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Company Strategy
The Disney Company is an international multimedia conglomerate produces many different types of products and services, primarily in the entertainment sphere. The company HQ is based in California, although most of the organization’s business is done both around the US and overseas (“Walt Disney”). The biggest markets for the brand are Canada and the US, but their products produce admirable profits in European and Asian markets (“Walt Disney Revenue”). Most of the company’s toys and other merchandise are made in China, helping to reduce costs and increase production speeds (“New Green America Campaign”). The marketing strategy, focus and branding of Disney Company products change drastically depending on the culture and legislation surrounding it (Cochran). The company employs a multi-domestic strategy, allowing it to adjust to the cultural and historical climate its works in.
Working Internationally and Handling Differences
Working to examine Disney’s operations outside of the US, several significant changes from the company’s usual formula can be observed. To demonstrate that, China will be used as an example. The nation has a longstanding history of relations with the Walt Disney Company, contrasted by certain social constraints that are often difficult to navigate. One of the first major interactions between the brand and the People’s Republic of China was in 2016 when the plans to open a Disneyland location in Shanghai finally concluded (Barboza and Barnes). The interesting part of the project is that Disney had to make specific concessions in order to cooperate with the Chinese government. Without compliance, it was impossible to establish mutually beneficial cooperation between the two entities.
The ability of the Walt Disney Company to abandon its own plans or significantly change them for the sake of international cooperation shows the organization’s flexibility and adaptability. The Disney company had to allow the Chinese ruling party to have oversight over some of the park’s activities, relinquishing full control of the facility. In addition, the plans to launch a TV channel in China fell through, with Disney abandoning their demands (Barboza and Barnes). Both TV programming and creative control over amusement park locations presented significant strengths for Disney, allowing it to entice new visitors more effectively and create a young audience for its products. In China, the pursuit of their traditional scheme has failed, forcing the company to improvise.
In addition, the company’s handling of park attractions and other management decisions has been admirable, allowing it to create a relationship of trust with the Chinese authorities. Instead of simply importing existing popular rides from the US location, the company went forward with creating new, unique attractions for the Shanghai Disneyland resort. As noted by the overview at the time, this move was positively received by China’s officials, adding a certain character to the new amusement part. In this vein, the organization clearly demonstrates its ability to establish territory-exclusive practices, negotiate agreeable terms for itself, and use new opportunities to its advantage. Generally, the actions of the organization, coupled with its present ratios, indicate that the Walt Disney Company has a stable financial status in the industry, capable of expanding and actively competing with other entities. Additionally, it has the necessary resources to take risks and recover from them. Despite facing a fall in profits that will be mentioned later, the company remains as one of the strongest contenders in its field.
Ratio Analysis
Liquidity ratios refer to the capacity of a business to pay the debt without using external capital. Currently, Disney’s liquidity ratio stands at around 1.06. However, it is difficult to compare the company to its competitors or the industry average values (“Disney Current Ratio”). The first reason for this is the organization’s unchallenged supremacy in certain areas of business, including the theme park industry. The second reason comes from the fact that Disney operates in multiple markets simultaneously, making it a part of the Motion Pictures market, toy merchandise market, streaming service market and many others. If one compares Disney’s ratio to an average in the film industry, it is slightly larger than its current value, sitting around 0.94 (“Motion Pictures”). Other motion picture entertainment companies, like Universal Entertainment, boast a liquidity ratio of 1.27, which might present a problem for Disney (“Universal Entertainment”). In the streaming services field as well, Disney’s largest competitor, Netflix, sports a ratio of 1.05 (“Netflix Current Ratio”).
Leverage ratios assess whether a company is capable of fulfilling its financial obligations. These can include property costs, debts to banks and other organizations, and other types of monetary concerns. The term leverage ratio can additionally be used to assess the amount of debt the organization has incurred. Debts and loans have a central role in the business sphere; ensuring one’s organization can pay them back is necessary for prosperity. Currently, Disney’s leverage ratio stands at 1.98, close to the average value the company has held for more than a decade (“DIS | Leverage Ratio”). Comparing it to the media industry average tells one that Disney comes out on top, showcasing its strong connection with the entertainment business and a stable foundation underpinning its financial decisions.
