Disney Analysis

EXECUTIVE SUMMARY

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 nation wide 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 worlds leading producer and provider of family entertainment and Eisner is steadily directed and loyal in his commitment to providing quality family entertainment.

I. Evaluation of Objectives and Current Strategy

The Walt Disney Corporation total net income for 1987 is $445 million. The company has been able to make the right decisions the past several years as its net income has almost doubled the last three years. Walt Disney’s philosophy of providing family entertainment which focused on children, youths and adults has put Disney ahead of the competition. Since Walt Disney put the copyright protection on Mickey Mouse and other characters it’s hard for competitors to even get close. Add this with the purchase of prime real estate in California and Florida has made it easy for customers to get access to its product.

The corporation believes that putting budgets on movies will reinforce responsibility across all lines of business. In addition, Eisner has created a corporate R&D group to encourage new ideas as well put movie budgets to certain target ranges. This target range will be closely managed to ensure they come in on time and below the targeted budget. Additionally, Disney has plans to refocus its efforts on identifying good scripts and pursing budding talents within the industry. They also plan to create limited partnerships to help with the financial cost of producing a movie. With plans to release 15 to 18 films per year and with the new targeted budget in place analyst are expecting returns to be between 10-15 percent. The company also plans to look over seas for theme park expansion. They have made an agreement with the French government to open a theme park 20 miles outside of Paris. This facility will be called Euro Disneyland and will be comprised of an updated state of the art Magic Kingdom. These types of decisions will help the company with long-term sustainability.

II. Analysis of Environmental Opportunities and Threats

If Disney wants to expand into the European Market it needs to make sure that it keeps the same philosophy that they have here in the United States. They also need to make sure the European Market and economy is stable. If they fail to research the European market it could cause major implications in the future. The mere size of current operations has given strength to the organization. The longevity of the organization has created a brand loyalty that keeps generations coming back. However the company needs to make sure they don’t overcharge for the cost of a ticket to get into their theme park. If they price the tickets to high it could cause them to lose revenue. But on the flip side they want to make sure they don’t lower the prices to low. Lowering the prices could cause an overload of attendance which could cause natural operating difficulties and ruin the individual experience. Like