1. State clearly the main problem or challenge that management faces and other strategic issues in a paragraph or less.

a. Do not recite what's given in the case such as history

b. show evidence of the management weaknesses from the case

2. Strategic Analysis

a. Strategic Analysis tools:

1.five forces model,

2. strategic group map,

3.PESTEL,

4. VRIN

5. State the generic strategy

6.analyze the vision, mission, what are the core values, and value proposition,

b. other tools: SWOT, etc

3. Financial Analysis

a. financial statement analysis

b. ratio analysis

4. Recommendations

\fC-284 Part 2 Cases in Crafting and Executing Strategy the company and it will continue to be relatively small. Operating results for Disney's Interactive Media We've said that we're targeting 2013 as a year of prof- division for fiscal 2009 through fiscal 2011 are pre- itability. It's about time, because we've invested a fair sented in Exhibit 8. The company's consolidated state- amount . . . Our goal now and our strategy is to diver- ments of income for fiscal 2009 through fiscal 2011 sify our gaming efforts. Some modest investment on are presented in Exhibit 9. The Walt Disney Compa- the console front, very Disney-branded and Marvel- ny's balance sheets for fiscal 2010 and fiscal 2011 are branded, some investment on the mobile front, and presented in Exhibit 10. investment on the social games front. EXHIBIT 8 Operating Results for Walt Disney's Interactive Media Business Unit, Fiscal 2009-Fiscal 2011 (in millions) 2011 2010 2009 Revenues Game sales and subscriptions $ 768 $ 563 $ 565 Advertising and other 214 198 147 Total revenues 982 761 712 Operating expenses 732 581 623 Selling, general, administrative, and other 504 371 336 Depreciation and amortization 54 43 50 Equity in the income of investees 2 Operating Loss $(308) $(234) $(295) Source: The Walt Disney Company 2011 10-K. EXHIBIT 9 Consolidated Statements of Income for The Walt Disney Company, Fiscal 2009-Fiscal 2011 (in millions, except per share data) 2011 2010 2009 Revenues $40,893 $38,063 $36, 149 Costs and expenses 33, 112 31,337 30,452 Restructuring and impairment charges 55 270 492 Add: Other income 75 140 342 Net interest expense 343 409 466 Add: Equity in the income of investees 585 440 577 Income before income taxes 3,043 6,627 5,658 Income taxes 2,785 2,314 2,049 Net Income 5 ,258 4,313 3,609 Less: Net Income attributable to noncontrolling interests 451 350 302 Net Income attributable to The Walt Disney Company (Disney) $ 4,807 $ 3,963 $ 3,307 Earnings per share attributable to Disney: Diluted $2.52 $2.03 $1.76 Basic $2.56 $2.07 $1.78 Weighted average number of common and common equivalent shares outstanding: Diluted 1,909 1,948 1,875 Basic 1,878 1,915 1,856 Source: The Walt Disney Company 2011 10-K.\fC-286 Part 2 Cases in Crafting and Executing Strategy THE WALT DISNEY interactive division decreased from $214 million for the nine months ended July 2, 2011 to $140 million for the COMPANY'S THIRD QUARTER nine months ending June 30, 2012. Disney CEO Bob 2012 PERFORMANCE AND ITS Iger summarized the company's position at mid-2012.13 FUTURE PROSPECTS I can say I look back at the last year and breaking ground in Shanghai, launching two new cruise ships, The Walt Disney Company recorded record earn- opening up Cars Land in a couple of weeks, buying a ings per share during its first nine months of fiscal media company in India, buying a network in Russia 2012 with its media networks division achieving an 8 to brand the Disney Channel, all big-and buying our stock back and increasing our dividend and, I think, percent period-over-period increase in operating proving to the world that the Marvel acquisition was profit, its parks and resorts division seeing a 24 percent a strong acquisition. So it's been, I'll call it a rich and increase in operating profits, its studio entertainment aggressive time, one that we feel good about in terms division operating profit increasing by 28 percent, and of the impact on our bottom line, both current and its consumer electronics operating profit increasing by future. And we'll continue to look opportunistically. 10 percent between the first nine months of 2011 and We obviously have demonstrated that we're not averse the same period in 2012. The operating loss for Disney's to allocating capital in multiple directions. ENDNOTES 1 As quoted by Bob Iger, Chairman and Chief 4 As quoted by Bob Iger, Chairman and Chief The Walt Disney Company, during the Nomura Executive Officer of The Walt Disney Com- Executive Officer of The Walt Disney Com- U.S. Media, Cable, and Telecom Summit, May pany, during the Sanford C. Bernstein Strate- pany, during the Sanford C. Bernstein Strate- 30, 2012. gic Decisions Conference, May 30, 2012. gic Decisions Conference, May 30, 2012. 