PowerPoint Presentation

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Strategic ManagementFall 2013

Bryan ClaireRebecca CraigJeff GloeChristina Orndorff

Corporate StrategyCentered on:Creating a high-quality family contentExploiting technological innovation to make entertainment experiences more memorableInternational expansion

* Disney is employing both a growth and differentiation strategy

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Walt Disney Companys PortfolioMediaParks and ResortsStudioConsumer ProductsInteractive Media3

3Media Industry4Threats:Social Media and video on mobile devicesUser Generated ContentFragmentationShift from traditional media outlets

Opportunities:Social MediaCombining social media with traditional media for expanded footprint

4Parks and Resorts5Threats:High competition in U.S. Markets (Busch Entertainment)Weak economyHigh unemployment

Opportunities:High barriers to entry Technology advancementThreat of substitutes are minimalNiche market for theme parks and resorts

According to a 2011 IAAPA U.S. survey of adults: 25 percent of Americans surveyed visited an amusement park within the last 12 months, with 43 percent of Americans indicating they plan to visit an amusement park within the next 12 months.64 percent of Americans reported that their last trip to an amusement park was a day trip and 27 percent say it wasan overnight trip.28 percent of Americans said they would be interested in working for an amusement company.- See more at: http://www.iaapa.org/resources/by-park-type/amusement-parks-and-attractions/industry-statistics#sthash.115QNkuq.dpuf56Studio EntertainmentThreats:High competitionWeak economyHigh unemployment Social MediaIncreasing box office pricesShorter time in box office

Opportunities:High barriers to entry Technology advancementLow consumer bargaining powerImproved CGI and 3D capabilitiesSocial Media

Studio Entertainment (contd)7

7Consumer Products8Threats:Consumer products industry is highly competitiveWeakened global economy has significantly impacted bottom linesTechnological impactsMany available substitutes

Opportunities:High supplier power

89Interactive MediaThreats:Low barriers to entry

Opportunities:TechnologyInexpensive for consumers in a weakened economySocial MediaGrowing market

9Long-Term Attractiveness of Portfolio10Media - AttractiveParks and Resorts AttractiveStudio/Motion Picture Neither Attractive nor UnattractiveConsumer Products UnattractiveInteractive Media AttractiveOverall the industries represented in Disneys portfolio are attractive.

-Media - Projected to grow 18.7% -Parks and Resorts -Studio and Motion Picture Industry is expected to remain relatively stagnant over the next 5 years. -Consumer Products is a highly competitive industry. One reason for a significant weakness is due to a reduction in household residual income. Technology and the growth of non-traditional channels (warehouse clubs) are also a major challenge to the consumer products industry. -Interactive Media Projected to grow 105% between 2013 and 2017. Interactive Media has a large number of opportunities for growth due to improved and ever changing technology.

10Competitive StrengthMedia NetworksBusiness unit operates domestic and international cable networks, ABC Television network, television production, U.S. domestic TV stationsAdvancing in the global market with filmed entertainmentMost TV stations are number one in their marketVery strong news brands with 238 affiliates that reach 99% of U.S. householdsRadio Disney is offered through multiple platforms including SiriusXM, iTunes, and mobile phonesUtilizing technology to reach viewers via apps for mobile devices and online viewingOperating income increased 29% from 2009 to 201111

Competitive StrengthParks and ResortsDisney has parks on both the west coast and east coast of the U.S., as well as a cruise line with ports on both U.S. coastsDisney has ownership in other parks and resorts in the global marketInclusive facilities so visitors never need to leave the area which results in high revenues due to hotel lodging and food salesAll parks and resorts tie back to the themes of popular movies produced by DisneyDisney has the capital resources to expand attractions when necessaryTwo new cruise ships were deployed due to the existing fleet operating at full capacity12

Competitive StrengthStudio EntertainmentBusiness unit produces live-action and animated movies, pay-per-view and DVD home entertainment, and Disney on Ice performancesPixar and Marvel were purchased by Disney for use of technology as well as character useDisney knows exactly how many of each branded movies will be produced each year: one animated Pixar and Disney film, two Marvel films and six to eight live-action Disney filmsOperating profits grew about 250% after acquisition of Marvel13

The studio entertainment business unit produces live-action and animated movies, as well as pay-per-view and DVD home entertainment in which,

Over the last several years, disney acquired Pixar and marvel for use of their technology as well as characters

This alone is s a huge advantage over competiors since, considering that just last week, the Marvel Movie Thor: The Dark Age, set a marvel record of $86 million on its opening weekend13Competitive StrengthConsumer ProductsBusiness unit includes Disney Stores and businesses focusing on merchandise licensing and childrens books and magazine publishingGlobal with 208 Disney Stores in North America, 103 in Europe, and 46 in JapanPublishing includes print format as well as electronic format that is viewed on mobile or tablet devices14

Competitive StrengthInteractive MediaBusiness unit produces video games for multiple devices as well as Disneys websitesAcquired Playdom, Inc. which creates online games for social networking15

9-Cell Industry Attractiveness/Business Strength MatrixBusiness Strength/Competitive PositionIndustry AttractivenessStrongWeakLowHigh16

The 9-cell industry atrractiveness, business strength matrix shows at a glance which of disneys business units should have priority. The size of the circle shows the current financial value of each business unit and the blue shaded portion shows disneys current market share

As you can see in general, the more market share the larger the circle and parks and resorts is disneys leading business unit.

