Conclusion

The main entrance to Walt Disney World Orlando Florida

Source: (fodors.com)

For the past month, this blog has taken an in depth look at The Walt Disney company and the analytics that surround it.  In the first week, the Walt Disney Company business was described and compared to its fiercest competitors. Following that discussion it was quite clear that Disney is well ahead of its competitors but that they should keep an eye out to protect their interests. To add to the success of Disney, an argument was made in favor of the expansion of the Disney retail business into India. With a booming retail market and Disney’s global resources, this decision was an easy one. To succeed in this venture, a Data flow diagram was presented outlining the logistics behind the retail expansion. The decision to venture into India was supported through quantitative and qualitative analysis. Mumbai was targeted as the primary location based on several factors including technological infrastructure, available transportation and shipping routes and local economy.  In addition, Mumbai is an entertainment and fashion hub.

During the second week of the block, promotional events were discussed. Disney’s plans to hold a special promotional event for its Annual Pass holders and DVC members was presented. Using trips to the Hawaiian Aulani Resort as a grand prize, it was estimated that nearly 1 million guests were eligible to participate. Probabilities were then calculated to confirm that there is no bias in the selection of the winners.  After a geographical analysis, it was determined that the events should be held in both Disneyland California and The Walt Disney World Resort in Florida. Utilizing the Bayesian Paradigm, the probability of where the selected winner may reside was calculated. Based on a cost analysis, the event is expected to garnish $13 million dollars in revenue from new pass and membership sales.

disneyworlcom

Source : (Disneyworld.com)

The success of Disney does come with its issues. One of those being overcrowding and how to maintain the quality product that the guests have learned to expect. In the third week of the blog this was the problem that was analyzed. Focusing on crowd levels and consumer sentiment, the recommendation to expand upon the parks was proposed. Giving higher levels of capacity numbers, increased revenue and positive guest sentiment would allow Disney to comfortably entertain a crowd explosion for years to come. Additionally, the expansion would keep all eyes on Disney and away from the plans of expansion that were presented for Universal Studios.

Every effort should be made to grow the market share and protect itself from competitor advances. To better organize the company to deal with the massive expansion and growth, the operation must be streamlined and effective. It was proposed that Disney utilize a Growth Operational Strategy including accurate forecasting, product reliability and competitiveness. Finally, a deep dive was taken into the corporate 10k to see where all the money comes from and goes and determined that borrowing capital for the expansion was the recommended method of financing the projects. It proved that borrowing money was very inexpensive vs damaging the corporate cash flow and liquidity.

The ROI is also a vital aspect of the expansion. A sales analysis was conducted to determine appropriate marketing strategy, target audiences and pricing. Animal Kingdom was the only expansion that stood to be questioned. A decision tree for this project as well as the calculation of Expected Monetary Value supplied the information to make the decision clearer. The Avatar expansion was recommended to go forward as the worst case loss was not enough to overcome the positive gains especially with Disney in position to take a moderate risk.

robot6com

Source : (robot6.com)

Everyone is looking forward to the first Disney released Star Wars movie.  The films stands to be the top grossing movie of all time with licensed merchandise sales in the Billions.  A definite revenue stream in the making.  During merchandise runs prior to the films release, the Disney vendor started to show signs of deteriorating quality. As important to Disney as quality is, a plan was outlined to find and alleviate the problems going forward so that these issues would be corrected in time for the major film release and merchandise demands. A set back in the large Disney Consumer goods segment would not be tolerated. To stop the forecasted deterioration form progressing, it was recommended that the vendor implement an In Process Quality Control process to find, document and analyze defects as well as utilize control charts and dashboards to monitor the process. The proposed process was compared to the Deming criteria and proved that it would be a major asset in the Total Quality Management initiative. The process was mapped out and validated in a process flow diagram showing all of the recursive test points bringing continuous improvements to the process. Finally, Six Sigma was discussed in relation to the Disney implementation and how it was implemented it over four phases as well as the benefits that were gained.

This Blog has been very educational and informative in its creation. I have appreciated the effort, research and new skills that it has provided over the past month. The Walt Disney Company is a massive enterprise and this blog has touched on only a small portion of it. A high level of respect must be given to the organization for its undeniable ability to succeed, survive and always give the guest an unpatrolled experience. Have a Magical Day!!!

thewaltdisneycompany

Source: (thewaltdisneycompany.com)

Process Analysis

To address the quality issues at the production facility of the Disney vendor, quality and process improvements were recommended. The proposed process flow is shown below:

Disney Vendor Process Flow2

The flow is specifically designed with continuous process improvement in mind. It includes quality checks at multiple phases of the production cycle from parts acquisition and validation and sample production run checks to continuous validation during production and packaging. In addition, any failures are being investigated and recorded allowing for further improvement of process and product quality.

