Corporate TheoryEssay Preview: Corporate TheoryReport this essayHector RodriguezIrvine, CA 92651September 21, 2016Dr. Sean D. JassoCalifornia State University, Fullerton800 N State College BlvdFullerton, California Dear Dr. Jasso,After reading the two past articles we are taught on how to approach the market with five forces and Blue Ocean. In “ What Is the Theory of Your Firm” by Todd Zenger we should “focus less on competitive advantage and more on growth”.  Many executives would approach strategy by finding an attractive market and creating places that hold a competitive advantage. Big companies that have strong positions in the market are successful but they do not grow any equity price due to focus on their competitive advantages. In corporate theory, the company that creates value will recognize and create tactical choices for the growth of the company. In order to create value a company needs to have a vision that can combine unique resources and capabilities with other assets. A great example is companies like Disney and Apple; they really have unique resources and capabilities with other assets. Like every empire that falls, Disney managed to rise after Walt Disney death by hiring Michael Eisner. Eisner studied Walt Disney’s theory and used it to create animated productions, which gained growth from 1.9 billion in 1984 to 28 billion in 1994. Any great company will implement three theories into their corporate theory of value creation. To make sure the company has a good corporate theory it should provide a foresight, insight, and cross-sight. In foresight the company would predict a new consumer demand and predict the development of important technologies.
It is difficult predicting the future and customer demands. Many greats like Nicolas Tesla, Walt Disney, and fashion designers all have a great sense of foresight. Second is insight, where companies thoroughly comprehend their existing assets and activities. The company can distinguish how valuable and rare they are. For example, Disney could identify their insight by recognizing the investment in animation that created unique characters which requires no agents. Cross-sight is the last variable of a great corporate theory. Cross-sight is created by acquiring assets that are meshed with existing ones to create value to your company. An example with Disney would be a broad spectrum of entertainment assets that create value from the foundation of animation. Apple and Disney both carry the three sights of strategy in there corporate theory of value creation.
The Disney/Frozen model
Frozen, Disney, and their Disney counterparts have developed a formula that gives them a complete picture of a company’s financial situation. In its recent report on Disney vs. the Walt Disney Company, the Center for Economics and Global Research, a nonprofit academic trade group in Washington, DC, used data from the 2014–15 quarter. They found that Disney’s financial structure reflected the success of “Frozen: Disney is No. 1” and their financial statements, issued between March 2012 and August 2014, reflect what the company calls “the Company’s fiscal and operating performance”. The first year the company reported results would represent an 18% decline in revenues and 30% increase in earnings. For the remaining seven quarters, the company reported a decline of 18% on the strength of its U.S.-based overseas operating account and a 30% decline on its adjusted income. The Disney/Frozen model, a one-size-fits all formula, accounts for every third of a firm’s “successor” assets (i.e. in-house assets/assets, cash flow or revenue) and uses data from the Company’s financial statements.
Figure 3. Disney/Frozen’s fiscal 2014 Financial Statement
The next figure summarizes Disney’s financial statements for the quarter, showing a decline in average revenues and $2.5 billion in GAAP, but also $1.2 billion in deferred financial statements. The total financial results do not include the impact Disney has received in the U.S. and the decline in average revenues in the U.S.
Frozen had a total net income of $3.5 billion in FY13. Disney paid $1.1 billion in deferred federal income taxes on its first 11 quarters. This was offset by a reduction in all federal government revenue. In 2014, there were two separate adjustments that occurred on average, resulting in an increase in revenues and a 14% fall in GAAP. This result is attributed to the closing of the S&P 500 ETF and an increase in revenue and non-GAAP revenues. Since revenue and GAAP revenues grew by 26 cents in 2014, that’s down from a year ago. This results in a $1.2 billion net profit for the quarter, but it is down from a year ago and is lower than the 15 cents it did in year over same number of quarters in 2013.
Figure 4. Disney/Frozen’s FY13 Revenue
The new Disney analysis also shows that operating revenue grew for the year but declined by $1 billion. The decline in gross assets is attributable to a decrease in gross income attributable to the closing of its current operations. This data also excludes the impact of changes in U.S. trade balances, which were impacted by the loss of its Canadian sales associates and the elimination of its U.S. business in Asia.
The growth rate for the fiscal year ended July 30th is 12.4%, an increase of $1.5 billion. The loss of U.S.-based offshore stores is also a factor in their decline in revenues and also a cost for Disney based in North America ($27.6 a share). The cost of their U.S. business in North America decreased to $26.6 billion from $19.7 billion. This results in a profit of more $3.3 billion for Disney based globally, and an additional $1.1 billion for Disney based in Europe ($9.5 a share). Both