Evaluation of Future Prospects

 
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Evaluation of Future Prospects

Introduction

All successful businesses keep track of all the factors that affect its operations. Walt Disney has considered itself a company of creative content, and it is known that creative excellence is the only way to succeed. The company should progress with investment organically as well as inorganically to follow the aspect of its strategy. Technology is an important part for the company’s long-term strategy of growth. The company recognizes the fact that the development of new technology accords it with the challenge and opportunity to enable many people its contents in many ways. With the dynamic nature of technology, a new generation of vibrant consumers is embracing quickly all that it has to offer. Walt Disney is expected so is it committed to providing original content that compels to meet the ever-rising demand of the people. Disney believes that customer access to content through mobile is the one largest technology that has taken the industry by storm and been beneficial to its customers. The company expects to embrace this new technology to increase digital content distribution to other platforms. The other strategy is an expansion of its brand and content globally.

Discussion

Internal and external features for the growth of Walt Disney

The company’s current strategies are; the creation of high quality content for domestic consumption, have grown the brand of the company and the business as well across the worlds of the market, and make its content more engaging and accessible through technology’s innovative use (Schlegel, 2015). The company resolved to move to major foreign markets as it remain ready to adapt with the ever changing wants of the customers. The company has moved to form strategies that will help them meet interest of its growing customers in foreign countries. Disney’s has had its shares fall nearly in the last 6 months by up to 20% because of the incessant concerns on the business of the cable television that was ruined by code cutters.

This threat was overlooked by the Bears given that the revenue and operating income rose the same quarter by 12% and 30% respectively annually. The stock of the company was not cheap over the past few years, and its trailing price-earnings ratio hit a multi-year high of about 25. However, the price-earnings ratio has since reduced to 20 that match the industry’s average for entertainment companies that are diversified. The company’s forward price earnings of 16 is also not expensive as compared to its projected annual earnings growth rate of about 12% for the coming five years.

The growth of television viewing and many other domestic viewing devices have reduced the attendance to movies leading to drop in sales revenue of tickets drastically over the recent past. Extra distribution channels with an inclusion of cable and the services based on subscriptions have also contributed to high competition to the participants of the motion picture industry. As a strategy aimed at recovering lost revenue and response to the changes in the industry, movie studios have moved their main focus from the quality of the show and its content to marketing, distribution, merchandising and licensing. Taking advantage of the emerging technological improvements and trying to find some new other revenue sources, the ancient studios have stretched their reach wider to other kinds of entertainment. Through diversification and integration, the participants in the industry including Disney have not only survived the transformation in the industry, but the strategic actions by the big players in the industry have led to some changes in it as well.

The core business of Disney has always revolved around its reputation as a premier producer of animated films. New entrants to the industry have come up with the advent of new technology. For instance, Pixar has come up as a highly profitable new animation giant. Others like DreamWorks have released animated blockbusters that have been successful and is a rising competitor to Disney. Regardless of the American culture’s evolution, Disney has vitally remained unchanged after the death of Walt Disney who was the founder in the year 1966 (Schlegel, 2015). The directors had been with the company for a long period and were aging; this suggested a possibility in the distance from the outward or external environment. Whereas the culture and tradition in the company have been strength, a never changing internal environment, which was not responsive to the changes in the industry, is a threat to the survival of the company.

There were few movies released, a poor performance of the stock, along with an unsolicited takeover attempt of the company before Eisner joined Disney were indications that the company was struggling and its independence was at risk. The poor financial results and management were because of failure to hire great talent in the television production and film production. Animated film units remained to be the heart of the company that could prove an advantage and a limitation. As there were rapid changes during the 1980’s in the industry, to Disney it was a time where the crisis was at its helm. This led to defensive strategies that ended up in deals that changed the ownership of the company hence creating room for new shareholders who had enough power to influence the decisions of the company. Before the departure of Miller, he had started making moves that could develop the content of entertainment far beyond animation with the target of a broader audience.

The introduction of creative experience and an insight of Hollywood by Eisner to Disney is created for revitalizing it with a corporate strategy that has a related diversification. After his first ten years at Disney, the heart of the company was still in movie production. The film business was competing with some of the biggest Hollywood studios and still recording record operating profits. The films that were only accounting for 5% of the company’s revenue had grown and were now making up for 40% of the company’s earnings (Gabler, 2006).

Expansion its resort operations, studios, divisions of entertainment and theme parks enabled the corporation to achieve some growth that was remarkable. This is what the company should keep up with and have an efficient and vibrant research and development team that will help it keep up with the dynamic industry. This is the best way that the company can raise revenue, increase the competition, and not be obsolete with technology. This transformation came in at that time when there were rapid changes in the industry. In the new and fast cycle market, the management of release windows development of software pricing of home video and distribution of home viewing was increasingly getting complex.

