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
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4 comments:
I agree with you that it is not the Walt Disney's fault for cutting the number of jobs down in order to sustain itself. It is business and it is expected that there will be ups and downs. I think that laying off employees now is a better decision in the long run because Disney can always re-hire the people they've fired if they wanted to. On the otherhand, if Disney were to keep its employees, it will most likely experience bankrupcy which in return, will result in firing employees as well. Not only so, to be fired due to an economic crisis would sound much better than being fired due to laziness and not showing up for work. The act of cutting down on workers will decrease Disney's expenses, which will compensate (or at least a little) for the lack of tickets sold.
As it was mentioned in the article, the lack of consumer spending is the result of no money or a lessened consumer confidence in their ability to pay the company.
Betty Chan
Block A
Accounting 12
The recession has hit the world hard. A lot of industries are impacted at this time. Said in the article, Walt Disney is one of them. Knowing that having too many employees costs them a lot, they made a good decision in letting them go. Learned in Chapter 16, for every insurance and plan an employee has, the employer has to make a contribution to it. This means that they have to pay a portion, the same amount, or even more than the employee pays. Even though letting an employee go cost money as well, in the long run, it cost less than paying for them every month. In a strictly business perspective, they made a good decision.
Betty Sung
Blk A
I concur Walt Disney is not at fault for the recent job cuts, but the blame should be solely put upon the recent economic recession. I have heard of other cases like this, for instance the gaming industry which has featured massive job cuts and closers, and also Microsoft who fired a massive amount of workers mainly from their marketing department. Walt Disney had the right to do what they did as they were only protecting their business with a 'final solution' plan. To make money you have to spend money, and in Walt Disney's case to have money just don't spend it at all.
A lot of people, viewing this situation with a business mind, would agree that the blame is not to be put on Walt Disney but rather on the global recession that we are experiencing. I, for one, do not believe it is entirely Walt Disney's fault. The reason why Disney decided to cut down on the wages expense is because of the low revenue that they were experiencing for that quarter. We have the right to assume that it is a decrease in sales which is caused by not having enough visitors. People are blaming companies like Walt Disney for job losses in times like these, when in reality it is actually the citizens around them that are to be blamed. If people were to spend more, perhaps go on a vacation to Disneyland, then the sales would increased. When sales increase, revenue will increase as well which will not result in job losses like it does currently. When citizens spend more, it will stimulate the economy and increase the cash flow. Also, I would like to add that the decrease in the sales of tickets can also be blamed on the current trend of the generations. Nowadays, its very popular for couples not to have kids. With the decreasing amount of children, there's no wonder the sales at Disneyland are going down.
K. Li
Block A
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