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II EXTERNAL AUDIT
Economic Force
Moderate economic condition in the United States increases customer spending by
6%.
Economic conditions are relevant on the number of visitors to the parks as well
as their spending rates. It was mentioned on the case that in 2011, Disney's domestic
revenues from its parks and resorts segment grew 11 percent to $12.9 billion, owing to
a 6 percent increase in customer spending, primarily due to higher ticket and hotel
prices. With this, it can be perceived that the economy in the United States is in a
moderate condition because of the increased number of visitors to the parks, and as
well as comprehended by the rate of spending by the customers on the Disney domestic
parks and resorts operations.
The United States is maintaining positive strategic vision in the media and
entertainment industry.
Walt Disney Company is distinguished as the world's leading and largest media
conglomerate. News Corporation is also known as the world's second-largest media
conglomerate. Meanwhile, Time Warner, Inc. is recognized as the third-largest media
conglomerate in the world. With those notable established reputations, all of which are
situated and based on the United States. In connection with this, they are all associated
with operations spanning television, film, and publishing, which are widely known across
the globe; such as HBO, Cinemax, Warner Bros. Pictures, owned by Time Warner, Inc.
and Fox Filmed Entertainment and Dow Jones (The Wall Street Journal) published by
News Corp. Furthermore, with those given statements, it can be discerned that the land
of United States have helped them maintained and flourished a global reach in the
entertainment industry.
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Economic growth, per capita income and stage of economic development among
different countries are varied.
Parks and resorts industry is reliant on the state of the economy due to the fact
that demand is mostly driven by customers' disposable income. Also, it can be perceived
that business cycles in each nation can influence people's free time, and as a result,
their attendance rates in parks and resorts will as well be affected. However, Disney
theme parks and resorts internal operations have still managed to reflect a 6% revenue
growth in this business segment.
Exchange rate fluctuations
Disney owns and runs 14 major theme parks across the world, as well as large
cruise ships. With this, exchange rate fluctuations are visible and the profitability of Park
and Resorts divisions are uncertain. However, it was stated that the international
operations of Disney had a 6% increase in revenue, attributed to a 4% increase in
spending, a 3% increase in volume, and a 3% gain on foreign currency appreciation.
Social, Cultural, Demographic, and Natural Forces
Different local cultures
It can be perceived that when operating internationally, culture must be
considered. In theme parks and resorts, it was stated that the primary source of revenue
in this sector is the sale of entry tickets to the theme parks, per-night hotel room rates,
merchandising, food and beverage sales, rentals, and sales from vacation club homes, as
well as sales of cruise vacations, all contribute to revenue. With this, conformity with
the nation which the company will operate is a must, especially in food and beverages,
since food trends and culture among nations are varied.
Fortunately, the international operations of Disney in parks and resorts segment
have shown positive outcome due to the increased revenue growth of 6% in this
division.
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Changes in customers’ preference for entertainment
It can be observed that the theatrical unit, home entertainment and television
distribution and other unit by Disney have all shown a decreased on its revenue. In
connections with this, it was stated on the case that the entire world has gone online.
With those given statements, it can be discerned that the customer’s preference have
shifted towards online activities which benefits other business who already engages in
such platform, but have harmed other entertainment products such as the theatrical
market, and television market.
Political, Government, and Legal Forces
International trade can be hampered by political differences
The park and resorts industry can be greatly influenced by the political condition.
With this, Disney operating in China, which is heavily reliant on government laws and is
regularly monitored by the government, have fortunately built a good ties with them,
and also to other international countries that Disney have affiliated with. In which as a
result, Disney have successfully operated on these nations and have generated 6%
growth in their international operation parks and resorts segment.
Licensing legislations gives opportunities for entertainment and merchandising
segments industry
Disney has licensed third-party companies the rights to make and deploy feature
films including Spider-Man, The Fantastic Four, and X-Men. On these films, Disney
receives a licensing fee. Seemingly, Disney's consumer products division collaborates
with licenses, manufacturers, publishers, and retailers throughout the world to create,
promote, and sell a wide range of items based on new and classic Disney characters.
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Technological Forces
Technological advancements have propounded an effect on the world’s media
In the media and entertainment industry, technological advancement is
absolutely fundamental. Growth opportunities are ensured by the employment of
modern machines to develop better content. From this standpoint, it can be
comprehended that with the existence of the technological advancements, business in
the said industries were able to produce high quality films, series, and animations,
operate efficiently, and have reached out globally.
Technological changes affecting demand for entertainment products
It was stated on the case that the entire world has gone online. With this, it can
be perceived that some companies have benefitted the changes, and some were
affected. Especially on the segment of theatrical unit, home entertainment and
television distribution and other unit by Disney, which have mentioned previously that
all have shown a decreased on its revenue. With this, it can be discerned that the
demand for this entertainment products were affected. Also, this could have benefited
Disney's interactive media division, which creates and distributes games and media for
smartphones and tablets. Unfortunately, it have shown a decrease of revenue for
several years.

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