Question

"What strategic issues currently confront Lucasfilm? What market or internal circumstances should most concern Lucasfilm’s senior leadership team?"

Information about Lucasfilm

	2019 #'s (In millions)	2018 #'s (In millions)	2017 #'s (In millions)
Net Income (Earnings)	$11,584	$13,066	$9,366
Total Revenues (Sales)	$ 69,570	$ 59,434	$ 55,137
Total Assets	$ 193,984	$ 98,598	$ 95,789
Total Equity	$ 93,889	$ 52,832	$ 45,004
Operating Income	$ 14,868	$ 15,689	$ 14,775
Total Debt	$ 59,791	$ 26,783	$ 30,042
Total Shareholder's Equity	$ 88,877

Following information for 2019:
Operating Margin: 21.37%
Profit Margin: 16.65%
ROE: 12.34%
Debt-Equity Ratio: 0.64
Debt-to-Assets Ratio: 30.82%
Equity Multiplier: 2.07
Asset Turnover: 35.86%
Return on Assets: 5.97%
Return on Equity: 12.34%
Sales Growth: 17%

Answer 1

Answer-

The top strategic issues that confront Lucasfilm are

1) Net earnings has decreased despite the increase in net sales.
2) The Total assets have doubled in 2019 from 2018 but the Return on Assets ( Net income / Sales ) which is

2018 --- ROA = $ 13066 / $ 98598 = 0.1325 = 13.25 %

2019 ---- ROA = $ 11584 / $ 193984 = 0.0597 = 5.97 %

The utilization of assets has reduced in 2019 as compared to 2018 which is an immediate concern

The Return on Equity ( ROE) = Net income / Equity

2018 ----- ROE = $ 13066 / $ 52832 = 0.2473 = 24.73 %

2019 ---- ROE = $ 11584 / $ 93889 = 0.1234 = 12.34 %

The ROE has also decreased in 2019 compared by to 2018.  

Operating income has decreases from $14868 in 2019 compared to $ 15689 in 2018 which is a concern as it has decreased despite the increase in sales.

The current scenario of the outbreak of COVID-19 which has rattled the economy in all spheres of life should be a concern and the furlough of employees taken by the firm may be one of the good decisions. The situation which might take time to improve while it depends on how the economy will recover after things start stabilizing.  

The internal and external (market) situations for the company seem to grim and should concern the senior leadership and they should take appropriate strategic measures to deal with the situation after the conditions stabiize.