FINANCIAL ANALYSIS:

NAME: Walt Disney Corporation

EXECUTIVE SUMMARY: Walt Disney is one of the world’s leading producers and providers of entertainment and information. It owns media networks, parks and resorts. The company also is one of the largest movie makers and markets consumer products. Walt Disney operates in North America, Europe, Asia Pacific and Latin America. It has a strong collection of brands of entertainment business. Disney’s strong brand image helps the company attract consumers to its entertainment products. In addition, Disney has the option to leverage its strong brand image to enter new businesses.

Throughout the years, Disney has become world-renowned for its creativity and innovation. Disney has developed the term “Imagineering” to apply the blending of creativity and technology. Imagineering refers to the theory that the company is always exploring and experimenting with new ideas. The success that Disney has experienced over the past 80 years is greatly attributed to the effective management of the organization while paying close attention to Planning, Organizing, Leading and Controlling. As stated by Robert Igar, President and Chief Executive Officer (Datamonitor 2006), “In order to thrive in this new era and deliver long-term growth and increased shareholder value, we have established three strategic priorities: global expansion, creative innovation, and application of technology”.

Year over year, Walt Disney Co. has been able to grow revenues from $38 to $40.9B. In addition the company has been able to reduce the percentage of sales devoted to cost of goods sold from 81.68% to 80.86%. Disney has experienced an increasingly strong performance with the recent record breaking performance of The Avengers.

SWOT ANALYSIS:

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RECOMMENDATIONS AND JUSTIFICATIONS:

RECOMMENDATION #1: Should the firm increase their capital expenditures to increase competitiveness? This will almost always be true but what segments of the business get the most capital allocated to them and why?
Justification: Disney should increase their capital expenditures to increase competiveness by investing in expansion projects for its cruise lines, cable and broadcast TV movie studios. Currently Disney spends approximately $1.7 Billion in capital expenditures with 67% being allocated to parks and resorts. Although there must be continued focus on the parks I think that the media and cruise areas will require more focus in the coming years.

RECOMMENDATION #2: Should the firm increase growth by acquiring other companies for synergies or grow internally? Do they have the infrastructure to grow internally? If they by a competitor how will the merger be integrated in regards to culture, overlapping businesses, etc.

Justification: I think that Disney has the infrastructure to grow externally; however I think that this may not be a good idea for them right now. Disney has made excellent decisions with prior acquisitions and I’m confident they will continue to do so but with the economy as it is today there could be financial implications that can be avoided if they just focus on what they currently have until the economy improves. I think that growth or expanding the existing properties would be more beneficial for the next few years.

RECOMMENDATION #3: Should the firm risk increasing their leverage (debt) to increase earnings and return on capital or keep the leverage the same (or even decrease it). If so, why and by how much.

Justification: I feel that Disney should increase leverage to increase earnings return on capital. Focusing on improving some of the parks by upgrading or adding new rides will allow positive returns on the investment. Disney currently has a strong debt to equity ratio at 0.37 compared to an industry average of 0.56 so at minimal an increase of 10% in debt should not have a negative impact on performance.

RECOMMENDATION #4: Should they increase marketing spending?