One of the main weaknesses that The Walt Disney Company has to deal with is the increased costs of movie production. These costs have skyrocketed over the last few years and pose a major threat to profit realization in this area of the company’s business. The continued high cost of movie production is something that the Disney will have to watch closely because even a minor mistake could mean the loss of millions of dollars. While amusement park attendance has been growing over the last several years at Disney parks they face more competition than ever before.
Disney will need to keep a close watch on competition in this area and have an aggressive response should their market share start to slip. III. The Company’s Current Environmental Opportunities and Threats Current trends show very favorable opportunities for The Walt Disney Company. Amusement park attendance has increased across the United States over the last 10 years and almost tripling at Walt Disney World. This is a tremendous opportunity for the company because it creates more revenues at the amusement parks division.
The creation of more revenue from the amusement parks division offsets some of the risk the company faces in other areas. Video cassette sales have turned into a multi-billion dollar industry and The Walt Disney Company is in a great position to take advantage of this opportunity. The company controls a library that contains decades of movies, animated shows, and educational tutorials that can be made available to both rental companies and individual purchasers.
With the relaxing of government regulation, studios are once again owning movie theaters, cable channels, and in some cases television networks. This gives Disney the opportunity to own a distribution channel for their volumes of pre-released material and any new programming. The Walt Disney Company is enjoying favorable opportunities, but there are a few threats they face. When you are good at what you do there are sure to be those who try to copy your successes. Disney faces a problem with competitors moving their attractions closer to the Disney owned resorts.
Other studios and corporations are continuing to locate their attractions closer to Walt Disney World in order to cut into some of Disney’s business. Another threat Disney faces in the increase cost of doing business. Movie costs, park expansions, the creation of 100 Disney stores, and advertising are continuing to rise and cutting into the profit margins. Stakeholder Analysis a. Government Agencies – The Walt Disney Company is so diversified and located in so many different locations they have to deal with government agencies on a regular basis.
The Walt Disney Company has to meet FCC guidelines when distributing material for television viewing. They must also deal with both state and local governments when their pursing aspects associated with their real estate ventures. Labor Unions – The Walt Disney Company must deal with labor unions anytime it deals with actors/actresses that are part of the Screen Actors Guild. A company the size of Disney deals with employee unions is some aspect on a continuing basis.
Disney employees thousands of full and part time workers and even if the company isn’t facing union issues at it parks at this time it will most likely face them in the future. Competing organizations – Disney faces competing organizations in almost all of its industry sectors. In the amusement park area they face both local and national competition. Any local competitors entering the market place would have an immediate impact and any regional competition would surely cause some concern.
Competition in the movie and television business would be impacted by competition, but these impacts could be leveraged by the quality of the competing firm’s films and movie release times. d. Employees – Employees will be impacted by the decisions of management and the success of the company. In the service industry it is important that all employees help sell the company and make it be as successful as possible. The success of the Disney company is hinged to the employee as much as the employee is hinged to the success of the company.
Suppliers – The Walt Disney Company relies on many suppliers to run their daily operations. Any decisions that the company makes could have an effect on a suppliers in that area. Any major disruption from either Disney or its suppliers could have adverse reaction on both companies. f. Customers – Customers will be impacted by the actions taken by The Walt Disney Company. It is in Disney’s best interest to create the best quality films and provide the most entertaining amusement park experience if it wishes to maintain its place atop the entertainment ladder.
With increased competition Disney must strive to achieve perfection now more than ever. Civic Groups – Disney has spent many years building a solid reputation and working with other corporations, but some civic groups will be impacted by changes made by Disney. These groups may be both the national and local levels since Disney is a recognized as a global corporation. Public Interest Groups – Public interest groups will be impacted if Disney changes from its family oriented standards and starts producing a product that doesn’t fit this model.
If Disney strays from its long conceived model of a socially responsible company, then public interest groups will react in a negative way. i. Stockholders – Stockholders are directly impacted by the decisions made by Disney’s management. If management makes solid decisions and the company is successful then the stockholders are rewarded with increased dividends, however; if bad decisions are made and the company struggles then the stockholders will lose out on their investment.
Current problems facing The Walt Disney Company are costs associated with new film productions and increased competition in the amusement park arena. The Walt Disney Company will need to stick with its current strategy of setting limits in the costs of movie development and try to continue signing actors to multiple movie deals. In the amusement park arena Disney will need to rely on advertising more than it has over the previous decades which will result in higher costs. Alternative Strategies The Walt Disney Company could look into one or more partnerships in the movie making industry.
To help offset production costs Disney could partner with one of the other big movie producing firms, specifically those that already have big name actors under contract. This strategy only works if Disney is looking for star power in their films. If Disney chooses not to go with the name recognition, instead relying on the quality of the movie, it might consider more short term deals with up and coming actors. Another strategy to help Disney with the distribution of their films (both old and new) in the possibility of acquiring a television network.
FCC regulations on been eased and at least one other movie producing company has made a similar acquisition. Slowing down the rising costs of admission at the Disney amusement parks may help keep some of the competition away and create more attendance at the Disney Parks. Since there is no longer a limit on the number of guests that can be in the park at any given time the additional number of guests would offset the price reduction and create the possibility of more money spent once the guest are inside the park.
Use more of the 43 square miles of property the company owns to build more hotels with the Disney theme . Disney owns more than 43 square miles of undeveloped property in the Orlando area. This property could be developed and used to create more Disney owned and operated hotels. While this would not be a new concept, it would add more vacancies for guests to reside at the Walt Disney World Resort. 2. Consider adding more attractions at Disney parks to help combat competition. If Disney is going to compete with regional amusement parks then it must continue in invest in new attractions.
This investment will need to happen at a quicker pace then it has over the last decade, because the competition is getting closer every year. Expand the home video market . The home video market has exploded and Disney is in a position to take advantage of this opportunity. While the rental market seems to be the best option for traditional movies I think Disney’s could be most successful marketing straight to the home buyer. Use Disney’s creative resource to expand the roster of Disney’s characters . The Disney company was built on the backs of the animated characters in licenses to thousands of companies.
With Disney’s creative resources there are still a multitude of characters to create. Each new character brings with it the possibility of revenue from movies, animated clips, amusement park theme rides, and product license. Continue following the “financial box” model with movie productions budgets . Disney must continue with its practice of setting a limit to movie productions. The continued costs associated with movie production make every film a risky adventure. If price controls are in place and adhered to then some of that risk can be maintained.
At this point in time a minor mistake in the movie making business can have rippling effects across the company. 6. Consider acquiring a television network to distribute to help with distribution of our products (new films and projects from our Disney library) FCC regulations have made it easier on production companies to acquire means of distributing their films. Since Disney already owns its own cable channel and local television station it only makes sense to research the possibility of acquiring a television network, much like Twentieth Century Fox has already done.