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
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$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
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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
External Opp Weight Ratings Weighted
Score
1 Wide global market 0.2 2 0.4
2 Stable US Economy 0.12 3 0.36
3 Diversified Services 0.1 2 0.2
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4 Other Markets to
supp
0.11 3 0.33
lement its core trade
5 Huge financial base 0.1 4 0.4
and advanced advert
ising strategies
6 Emerging Markets 0.1 1 0.1
External Threats Weight Ratings Weighted Score
1 Stiff Competition
local
0.03 3 0.09
2 Change in consumer 0.05 2 0.1
behavior
3 Fluctuations and 0.03 1 0.03
inflation in the Econ
4 High and
Fluctuating
0.05 1 0.05
Labor rates
5 Government 0.1 1 0.1
Regulation
6 Bad Economy/
Effects
of floods/earth
quakes/
0.01 2 0.02
terrorists threats
1 2.18
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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
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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.
