attend Disney University before going to specialized training sessions, top-level mangers are entitled to frequent job rotation with the customer facing employees.

2. Issue or problem definition In the early 1984, WDP had faced serious problems with a symptoms that can be summarized as follows: Earnings had been sliding; income declined 34 % to $ 31.5 million. The company’s stock after reaching $ 84 in the year 1983, had dropped to $ 51. The stock had been downgraded from a “buy” to a “hold”. Many prominent businesses were reporting the possibility of a takeover. The Attendance in the Theme parks had dropped by 19 %. The decline in Disney stock had dropped the personal shareholding from $ 96 million in 1983 to $ 54 million”  Traditional Disney audience had shrunk. •

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And to put our hands more on the PROBLEM, we can sum it up in the following statement:

“Disney’s Net Income is decreasing and the company is losing because of being unable to have full control over its diversified operations”

3. External environment analysis In undertaking external environment scanning we must be aware of  many factors within the corporation’s societal and task environment.

3.1 Societal Environment: It includes the general environment forces that affect both Disney and the industries in which it compete. These forces are economic, technological, political-legal and sociocultural. The main external environmental force that imposes a threat on Disney lies in the sociocultural force that is related to the audience lifestyle, norms and values.

Young adults who are the traditional targeted audience of Disney Movie division are shrinking, because they want more sophisticated point of views and WDP does not want to go that far, this threat is related to a change in norms and values. Attendance in the Theme parks had dropped, as it is not attracting the young married who are part of the targeted segment, because Disney is not marketing the resort and recreational aspects of the park, this threat is related to the change in lifestyles as people now are willing to go to travel to discover the far east and the natural scenes of  Malaysia for example, things that are not marketed by Disney.

3.2 Task Environment: We will be using Porter’s approach to scan the task environment, which includes those elements that directly affect the corporation and in turn are affected by it. These elements or competitive forces are as follows: •

Threats of New Entrants:

The idea of having amusement parks are now growing successfully in many cities allover the world and on the other hand top management in Disney had opposed the project that proposed building a series of  mini-Disney entertainment parks. I believe that going on opposing this idea and the successful growth of the others mini parks is imposing a threat on Disney •

Rivalry among existing Firms

Real State corporations are growing and Disney has a control over undeveloped acres wherever it goes, it is concerned with buying more acres than it actually needs so as to prevent the honky-tonks from detracting Disney’s image in its parks, this is a threat as other corporations are making use of the acres or assets he own.

The rate of industry growth in the movies business is growing and Disney can not take advantage of this because its problem in the film division that is mainly concerning the shrinkage in its audience. And so this growth is a threat.

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Substitute Products or Services

Disney as being the first mover in its productions had placed it to be a royal entity that had got its Mania in every age and generation, and so it can not be substituted by other non original entity and this is clear in every item that carries the name of Disney or any of its characters generates revenue. I consider this as an opportunity. •

Bargaining Power of Buyers

Power of buyers or those getting benefit of Disney’s services are imposing power over it because of the change in their interest and values as what Disney offers are entertainment services that is affected by people’s taste over time. I believe this is a threat •

Bargaining Power of Suppliers:

In the movie division, its an opportunity as Disney is the supplier of  the material being broadcasted, and in this movie and the Disney channel industry the bargaining power of suppliers is Null and so this is an opportunity •

Relative Power of other stakeholders:

The relative power of unions, special interest groups is not considered a threat for Disney as it is taking care of its social responsibility toward the society and it had been mentioned before that the management in Disney won’t ever think of introducing issues related to sex and violence. Many TV channels are asking for Disney products because they are trust worthy sources of entertainment for the young segment. So this is an opportunity

3.3 Summary of external factors:

The total weighted score for Disney shows that its response to the strategic factors in its external environmental is AVERAGE.

4. Internal environment analysis •

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Disney is adopting a strong cultural out of the belief that strong culture does not only promote survival, but it creates as well the basis for superior competitive position. The structure was centralized in the top, not because of  eagerness to have the power, but because Walt Disney was the catalyst of the ideas, he was very talented and when he died many of WDP’s new plans were leftover ideas from him. Looking on some financial ratio:

Current ratio = Current assets / Current liabilities 333.102 / 238.198 =1.39 This indicates how much of current assets are available to cover each dollar of current liabilities.

Summary of Internal Factors:

The total weighted score for Disney shows that its response to the strategic factors in its internal environmental is BELOW AVERAGE.

5. Recommendations •

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After examining the latest financial reports, I recommend a defensive marketing strategy for the time being, where Disney can adopt retrenchment or concentric diversification. Disney had been engaged in unrelated business, such as the Walt Disney World, I believe that it can adopt one of the grand directional strategies which isare retrenchment in this sector. Bearing in mind that retrenchment will be followed by downsizing, while doing so compensation packages should be offered to those who had been serving Disney and more attention should be given to those who are still in Disney so as to avoid any mistrust spirit that can harm and hinder Disney from achieving its goals For instance, the Gulf Air in the late 80’s and the early 90’s decided to sell most of its fleets, they decided to fly over 20 instead of 35 cities. They decided to adopt retrenchment, and the money resulted will be used to finance other successful

operations and then they can grow again, this is the same as what I recommend for Disney •

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Disney can sell the underdeveloped and unused acres to the hotels and motels and give up being conservative and worried on springing up around the periphery of the park and it can benefit from their advertisements. Disney can invest more in the Cost Focus competitive business strategy, where it had gained its niche already, this white area with the kids at schools. Disney can adopt the Cost leadership strategy (one fits all), allover the world. It can have retailers that sell Disney consumer products, items that carries the name of Disney or any of its characters. To implement any recommended strategy, we should look for tools, noting that the tools selected should be based on the direction of the objectives.

First tool is structure Second tool is selecting, developing and retaining our Human Resources. Third tool is corporate values or corporate culture And above all is leadership. •

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We have two major types of structures organic and mechanistic, based on the degree of centralization, specialization and formalization the structure is formed. I highly recommend having an organic structure in the Marketing, Public Relations, corporate communication, Art Production and Innovations departments in Disney; this will help employees becoming more creative. Mechanistic structure can be applied in the Finance, store, and administrative departments, this will maintain specialization

The selection process for Disney human resources should be based on Disney’s future goals, we are in the Knowledge era, its not what you have it is what you know, and so having capable and qualified and skilled employees who works in Disney who can develop new products and services.

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Disney as well should set plans for employee development, Career path improvement, and employee retention plans , the result will in having Human resources that are considered as Intellectual capital. Bearing in mind that technology makes things possible but people make things happen. Disney should start focusing in the CRM (Customer Relationship Management) trend, where customers are in the focus of the corporation’s objectives and strategies settings. Listening to customers’ complaints is a gift, Disney can have a bottom on its web site saying “Contact us”, and a monitored responsible team should take over the responsibility of delivering customers complaints and suggestions to the concerned teams and top managers as well as being accountable of giving feedback to customers, this will maintain the CRM trend. Disney should focus on the Process R&D as the designs of its products now are solidified and the emphasis is on reducing costs and improving quality. As long as the strategies will be changed Disney’s culture should be compatible with the new strategy, and failing to maintain an updated culture will result in a threat to Disney. Managers at all levels should receive refreshment training courses on Disney’s way of leadership, in which he integrated human relations, training, and planning and communication skills.