The Last Blog : Disney U.S. parks cutting jobs, seeking efficiencies

Link: http://www.canada.com/Business/Disney+parks+cutting+jobs+seeking+efficiencies/1444407/story.html


Summary:
Due to consequences of the economic recession, The Walt Disney Company has cut great numbers of workers. As statistics show, Walt Disney chooses to cut a sky-rocking number of 450 job opportunity. By doing so, It causes even more poverty and unemployment to the country. In fact, this is a great example of positive feedback, which is ironically pulling us into a deeper hole of the economical downfall trap. As stated, Michael Griffin claims that further elimination of different positions will initiate because they crave to maximize profit. In February of 2009, Walt Disney has experienced a dramatic decline of 24% drop in quarterly operating income and a 4% drop in revenue in the first fiscal quarter. This is ultimately due to slower consumer spending, which is greatly influenced by the current recession. During this time of year, it is understandable that consumers choose not to spend as much.

Connections:
As unlikely as it seems, this article has a lot to do with our accounting curriculum, in truth. For one thing, the ultimate goal for any profit is to maximize revenue and minimize expenses. Now, Walt Disney is doing exactly what they should be doing. By cutting down their employees, they are simply minimizing their expenses. Also, they are also playing it safe by preventing themselves to operate under large amounts of borrowed money. Realizing that using anything over one-third as leverage is considered a bad idea, they choose to reduce the number of their employees instead. For another, as said on the summary paragraph, Walt Disney has experienced a dramatic decline in their net income. In a mathematical sense, it has a low rate of return on net sales. As we all know from our accounting knowledge, rate of return on net sale is equal to net income over net sale. When the company fails to produce enough sales in tickets, their rate will simply decrease. In this case, Walt Disney has decided to compensate by cutting down its employees. Doing so, its net income would increase due to less expense and so will the rate of return on net sale.

Personal Reflection:
At an age past childhood, the prosperity of Disneyland does not have an impact on me. However, being a student in the business department, decisions regarding the prosperity of a business will indeed draw my attention. In this case, Walt Disney chooses to limit their possible expenses in a cruel way. However, this is action is forced by the nature of the economy and for the benefit of the business. On the shallow side, it may seem like it is Walt Disney’s fault for the large numbers to cuts, leading hundreds of people to lose their job. However, the truth is not as obvious this time. For all entrepreneurs, the ultimate reason to start a business is to make a profit. During times like the economic depressions, businesses and corporations must do whatever it takes to maintain their profit level. Personally, I do not believe it is their fault in doing something for the benefit for their business.


- A. Tao
Block A