Graduate School of Business

MBA Program

“De

Comprehensive Exam
“Disney Production”

Name: Mohamed Ali MOUSSA

Program: MBA
Major: Marketing.
Exam Date: 16 April, 2004
 In the direction of solving this case and providing my recommendations I
follow the following outline:

I. Introduction:
In which a general historical overview will be done regarding Walt
Productions as well as brief of problem identification.

II. Step 1: Environmental Scanning

This step will cover monitoring, evaluating, and disseminating of info
from internal & external environments to key people within WDP
(Walt Productions)

III. Step 2: Strategy Formulation

This step covers the developing of long-range plans for effective
management of environmental Opportunities and Threats, in light of
corporate Strengths and Weaknesses. From these developed
alternatives, the best one should be selected.

IV. Step 3: Strategy Implementation

Putting strategies and policies, that are generated and developed in
the previous step, into actions

V. Step4: Evaluation and Control

This step covers the monitoring of WDP activities and evaluating them
with respect to the desired performance and results.

VI. Step5: Feedback and learning Process

VII. Conclusion and recommendations.

After showing the analysis, from WP point of view, I’ll provide my
recommendation as reflected from my own opinion.
In this part I’ll give more descriptive problem definition, then criticize
the situation and put my recommendations
 I. Introduction

Walt Disney, the poor young boy but the very innovative, has created the
idea to enter the gate of the business world. He decided to do a series about a
mouse. Although it was very difficult to work at the early beginning, however it
became one of the biggest companies in the entertainment world.

Walt Disney, his brother Roy and another guy, Ub Iwerks, were the
founders of this great giant.

Starting with the very low techniques and financial resources to develop
their early cartoon movies early 1900s and ending with WDW (Walt Disney
World) at cost of $600 million, WP was growing too dramatically. Their market
and financial positions were strong enough to be as a power of a country.

Their reached their peak during the period between 1965 and 1970.
However, by losing their main competitive advantage; creativity, they started
to decline.

The main problem they faced is sliding of their earnings.

The point was in the change of Management Philosophy. Yesterday,

top management was focusing on good management as a tool to apply
innovative ideas in order to attract people. Today, top management is
squelching creativity; the main key competitive advantage and market leadership
motivator.
 II. Step 1: Environmental Scanning
In this step all the major affecting factors, External and internal, will be
assessed
A. External Factors.

The external factors are important in order to assess the degree of

environmental uncertainty.
External factors are usually categorized as, factors of Social
Environment variables and factors of Task environment variables.

i. Social environment (PEST)

 Political-Legal Forces:
a. The world war affecting the money supply to the WDP
since it was impounded abroad.

 Economic Forces:
a. After the great recession, in the 1930s, it became more
promising due to the better economic situation.
b. Bad weather in harsh winters affects the purchase
power, especially in Disney lands, since people will not
prefer to go to open parks in winters.

 Socio-cultural Forces:
a. A demographic change; the percentage of target
segment age (under 14) has reduced from 18.2% in
1960s to 13.6% in 1980s.
b. Market has been changed; the target segment became
tending more towards more sophisticated points and
contain more sexy and violent materials

 Technological Forces:
a. The advancement in the technology improving the
production and management processes.
b. Patent protection increased and technology helped to
put a barriers for intellectual and trade stealing.

ii. Task environment:

 Using “Porter’s competitive industry analysis”

a. Threats of new entrance: it is very high since the huge
amount of financial and capital resources that a new
business unit could need to compete, directly or
indirectly, with WDP.
b. Rivalry among existing Firm: although the industry is
consolidated, rivalry is high due to the high
 diversification in sorts of entertainments. Some of them
are suiting much more the market changes. As an
example “Metro Golden Mayer”.
c. Threats of substitute products and services: changing
of WDP is very difficult right now, although I do
believe it is a must.
d. Bargaining power of Buyers: it is very low as well.
e. Bargaining Power of Supplier: it is low since WDP not
depends on very sophisticated suppliers and do a lot of
work in house.
f. Relative power of other Stakeholder: it seemed to be
high.

 Type of Industry:
WDP is represented as “Consolidated industry”. As it might
be noticed, the entertainment industry is dominated by large
firms. No place for small business units, due to the high cost and
entrance barrier.

