Walt Disney External Factors Evaluation Matrix

Assurance of leaning exercise 3C

            Walt Disney External Factors Evaluation Matrix

Introduction

EFE Matrix is a strategic tool that is used for evaluating existing strategies for a company. It basically evaluates the external environment or the macro environment of the company that includes political, legal, social, economic or technological information.

Walt Disney began its operations in the year 1920 as a studio for cartoon creations and animation. At the time it was known as The Disney Brothers Studios when Walt signed a contract to produce some comedies for Alice Comedies. In November the year 1928, the first Mickey Mouse Cartoon featured in a movie release known as the Steam Willie by the Colony Theater in the city of New York. Minnie Mouse cartoon also made the first appearance in this movie.

The Walt Disney Company made a lot of achievement in the year 2012. There turnover reached a record high of $5.7 billion dollars which included an increase of 18% from the previous year. Its earnings per share increased by 24% in the same year i.e. the earnings per share increased to $3.13. The successes of Walt Disney Company is based on its strategy to significantly invest in capturing the imaginations of millions of its viewers by building an amazing collection of the world’s best high quality content which can only achieve unparalleled experiences. In a world of ever growing entertainment choices, people prefer to reach out to the brand that they are aware of and which they love. Walt Disney is positioning itself as a leading brand in the entertainment world where there is everything for everyone i.e. entertainment for children, sportsmen, movies, games, music, books, luxurious cruises, parks and all forms of fantasy dreams that exist only in Disneyland.

The following are the External opportunities and Threats facing Walt Disney Inc;

Walt Disney derives its strength from its huge market capitalization of about $123 Billion. www.yahoo.finance The strengths of Walt Disney are based on three strong core competences. i.e. existence of very strong organizational ability and culture, advanced technological innovation and outstanding continuous improvements. Walt Disney has position itself as the market leader in animation and the fantasy world. It has a very strong market position, with high market capitalization and market share with relatively high profitability (Drucker, 1999)

The global market that’s very strong, the huge market available in the US and other developed nations provide a world of opportunities for Walt Disney to market its products and services and expand to other markets worldwide. The technological advances, including the motion movies, music and games on modern digital phones provide very strong incentives for Walt Disney. It has acquired several companies that are strategically located in different parts of the world. Walt Disney Controls Slightly more than 50% of the entire Entertainment industry in the US. The construction of the commuter rail in Orlando, Florida is expected to open up more opportunities at the theme parks.

The major threats facing Walt Disney are its competitors and the regular price increases. The frequent energy prices and the cost of maintaining the environment pose a major threat to business operations of Walt Disney. The slowing down of the American economy also provides a weak link in the organization management. For instance in the year 2008 and parts of 2009, when the US economy recorded a negative 8% growth, www. research.stlouisfed.org/publications/iet/, the employment level during that period was at an all time low which stood at negative 4% growth while unemployment was at 10%. Most Multinational companies were severely affected by the global recession.  The over reliance on the American market provides a weak link in the company’s marketing strategy. From the segments income the US and the Canadian Market accounted for 70% of its total consolidated market. The rest of the income which is 30% is earned from the rest of the world.

The other factor is the change in consumer behavior which has affected its Studio Entertainment segment. The segments earnings reduced by 13% while its operating income registered a 65% decline compared in the year 2012 from the year 2011. These was largely attributed to the shift in consumer behavior from the normal DVD sales to the more outstanding on-demand pay TV services together with other digital mediums. www.Walt Disney. Com

Walt Disney External Factors Evaluation

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To conclude, the EFE indicates the performance of Walt Disney is above average at 2.18. These is mostly due the expanding emerging markets but some of which are incurring losses and still require financial subsidies to breakeven like the theme parks in China i.e. in Shanghai. Also the effects of the 2008 financial crisis that saw Disney write off over hundred million dollar incurred as losses due to the Lehman Brothers investment bank bankruptcy. The economic effects of global disasters like earthquakes, floods and the threat of terrorism have slowed down Walt Disney Expansion strategies.

Reference

Drucker, F. (1999) Management Challenges of the 21st Century. New York: Harper Business.

Www. research.stlouisfed.org/publications/iet/,

www.yahoo.finance

www.Walt Disney.com

www.mba-tutorials.com/strategy/76-the-efe-matrix-external-factor-evaluation-matrix.html

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