Analysis of Walt Disney Media Company Limited - Case Study Example

Running head: MEDIA COMPANY ANALYSIS Analysis of Walt Disney Media Company Limited Your Name Course Information Professor Information Date Due Executive Summary Walter Disney Company came into existence in 1923 following a partnership between Walter Disney and Roy O Disney, who were brothers. This company operates three major media business segments including Media Networks, Consumer goods, Disney interactive, and Studio entertainment. Internally, the company is strong because of the diverse media business, strong financial base, and quality customer care. Conversely, internal audit indicates that Walter Disney is weak due to high cost of producing films, global recession, and the need to stay on top of invention. While analysing a company, it is also vital to pay attention to external environment. Table of Contents Executive Summary ii Table of Contents iii Introduction iv Media products and the market iv SWOT analysis of Walter Disney Company vii Internal Audit: Strengths vii Weaknesses viii External Audit: opportunities ix Threats ix Past challenges/ opportunities in Walter Disney Company x Walter Disney current performance x Future challenges/ opportunities in Walter Disney Company xi Conclusion xii References xiii Appendices xv Introduction This paper seeks to provide a detailed analysis of Walter Disney Company Limited, which was started by Walter Disney and Roy O Disney in 1923. The first part of the essay will focus on media product and the market. This will be followed by SWOT analysis of Walter Disney Company while also highlighting relevant media market. Past, present, and future challenges and opportunities of Walt Disney will be given due attention. Media products and the market Walter Disney Company limited is amongst the largest company competing with Time Warner Inc, CBS, and Fox Entertainment. It deals with several media products whose market satisfies the classification of dual description i.e. content is sold to consumers. Diversity of media products indicates that market is also diverse. Media products handled by the company include Media Networks, Consumer goods, Disney interactive, and Studio entertainment (Disney, 2012). In the category of Media Networks, Walter Disney provides broadcasting and cable networks to target market. ABC television network is a product under broadcasting and is ranked third after NBC and CBS broadcasting. However, the broadcasting faces high level of regulation from the government in terms of content areas covered. The rationale behind the regulation is to protect the public, especially the children, against media exploitation. Moreover, broadcasting market allows multiple genres of programs and it is free for both public and commercial purposes. In Cable Networks, Walter Disney has diverse range of products i.e. Disney Channel and ESPN-branded cable network. In the second media line of Studio Entertainment, Walter Disney produces numerous movies, TV animation programs, and live performance on stage. This is where the company delivers entertainment as the content. Besides, the company records music, which is subsequently sold to potential consumers. These contents are distributed to numerous markets through medium like CDs, pods, and internet. It is also in this line of business that Walter Disney distributes products from Disney Film and TV library. Such products comprise of home video, television, and theatrical works under the banner of Walter Disney Pictures, Touchstone, and Miramax. Concisely, the media product is highly distributable. Consumer products in the company stretch from Disney Licensing, Disney Stores to Disney Stores. In the licensing group, Walter Disney licenses company’s characters to various players such as consumer, manufacturer, and retailer. Through the Disney Stores, the company acts as a retailer by producing books and magazines across US and Europe. The trend towards ebooks posses as a threat to Disney stores. To cater for educational marketplace, Walter Disney produces and supplies audio and computer software products, film, and video products. Disney has also been dubbed the world’s largest publisher of Children’s books and other reading materials, which is distributed to about 85 countries in 75 languages. It is also important to note that evolution of media content from ownership to service has an impact on Disney. As opposed to owning books and music CDs, people can now pay subscription fee to listen to music or rather access google docs for information. The final media business operated by Disney is Disney Interactive i.e. Disney interactive media and Disney games. Disney Interactive Media provides an avenue through which kids, families, and other consumers interact. Disney website, Disney mobile, and Disney You Tube channels grants interactive experiences and has been rated as the leading product in the world. Similarly, Disney interactive games present a platform for consumers to interact through mobile devices, social networks, and virtual world. This class is characterised by intense regulation to protect vulnerable group i.e. children. SWOT analysis of Walter Disney Company Internal Audit: Strengths Walter Disney has gained its strength from the vast and diverse portfolio owned by the company. Initially, Walter Disney ran the business of drawing cartoons but later moved to Hollywood. By making use of classics such as Robin Hood and Alice in Wonderland, the company has developed numerous characters to feature in its films. Original characters in Disney cartoons were Mickey Mouse, Minnie Mouse, and Simba, which demonstrates existence of huge portfolio that earns the company strength in a competitive media market. Besides, Disney’s brand and logo is well known among consumers simply because of quality and experience. The fame of Disney Characters has allowed the company to maintain its target customers, mainly composed of children. The second visible strength within Disney Walter Company is diversification strategy where the company has introduced other businesses besides cartoons (Ramjee, 2012). Disney has ventured into entertainment industry by opening Disneyland in California. This was a strategic move to meet consumers from all corners of the world and to make Disneyland an attractive park by merging extensive film characters with the parks. To demonstrate further diversification in Walter Disney, the company’s supplementary business ventures are Consumer goods, Disney interactive, and Studio entertainment. In addition to providing exemplary customer service to customers, Disney gained more power by purchasing Pixar Animation Studios in 2006. Previously, Walter Disney would collaborate with Pixar to produce quality films such as Toy Story. This partnership was a limiting factor given that Disney was regulated on use and reuse of the films produced by