But The interactive media business unit seems promising. Disney currently has strong competitive position in the area that is getting more attractive as technology advances with a great amount of room for growth. Who knows, maybe in the future, visits to the parks will just be through interactive media.16Strategic Fit: How do Disneys businesses build off each others successes?Branding is king leveraging to the maxCosts incurred long ago by the Studios to develop characters like Mickey Mouse and Cinderella now continue to generate returns in hotels/cruise ships, gaming/video production, theme parksGaining Expertise in technology also to be shared, no borders, to catch up and potentially overtake competitorsAssets are deployed across all business lines to drive shareholder value. Lets look at three examples.

In the slides that follow, how Disney leverages its corporate assets to build shareholder success is highlighted in each of its 5 major business lines. You will see that while Disneys historical strengths continue to thrive, Disney is about to break out into the digital environment, with its assets fully engaged in converting customers to Disney interactive games, and a future building on personalized, on-demand entertainment. 17Disney Growth by Strategic Business UnitFYE 9-28-201318

Well discuss the relative strengths of these strategic business units history and future at Disney. The tremendous growth (from a very small base 2%) in Interactive Revenues is a key strategy for Disney. The company has spent dollars in acquisitions in the arena to establish itself, and not get left behind. Those acquisitions appear to be paying off. 18Parks & Resorts: An example of Strategic Fit at Work in China19

Disney will be opening this new resort, with China as a partner, in 2015. Millions of people will be within a 3 hour drive of this park, but Mickey Mouse and Donald Duck are not part of the culture in China, and this presents a problem for Disney how to get people to come? Tokyo Disneyland and Hong Kong Disneyland has given the company experience in the far east so they will use these lessons to make a big splash in China.1920

The size of the Shanghai resort will be more like DisneyLand in California; not the size of Orlandos Disney World. Disney will own 44% and the Chinese Government will own the rest. 20China and Theme Parks: What not to do21

Chinas deserted, fake Disneyland was begun in the late 1990s and never got off the ground. This was located on about 100 acres, and was never completed. Fields are going back to the farmers. Disputes with property owners doomed the developers to failure. Disney has much more experience than that and knows how to roll this out in a whole different technological era. 21How Strategic Fit Informs Disneys Shanghai Plan(http://skift.com/2013/11/08/how-disney-plans-to-build-a-brand-in-china-before-shanghai-park-opening)There are risks: Disney still has a far way before Mickeys famous ears are recognizable by every child and parent in China.

Disney CEO Robert Iger addressed the issue during the companys 4th quarter call on Nov 7, 2013. He cited the synergies of the Disney empire in addressing these risks:

LEVERAGING MEDIA In CHINA:

Relying more on its mobile and online platforms than TV due to national restrictions. The company is planning to increase marketing once park attractions based on cultural or media interests are announced. Chinese culture will be wedded to Mickey.22

22Disneys Shanghai Plan, contd(http://skift.com/2013/11/08/how-disney-plans-to-build-a-brand-in-china-before-shanghai-park-opening)RETAIL: will also help Disney build a buzz before the 2015 opening .

Were also opening or developing our first big store in China and that is actually in Shanghai, which will be used before it opens sort of a quasi visitor center to let people know more about the park itself, said Iger. Once the park opens we actually believe that well have a significant halo effect on the brand. There will be a lot more interest in and appreciation of Disney stories and characters.

DISNEYS CRUISE LINE: represents another opportunity for tapping into the Chinese market. Iger says the company currently has no plans of adding to its fleet or expanding itineraries; however, it could become an option when Asia opens up to the family cruise business.

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Classis Disney they exploit every opportunity to cross-sell. 23Another example of Strategic Fit: Consumer Products (9% growth) In August 2013, Disney Introduced its latest COLLECTION Disney Fairytales Designer Collection.

Limited to an edition of 6,000 of each of the five couples globally, each Doll Set retails for $129.95.

And what else? Apparel and home dcor, of course.

