1 of 16

The Walt Disney Company

Diversification Strategy 2018

2 of 16

Company History

  • Walt Disney Inc. traces its roots back to 1923 when Disney was granted a contract to produce series of short films.
  • Company tasted real success following the creation of Mickey Mouse in 1928.
  • The company ventured into the amusement park market in 1955 with the launch of Disneyland Park.
  • Following the death of Walt Disney the company was taken over by Roy O. Disney and then by Donn Tatum.

3 of 16

Company History (cont.’)

  • Michael Eisner took over the company reigns in 1984 and undertook an aggressive strategy of inorganic growth.
  • The company in this phase acquired ABC, ESPN, Miramax Films, and the Anaheim Angels, and the Fox Family Channel.
  • Company became public in 1957 at a share price of USD 13.88 per share. (Goldman Sachs, 2021)

​

​

4 of 16

Financial Performance & Position

​

2017

2016

2015

2014

2013

Revenues

$55,137

$55,632

$52,465

$48,813

$45,041

Net income

9,366

9,790

8,852

8,004

6,636

Net income attributable to Disney

8,980

9,391

8,382

7,501

6,136

Per common share

Earnings attributable to Disney

​

​

​

​

​

Diluted

$5.69

$5.73

$4.90

$4.26

$3.38

Basic

$5.73

$5.76

$4.95

$4.31

$3.42

Dividends

$1.56

$1.42

$1.81

$0.86

$0.75

Balance sheets

Total assets

$95,789

$92,033

$88,182

$84,141

$81,197

Long-term obligations

26,710

24,189

19,142

18,537

17,293

Disney shareholders’ equity

41,315

43,265

44,525

44,958

45,429

Statements of cash flows

Cash provided by operations

$12,343

$13,136

$11,385

$10,148

$9,495

Investing activities

4,111

5,758

4,245

3,345

4,676

Financing activities

8,959

7,220

5,801

6,981

4,458

Table Summary: Summary

5 of 16

Corporate Strategy - 2018

Disney’s corporate strategy is base on three primary elements;

  • Creation of high-quality content
  • Optimum use of technological innovations
  • International expansion.

6 of 16

Diversification Strategy

  • Disney’s diversification strategy is based on the concept of related diversification.
  • Related diversification is one where a business moves into a new industry which has similarities with the firm's existing industry or business activities. (Oregon State University, 2021)

7 of 16

Walt Disney Inc. Product Portfolio

Disney’s business portfolio is extensively diversified and includes;

  • Theme parks
  • Hotels ,resorts and cruise ships,
  • Cable and broadcast television networks,
  • Television and animated motion picture production
  • Music publishing
  • Children’s book publishing
  • Consumer products retailing

8 of 16

Company Organization

Media Networks

Parks and Resorts

Studio Entertainment

Consumer Products & Interactive Media

Disney’s business portfolio is divided into four core divisions;

9 of 16

Division 1: Media Networks

​

2017

2016

2015

Revenue

23,510

23,689

23,264

Operating Income

6,902

7,755

7,793

  • Media Network's division revenues remained relatively stable between 2015-17.
  • Revenues for the division are broken into affiliate fee, advertising revenues and TV/SOD distributions.
  • Operating income for the division saw a decline of approximately USD 700 million during the same period.

10 of 16

Division 2: Parks and Resorts

​

2017

2016

2015

Revenue

18,415

16,974

16,162

Operating Income

3,774

3,298

3,031

  • Parks and Resorts division revenues increased between 2015-17.
  • Revenues for the division are broken into International and domestic revenues
  • Operating income for the division saw a increase of approximately USD 700 million during the same period.

11 of 16

Division 3: Studio Entertainment

​

2017

2016

2015

Revenue

8,379

9,441

7,366

Operating Income

2,355

2,703

1,973

  • Studio Entertainment division experienced an a growth and decline cycle in terms of revenues between 2015-17.
  • Revenues decline observed between 2016-17 was traced to both theoretical distribution and home entertainment.

12 of 16

Division 4: Consumer Products & Interactive Media

​

2017

2016

2015

Revenue

4,833

5,528

5,673

Operating Income

1,744

1,965

1,884

  • Studio Entertainment division experienced an a growth and decline cycle in terms of revenues between 2015-17.
  • Revenues decline observed between 2016-17 was traced primacy to licensing and publishing.

13 of 16

Latest Acquisitions

  • Company announced acquisition of 21st Century Fox in December 2017
  • Deal was valued at USD 71.3 billion
  • Mergers to include both Cash and Stock consideration
  • Expected to further boost shareholders value

​

14 of 16

Future Prospects and Strategy Initiates

  • Parks to continue driving company growth
  • Studio business to deliver in of both creative and commercial success
  • Positive growth expected from ESPN+ service
  • Merger of Consumer Products with Parks and Resorts

15 of 16

Conclusion

  • Company performance indicates the overall success of its diversification strategy.
  • Company revenues showed impressive growth despite revenue declines in individual divisions and revenue streams.
  • Growth of both international and domestic revenues is also an indication of company's successful international diversification strategy.

16 of 16

References

  • 2021. Disney Magic Comes to NYSE in IPO. [online] Available at: <https://www.goldmansachs.com/our-firm/history/moments/1957-disney-ipo.html> [Accessed 21 November 2021].
  • Courses.lumenlearning.com. 2021. Reading: Diversification Example | Principles of Marketing – Candela. [online] Available at: <https://courses.lumenlearning.com/cochise-marketing/chapter/reading-diversification-example/> [Accessed 21 November 2021].
  • Open.oregonstate.education. 2021. Diversification Strategies. [online] Available at: <https://open.oregonstate.education/strategicmanagement/chapter/7-diversification-strategies/> [Accessed 21 November 2021].