IF YOU WANT TO GO WHERE YOU NEED

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IF YOU WANT TO GO WHERE YOU NEED TO BE

IF YOU WANT TO GO WHERE YOU NEED TO BE

YOU CANNOT STAY THE WAY YOU ARE

YOU CANNOT STAY THE WAY YOU ARE

N Nanyang Consulting WALT DISNEY “Blowing Up The Castle? ” Presented to: Robert A.

N Nanyang Consulting WALT DISNEY “Blowing Up The Castle? ” Presented to: Robert A. Iger, Chairman and CEO at The Walt Disney Company Presented by: Daniela, Minghao, Victor, Vishnu 11 January 2019

Agenda 1 Problem 2 Recommendations 3 Internal & External Analysis 4 Strategic Alternatives 5

Agenda 1 Problem 2 Recommendations 3 Internal & External Analysis 4 Strategic Alternatives 5 Implementation 6 Financial Analysis 7 Contingency Plan 8 Conclusion Page 4

Problem: Walt Disney is facing three key challenges that need to be overcome to

Problem: Walt Disney is facing three key challenges that need to be overcome to compete in an increasingly disrupted market Cannibalization Threat Post-Merger Integration Disruption from OTT Ø How can you make best use of the Fox acquisition? Ø How can you disrupt your business model while mitigating for cannibalization? Ø How can you stay competitive? Problem Recommendation Analysis Alternatives Implementation Page 5 Financials Contingencies Conclusion

Recommendation: Three strategies will enable Walt Disney to overcome the identified challenges and prepare

Recommendation: Three strategies will enable Walt Disney to overcome the identified challenges and prepare for the future Page 6 Customer Acquisition Customer Experience Integration Strategy Customer Segment Strategy Online-Offline (O 2 O) Strategy Post-Merger Integration Cannibalization Threat Disruption from OTT Organizational Assets Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Internal Analysis: Walt Disney exhibits extensive experience and strong core competencies in the media

Internal Analysis: Walt Disney exhibits extensive experience and strong core competencies in the media industry Strengths Weaknesses Ø Strong reputation and brand Ø Large volume of content (Pixar, Disney, ESPN Sports) Ø Multiple streams of revenues (e. g. theme parks, merchandise) TV (40%) Ø Large integration challenge ahead Ø Lack of technology focus in new media (e. g. streaming, analytics) Ø M&A experience Recommendation Ø Revenues largely from traditional cable Ø Traditional media Ø Family-focused image Problem Page 7 Analysis Alternatives Implementation Financials Contingencies Conclusion

External Analysis: Walt Disney exhibits extensive experience and strong core competencies in the media

External Analysis: Walt Disney exhibits extensive experience and strong core competencies in the media industry Opportunities Page 8 Threats Ø Technological advancements improving Ø Strong competition incl. new entrants (e. g. customer experience Ø Exponential growth in streaming services Netflix, Amazon) Ø Increased (mobile) connectivity Ø Rapid decrease in subscribers to cable TV Ø Globalization Ø Customers looking for “long-tail’ offerings Ø Disintermediation Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Competitor Analysis: The following positioning map illustrates the competitive landscape Walt Disney competes in

Competitor Analysis: The following positioning map illustrates the competitive landscape Walt Disney competes in Page 9 Large Content Volume Walt Disney Netflix HBO Hulu Standalone Services Diversified Services You. Tube Premium Amazon Prime Low Content Volume Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Chosen Strategies Strategic Alternatives: Six key strategies have been considered analyzed to identify the

Chosen Strategies Strategic Alternatives: Six key strategies have been considered analyzed to identify the best-fit recommendations Page 10 STRATEGY Strategic Fit Customer Fit Profitability Feasibility Innovation Level DECISION License Content to Competitors × + + + × × Stimulate a Content “War” × + × × Go “All-In” on OTT × + × Integration Strategy + + × + Customer Segment Strategy + + × + Online-Offline (O 2 O) Strategy + + + Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Implementation (1/3): Integration Strategy Page 11 What Ø Develop and launch an integration strategy