10 As quoted by Bob Iger, Chairman and Chief 2 Ibid. Ibid. Executive Officer of The Walt Disney Com- As quoted by Jay Rasulo, Senior Executive 6 Ibid. pany, during the Sanford C. Bernstein Strate- Vice President and Chief Financial Officer of 7 Ibid. gic Decisions Conference, May 30, 2012. The Walt Disney Company, during the Nomura 8 Ibid. 1Ibid U.S. Media, Cable, and Telecom Summit, May 9 As quoted by Jay Rasulo, Senior Executive 2 Ibid 30, 2012. Vice President and Chief Financial Officer of 13 Ibid .\fC-274 Part 2 Cases in Crafting and Executing Strategy business units were providing sufficient returns on In 1928, Disney and Iwerks created Mickey invested capital and some business units competed in Mouse to replace Oswald as the feature character in challenging industry environments. Going into 2013, Walt Disney Studios cartoons. Unlike with Oswald, Iger and Disney's management team planned to evalu- Disney retained all rights over Mickey Mouse and all ate the corporation's diversification strategy. subsequent Disney characters. Mickey Mouse and his girlfriend, Minnie Mouse, made their cartoon debuts COMPANY HISTORY later in 1928 in the cartoons, Plane Crazy, The Gallo- pin' Gaucho, and Steamboat Willie. Steamboat Willie Walt Disney's venture into animation began in 1919 was the first cartoon with synchronized sound and when he returned to the United States from France, became one of the most famous short films of all time. where he had volunteered to be an ambulance driver The animated film's historical importance was recog- for the American Red Cross during World War I. Dis- nized in 1998 when it was added to the National Film ney volunteered for the American Red Cross only after Registry by the United States Library of Congress. Mickey being told he was too young to enlist for the United Mouse's popularity exploded over the next few decades States Army. Upon returning after the war, Disney with a Mickey Mouse Club being created in 1929, new settled in Kansas City, Missouri, and found work as an accompanying characters such as Pluto, Goofy, Donald animator for Pesman Art Studio. Disney, and fellow Duck, and Daisy Duck being added to Mickey Mouse Pesman animator, Ub Iwerks, soon left the company cartoon storylines, and Mickey Mouse appearing in to found Iwerks-Disney Commercial Artists in 1920. Walt Disney's 1940 feature length film, Fantasia. Mickey The company lasted only briefly, but Iwerks and Dis- Mouse's universal appeal reversed Walt Disney's series ney were both able to find employment with a Kansas of failures in the animated film industry and became City company that produced short animated advertise- known as the mascot of Disney Studios, Walt Disney ments for local movie theaters. Disney left his job again Productions, and The Walt Disney Company. in 1922 to found Laugh-O-Grams, where he employed The success of The Walt Disney Company was Iwerks and three other animators to produce short sparked by Mickey Mouse, but Disney Studios also pro- animated cartoons. Laugh-O-Grams was able to sell duced several other highly successful animated feature its short cartoons to local Kansas City movie theaters, films including Snow White and the Seven Dwarfs in but its costs far exceeded its revenues-forcing Disney 1937, Pinocchio in 1940, Dumbo in 1941, Bambi in 1942, to declare bankruptcy in 1923. Having exhausted his Song of the South in 1946, Cinderella in 1950, Treasure savings, Disney had only enough cash to purchase a Island in 1950, and Peter Pan in 1953, Sleeping Beauty in one-way train ticket to Hollywood, California, where 1959, and One Hundred and One Dalmatians in 1961. his brother, Roy, had offered a temporary room. What would prove to be Disney's greatest achievement Once in California, Roy began to look for buyers for began to emerge in 1954 when construction began a finished animated-live action film he retained from on his Disneyland Park in Anaheim, California. Walt Laugh-O-Grams. The film was never distributed, but Disney's Disneyland resulted from an idea that Disney New York distributors Margaret Winkler and Charles had many years earlier while sitting on an amusement Mintz were impressed enough with the short film that park bench watching his young daughters play. Walt they granted Disney a contract in October 1923 to Disney thought that there should be a clean and safe produce a series of short films that blended cartoon park that had attractions that both parents and children animation with live action motion picture photogra alike would find entertaining. Walt Disney spent years phy. Disney brought Ub Iwerks from Kansas City to planning the park and announced the construction of Hollywood to work with Disney Brothers Studio (later the new park to America on his Disneyland television to be named Walt