partners. Acquisition of Pixar allowed Disney to advance own business without the necessity to seek permission from the partner. This can be classified as a form of vertical integration where Disney wants to take full control of production and distribution. Weaknesses These internal characteristics have negative impact on overall company’s portfolio. One of the weaknesses is the need to create a successful product constantly. This is a challenging task since the company can lose customers to competitors when it fails to deliver quality film. The second weakness is high cost of operation related to successful production of a film. Coupled with global recession and deteriorating profits, Walter Disney has experienced rising cost of doing business. The virtue of operating diverse portfolio is in itself a weakness. This follows a reason that diverse business lines often leads to inefficiencies and lack of strategic focus. Minimal revenue realized from studio entertainment category of Disney products is an internal weakness to the company. This minimal performance within consumer section is an indicator of poor marketing strategy deployed within the business line. External Audit: opportunities Taking into consideration the growing market for ebooks, Disney should invest in this area (Fowler and Trachtenberg, 2010). An opportunity also exists in music industry. By hiring persons with multiple talents, Disney has produced successful films such as Camp Rock and stars including Hannah Montana. This demonstrates that music industry is an opportunity for Disney to merge talents and produce material that is finds market. Thirdly, Disney should look into the possibility of expanding radio operations to supplement on the opportunity present in music industry. To reach vast market, all radio should be utilised. Other potential market areas are Asia and Europe (Clark, 2012) Threats The first threat is rapidly changing media and technology. Slowly, physical books are being replaced by ebooks while the use CDs and DVDs are being substituted by service subscription and internet music. Even though media and technological advancement is a positive move, companies are left struggling to remain competitive amid daily changes. A company that manages to remain at the top of the change becomes the leaders. As an example, new change in technology such as facebook and twitter must be exploited by companies to remain relevant in the present world where most customers are appreciating the value of social media. Secondly, competitive nature of media market is a threat to Disney and its products. Past challenges/ opportunities in Walter Disney Company In an article by Clancy (2011), the challenge of conducting business in a sustainable manner is discussed. By investing in energy management systems, new lighting, and updated equipments, the company managed to reduce electricity consumption by 6.6% (Clancy, para. 5). Secondly, Disney faced the challenge of being irrelevant in the face of changing technology. This has been solved by extensive research in media industry. Independence of the media was a challenge in the past but has been handled through liberalization thus a media company decides on content to broadcast. Walter Disney current performance The details of changes in both operating income and revenue in various sections within Walter Disney Company for the first quarter ended 31 March 2012 are shown in appendix A. According to Calif (2012), Media Networks registered an increase in revenues and operating income by 9% and 13% respectively. The 8% revenue increase in consumer products was attributed to increases recorded in Merchandise Licensing. Driven by high games business, the interactive media class rose by 13%. The increase was also credited to improved console game since product development costs was low. Despite above increases, revenue and operating income decreased in Studio Entertainment by 12% and $77 million respectively. The poor record followed deterioration in worldwide theatrical results. Future challenges/ opportunities in Walter Disney Company A challenge, which can also be viewed as an opportunity is Disney diversification strategy. As opposed to licensing product ideas, Disney itself should concentrate on producing, marketing, and selling consumer products. This characterises unbundling of media content. Originally, Disney had a mission to improve imagination of children and to uphold American values. By venturing to other business segments, Disney is deviating from original mission. Moreover, investing in business lines that do not have direct relationship with products that customer associate with Disney Company will automatically breed disaster. To solve this challenge, Disney ought to concentrate on its original plan. Conclusion This paper began by analysing Walt Disney media product and the competitive market. Internal and external audit was carried out. To understand present situation of the media company, revenue and operating income in different business lines was examined. This gave an outlook of whether the company is performing well or not. Finally, the report discussed future challenges and opportunities in addition to how the company is positioned to deal with these elements in a changing business environment. References Calif, B. (2012, May 8). The Walt Disney Company Reports Second Quarter Earnings. Retrieved 6, July, 2012 from: http://thewaltdisneycompany.com/disney-news/press- releases/2012/05/walt-disney-company-reports-second- quarter-earnings. Clancy, H. (2011, March 24). Disney’s diversity makes sustainability challenging. Retrieved 5 July, 2012, from http://www.smartplanet.com/blog/business-brains/disneys- diversity-makes-sustainability-challenging/14526. Clark, W. (2012). Walt Disney World SWOT Analysis. Retrieved 6 July, 2012 from http://www.ehow.com/about_6849194_walt- disney-world-swot-analysis.html. Disney. (n.d). Company Overview. Retrieved 6 July, 2012 from http://thewaltdisneycompany.com/about-disney. Fowler, G. A., & Trachtenberg, J. A. (2010, July). Amazon Says E-books Sales Outpace Hardcovers. Retrieved 19 July 2012 from: http://online.wsj.com/article/SB100014240527487037205045753 77472723652734.html?mod=WSJ_article_related. Ramjee, P. (2012). Disney's Marketing Strategies. Retrieved 19 July, 2012 from: http. Appendices Appendix A. Source: Calif (2012). Summary of performance of Disney Company in the first quarter 31 March 2012 Quarter Ended Revenue 31-Mar-12 2 April, 2012 % Change Media Networks 4,692 4,322 9% Parks and Resorts 2,899 2,630 10% Studio Entertainment 1,180 1,340 -12% Consumer Products 679 626 8% Interactive Media 179 159 13% Segment Operating Income (loss) Media Networks 1,729 1,524 13% Parks and Resorts 222 145 53% Studio Entertainment -84 77 Consumer Products 148 142 4% Interactive Media -70 -115 39% Appendix B Source: (Fowler & Trachtenberg, 2010) Read More

