Strengths

The strengths listed here is a result of an analysis made on competencies and competitive capabilities of The Walt Disney Company > Studio Entertainment area, mainly with focus on Walt Disney Pictures.

Economies of scope

Economies of scope are a large factor in The Walt Disney Company. The different corporate divisions is closely interlinked, so that production facilities can be used for not only producing DVD’s for Miramax, but also Walt Disney Pictures and Touchstone Pictures.

Furthermore, the large network of TV and Radio channels makes it easy to advertise for different products across the whole global company. This synergy between the different divisions makes The Walt Disney Company able to help and support from each other, and thereby creating larger profit margins.

These are only a few examples, but the four corporate entities surrounding the Disney figures and worlds are closely interlinked and create large synergies, since they are all dealing with related businesses.

Economies of scale

The Walt Disney Company is in a large degree capable of focusing on economies of scale, with a presence in Northern America, Europe, Asia-Pacific, and Latin America. This presence and related operations across their different businesses makes it possible to enjoy and profit from an economies of scale. Movies, merchandise and music can go through the same distribution channels, and the amusement parks and resort can benefit from at global development of new amusements, being created at the same time for multiple parks around the world. Furthermore is the Media Network division ideal for marketing and reaching consumers. It makes it possible to reach 99% of the US television viewers with their marketing.

Strong brands

The Disney brand and logos are a world known. According to BusinessWeek the Disney brand had a world place as number seven in 2005. This massive brand power is hardly matched by any competitors in the industry. This gives The Walt Disney Company a great advantage, and is a great strength.

But it is not only the Disney brand it self that is valuable. Through out Disney’s history it have been able to build long lasting characters as Winnie The Pooh, which in pure licenses and merchandise was considered to be a $5.6 billion industry in 2004 alone (Brand Strategy 2006). Disney has a long history of creating and maintaining character-brands from their animation films. This have not only helped them in making strong brands that will secure a stable income in the following years, but they have also a great knowledge on expanding the brands to create higher revenues. Again Winnie The Pooh as an example; Within the last 10 years, the world of the Pooh brand have been expanded to also including brand characters as Tigger and Piglet, which each have their own movies now (The Tigger Movie and Piglet’s Big Movie).

Internet visibility

Being a media and entertainment conglomerate makes the internet a necessity. The Walt Disney Company have an dedicated internet department that have served the company well so far. The two largest websites are ESPN.com and Disney.com, which both are number one sites in their respective segments.

Award winning shows and films

When looking on 2005, then The Walt Disney Company and especially their Studio Entertainment Division have done well. With shows like Lost, Desperate Housewives, and Greys Anatomy they have achieved to take 16 Emmy’s and have the rights to 5 out of top 6 programs for the age audience 18-49 years, with Desperate Housewives as number one. Furthermore the have produced 4 out of top 10 video titles in 2005, and with The Aviator they won the most Academy Awards at the Academy Award show of 2005.

This shows an immediate great strength and ability to successful transform films into hits. But since these data only represents the year 2005, then it is not a strong indicator of a competitive capability. But it gives an indication of that they have been doing something right that year, and it gives a good basis of future programs and filmmaking.

Good overall financial performance

In the fiscal year 2005 The Walt Disney Company reached total revenues of $31,944 millions, and of this reached a net income of $2,533 millions. This is a revenue increase of 12 percent and a net income increase of 4 percent. Their free cash flow has both in 2004 and 2005 been above $3 billion, and thereby creating a very sound basis for creating and maintaining future investments.

Their five year average operating margins (2001-05) stood at 9.6%, compared to an industry average of 6.1% in the same period. Its average five year net margins (2001-05) stood at 5.9%, considerably higher than the industry average of -0.3% for the same period. The company’s five year return on average assets (RoA) for the period 2001-05 stood at 3.4%, significantly higher than the industry averages of -2.1%. Its five year return on average investments (4.1%) was also significantly higher than the industry average
(-2.1%) for the same period. These figures give a strong signal of an ability to perform above average.