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Walt Disney SWOT Analysis

Disney Swot Analysis – 2017

The Walt Disney Company is a diversified global entertainment company that operates in four business segments.  These business segments are Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products & Interactive Media. The media network segment of Disney’s business includes cable and broadcast television networks, television production and distribution operations, domestic television stations and radio networks and stations.  The foundation of Disney was laid in the 1920s and in these more than 90 years of its existence, its business has expanded a lot. The company grew with Disney studios and owns a large range of businesses today. Its media networks include ESPN, the Disney channels and Freeform that make their own programs or acquire rights from the third parties to air their programs on Disney’s networks.

The Disney channels include over 100 channels that are broadcast in 34 languages and in 163 countries and territories. However, the competitive pressure in media and entertainment industry has continued to rise and that poses a threat to Disney’s business. Apart from that, there are additional regulatory and other kind of threats and risk factors before Disney. This is a SWOT analysis that discusses the important strengths and weaknesses of Disney as well as the opportunities and threats before it.

Disney’s revenues for the last three years:

Revenues (figures in millions)201620152014
Services$47,130$43,894$40,246
Products$8,502$8,571$8,567
Total Revenues$55,632$52,465$48,813
SWOT Analysis of Walt Disney

Strengths:

Brand name and brand image – Walt Disney is a known brand name that has been in existence for more than 90 years and has continued to grow and expand internationally. It has an excellent image in the media industry and a large subscriber base. The growth in its business can also be attributed to its great brand image. This brand name is operational across 40 countries and makes and sells a large range of products and services.

Leadership position in media and entertainment industry – The brand is a leading name in the media and entertainment industry. It is among the top ten in the industry.

Financial performance – The brand is in a financially strong position and its financial performance has continued to grow better over years as shown in the table above. In 2016, it made a whopping $55 Billion. From 48 Billion in 2014, it has been enjoying a continuous rise.

Large range of market leading products and services – Disney has brought a large range of market leading products and services. There are four categories of businesses that Disney operates in. They are Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products & Interactive Media. Its cable networks mainly consist of Disney, ESPN and freeform. ESPN’s domestic channels include ESPN, ESPN2, ESPNU, ESPNEWS, SEC Network. Disney’s domestic channels include DISNEY channel, Disney Junior and Disney XD. The International channels from Disney include ESPN Channels, Disney channels, Disney Junior and Disney XD. Most of these channels have more than 80 million subscribers.   ESPN is a multimedia sports company and Disney has an 80 percent stake in it and Hearst has 20%. There are 8, round the clock domestic television sports networks operated ESPN. There are 100 Disney channels broadcast in 34 languages and 163 countries. Apart from them, Disney owns parks and resorts, cruise line and adventure park – Walt Disney World Resort in Florida; the Disneyland Resort in California; Aulani, a Disney Resort & Spa in Hawaii; the Disney Vacation Club; the Disney Cruise Line; and Adventures by Disney.

Global presence and popularity – Another important strength of Disney is the global presence and its popularity. While Disney broadcasts its channels in 163 countries, it also operates in 40 countries. Its brand, products and services are highly popular across the globe. Mostly, Disney targets the kids and teenagers through its products and services However, its certain products and services are also aimed at families like resorts, spas and cruise line.

Weaknesses:

Seasonality of businesses – Several of Disney’s businesses are affected by seasonality. Especially the media networks and their advertising revenues are affected by the seasonality effect. Advertising patterns keep changing with seasons and the viewership levels too. While the revenues are generally high during the fall, they decline during the summer months. The attendance level in the theme parks and the occupancy of the resorts can fluctuate and vary with seasons. It is because of the seasonal nature of the travel and leisure business. It is during the summer months when the number of visitors at the resorts is the highest. This is how seasonality affects the business of Disney. Obviously, this is an important factor affecting its business and during the off season Disney has to work harder on attracting and retaining visitors and customers.

Consumers’ movement towards internet leading to decline in subscriber levels across the industry – Internet has affected major changes in this world and it has influenced consumers’ tastes and preferences like nothing else. The consumers are gravitating towards internet based services and options. This has led to fall in the subscriber level of several of Disney’s channels. However, Disney has brought its services online to overcome the defect. Otherwise the defection of subscribers towards the internet can led to larger fall in revenue. Disney is competing with the internet based sources of entertainment and media and this is a major pressure that is affecting Disney’s business and revenue.

Increased operational costs and expenses – Cost of services, products and operations have grown at Disney and this creates financial pressure on the brand. The higher sports programming costs as well as inflation and operations support cost growth, have led to higher costs and expenses. Apart from it, there are restructuring and impairment costs. In 2016, the restructuring and impairment charges that Disney incurred were equal to $156 millions.

Heavy dependence on US and Canada markets: Disney’s business is heavily dependent on the US and Canada markets. More than 75% of the company’s revenue comes from these two markets.

Here is a breakup of the revenue that Disney has generated from its respective markets during the last three years.