Through the Disney Stores, the company acts as a retailer by producing books and magazines across US and Europe. The trend towards ebooks posses as a threat to Disney stores. To cater for educational marketplace, Walter Disney produces and supplies audio and computer software products, film, and video products. Disney has also been dubbed the world’s largest publisher of Children’s books and other reading materials, which is distributed to about 85 countries in 75 languages. It is also important to note that evolution of media content from ownership to service has an impact on Disney.

As opposed to owning books and music CDs, people can now pay subscription fee to listen to music or rather access google docs for information. The final media business operated by Disney is Disney Interactive i.e. Disney interactive media and Disney games. Disney Interactive Media provides an avenue through which kids, families, and other consumers interact. Disney website, Disney mobile, and Disney You Tube channels grants interactive experiences and has been rated as the leading product in the world.

Similarly, Disney interactive games present a platform for consumers to interact through mobile devices, social networks, and virtual world. This class is characterised by intense regulation to protect vulnerable group i.e. children. SWOT analysis of Walter Disney Company Internal Audit: Strengths Walter Disney has gained its strength from the vast and diverse portfolio owned by the company. Initially, Walter Disney ran the business of drawing cartoons but later moved to Hollywood. By making use of classics such as Robin Hood and Alice in Wonderland, the company has developed numerous characters to feature in its films.

Original characters in Disney cartoons were Mickey Mouse, Minnie Mouse, and Simba, which demonstrates existence of huge portfolio that earns the company strength in a competitive media market. Besides, Disney’s brand and logo is well known among consumers simply because of quality and experience. The fame of Disney Characters has allowed the company to maintain its target customers, mainly composed of children. The second visible strength within Disney Walter Company is diversification strategy where the company has introduced other businesses besides cartoons (Ramjee, 2012).

Disney has ventured into entertainment industry by opening Disneyland in California. This was a strategic move to meet consumers from all corners of the world and to make Disneyland an attractive park by merging extensive film characters with the parks. To demonstrate further diversification in Walter Disney, the company’s supplementary business ventures are Consumer goods, Disney interactive, and Studio entertainment. In addition to providing exemplary customer service to customers, Disney gained more power by purchasing Pixar Animation Studios in 2006.

Previously, Walter Disney would collaborate with Pixar to produce quality films such as Toy Story. This partnership was a limiting factor given that Disney was regulated on use and reuse of the films produced by partners. Acquisition of Pixar allowed Disney to advance own business without the necessity to seek permission from the partner. This can be classified as a form of vertical integration where Disney wants to take full control of production and distribution. Weaknesses These internal characteristics have negative impact on overall company’s portfolio.

One of the weaknesses is the need to create a successful product constantly. This is a challenging task since the company can lose customers to competitors when it fails to deliver quality film. The second weakness is high cost of operation related to successful production of a film. Coupled with global recession and deteriorating profits, Walter Disney has experienced rising cost of doing business. The virtue of operating diverse portfolio is in itself a weakness. This follows a reason that diverse business lines often leads to inefficiencies and lack of strategic focus.

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