Implementation (1/3): Integration Strategy Page 11 What Ø Develop and launch an integration strategy for Walt Disney & Fox Why Ø Reduce integration risks and fully exploit potential synergies despite differing cultures Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Implementation (1/3): Integration Strategy Page 12 How Operations & HR Ø Culture Determine content

Implementation (1/3): Integration Strategy Page 12 How Operations & HR Ø Culture Determine content from Fox that will be integrated into Disney’s offerings vs. standalone Ø Ø Progressively integrate Fox franchises, e. g. Marvel into Disney theme parks and merchandise Ø Ø company (e. g. focus groups, workshops) Ø Leverage on HR from both organizations (integration team) Initiate quarterly culture events, e. g. dinner and dance, movie nights Ø Form a dedicated future technologies team across Invite an experienced integration consultant to the Install cross-organizational communication channels, e. g. Skype for Work both organizations for e. g. AR/VR, gamification Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Implementation (2/3): Customer Segment Strategy Page 13 What Ø Develop a coherent customer segmentation

Implementation (2/3): Customer Segment Strategy Page 13 What Ø Develop a coherent customer segmentation strategy to convert non-pay. TV users in the US and international subscribers to Disney DTC (direct-to-consumer channel) Why Ø Avoid cannibalization of cable TV subscribers in the US and increase DTV subscribers from international Disney fan base Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Implementation (2/3): Customer Segment Strategy Page 14 How Operations & HR Ø Marketing Conduct

Implementation (2/3): Customer Segment Strategy Page 14 How Operations & HR Ø Marketing Conduct market research on international OTT Ø subscribers Ø at Universities, e. g. HEC Paris Hire a local marketing team (Paris, London, Ø Tokyo) for SNS (social networking service) Ø Hire a US digital marketing team to focus OTTusers marketing, targeting cable TV leavers Problem Recommendation Sponsor a family-related script-writing contest Analysis Alternatives Give-away free-trials to e. g. Millennials through partnerships, e. g. Grab Rewards, Deliveroo Ø Leverage on digital marketing channels (e. g. Instagram) with strong video content Implementation Financials Contingencies Conclusion

Implementation (3/3): Online-Offline (O 2 O) Strategy Page 15 What Ø Leverage Disney’s US

Implementation (3/3): Online-Offline (O 2 O) Strategy Page 15 What Ø Leverage Disney’s US and international theme parks to promote streaming subscription service Why Ø Use real estate as strategic angle to increase the subscriber base rapidly Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Implementation (3/3): Online-Offline (O 2 O) Strategy Page 16 How Operations & HR Ø

Implementation (3/3): Online-Offline (O 2 O) Strategy Page 16 How Operations & HR Ø Marketing Hire a dedicated team focusing on cross-marketing strategies Ø Train hotel staff on usage of streaming service in hotel rooms at Disney resorts Ø Establish an analytics team to focus on optimizing customer conversion rate Ø Establish a dedicated customer satisfaction team Problem Recommendation Analysis Alternatives Ø Focus on live sports as a key differentiator Ø Sponsor University sports competitions, e. g. MBA Olympics Ø Offer a 2 -month free trial with entry ticket to theme parks Ø Promote streaming service at merchandising spots Ø Offer free subscription service at hotel rooms and Disney resorts Implementation Financials Contingencies Conclusion

Key Performance Indicators: The following metrics should be used to monitor the success of

Key Performance Indicators: The following metrics should be used to monitor the success of the suggested strategies Key Performance Indicator 1 2 3 4 5 6 7 8 Target Ø Attrition rate of employees Less than 10% Ø Employee satisfaction level 90% Ø Customer satisfaction level (DTC) 92% 32. 5 million by 2023 Ø Number of DTC subscribers Ø Cannibalization rate of cable TV with DTC Ø Below 2% 2+ p. a. Pace of introduction of Fox franchises into theme parks 40% Ø Conversion rate of free-trials to paid service 5 million p. a. Ø Number of DTC sign-ups due to theme park trials Problem Recommendation Analysis Page 17 Alternatives Implementation Financials Contingencies Conclusion