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A final example of Strategic Fit of Disney products Interactive Media 26% growth in FY 13. This review sums it all up brand marketing. Family friendly.. Using technology developed by another company 2526 Disneys mission focuses heavily on financial performance:

The Walt Disney Company's objective is to be one of the world's leading producers and providers of entertainment and information, using its portfolio of brands to differentiate its content, services and consumer products. The company's primary financial goals are to maximize earnings and cash flow, and to allocate capital toward growth initiatives that will drive long-term shareholder value.-thewaltdisneycompany.com/investorsDelivering on Strategy: Financial Performance

26Strategic Business Unit Contribution

Amounts in $MM USD20112010MEDIAPARKS & RESORTSSTUDIOCONSUMER INTERACTIVE MEDIAMEDIAPARKS & RESORTSSTUDIOCONSUMER INTERACTIVE MEDIARevenue 18,714 11,797 6,351 3,049 982 17,162 10,761 6,701 2,678 761 Operating Expense 10,376 7,383 3,136 1,334 732 9,888 6,787 3,469 1,236 581 Selling & General Expense 2,539 1,696 2,465 794 504 2,358 1,517 2,450 687 371 Depreciation & Amortization 237 1,165 132 105 54 222 1,139 89 78 43 Other (584) (438)OPERATING INCOME 6,146 1,553 618 816 (308) 5,132 1,318 693 677 (234)Total Operating Income from SBUs 8,825 7586CONTRIBUTION20112010MEDIA70%68%PARKS & RESORTS18%17%STUDIO7%9%CONSUMER 9%9%INTERACTIVE MEDIA-3%-3% Media by far the strongest strategic unit

Parks & Resorts, Studio and Consumer are all effectively leveraging the Media / Broadcast unit

Disney has not effectively capitalized on Interactive Media. Why? 27

The Media Networks group drives the majority of the business and supports the marketing efforts of all the other SBUs. Media is by far the most important strategic unit of Disney Parks and resorts are a solid contributor to overall income. Their contribution has remained essentially flat Studio productions is showing year over year decline in operating income. This is in spite of a reduction in expenses for the division. Consumer products contribution remained flat year over year Interactive Media is the problem child of the SBUs. Operating losses in the unit have increased 74mm year over year27Strategic Business Unit Contribution

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http://thewaltdisneycompany.com/sites/default/files/reports/q4-fy13-earnings.pdfThe roll out of the Disney Infinity game has had a massive impact

The Media Networks group drives the majority of the business and supports the marketing efforts of all the other SBUs. Media is by far the most important strategic unit of Disney Parks and resorts are a solid contributor to overall income. Their contribution has remained essentially flat Studio productions is showing year over year decline in operating income. This is in spite of a reduction in expenses for the division. Consumer products contribution remained flat year over year Interactive Media is the problem child of the SBUs. Operating losses in the unit have increased 74mm year over year28Interactive Media Sales

29Interactive Media Revenue Trend $MM2010201120122013 761 982 845 1,064 Disneys fiscal year runs October September Anticipated holiday sales of Infinity may take unit to profitability

29Interactive Media Operating Income

30 Disney is erasing the huge operating losses in the division slowly Infinitys Q4 release led to the first profitable quarter in years for the division

Operating Losses2010201120122013-234-308-216-87

30Interactive Media Sales Forecasts

31 Currently not providing guidance Key Factors for Sales: Holiday Season for Infinity Leveraging the Lucas Arts and Marvel intellectual properties New Platforms: Playstation 4 and Xbox One

31Referenceshttp://www.iaapa.org/resources/by-park-type/amusement-parks-and-attractions/industry-statistics http://www.mpaa.org/Resources/92be6469-1d3c-4955-b572-1d3f40f80787.pdfhttp://stateofthemedia.org/2013 http://www.disneyabctv.com/division/index_stations.shtmlhttp://www.ibisworld.com/Common/MediaCenter/Fastest%20Growing%20Industries.pdf http://www.joystiq.com/2013/08/07/disney-interactive-loses-58-million-in-q3/http://www.nintendolife.com/news/2013/11/disney_interactive_sees_big_financial_boost_in_q4http://www.gamasutra.com/view/news/32919/Disney_Interactive_Losses_Up_Slightly_On_Continuing_Playdom_Acquisition_Costs.phphttp://www.iaapa.org/resources/by-park-type/amusement-parks-and-attractions/industry-statistics http://www.mpaa.org/Resources/92be6469-1d3c-4955-b572-1d3f40f80787.pdfhttp://stateofthemedia.org/2013 http://www.disneyabctv.com/division/index_stations.shtmlhttp://www.ibisworld.com/Common/MediaCenter/Fastest%20Growing%20Industries.pdf http://www.forbes.com/sites/scottmendelson/2013/11/10/weekend-box-office-analysis-thor-2-sets-marvel-record-with-mighty-86-million/3232