Disney Productions) to produce show that was launched to promote the new $17 million the Alice Comedies series that would number 50-plus park. The park was an instant success when it opened in films by the series end in 1927. Disney followed the 1955 and recorded revenues of more than $10 million Alice Comedies series with a new animated cartoon during its first year of operation. After the success of for Universal Studios. After Disney's Oswald the Disneyland, Walt Disney began looking for a site in Lucky Rabbit cartoons quickly became a hit, Universal the eastern United States for a second Disney park. terminated Disney Brothers Studio and hired most He settled on an area near Orlando, Florida in 1963 of Disney's animators to continue producing the and acquired more than 27,000 acres for the new park cartoon. by 1965.C-276 Part 2 Cases in Crafting and Executing Strategy HI EXHIBIT 1 (Continued) 2011(1) 2010(2) 2009(3) 2008(4) 2007(5)(6) Balance sheets Total assets $72, 124 $69,206 $63, 117 $62,497 $60,928 Long-term obligations 17,717 16,234 16,939 14,889 14,916 Disney shareholders' equity 37,385 37,519 33,734 32,323 30,753 Statements of cash flows Cash provided by operations $ 6,994 $ 6,578 $ 5,319 $ 5,685 $ 5,519 Investing activities Investments in parks, resorts, and other property (3,559) (2, 110) (1,753) (1,578) (1,566) Proceeds from dispositions 564 170 185 14 1,530 Acquisitions (184) (2,493) (176) (660) (608 Financing activities Dividends (756) (653) (648) (664) (637) Repurchases of common stock (4,993) (2,669) (138) (4,453) (6,923) Supplemental cash flow information Interest paid 377 393 485 555 551 Income taxes paid 2,341 2, 170 1,609 2,768 2,796 (1) The fiscal 2011 results include restructuring and impairment charges that rounded to $0.00 per diluted share and gains on the sales of Miramax and BASS ($0.02 per diluted share), which collectively resulted in a net adverse impact of $0.02 per diluted share. See the discussion of the per share impacts in Item 7. During fiscal 2010, the Company completed a cash and stock acquisition for the outstanding capital stock of Marvel for $4.2 billion (see Note 4 to the Consolidated Financial Statements for further discussion). In addition, results include restructuring and impairment charges ($0.09 per diluted share), gains on the sales of investments in two television services in Europe ($0.02 per diluted share), a gain on the sale of the Power Rangers property ($0.01 per diluted share), and an accounting gain related to the acquisition of The Disney Store Japan ($0.01 per diluted share). Including the impact of rounding, these items collectively resulted in a net adverse impact of $0.04 per diluted share. (3) The fiscal 2009 results include restructuring and impairment charges ($0.17 per diluted share), a non-cash gain in connection with the AETN/Lifetime merger ($0.08 per diluted share) and a gain on the sale of their investment in two pay television services in Latin America ($0.04 per diluted share). Including the impact of rounding, these items collectively resulted in a net adverse impact of $0.06 per diluted share. (4) The fiscal 2008 results include an accounting gain related to the acquisition of the Disney Stores North America and a gain on the sale of movies.com (together $0.01 per diluted share), the favorable resolution of certain income tax matters ($0.03 per diluted share), a bad debt charge for a receivable from Lehman Brothers ($0.03 per diluted share) and an impairment charge ($0.01 per diluted share). These tems collectively had no net impact on earnings per share. ()During fiscal 2007, the Company concluded the spin-off of the ABC Radio business and thus reports ABC Radio as discontinued opera- tions for all periods presented. (The fiscal 2007 results include gains from the sales of E! Entertainment and Us Weekly (together $0.31 per diluted share), the favorable Playd resolution of certain income tax matters ($0.03 per diluted share), an equity-based compensation plan modification charge ($0.01 per diluted Spabilit share), and an impairment charge ($0.01 per diluted share). These items collectively resulted in a net benefit of $0.32 per diluted share. peered to Source: The Walt Disney Company 2008 and 2011 10-Ks. when as Bring a THE WALT DISNEY production and distribution, music publishing, live vence in theatrical productions, children's book publishing, COMPANY'S CORPORATE interactive media, and consumer products retailing. The company's corporate strategy was centered on STRATEGY AND BUSINESS (1) creating high-quality family content, (2) exploit- OPERATIONS IN 2012 ing technological innovations to make entertainment experiences more memorable, and (3) international In 2012, The Walt Disney Company was broadly expansion. The company's 2006 acquisition of Pixar