Using this data, a Pareto analysis can be conducted to determine the most common defects that are being seen during the production process. A sample Pareto chart is shown below:

statisticalconcepts

Source: (Statisticalconcepts.com)

Currently, the vendor conducts an end of process sampling as their validation and is having issues with a growing quality deterioration as stated in earlier posts. The new process and previously discussed control charts and Pareto Analysis should find and alleviate most issues.

Six Sigma

nhlearningsolutions

Source: (nhlearningsolutions.com)

No discussion in regards to quality would be complete without talking about Six Sigma. The image above depicts the problem solving approach called DMAIC which is the heart of the Six Sigma methodology. This approach to quality is very popular in the manufacturing and service industries. Both are important part of the Walt Disney Corporation and as a result, Disney was an early implementer of this quality approach. The implementation of Six Sigma within Disney forces the company to work much more diligently and quickly to uncover and reduce unacceptable variations in processes. In addition, it empowers all employees with the ability to improve quality.

gifsgallery

Source: (gifsgallery.com)

This is a requirement for Disney to maintain its classification as a world class enterprise company. The text book, Business Statistics: For Contemporary Decision Making, describes the intense level of six sigma quite well in the following passage,

“In the airline industry, the three sigma goal implies that it is acceptable to have 2,600 unsatisfactory landings by commercial aircraft out of every million landings. In contrast, a Six Sigma approach would require that there be no more than 3.4 unsatisfactory landings per million, with a goal of approaching zero”(Black, 2013).

A Six Sigma implementation within Disney fits the business perfectly. Disney is data driven and customer focused. To maintain their high standard, Disney sends required cast member to Lean Six Sigma training taught by Master Black Belts currently working with the methodologies. In addition, additional training is offered onsite for cast members as well as online via web training. The levels of training are depicted in the following image:

consulenzacom

Source: (consulenza.com)

Implementation of Six Sigma, while not easy, is worth the cost, time and effort. It all starts with executive buy-in and flows down from there. Deployment in large companies such as Disney is done in phases;

Measure Phase:

    • Establishing commitment and continues involvement of Disney leadership.
    • Create a Six Sigma Core Team responsible for the development initiative.
    • Work with outside quality facilitators to garnish training and guidance.
    • Train leaders and core team members
    • Regularly conduct implementation reviews during the development process
Analyze Phase:
    • Utilize the organization’s goals to create the business plan and goals for the Six Sigma Implementation.
    • Use tools such as gap analysis to identify how the current processes perform.
    • Plan out the separate projects that make up the overall initiative.
    • Plan goals and metrics for expected performance
    • Implement a recognition and incentive program.
    • Create a team for quality service responsible to motivate and train employees.
Improve Phase:
    • Form the Six Sigma project teams responsible for the completion of project goals.
    • Train the members of the project teams
    • Implement the individual projects
    • Continuously review and monitor the status and results of each of the projects.
Control Phase:
    • Post Implementation auditing of experienced results
    • For improved systems, implement the changes to policies, procedure and operations to maintain the   gains.
    • Recognize project team members for accomplishments and successes.
    • Based on results, implement continuous process improvement.

References:

PQA.net. Six Sigma for Large Companies. Retrieved September 26, 2015, from http://www.pqa.net/ProdServices/sixsigma/W06002006.html

SixSigma. The Walt Disney Co. Retrieved September 26, 2015, from http://www.6sigma.us/company_logo/the-walt-disney-co/

Total Quality Control

In the previous Risk Avoidance post, several ideas where presented that could aid in the production quality issues that a large vendor for Disney merchandise is experiencing. These include a IPQC approach as well as control charts and dashboards to monitor and evaluate the production process. These actions, as well as giving the quality control personnel the responsibility for improved quality, are all components that make up a total quality management (TQM) effort.

armadiahmadcom

Source: (armadiahmad.com)

Deming, an advocate for quality, created 14 individual points for improved management of quality. His belief is that improved quality leads to cheaper costs and better product. The recommendations in the previous post fulfill his requirements. Below shows the actions being taken followed by the Deming Criteria that are being met:

 The newly implemented IPQC is dedicated to constantly improve process and product quality.

