Why has the Euro Disney's Land failed (Dec 2005)
1.1 Purpose
The purpose of this report is to analyse problems of Euro Disney's Land and recommends alternatives and solutions. 1.2 Scope
In examining the problems and recommending the solutions, the report considers causes of the problems. Not only does it provide alternatives and solutions, but also presents issues that Disney should consider when next entering a foreign market. 1.3 Method
In order to complete this report, information has been researched from academic journals, textbooks, newspapers and websites. 1.4 Assumptions
In preparing the last part of the report, it was assumed that Shanghai, China, would be the next site where Disney would choose to invest. 1.5 Background
The Walt Disney Company was founded by Walt and Roy Disney in 1922. At present, Disney, a multinational company, has become a world leader in family entertainment with over 58,000 employees and over 189,000 shareholders around the world ("The Walt Disney Company-a case study", 1996). Initially, Disney was considered as a specialist in animated films, but after the Second World War the company has diversified into several sectors of entertainment such as television, publishing, film, broadcasting, and theme parks. It is said that Disney's theme parks represent American mass culture. Between 1955 and 1992, Disneyland opened theme parks in California, Florida, Japan and France. In 1997, total revenue from these theme parks accounted for 17 per cent of the company's revenue ("Human resource practices at Disney", 2003). However, in the early stage of Euro Disney, there were several problems, which result in falling attendance and losing its revenue (Ball, McCulloch, Frantz, Geringer and Minor, 2002, p.304). The problems will be presented in the following part. 2. Primary Problems facing Euro Disney in the early stages of its operation in Europe 2.1 Cultural Issues 2.1.1 Human Resource Practices
Initially Disney placed its advertisements for work bids in English leaving smaller and medium sized French recruitment firms feeling like foreigners in their own land (Hodgetts & Luthans, 2003, p.243). Eventually Euro Disney recruited 14,000 'cast members' representing 75 nationalities and speaking 40 languages. However, Disney had never had to manage a multinational workforce before. Its two theme parks in the U.S. employ mostly Americans and its third park, Tokyo Disneyland, employs mostly Japanese (Skapinker, 1992). Therefore to employ the same Human Resource strategy as employed in the other parks was to prove problematic for Euro Disney.
The Disney Appearance Code which is used in its other three parks was not well received by the French. Codes such as "wear proper underwear, use deodorant, maintain a height to weight equilibrium" proved to be rude and discriminatory in Europe (Deresky, 1997, p.130). Some appearance codes were seen as a 'violation of human dignity'. French law inhibits employers from restricting individual and collective liberties unless the restrictions can be justified by the nature of the task to be accomplished and are proportional to that end (Hodgetts and Luthans, 2003, pp. 242-243). 2.1.2 Other Cultural Issues
As with the other Disney parks alcohol was banned in the park by Euro Disney managers who misunderstood the European habit of drinking beer and wine as an integral part of the meal. Also, no provision was made for serving breakfast within the park (Deresky, 1997, p.129).
The Culture Ministry (France) objected to the English language names of attractions like Fantasyland and Pirates of the Carribean (Lever, 1992). Prior to opening, Euro Disney had received bad press from French reporters who had called it a "Cultural Chernobyl" (Deresky, 1997, p. 129). This reflects the public sentiment in France that Euro Disney is an example of American "neoprovincialism" (Hodgetts & Luthans, 2003, p. 240).
However, it was not only the French that experienced cultural difficulties at Euro Disney. Of the 30 million people situated within a day's travel of the park, just fewer than 50 percent were expected to come from neighbouring countries to France (Hodgetts & Luthans, 2003, p.239; Deresky, 1997, p.128). British tourists complained that the cost, language difficulties and weather at Euro Disney fell short of their expectation in comparison to Disney World in Florida (Deresky, 1997, p. 129). Others complained about the crowds while queuing for the rides. Given that different cultures
have different definitions of personal space, queuing with French crowds was an unpleasant experience for some foreign visitors (Hodgetts & Luthans, 2003, p.243). 2.2 Lack of Environmental Scanning
In the early stages of its operation in Europe, Euro Disney was threatened by serious cash flow problems during the slack winter season ("Euro Disney plans to chop 950 more jobs", 1993). Mr Michael Forsgren, Chief Financial Officer of Euro Disney said that good winter attendances would be crucial to Euro Disney's success (Skapinker, 1992). However, this ignored the fact that the French have set vacation dates, the French vacation during the month of August. For Disney to expect that Europeans would change their vacation habits was extremely arrogant on their part (Deresky, 1997, p.129).
