Case #3 The Walt Disney Company’s Yen Financing In the early 1980’s, Disney opened a theme park in Tokyo Japan. It was operated by an unrelated Japanese company to Disney and Disney was receiving royalties in the form of the Yen. Rolf Anderson foresaw that there could be a possible exposure to Yen-Dollar exchange risk due to the increasing royalties received in Yen because of the theme park growth. Given the recent depreciation of the yen to the dollar, he was considering different ways to hedge this exposure. There were many ways to hedge that were considered by Anderson, such as options, futures, forwards, and swaps.
Walt Disney Analysis: Known informally as "The Magic Kingdom," Disney traces its roots to before The Great Depression, with cartoonist Walt Disney and his brother Roy. Together, they founded the company in 1923 as a cartoon studio operating in their uncle's garage. Five years later, Disney would release the cartoon Steamboat Willie, starring Mickey Mouse. Today, Disney is a multimedia powerhouse with global operations that include television networks, a movie studio, theme parks, and the world's largest and most lucrative library of licensed brands. Disney imprints were responsible for $37.5 billion in retail sales last year, magazine License!
Despite being a leader in entertainment with a strong managerial structure and traditional roots the organization needs to take into account the technological era and need for innovation in service. The report is concluded with the situation of the Shanghai upcoming Disney park in a search for solutions over a possible cannibalization effect on the Hong Kong Disneyland. Table of Contents Executive Summary 2 Background: Introduction to Disney History 3 Issue Statement: The Global “Disneyfication” 5 Analysis of the Problem: Disney Parks around the World 6 Tokyo Disneyland 6 Euro Disney or Disneyland Paris 7 Hong Kong Disneyland 8 Alternative Analysis and Selection Criteria 9 Recommendations 11 Action and Implementation Plan 12 References 13 Appendices 15 List of Tables and Figures Figure 1 David, F., 2011, Strategic Management, The Walt Disney Company Internal Report 5 Figure 2 Public Data,2013. “Theme Park Revenues: By Park” Curated by Pro-Forma Advisors 11 Table 1 Countries with the largest shares of FDI inflows 12
Euro Disney was to be run as a nongovernment concern. 1.3 When the theme park was built, cost escalated to US$5 billion due to a number of design and construction changes. Between 1992 and 1994, a combination of reasons led to financial difficulty at Euro Disney: the US$4 billion debt posed a huge financial burden on the park, interest rates were double that estimated, tourist spending was lower because of recession in Europe, half the revenue projected to come from real estate development did not materialize as a result of the collapse of the property market in France, a strong franc which made it expensive for visitors, and low attendance which fell below the expected annual 10 million for the period. 1.4 In 1994, a huge financial restructuring took place to reduce debt by US$1 billion. This gave Euro Disney 24 months’ forgiveness from paying interest on roughly US$3 billion of the loans, along with a 3-year postponement on paying back the principal.
Using Exhibit 5 as a starting point for our analysis, we completed a DuPont analysis. In this, we found several major trends: net income is decreasing while sales, assets, and equity all increased year over year. We found these results to be a troubling because of a decline in ROA and ROE with increased asset and equity bases. Further analysis is required to discern decreased performance from these metrics, however one thing has become clear; Disney, because of various factors, is not financially healthy, thereby prompting this potential hostile takeover. The Company faces numerous issues.
Paris was chosen for the location of EuroDisney over 200 other sites because the French government had offered incentives to the company, along with the demographic data available showing Paris to be Europe’s most visited city by tourists. Tourists were braving the cold and wind in Tokyo to visit Disneyland, so the climate of northern France did not trouble the company when choosing this site. During the first year, the Walt Disney Company believed the park would draw 11 million tourists and generate $100 million, but by 1994 Disney had only had 9.2 million visitors in two years and had lost more than $900 million. European tourists were taking advantage of battling transatlantic air carriers and were choosing to go to Disneyworld in Orlando, because it was cheaper than EuroDisney and the location promised better weather and Florida beaches. Disney had believed that if they built a large, glamorous park in the style of American parks, the European tourists would flock to it to get their slice of American culture.
Analysis is falling into three parts, operating strategies, bank and investors, financial operation with a particular emphasis on Disney. Industry overview DreamWorks and Disney Studios are both part of the Motion Pictures and Video Production industry. Disney, FOX, MGM, Paramount, Sony Pictures, Universal, and Warner Bros are the major US domestic players in this industry. Some important international companies are Promotora de Informaciones (Spain), Toho Co (Japan) and Egmont International Holding (Danmark). Porter’s five forces is a marketing tool
Having two based in North America, and with the other 3 based in Europe and Asia. Having been ranked in the top 100 public companies in the world according (Forbes.com, 2014) Disney is seen as having anything but financial difficulty. That however is not the case for one of its prestigious theme parks. Since opening in 1992, Euro Disney, or currently recognized as Disneyland Paris, has become one of the largest tourist attractions in all of Europe. Though touted as one, if not the happiest places on earth, financially it is not much but a mirage.
.................................. 4 III. Conclusion and Solution........................................................................................................................ 4 1|Page I. Introduction After the successful formula of Walt Disney Company in the amusement park business, and the success stories of the Disney theme parks in USA (first opened in 1955 and second in 1970) and Japan (in 1983), in 1986 Walt Disney decided to open its first location in Europe. For this the Company chose Paris, France, the self-proclaimed capital of high culture and style. Many asked the question of “Why did they pick Paris?” as it seemed that since the very beginning the EuroDisney World in Paris was far from reaching the expected success and fame that that park enjoyed in USA and Japan.
In 1955 opened the first California Disney theme park, Disneyland. Disney continued its rise in popularity, and survived even the death of its founder in 1966. His brother Roy took over supervision at that time, and then was succeeded by an executive team in 1971. In 1983, Disney went international with the opening of Tokyo Disneyland. In the past few decades, Disney has moved into a wider market, beginning The Disney Channel on cable and establishing subdivisions such as Touchstone Pictures to produce films other than the usual family-oriented fare, gaining a firmer footing on a broader range.