  • Create constancy of purpose for improvement of product and service
  • Cease dependence on mass inspection

The training the vendors in the new processes and making the QA personnel responsible for product quality

  • Adopt the new philosophy
  • Institute Training
  • Institute Leadership
  • Institute a vigorous program of education and retraining

By implementing the control mechanisms via control charts and data analysis  

  • Improve constantly and forever the system of production and service
  • Take action to accomplish the transformation

 Centralized Dashboard to monitor production quality metrics 

  • Break down barriers between staff areas

 Assessment of vendor production facility for safety and worker sentiment and implement reward programs for improved and sustained performance 

  • Remove barriers to pride of workmanship
  • Drive out fear
  • Eliminate quotas
  • Eliminate Slogans
  • Adopt the hew philosophy

Regular vendor assessments 

  • End the practice of awarding business on price tag alone

Risk Avoidance

Successfully correcting the ticking time bomb of defective merchandise is a critical priority for Disney at this time. To alleviate the issues, Disney will need to examine the vendor for process and quality controls implemented in the production of the effected merchandise and inspection criteria that follow. In addition, assessing the production facility for worker sentiment, safety and needed education and training is essential. If needed, implementation of reward programs for improved and sustained performance will improve workmanship and employee satisfaction.

The introduction of and training of In-Process quality-control (IPQC) will aid in pinpointing any errors in the manufacturing process prior to getting to the final inspection. Measuring products against specifications at critical points of the production process will allow for continuous process improvement and a decline in overall issues. A sample of this process is shown below.

ICQ

Source: (ICQ)

Using this process, data will be collected and maintained giving the ability to do further analysis using control charts such as x Charts, R Charts, p Charts and c Charts. These visuals each have their own purpose and define control limits to monitor the process. These control limits, upper and lower are set at 3 Standard Deviation from the centerline. A sample control chart is shown below which clearly displays the upper and lower control boundaries as well as the centerline. In addition, it displays a non-conforming event that fell out of the boundaries,

iirsmorg

Source: (iirsm.org)

In addition to newly implemented quality processes, the ability to monitor progress and results via a supplier quality dashboard would serve as an additional benefit. A sample dashboard is shown below.

apriso

Source: (Aspiro)

Forecast Analysis

The Walt Disney Company enjoys a strong revenue stream from its Consumer Products business. Leaning on successful films and licensed merchandise, Disney retail brings in 8% of the total revenue which totals approximately $1 Billion dollars per quarter.

fool com

Source: (fool.com)

Disney acquired Lucasfilm for $4 Billion and has invested several over a billion more for film creation and merchandise development. Recently, consumers as well as retail associates have noticed a growing quality concern resulting in an increase in returned merchandise for defective craftsmanship. In addition, negative sentiment has been increasing from guest surveys in regards to poor product quality. This news coming on the heels of the new Star Wars movie release at the end of 2015 would spell disaster for what Disney estimates will be a 10 to 15 billion dollar market for Star Wars licensed merchandise.

Walt Disney Co.'s Star Wars movie franchise merchandise is displayed inside a Target Corp. store during the sales launch of Walt Disney Co.'s Star Wars movie franchise merchandise at Westfield Parramatta shopping mall in western Sydney, Australia, on Thursday, Sept. 3, 2015. Photographer: Brendon Throne

Source: (GettyImages)

Rather than take a wait and see attitude, Disney has had the past quality data analyzed. The historical quality numbers and calculated trend line are presented in the following graph.

defects

Defects from the primary US supplier have increased nearly 400 percent over the past year. The forecast calls for this trend to continue at a similar rate over the coming months. If actions are not taken to curb this trend, the forecast predicts that up to 4% of all merchandise may contain defects by the end of fiscal year 2016.

References:

Krants, Matt. (2012) Disney buys Lucasfilm for $4 billion. Retrieved September 25, 2015, from http://www.usatoday.com/story/money/business/2012/10/30/disney-star-wars-lucasfilm/1669739/

Zack, George. (2015). Will Walt Disney Co Continue to Post New Highs? Retrieved September 25, 2015, from http://www.bidnessetc.com/45957-will-walt-disney-co-continue-to-post-new-highs/

Risk Analysis

Now is a good time for Disney to take risks. With growing popularity, revenue and newly upcoming attractions and movies the company is perfectly positioned to take on some risk. The largest identified expansion that has been discussed is Avatar which is a very expansive addition to Animal Kingdom.

psu edu

Source:(PSU.edu)

As seen above, the Animal Kingdom does not draw as many guests as the other parks. This is one of the primary reasons for the Avatar addition. If the draw of Animal Kingdom does not increase as expected due to the addition, Disney may never see an acceptable return on its investment which will be close to 200 million dollars. The following decision tree clarifies the risks involved:

decision data

The Expected monetary value is 226 million. A strong monetary value expectation signifies that there is a good possibility of a successful investment and therefore Avatar should go forward. Overcrowding, competitive drive and increasing demand are all good problems to have. How Disney deals with the decisions involved with them will be critical to success over the next 5 years and beyond.