Disappointing Hotel Occupancy rates and low sales of food and merchandise in the park added to the poor operation performance of Euro Disney (Cohen, 1993). It was found that the park was too expensive - in terms of entrance fees, meal prices, hotel rates and extra spending on souvenirs. The French considered the cost for a family too frivolous (Deresky, 1997, p.129).
In respect of souvenirs, the number of different items stocked was reduced to 17,000 from the 30,000 that Euro Disney had on its shelves when operations began. The company was surprised to find that visitors preferred garish Mickey & Minnie souvenirs to the more subtle items that it had thought would better suit European taste (Gumbel, 1994).
Disney negotiators did not adequately consider that the unemployment rate had been as high as 10 percent in some areas of France and French economic problems had hit the local construction industry (Hodgetts & Luthans, 2003, p.243). This led Walt Disney CEO Michael D. Eisner to blame Euro Disney's dismal performance on Europe's recession and the strong French franc (Sims, 1994). This same issue resulted in Euro Disney cutting 950 jobs ("Euro Disney plans to chop 950 more jobs", 1993). In addition, Euro Disney had initially hoped to sell some of its hotels to raise money, but those plans were thwarted by France's real estate slump (Gumbel, 1994). 2.3 Financial Structuring
The financial structure of Euro Disney SCA was that it was owned 49 percent by Walt Disney and 51 percent owned by a share offering to the public. The project was effectively a joint venture between Walt Disney and the public. The off balance sheet debt for Euro Disney was 16.65 billion francs (US3.14 billion). The heavy debt load made Euro Disney's bottom line very susceptible to swings in interest rates (Eichenwald, 1992). 2.4 Management Structure and Management Style
23 U.S. expatriates held most of the top jobs (Hodgetts & Luthans, 2003, p.243). This reinforced Disney's ethnocentric attitude to setting up operation in Europe.
Euro Disney's top management was not employed by Euro Disney, but instead was employed by a wholly owned subsidiary of Walt Disney known as Gerant. These executives' incentive bonuses, through stock options, are issued not in shares of Euro Disney, a move that would put them in the same position as the companies shareholders, but rather in shares of Walt Disney (Eichenwald, 1992).
Given the financial pressures on the Euro Disney project, payment for some contractors involved in the construction of the park was with held. This led to a growing resentment toward Euro Disney by local companies but Disney's main concern was staying within budget; it did not focus on building good relations with the host country (Deresky, 1997, p. 130). 3. Analysis of Major Factors and Alternatives 3.1 Major factors 3.1.1 Culture
Cultural differences contributed to the failure of Euro Disneyland in a number of important ways. Because of different preferences and tastes, European customers do not demand the same products as American customers do. Though the French government obliged Disney to respect the French culture, Disney failed to understand and to make adjustments in managing the culture difference (Deresky 1997, p 129).
According to Hofstede (cited in Hodgett & Luthans 2003, p 116), there are four dimensions of culture that explain how and why people from different countries behave uniquely. Since Euro Disney is located in France and targets European customers, such as British, Germans, Italians, and Spanish customers, French culture as well as other European cultures should be considered.
According to Hofstede (2003), the United States has the lowest power distance (PDI) at 40% compared to France at 62 % and European countries at 43 % and the lowest uncertainty avoidance (UAI) at 46% compared to France at 82% and European countries at 70%. Nevertheless, the United States has the highest masculinity (MAS) at 62% while France and other European countries are at 38% and 53% respectively. The United States has the highest score, 91%, among other nations in the dimension of individualism (IDV), whereas France and European countries are at 68% and 58% respectively.
Because France has had many European nationalities, such as Italian, Spanish, and Polish, to shape its culture, France is a melting pot that integrate various cultures into its own "republican model" (Roesler, 2001). It can be seen that all the dimensions of American culture are different from those of French and European cultures. Even French and European cultures are still dissimilar. It can be implied that the strategies that Disney applied in a pure transplant from the Untied States in many ways to create themes which would be reflected not only in the rides but in the surrounding infrastructure, the employees' appearance, and management styles are inappropriate (Peter, 1995).
The French are very sensitive of their presence and tremendously proud of their heritage. They are arrogant of their long history and important roles in world affairs, as well as being known as a world center for culture (France, 2003). To start a business relationship with the French, the corporations should first be aware of a basic fact about the diversities which are French history and geography (Roesler, 2001). Disney failed to realize how French value their custom and culture; thus, it reflected the French's attitude that the theme park is example of American neoprovincialism (Hodgett & Luthans 2003, p 240).