Efficiency ratios refer to the capability of a company to actively employ its assets to generate profit. The measurement determines whether it is difficult for the organization to keep earning its profits consistently. Capital, stocks, bonds, and other types of financial resources are all connected with this metric. By calculating its efficiency ratio, a company can determine if it is making a profit by continuing its operations as planned. Comparing efficiency benchmarks, sources indicate that Disney company stands at around 2.8% asset efficiency, placing it in the middle of the list with other major film companies (“The Complete Toolbox”). This result makes it clear that the company is not failing but does face considerable issues overcoming its competition this year.
Profitability ratios are one of the most important metrics for a company and its management. Disney’s current profitability ratio stands at 2.25%, rising from a recent sharp decline that started in 2018 (“Walt Disney Co.”). With the years of the pandemic, Disney has successfully managed to use the streaming service market to its advantage and produce considerable profits. When examining another streaming giant, Netflix, Disney seems to pale in comparison. Netflix currently sits at 32% return on equity, making it significantly more sustainable than Disney’s values (“Netflix ROE”). Profitability ratios are a metric used to assess a company’s ability to generate profit, making them important for businesses of any size. If a company produces goods or services while being unable to profit from them, it will not have sufficient funds to develop, grow, or react to changes in the market.
Financial Condition
Although struggling in some areas, it appears that the Walt Disney Company has found its niche in streaming services, seeking to secure profits during the time of the pandemic. Its multimedia franchises and many different kinds of intellectual properties, combined with the company’s longstanding success, make it difficult for Disney to truly be considered to be “failing”, even when it loses profits or customer retention. As a brand that appeals to a wide variety of demographics, Disney has managed to build a strong supporter base and a well-recognized brand identity. These qualities help the company stand out from the rest and maintain its high level of activity. Despite relatively stiff competition and a need to constantly produce content, the media conglomerate seems capable of setting itself up for future success in the streaming market (Jasinski). Seeing the profitability ratios and other values gradually rise over the recent years makes it clear that Disney is in a good financial position.
Works Cited
“DIS | Leverage Ratio Chart and History 2009-2022 | DiscoverCI.” Stock Analysis, Valuation, and Research Software | DiscoverCI, 2022, Web.
“Disney Current Ratio 2006-2021 | DIS.” Macrotrends | The Long Term Perspective on Markets, 2022, Web.
“Motion Pictures: Industry Financial Ratios Benchmarking.” Financial Analysis Software | Financial Analysis | Financial Statements | Current Ratio | Financial Ratio | ReadyRatios.com, 2022, Web.
“Netflix Current Ratio 2006-2021 | NFLX.” Macrotrends | The Long Term Perspective on Markets, 2022, Web.
“Netflix ROE 2006-2020 | NFLX.” Macrotrends | The Long Term Perspective on Markets, 2022, Web.
“New Green America Campaign Calls Out Hasbro and Disney for Sweatshop-Made Toys.” Green America, 2015 Web.
“The Complete Toolbox For Investors.” The Complete Toolbox For Investors | Finbox.com, Web.
“Universal Entertainment Corp (6425) Financial Ratios.” Investing.com, 2022, Web.
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“Walt Disney Revenue by Region.” Statista, 2020, Web.
Barboza, David, and Brooks Barnes. “How China Won the Keys to Disney’s Magic Kingdom.” The New York Times – Breaking News, US News, World News and Videos, 2016, Web.
Cochran, Jason. “Look at How Different Shanghai Disneyland Is from Other Disney Parks.” Frommer’s Travel Guides: Trip Ideas, Inspiration & Deals, 2018, Web.
Jasinski, Nicholas. “Disney Misses on Earnings. Streaming Is All That Matters.” Barrons, 2022, Web.
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