 

References:

PSU.edu. (2015) Walt Disney World – Can we expect a fifth park in the near future? Retrieved September 20, 2015, from http://sites.psu.edu/emilysguidetodisney/2015/02/26/walt-disney-world-can-we-expect-a-fifth-park-in-the-near-future/

 

Sales Analysis

According to a presentation made by SAS, to maximize the returns on the investment in growth, The Walt Disney Company will need to be certain of the following in regards to marketing the new attractions:

  • Reach the right audience
  • Utilize the correct channels
  • Advertise at the right time
  • Sell the product at the right price.

The rising cost of operations and expanded guest offerings have been responsible for yearly increases in ticket prices. The company has invested a large amount of money into the technology advancements in the parks. The development of the magic band and the complete RFID solution cost in excess of $1 Billion dollars. Some of these costs can be offset by a n increase in ticket and special event prices. The image below displays the change in ticket price from 1971 to today vs the rate of inflation:

disneyticketpricescagr before it was newes

Source: (Beforeitsnews.com)

A 10 percent increase in gate price would be justified at this time to offset the cost on the additions and to generate additional revenue. In addition, big data and web mining should be utilized to generate insights into customer impressions and marketing success rate.

Star Wars and Avatar will bring in guest from near and far and create demand for merchandise in all forms from clothing to toys and collectibles. This licensed merchandise is ideal for global mass marketing as the Lucas Film Star Wars brand is extremely popular throughout the world. Utilizing this popularity, Disney can expand to untouched markets and create new and high quality products such as realistic robots representing the characters from the film. These high end products will generate a large amount of sales meanwhile exposing the guests to other products as well.

Reference.

Beforeitsnews.com (2015). Shocking Disney World Price Inflation. Retrieved September 20, 2015, from http://beforeitsnews.com/economy/2015/02/shocking-disney-world-price-inflation-2704208.html

Vivastream. (2012). Disney Marketing ROI Case Study DMA Conference. Retrieved September 19, 2015, from: http://www.slideshare.net/vivastream/disney-marketinganalyticsoptimization-14907727

Cash Flow Analysis

The proposed new construction for the park expansion is estimated to cost700 million dollars. While current cash can pay for the upcoming projects, liquidity and cash flow would suffer. In order to maintain a positive cash flow the recommendation is to borrow money utilizing the current available credit line. Current cash flow analysis for fiscal year 2014 from the corporate 10k is shown below

cash flow

It is very inexpensive to borrow money and the low interest rates at this point would easily be exceeded by the increase in value to the company and its business. Below is taken from the 2014 10k showing the total borrowing activity for Fiscal 2014:

borrow 10k

References:

Companies Incorporated. Importance of Borrowing. Retrieved September 19, 2015, from http://www.companiesinc.com/business-credit/importance-of-borrowing.asp

Operation Analysis

Disney will continue to utilize technology and world class analytics to increase operational efficiencies and streamline operations and decision making. Improving agility, insightful data and communication across financial departments, marketing, research and development, and human resources will allow the company to quickly respond to changing consumer trends, market environment and sales statistics. As the company grows so does the need to expand upon and enhance the current Business Intelligence systems and collaboration tools. The Walt Disney Operational objectives are displayed below.

walt-disney-an-analysis-of-the-strategic-challenges-11-638

Source:(Slideshare)

To attain the lofty goals above Disney must utilize an effective Operational strategy that fits the current growth cycle. The bullet points for successful growth are as seen here:

hiba

References:

Papadopoulos, Grigoris. The Walt Disney Company An analysis of the strategic challenges, Retrieved September 20, 2015, from http://www.slideshare.net/greg1510/walt-disney-an-analysis-of-the-strategic-challenges

Vane,Petre. Management Systems Operations Strategy. Retrieved September 20, 2015, from http://www.slideshare.net/petrevane/operations-strategy-39226315