diversified into theme parks, hotels and resorts, and 2009 acquisition of Marvel were executed to cruise ships, cable networks, broadcast television enhance the resources and capabilities of its core ani- networks, television production, television station mation business with the addition of new animation operations, live action and animated motion picture skills and characters. The company's 2010 acquisitionMickey Case 20 The Walt Disney Company: Its Diversification Strategy in 2012 cter in Walt Disney died of lung cancer in 1966, but C-275 swald, upon his death, Roy O. Disney postponed retirement nd all to become president and CEO of Walt Disney Pro- derivatives suit led to his removal as chairman in 2004 and his resignation in 2005. nd his ductions and oversee the development of Walt Dis- The Walt Disney Company's CEO in 2012, debuts World Resort. Walt Disney World Resort opened Gallo- ney october 1971- only two months before Roy O. Robert (Bob) Iger, became a Disney employee in 1996 when the company acquired ABC. Iger was president Willie Disney's death in December 1971. The company was and CEO of ABC at the time of its acquisition by The and led by Donn Tatum from 1971 to 1976. Tatum had been with Walt Disney Productions since 1956 and led the Walt Disney Company and remained in that position ime until made president of Walt Disney International cog- further development of Walt Disney World Resort and by Alan Eisner in 1999. Bob Iger was promoted to Film began the planning of EPCOT in Orlando and Tokyo president and chief operating officer of The Walt ckey Disneyland . Those two parks were opened during the Disney Company in 2000 and was named as Eisner's des enure of Esmond Cardon Walker, who had been an replacement as CEO in 2005. Iger's first strategic new executive at the company since 1956 and chief operating moves in 2006 included the $7.4 billion acquisition ald officer since Walt Disney's death in 1966. Walker also of Pixar animation studios and the purchase of the rights to Disney's first cartoon character, Oswald the use launched The Disney Channel before his retirement in in 1983. Walt Disney Productions was briefly led by Lucky Rabbit, from NBCUniversal. In 2007, Robert Iger commissioned two new 340-meter ships for the key Ronald Miller, who was the son-in-law of Walt Disney. ies Miller was ineffective as Disney chief executive officer Disney Cruise Lines that would double its fleet size and was replaced by Michael Eisner in 1984. from two ships to four. The new ships ordered by Iger Eisner formulated and oversaw the implement were 40 percent larger than Disney's two older ves- tation of a bold strategy for Walt Disney Studios, sels and entered service in 2011 and 2012. Iger also which included the acquisitions of ABC, ESPN, Mira- engineered the acquisition of Marvel Entertainment in 2009, which would enable the Disney produc- max Films, and the Anaheim Angels, and the Fox tion motion pictures featuring Marvel comic book Family Channel, the development of Disneyland Paris, characters such as Iron Man, the Incredible Hulk, Disney-MGM Studios in Orlando, Disney California Thor, Spider-Man, and Captain America. All of the Adventure Park, Walt Disney Studios theme park in movies produced by Disney's Marvel unit had per- France, and Hong Kong Disneyland, and the launch of formed exceptionally well at the box office, with The the Disney Cruise Line, the Disney Interactive game Avengers, which was released in May 2012, recording division, and the Disney Store retail chain. Eisner also worldwide box office receipts of more than $1 billion. restored the company's reputation for blockbuster Disney's Miramax film production company and animated feature films with the creation of The Little Dimension film assets were divested by Iger in 2010 Mermaid in 1989, Beauty and the Beast in 1991, for $663 million. A financial summary for The Walt Aladdin in 1992, and The Lion King in 1994. Despite Disney Company for 2007 through 2011 is provided Eisner's successes, his tendencies toward microman- in Exhibit 1. Exhibit 2 tracks the performance of The agement and skirting board approval for many of Walt Disney Company's common shares between his initiatives and his involvement in a long-running August 2002 and August 2012. EXHIBIT 1 Financial Summary for The Walt Disney Company, Fiscal 2007-Fiscal 2011 (in millions) 2007(5)(6) 2011(1) 2010(2) 2009(3) 2008(4) $36, 149 $35,510 $40,893 $38,063 $37,843 Revenues 5,258 4,313 3,609 4,729 4,851 Income from continuing operations 4,807 3,963 3,307 4,427 4,674 Income from continuing operations attributable to Disney Per common share Earnings from continuing operations attributable to Disney 2.24 $2.52 $2.03 $1.76 $2.28 1.78 2.34 2.33 Diluted 2.56 2.07 0.35 0.31 Basic 0.40 0.35 0.35 Continued) Dividends