Strategic Management, IFE and Financial Ratios
For Walt Disney
Introduction
Walt Disney IFE (Internal Factor Evaluation) reflects the efficiency in its management systems
that have catapulted its initial humble beginnings to its current multi-national corporation status.
Walt Disney began its operations in the 1920’s as a cartoon production studio. It currently has a
market capitalization of over $140.44 Billion.
In the financial years ending 2008, 2009 and 2010, its turnover stood at $37.843 Billion, $36.149
and $38.063 Billion respectively. These represented a decrease of 4% from 2008 to 2009 while
the period ending 2010 registered an increase of 5%. (Drucker, 1999)
IFE (Internal factor Evaluation)
Key Internal Factor Weights 0.0 to
1
Ratings
1-4
W/
Score
Strengths
Popular and well recognized entertainment Co. globally 0.09 4 0.36
Diversification (Books, Movies, Music, Games, Cruises) 0.09 4 0.36
Large Financial Base 0.07 4 0.28
Innovative 0.05 3 0.15
Effective and well funded Advertising strategies 0.06 3 0.18
Strategic Management, IFE and Financial Ratios 2
large consumer loyalty 0.09 4 0.36
Large Media houses , Movie studios and networks 0.08 4 0.32
Animations have near fanatical loyalty from children 0.09 4 0.36
Weaknesses
Creates addictive behaviors among children 0.09 3 0.27
Encourages violence among children 0.02 2 0.04
Its liquidity is weak 0.02 1 0.02
Asset turnover is very low 0.02 1 0.02
Profit margin is low and it has a decreasing trend 0.02 3 0.06
High cost of production 0.09 4 0.36
Employee turnover is high 0.02 3 0.06
Some of its products are exposed to privacy 0.02 4 0.08
Products are considered more costly 0.02 3 0.06
Totals 0.94 54 3.34
The IFE indicates that the successes of the company are based on its own systems to significantly
invest in strategic projects that capture the imaginations and dreams of millions of Americans
and other foreign nationals by investing and building an amazing global collection of the earth’s
best high standard and quality content that can only achieve unrivalled experiences. The 3.4
score indicates its high performance in the entertainment industry. In a global economy of ever
ending competition on entertainment choices, Disney prefers to reach out and invent the brands
that most of its clients love and expand their preferences. Walt Disney’s Form 10-K for 2009
Walt Disney has positioned itself as the number one leading brand globally in the entertainment
industry where everything is available for everyone that’s different entertainment for adults and
children, sportsmen, different classes of music, movies, games, sports, books, luxurious holidays
in cruises, theme parks and all kinds of fantasies that can be dreamed of only exists in
Disneyland. These are its major strengths however to some extent Disney has shared some
blames for promoting violence in its animated movies and video games besides some of
entertainment joints are considered costly. Global economic recession affects its profitability just
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like in all other industries only that in cases of financial difficulties the first industry to suffer is
the entertainment industry as most people cut down on their expenditures. (Levinson, 2006)
Ratios Analysis
Liquidity
The liquidity status of Walt Disney is average. The current ratio indicates that its total liabilities
are slightly above 1 when the standard industry average is 2. It may find it difficult to meet its
entire financial obligation in case of an emergency. It’s quick ratio for 2010 and 2009 are
however standard at 0.98 and 1.19 respectively almost similar to the standard average ratio of 1.
Profitability Ratio
The profit margin for 2010, 2009 and 2008 are 17.67%, 15.76% and 19.67% respectively. The
trend is decreasing while the asset turnover ratios are for the same period are 0.58, 0.55, 0.57.
Meaning that for every dollar invested in Walt Disney the average return on each dollar is $ 0.6.
The Earnings per Share for the same period are 2.09, 1.75, and 2.34 while the Rate of Return on
assets is 6.23 and 5.72 for the years 2010 and 2009 respectively. The rate of return on equity for
the same period is 10.96 and 10.91 respectively. The inventory turnover is also improving from
22.41 in 2008 to 23.1 in 2010. (Vance, 2003)
Leverage ratio
The debt to asset ratios for 2010 and 2009 are 0.18 and 0.2. These are within the normal industry
average.
Walt Disney Financial ratios for the years 2008 – 2010
Strategic Management, IFE and Financial Ratios 4
Financial Ratios Details 2010 2009 2008
Current Ratio Total Current Assets/Total current liabilities 1.11 1.33 –
Quick Ratio TT Current Assets – inventories /TT current assets 0.98 1.19 –
Inventory Turnover Cost of goods sold/Average inventory 23.10 22.45 22.41
Asset turnover Sales/Average total assets 0.58 0.55 0.57
Times interest
earned
EBIT/Annual Interest Expense 16.20 12.14 14.13
Debt to total Asset Debt/Assets 0.18 0.20 –
Profit margin on sale GP/sales % 17.67 15.76 19.67
R.R return on assets EAT/Total Assets % 6.23 5.72 –
R.R com stock equity Profit after taxes/Shareholders equity % 10.96 10.19 –
Earnings per share Profit after taxes-pref div)/No. of comm shares outst 2.09 1.75 2.34
Finally to conclude, the major strengths for Walt Disney are its vast financial resources and huge
marketing budgets that create a lot of awareness for its products globally. The advanced digital
technology has been developed into more innovative methods of entertainment in its theme parks
and international luxury cruises.
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References
Drucker, F. (1999) Management Challenges of the 21st Century. New York: Harper Business.
Levinson, M. (2006). Guide to Financial Markets. London: The Economist (Profile Books).
pp. 155–6. ISBN 1-86197-956-8
Vance, D. (2003) Financial analysis and decision making: tools and techniques to solve
financial problems and make effective business decisions. New York: McGraw-Hill.
Walt Disney’s Form 10-K for 2009 – 2010
