Case Analysis – Case Study Example

due Walt Disney: Case Analysis The Walt Disney Company has successfully thrived across different economic times (see profitability ratio trends). Its long run success is enabled by the corporate’s strategically managed approaches. Disney had experienced some downfall until Eisner came into its rescue in 1984. Eisner had a long term vision, focused on creating new characters such Mickey Mouse, goofy and Donald duck as well as incorporating new ideas to retain the firm’s products relevance in the market. The main strategic issue that this case embraces is Eisner’s heterogeneity; exclusivity and gigantic foresight that enable him coordinate various diversification strategies, achieving current and future success. Strategic analysis: 5 – porter forces analysis Disney’s external environment is a bit friendly with minimal and manageable threats to its success. Having been in operation for a long time, Disney has dominated the family entertainment market posing a barrier to new entrants. In addition to high capital requirements for new entrants( the European theme park cost USD 3.6 billion), new entrants will find it hard to develop and differentiate their products to fit target market needs, given that it has taken Disney several years to achieve this. Suppliers have moderate bargaining power. Disney’s industry is relatively unique and differentiated, with very few firms hence low demand for raw materials. Moreover, since suppliers prefer dealing with large companies, Disney is advantaged. Close substitutes to Disney’s products are hard to produce, hence posing a relatively low threat. Although cartoon figure, movies and theme parks can easily be generated, Disney has ensured uniqueness and quality as well as strategically planned comfort creation hence significantly reducing the threat. Moreover, price ceilings that Disney has placed on various products provide a competitive advantage to the firm. Competition is quite stiff, with the main competitors being Merlin Group, universal Studios and some other regional firms. However, these competitors do not directly affect Disney’s operation due the differentiation of the products (see P/E ratios). The only major threat that Disney faces is the high bargaining power of customers. Profitability in the entertainment industry requires a high number of customers, and thus Force Company to maintain low prices otherwise buyers will shift their consumption. Moreover, given that intangibility of the return obtained from entertainment products, especially in kids services, the buyer can easily quit if offered an unreasonable price. Recommendations To counter buyers bargaining power, Disney ought to emphasize on cost reduction and quality assurance strategies. With the current trend of new character creation and shortening of movie shooting period, Disney stands a higher chance of maintaining its current customers. To ensure maximum satisfaction, Disney management can ensure creativity and consistency in in new character creation. Secondly, the company’s costs is inflated by large workforce while quality deteriorated by changing frequent changes of the management team. Therefore, Disney can significantly cut costs by replacing some labor with machinery, and hence reduce prices. Justification Cost reduction and product differentiation will help Disney to achieve long term success by incorporating creative characters that not only fit the audience but also pocket friendly. Notably, setting the prices lower than their competitors can reduce buyers bargaining power significantly. For instance a well animated the park, marketed through t Disney’s TV shows entices potential customers if the prices are worth. Work cited RUKSTAD, Michael G., and David COLLIS. "The Walt Disney Company: The Entertainment King." havard business school 9.701-035 (2009): 27. Print. Charts and graphs Data Retrieved from S&P stock reports Period Ending: Trend 9/28/2013 9/29/2012 10/1/2011 10/2/2010 Liquidity Ratios Current Ratio 121% 107% 114% 111% Quick Ratio 108% 95% 101% 98% Cash Ratio 34% 26% 26% 25% Profitability Ratios Gross Margin 21% 21% 19% 18% Operating Margin 20% 21% 19% 17% Pre-Tax Margin 21% 22% 20% 17% Profit Margin 14% 13% 12% 10% Pre-Tax ROE 21% 23% 22% 18% After Tax ROE 14% 14% 13% 11% Retrieved from http://www.nasdaq.com/symbol/dis/financials?query=ratios.5