 Strategic type:
Actually WDP followed 2 different types of strategies in
two different eras. Before 1970 era, WDP was Prospector
since it was focus on product innovations and broad products.
After 1970 era, WDP was Defender or reactor since it was
trying only to improve the efficiency of their products or suffering
from lack of consistency between strategy, culture, and market
changes.
iii. Analyzing external factors (EFAS)

The EFAS Summary Table is shown in the next page:

B. Internal Factors.

 Identifying core competencies: WDP has some core

competencies:
o Innovation
o Good experience of the type of work.
o High businesslike and competent stuff.

 Resource-based approach to organization analysis (VRIO)

o Value: WDP used to have a competitive advantage
value of “Innovations”. However, recently, WDP started
to lose it. WDP also has good capital assets.
o Rareness: innovation and good capital assets are rare.
o Imitability: innovation is difficult to imitate and good
capital assets is not easily found.
o Organization: it used to be very reflective to these
resources. Recently, it is not.

 Value chain analysis:

As it was mentioned in the article, WDP moved vertically
along the value chain. They had built their own distributors.
They also built their fabrication.

 Organizational structures:
o WDP started with the very simple structure, few people
own the business and do every thing them selves. After a
while it followed functional structure, in which there
were many functional entities. At the final stage, WDP,
opened new divisions (e.g. TV, Disney lands, WDW) and
evolved and grew to Divisional Structure.

 Corporate culture.
The major characteristics of WDP corporate culture:
 Manicured lawns and ethereal is conveying a campus
like atmosphere in WDP.
 Men had to have their hair cut above their ears and
collars with clean shaven.
 Women have to be natural without emphasized or
noticeable make-up or wears.
 No eat, drink, smoke, curse, or chewing gum while
working with public.
 Employee should keep the quite and nice smile and
pleasure.
 WDP used to train their employees in a very good
manner before they become in touch with the
customers.
 Marketing Situation:
o Segment: the main segment for WDP was the younger
people (under 14). The sub segments include the parents
as well.
o Product life cycle: WDP’s products (TV, Parks) are at the
end of the “growth phase” and will start to “decline” if
WDP will not change their strategy. In my opinion the
WDW is in its “growth phase”.
o Market mix: for products, WDP is focus on the good
quality and good brand name. For Place it was very
concentrated, specially regarding the parks, if they
succeeded with the Mini-Disney it will be good. For
promotion it needs an aggressive advertising and
promotion campaigns.

 financial situation: according to the financial ratios that are

shown in the following page, here is some notices:
o ROI is declined more than 1 third.
o Operating Profit Margin show some increase.
o ROE show increase which another good sign.
o EPS and Current ratios declined by almost 30% which is
bad signs.
 Analyzing internal factors (IFAS)

The EFAS Summary Table is shown:

 III. Step 2: Strategy Formulation

A. Mission.
Unfortunately there is no stated mission statement in the given article.

B. Objectives & Goals

i. General Corporate Objectives
 Primary Objectives: is to provide the a good entertainment
service for the primary target (younger) as well as the
secondary one (Parents)
 Secondary Objectives: to have the good sink for million of
dollars.
 Objectives vs. time horizon: the objectives were very long
term objectives. However, WDP did not go with a very
important step; which is verifying these long term objectives
with the market changes.

i. Marketing Objectives
 Apply Ansoff’s matrix of products vs Market, we will find that
WDP used “Diversifications”
C. Situational analysis:
i. SFAS from the previous IFAS and EFAS tables, we can
create the SFAS table as shown in the next page:

D. Strategies

i. Corporate Strategy

 Directional Strategy
o Growth strategies
WDP worked in the growth strategy in its both directions;
 Concentration by vertical integration going both
forward and backward in the value chain by having its
own distributors as well as some manufacturing.
 Diversification concentric or related entertainments
sorts.

 Portfolio Strategy: it is working in the entertainment industry.
 Parenting Strategy: WDP is the owning parents for all other
sub-units; movie industry, Parks, WDW, and the remains.

ii. Business Strategy.