Revenues201620152014
US & Canada$42,616$40,320$36,769
Europe$6,714$6,507$6,505
Asia Pacific$4,582$3,958$3,930
Latin America and other$1,720$1,680$1,609
Total$55,632$52,465$48,813

So, any kind of economic decline or other forms of disruptions in its main two markets can cost Disney heavily.

Opportunities:

Technological shift- (growing demand for online media and entertainment) – The technological shift happening in the 21st century has brought great transformations. It has brought shifts in people’s lifestyles and their tastes and preferences. People have moved on to the internet and now it is the social media and the websites and blogs where most of them can be found most of the time. Disney can use this opportunity to grow its subscriber base. It provides its channel services through websites including DisneyChannel.com, DisneyXD.com and DisneyJunior.com. Radio Disney is also available through radiodisney.com.  Disney can use the web and apps to sell its products and services and for deeper engagement of its customers. Social media sites cannot be used only for marketing. They have to be used for better customer engagement and for branding. Disney will see more of its customers moving online for news and recreation and therefore it must focus the most on the web channels.

Expansion into emerging economies – The emerging economies like India, China, Brazil and Russia offer major opportunities for Disney. So, it must focus on penetrating these markets deeper to increase its customer base and revenue. However, Asia Pacific and Latin America and the other nations constitute a very small part of Disney’s total revenue. While the Asia pacific constitutes only 8 to 9% of Disney’s total revenue, Latin America and the other nations constitute only 2 to 3% of total revenue earned by Disney. Brazil is currently the hottest emerging market and Disney should try to expand its customer base there and simultaneously try to earn more customers from India and China.

Diversification – Diversification is another great option before Disney. It can diversify into more related services and products. While, it currently owns a large range of entertainment and media products and services, there is more scope for new partnerships and for diversification into new businesses.

Threats:

Heavy competition – The biggest threat before Disney is the competition from the other media and entertainment brands and from the other social media and entertainment websites. Social media has especially reduced the number of customers that usually flocked to entertainment avenues. Growing number of networks distributed by MVPDs (Multi channel Video Programming Distributors) and the increased number of online services has also resulted in higher competition for advertising revenue. Its websites and digital products compete with the other websites and entertainment products too.  The increased competition creates financial pressures since a higher number of brands are competing for market share and revenue.

Changing tastes and preferences – There is a larger array of entertainment products and services available before the customers and they have got just so many options to spoil themselves. Internet has brought a sea change in the way people consumed media and entertainment services. Their tastes and preferences have changed drastically and people have moved on from the traditional to the digital. This diversity and movement towards the digital has also led to a loss of subscriber base and a higher threat of competition.

Increased regulatory pressures – The legal and regulatory pressure over the media and entertainment companies has also increased. These regulatory changes can impair business and profits of Disney. The level of regulation on Disney’s broadcast networks and television stations is very high. Its other businesses are also subject to a high number of laws and regulations. These regulations include :

  1. US FCC regulation
  2. Federal, state and foreign privacy and data protection laws and regulations.
  3. Regulation of the safety of consumer products and theme park operations.
  4. Environmental protection regulations.
  5. Wage and tax laws and currency controls as well as other domestic and international laws and regulations.
  6. Trade restrictions, licensing and distribution related restrictions

Thus, there are several laws and regulations or restrictions that are applicable in case of Disney’s business. Changing regulations and regulatory activities can lead to additional pressures both financial and operational.

Economic turmoil – Economic turbulences affect most businesses and they affect Disney’s business too. Declining economic activity in US and other regions and mainly US has an adverse effect on Disney’s business. During the recession, spending at Disney’s resorts and parks had reduced greatly. Similar, declines were faced after activity declined in the non-US economies. Declining activity leads to decline in spending by the consumers and then a decline in revenue and profits.

Increased costs of pension and postretirement medical benefits and other obligations -Disney has around 195,000 employees and it results in substantial costs of pension benefits and post retirement medical benefits. Macroeconomic factors can also increase these burdens. These macroeconomic factors like healthcare costs can lead to rise in pension and medical benefits costs.

Conclusion:

Disney has seen a lot of expansion and growth since its foundation some 90 years ago. It has kept growing through acquisitions, partnerships and by growing its own line of products and services. Some important strengths of the media and entertainment company are its brand image, global reach, its large product and services range, popularity and financial strength. However, the trends are changing and they have given rise to higher competition. The movement towards the internet based services can lead to erosion of subscriber base. Disney has therefore released its media products and services online through its websites. Still, a major weakness of its products and services is the effect of seasonality on them. Regulatory and competitive pressures are also high. In such an environment, Disney can find more opportunities in the emerging markets. Brazil is especially a hot market and if Disney can extend its presence in Latin America and Asia Pacific and penetrate these markets deeper, it will be highly profitable for the company. This will also reduce the brand’s dependence on the US and Canada market.

  • Sources:
  • https://ditm-twdc-us.storage.googleapis.com/2016-Annual-Report.pdf

Written by Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.

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