Complexity and diversification further increased after merging Disney with ABC; this made the size of the company grow almost double its previous size and made it the second largest in the entertainment industry in the US. This act of merging the two highly complementary companies caused a regime of integration within in the industry. It also led to a combination of studio libraries with publishing and broadcast systems of distribution. The company now had a combination of film, distribution, television, and broadcast among many others under one studio entity; positioned it for a substantial growth not only in revenue but popularity as well across the world.

Disney has also partnered Pixar to help distribute and finance films that have been produced with the new digital technology. Apart from the unraveling relationship it has with Pixar and its success of outdoing Disney animation films, it is insisted that animation is at the heart of Disney and they need rebrand and take over and give glory back to the company. As the top management of Disney requires on its strategic operations, much of the outside attention is focused on the governance system of the company.one of the external governance mechanism of the company is the market for corporate control that gets active when the internal control of the firm fail. Some of the hostile takeover attempts like the one the company faced in 1984 come to play when the ownership position is acquired to take over a firm that is underperforming, or one that is undervalued and turn it around, or sell parts of it for a greater value (Lefkon, Safro, Brandon, Birnbaum, Birnbaum & Wakabayashi, 2016). The mechanisms of external governance that were needed to shake off Eisner from Disney and overcome the board that was ineffective were unprecedented and unique in the corporate America.

The management created an online website called ‘savedisney.com’ and urged the shareholders to withhold their votes for the management of Disney. At last, the board was able to separate the chairperson’s position and that of the CEO; this was the beginning of the transformation of the company’s performance and an end to the era of Eisner. After that, the company faced yet again another slide when it was faced with a takeover bid from Comcast.

The company required an agency relationship that needed oversight to cut down on the opportunism in management and set up strategies that will prevent a possible conflict of interest and questionable businesses that may arise. Furthermore, regulatory requirement required and set up to safeguard investor’s wealth and maintain confidence in the public in the stock market have to be achieved (Krasniewicz & Disney, 2010). This will contribute to the profitability of the company and ensure that no such previous setbacks as mentioned above ever occur again. These are some of the internal ways that the company can use to enhance growth and ensure financial stability.

The relationship between stakeholders is a vital internal factor that contributes to the success of the company. To manage this relationship of the people who control and determine the strategic performance and direction of the company, each one of the governance mechanisms that are set up to monitor and control the managerial decisions have to be effective. Some other internal factors that will contribute to growth include executive remuneration such as bonuses; salaries need to be used to unify the different interests of the owners and the managers.

To enhance growth, the decisions on stock compensation need to be based on the belief that managers are motivated by the practice to drive the stock prices up, and managers’ interests are to be aligned with those of the shareholders. The accounting and tax benefits that come along with these packages also make them appealing, and it is an incentive for growth of the company (Bodden, 2009). Its unintended effects make this practice’s effectiveness a suspect of governance mechanism. In case the management owns a significant chunk of shares, and when they are allocated stock options not relating to the performance of the firm, and in cases where stock option repricing is used reset the bar, then this entire process becomes controversial.

The decisions to compensate using stock options have to be well considered so that their intended effects are best achieved. The board will have to establish salary level based on a survey regarding the industry’s salaries to help define a strong and reasonable and ensure that the company can meet their salary demands without getting into liquidity problems. This will motivate the managers and the staff to drive the company to growth hence its success. The remuneration of the CEO along with the executive also needs to be tied indirectly but tangibly to the fundamental governance processes that are established by the board in maximizing the oversights tool effectiveness.

With this remarkable performance at some point, the position that despite success appearance through the performance of financial results, the need for governance mechanism is important. In many firms the challenges, complexities and the need for adequate knowledge and information required strategic leadership lead by a team of executives. The idea of the company using a team in making strategic decisions helps to evade serious probable problems when the CEO is only one person who makes the decisions (Chapin, Connerly & Higgins, 2007),. Research has it that when the CEO receives positive feedback, they tend to be overconfident in their decision making henceforth. They believe that they are n now invisible to any error in their judgment and are prone to making many poor strategic decisions. The top executive requires self-confidence, but they have to guard against the threat of it becoming arrogant and false belief in a way they cannot see it.

The governance mechanism of the company is important in aiding promote strategic decisions have in place the interests of all the shareholders of the organization, incorporating the interest of organizational stakeholders along with the goals of a shareholder in maximizing competitiveness and the company’s long-term viability.

 

 

References

Bodden, V. (2009). The story of Disney. Mankato, MN: Creative Education.

Chapin, T. S., Connerly, C. E., & Higgins, H. T. (2007). Growth Management in Florida: Planning for Paradise. Aldershot, England: Ashgate.

Gabler, N. (2006). Walt Disney: the biography. London, Aurum.

Krasniewicz, L., and Disney, W. (2010). Walt Disney: a biography. Santa Barbara, Calif, Greenwood.

Lefkon, W., Safro, J., Brandon, P., Birnbaum, A. M., Birnbaum, S., & Wakabayashi, H. C. (2016). Birnbaum’s 2017 Walt Disney World: Expert Advice from the inside source.

Schlegel, D. (2015). Cost-of- capital in managerial finance: An examination of practices in the German real economy sector.

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