  Competitive Strategies (Porter)
o WDP used the “Differentiation Strategies” by its
unique innovative ideas. It also worked to “focus” on
certain demographic segment (younger)

o Competitive tactics: At the first era, WDP was

following Offensive starting from “Guerrilla Warfare”
and ending with “Frontal Assault”. By time it changed to
“Defensive” tactics.

 Cooperative Strategies: as it is not so clear in the given

article, WDP did not have any alliances or collusion.

iii. Functional Strategy.

 Identifying core competencies: as shown before, the core

competency for WDP was “innovation”.

 Sourcing decision; WDP tended to not outsource its activities,

on contrary they made vertical integration.

 Marketing strategies: briefing of used marketing strategies is

as follows:
o Value Positioning / value disciplines: they used more for
more strategy (more value for more money)
o Push/ pull strategy: they followed Push strategy relying on
promotions rather than advertisements (Pull).
o They used Skim pricing strategy to “skim the kream”.
o They used value-pricing rather than cost-oriented or
market-oriented techniques.

E. Policies: the broad guideline was “The Wonderful World of

Disney”. The key word is Wonderful and World to point to the
amusing entertainment services as well as its very wide
diversifications.

IV. Step 3: Strategy Implementation.

A. Who implement strategy: Started by the 3 persons, Walt, his

Brother and Iwerks. And ended by Raymon Watsom, chairman, and
Roland Miller as a presedent.
 What must be done
B. How are strategies to be implemented? Organizing for
actions
 Action plan: there were many action plans:
 a. In providing the 1st movies:
b. In building Disneyland:
 Make designs.
 Lending money to continue planning.
 Alternative places.
 Choosing the proper place.
 Financing the operations.
a. In building WDW
 Building “Yesterday City”
 Building “Tomorrow City”
 Designs
 Lands purchasing
 Financing.

V. Step 4: Evaluation and Control

A. Performance evaluation
iv. Primary Measures of Corporate Performance:

 Traditional financial measures: e.g. ROI reduced by more

than 30% as shown previously in the financial ratios.

 Balanced Scorecard
 Learning and growth of the employees seemed to be
OK.
 Internal process: is not totally OK, since it do not
permit the innovative ideas to show-up.
 Customer: WDP focused on customer satisfaction
through high quality only. It did not run with the new
market needs.
 Financial: is not so good and declining.

v. Primary Measures of Divisional and Functional

Performance.
 Use benchmarking with the previous history of WDP we found
that the performance is declining.

VI. Step 5: Feedback and learning process

In this step we should outline the major learned lessons:
In my opinion, WDP should learn the following, as a higher level points:
 Not allow other competitors, even indirect ones, to be profit
from its activities as happened with Disneyland.
 Key competitive advantages (innovation) should be always
aliened with the objectives of the company.
 Use of all the resources efficiently.
VII. Conclusion and Recommendations.
i. Problem Definition

WDP is facing a declining earning and losing there old position

in the market.

ii. Conclusion:
 WDP passed by 2 eras; before 1970, in which it was
booming so fast and after 1970 where it started to
face earnings decline.
 Company diversified their business.
 During the 1st era, innovation was the key
Competitive advantage
 During 2nd era, the company started not to rely
strongly on its main competitive advantage
(innovation).
 Financial situation started to decline.
 It is needed to recommend solutions.

iii. Criticism:
 Objectives were SMART, Proactive, but unfortunately
did not consider competitive advantage
 Conflict between the new strategy and the corporate
culture.
iv. Recommendations:

In my opinion WDP need to work in 2 directions:

 Short run Direction: in which WDP might:
a. Review its policies and processes to open the
door for internal and external innovative
ideas as a lot of companies did.
b. Change the top management in order to get
fresh blood.
c. Retrench some of the activities as TV
business unit and just focus on movie
production.
d. Retrench also the distributors and work with
high and well known distributors.
e. Go for very strong and comprehensive
advertisements and other marketing tools.
f. Re-conduct the mission and objectives very
clearly to all the stakeholders.
 Long run Direction:
a. Follow growth strategy by diversification
through alliances which might improve their
situation and might be better than vertical
growth.
b. Work with the mini-Disney.
c. Fulfill the change in marketing needs by
providing new products that mach these needs
d. Put many segments, instead of only 2, and
fulfill deferent products for each segment.