HeatherFowler-Case Analysis Template
Note: Use additional page(s), if needed, for any of the followingsections however, the sections will expand as you add typedmaterial.
Note: The financial ratios are to be submitted using the Financial RatiosSpreadsheet, provided under Resources.
Important facts in this case (company, industry, competition, etc.)?
Walt Disney Company is a multinational entity founded in 1923 and domiciled in Los Angeles, California. The enterprise operates five business divisions Media Network, Parks, and Resorts. Studio Entertainment, Consumer Products, and Interactive. Walt Disney Company operates in the mass media and entertainment industry. Walt Disney has diversified its interest though it faces competition in various segments. The key competitors are NBC Universal, Paramount Pictures, Time Warner, CBS Corp. News Corp, Carnival Corp and Royal Caribbean and businesses globally that offer family entertainment.
Environmental & Competitive Scan
External factors outside the direct control of the company, but which affect the company. External factors create opportunities and threats to which the company must respond. (e.g., political, demographic, environmental, political, global, legal)
Political instability in a given region adversely affect the Walt Disney operations and revenues.
The entertainment industry has been negatively affected by the financial crisis in the US and other parts of the world.
The industry relies on the preference of the consumer which can change abruptly by favoring Disney products. Moreover, many cultures and stories can be used in the industry.
The entertainment industry is greatly affected by technology. Disney needs to substantively integrate latest forms of technology with the aim of giving the customer enhanced and high-quality experience.
The entertainment industry has numerous laws and regulations that must strictly adhere. The guidelines such as laws on prohibition of indecent content attract huge penalties when broken.
The protection of the environment guides Disney in manufacturing licensed products and theme parks management. The parks emphasize on the management of waste by incorporating activities such as recycling of materials to protect the environment.
Competitive factors that impact the company (e.g., nature of competition, characteristics of existing competitors, potential new competitors, substitute products, bargaining power of suppliers and customers)
The threat of new entrants. The industry has major players, but smaller can still enter the market and compete effectively.
Threats of substitutes. Innovation in technology and high competition in each business segment at Disney generates many choices for the consumers.
Rivalry among entities. The industry is highly competitive within the business sector.
The bargaining power if the buyer is high because the offerings are desires rather than necessities.
What are the critical success factors in this industry?
For an enterprise to accomplish its mission and flourish, the company must excel in certain areas that are unique to the industry to outshine the competitors (Grant, 2016). . The key success factors for the entertainment industry include
Demographic appeal heightens that an entity offers something that attracts the customer.
Product selection in the form of diversification of products to reach more customers.
Well recognized brand name accentuate that users are accustomed to the quality of goods and services the entity offers.
High fixed asset utilization. The factor accentuates that the fixed assets of the entity are utilized efficiently to their greatest potential.
Technological expertise heightens that companies in the industry must strive to be leaders in innovation and creativity to stay ahead of the competition.
How well does this company address those critical success factors?
High fixed assets utilization. Walt Disney is renowned as a leader in animation by invested heavily in fixed assets such as studios and amusement parks
Walt Disney has a strong brand name and has a lot of experience. The company is known to have the best studios in Hollywood.
Walt Disney is highly diversified and has an enormous range of products in each business segment.
Internal Scan – what are the company’s internal strengths and weaknesses relative to critical success factors, the competition, and the environment? (Include financial ratios, utilizing the Financial Ratios Spreadsheet provided under Course Materials – submit separately with this assignment)
The company times interest earned ratio is moving upward over the three financial years indicating that the earnings can adequately pay for interest expense.
Disney inventory turnover is on an upward trend. The perspective accentuates that company is selling the inventory more quickly.
The fixed asset turnover over the three fiscal years is on an upward trend thus indicating the fixed assets are utilized efficiently to generate sales.
Disney total asset turnover is increasing over the three financial years hence reflecting that the company is generating sufficient business volume for the size of invested assets.
The average collection period has dropped over the three fiscal years indicating that the debtors are paying earlier hence providing the company with cash for other purposes.
Disney gross profit, net profit, and operating margin heighten an upward trend over the three years. The ratios indicate the company revenues are adequate in covering the expenses.
Disney ROE is on an upward trend from FY2013 to FY2015 thus an increase in shareholder investment in the firm.
Walt Disney current ratio on a downward trend from 1.205 in FY2013 to 1.026 in FY2016. The perspective indicates the company is finding it difficult to meet the short-term obligation
The quick ratio for Walt Disney is decreasing from 1.078 times in FY2013 to 0.93 times in 2015. The ratio indicates that the company is finding it increasingly difficult to convert the quick assets to pay the due short term obligations.
The debt to total assets for Disney is on an upward trend. The ratio thus indicates that the company liquidity risk is increasing because assets are being tied to more debt.
The debt to equity ratio is moving upward over the three fiscal years hence increasing Disney liquidity risk.
As you consider this company, what do you see as its sustainable competitive advantages. List and comment on at least five. (i.e., what core competencies does this company have that competitors will not be able to imitate/improve upon in the foreseeable future)?
The capability to animate and design the shows.
Perfection of the art of storytelling
The efficient and productive manner of running the operations of the theme parks.
What strategic recommendations/initiatives would you make for this company (i.e., where should they go and how should they get there)?
Disney loses revenues from piracy and thus the company should come up with systems that curb the piracy menace.
The Persian Gulf nations offer the market that is lucrative because of their growing popularity. Disney should, therefore, expand to this market to optimize on the revenues.
Disney should set up a training institute that produces world class animators and ensures the company trains competent personnel to cater for its needs.
Grant,R. M. (2016). Contemporarystrategy analysis: Text and cases edition.John Wiley & Sons