Timeline: The following schedule illustrates how the suggested strategies should be implemented 2019 H

Timeline: The following schedule illustrates how the suggested strategies should be implemented 2019 H 1 2020 H 2 H 1 2021 H 2 H 1 Page 18 2022 H 1 2023 H 2 H 1 H 2 INTEGRATION STRATEGY Integration consultant, culture events Consultant Events Integrate Fox franchises Future technologies team Hire Develop US marketing team and campaign Develop Launch International marketing team and campaign Develop Launch Hire cross-marketing team and launch initiatives Hire Launch Train hotel staff Train Analytics team Hire CUSTOMER SEGMENT STRATEGY Market research ONLINE-OFFLINE STRATEGY Problem Recommendation Analysis Work Alternatives Implementation Financials Contingencies Conclusion

Financial Analysis: The following costs are associated with the proposed strategies Problem Recommendation Analysis

Financial Analysis: The following costs are associated with the proposed strategies Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Page 19 Conclusion

Financial Analysis: DTC is expected to be profitable in the 4 th year of

Financial Analysis: DTC is expected to be profitable in the 4 th year of implementation Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Page 20 Conclusion

Financial Analysis: DTC is expected to be profitable in 5 th year with a

Financial Analysis: DTC is expected to be profitable in 5 th year with a low subscriber take up scenario Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Page 21 Conclusion

Financial Analysis: Two profits scenarios have been evaluated and unveil the profitability of the

Financial Analysis: Two profits scenarios have been evaluated and unveil the profitability of the strategies Page 22 1, 000 500 - 2019 2020 2021 2022 2023 (500) (1, 000) (1, 500) (2, 000) Profits Predicted Problem Recommendation Analysis Profits Slow subscriber Take up Scenario Alternatives Implementation Financials Contingencies Conclusion

Contingency Plan: The following risks are underlying the suggested strategies and need to be

Contingency Plan: The following risks are underlying the suggested strategies and need to be mitigated in a timely manner Anticipated Risk 1 2 3 4 5 6 7 Page 23 Probability Mitigation Medium Close satisfaction tracking Low Increase marketing efforts Ø Top talent leaving the firm Ø Below forecasts sign-up for DTC Ø Resistance from staff on integration Medium Strong feedback culture Ø Slow technological progress Medium Hire “fresh” staff, e. g. incubate talent Ø Accelerated cannibalization Low Reexamination of marketing channels Ø Inability of offline channels to drive DTC subscribers Family-friendly brand image dilution Low Offer better packaging of free-trials Low Careful content selection Ø Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

Conclusion: Three strategies have been introduced and outlined that will allow Walt Disney to

Conclusion: Three strategies have been introduced and outlined that will allow Walt Disney to manage the disruption it is undergoing Page 24 Customer Acquisition Customer Experience Integration Strategy Customer Segment Strategy Online-Offline (O 2 O) Strategy Post-Merger Integration Cannibalization Threat Disruption from OTT Organizational Assets Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Conclusion

N Nanyang Consulting THANK YOU FOR YOUR ATTENTION We now welcome any questions you

N Nanyang Consulting THANK YOU FOR YOUR ATTENTION We now welcome any questions you may have. Kindly turn this page for the appendix.

N Nanyang Consulting APPENDIX Kindly turn this page to access supporting material.

N Nanyang Consulting APPENDIX Kindly turn this page to access supporting material.

Financial Analysis: The following subscriber number assumptions are underlying the financial model Problem Recommendation

Financial Analysis: The following subscriber number assumptions are underlying the financial model Problem Recommendation Analysis Alternatives Implementation Financials Contingencies Page 27 Conclusion