The globalization strategy, the distribution of product and services of a homogeneous type on a worldwide basis (Hodgett & Luthans 2003, p 141), is applied to the Euro Disney. According to Charles (2001), Disney tried to use the same teamwork model with its staff that had worked so well in America and Japan, but it ran into trouble in France. The French are against globalization as it may cause economic horrors because it ignores economic facts. Moreover, most French politicians scorn American capitalism and the American way of doing business. An example of this sentiment can be seen in the French attitude toward American entertainment, such as Hollywood films. The French ensured that the industry should not be treated in a particular way because it influences people's culture and mentality and they fear losing French identity (Roesler, 2001).
In order to understand the different customer tastes in different markets and respond to different national standards and regulations, national responsiveness is an appropriate strategy (Hodgett & Luthans 2003, p 141) which Disney should adopt especially in France where people are arrogant in their cultural identity. 3.1.2 Mismanagement
According to Hodgett and Luthans (2003, p 263), the corporations must consider three areas, which are location, ownership strategies, and functional strategies, in strategy implementation. From the Euro Disney case, it can be seen that the executives failed to apply these following areas in their strategic management.
The first consideration is the location of the Euro Disney. In choosing a location, the executives are allured by several incentives from the French government. Though France has central access to the European market, the poor climatic condition throughout the year is one of the important factors irritating the tourists. In this case, Spain would be the better solution for Disney's consideration (Deresky 1997, p 128; Peter, 1995). Furthermore, Disney should have considered why Europeans would choose to decide to go to a fake castle in Euro Disney rather than to a real thing in Florida (Peter, 1995).
In addition, the executives also failed to realize "the location issues" (Hodgett & Luthans 2003, p 264) in France, such as vacation date during August, banning alcohol in the park, appearance code, the way to greet the French name, and misunderstood the European breakfast norms; thus, the French believed the American did not give the respect to their culture (Burgoyne, 2001; Deresky 1997, pp 128 - 130).
The second issue is the executives were not successful in adopting functional strategies in areas such as marketing, production (service), and finance. According to Levitt and Ohmae (cited in Tung, 1995), the important differences in consumer tastes and preferences across countries for product standardization around the world still exist. Even where there is a demand, adaptations may have to be made to the product as well as the advertising message (Tung, 1995). Euro Disney executives advertised the park for its large size to capture French and European attention; nonetheless, the Europeans considered the benefits they will actually obtain from the park (Deresky 1997, p 129). In addition, the entrance fees, meal prices, hotel rates, and souvenir price are too expensive for the European during the recession period (Deresky 1997, p 129). The marketing also failed to recognize the customer's need, such as offering the inappropriate souvenirs (Deresky 1997, p 129).
In service areas, Disney failed to realize the importance of breakfast norms and the habit having lunch at a set time; thus this resulted in downsizing their restaurants. As a result, the queues were very long and this disappointed the tourists (Burgoyne, 2001). The crowds and lack of personal space is meant to the French (Hodgetts & Luthans 2003, p 243).
Lastly, the financial performance has not been as the executives' expected and turned out to be a problem. Disney had an unclear view of how to plan the companies finances and has faced losses since the first fiscal year, and has steadily drained its cash reserves while piling up debt (Hodgetts & Luthans 2003, p 235); hence, Disney could not afford to invest more money and failed to pay the subcontractors involved in the construction of the park (Deresky 1997, p 130). 3.2 Alternatives for Euro Disney
The mismanagement of Euro Disneyland lays in not only misinterpreting the European culture but also an ineffective management plan. Disney planned to target Europe as a single market. However, Euro Disneyland's strategic plan was difficult to implement in the early stage of operations because of the complexity of the heterogeneous European market. One of the reasons that Disney chose France for its European location was due to its easy access to the European market for consumers from the Britain, Germany, Italy and Spain. However, the design of Euro Disneyland failed to meet the needs of tourists from these countries (Deresky, 1997). 3.2.1 Strategic predisposition
The strategic predisposition is unappropriated to cope with the multinational plan. Euro Disneyland used the parent company to guide strategic decisions by adapting American culture to the European market. When Euro Disneyland first set up in France, it was described as a "leading symbol of American cultural imperialism" (R.M.P., 1992). Disneyland tried to export American culture into Europe, this lead to Disneyland's failure in incorporating the local consumers taste in its strategy. Disneyland overlooked important cultural factors in managing its operations in Europe.
Before MNCs enter into foreign markets, there are four options for the company to start business in the foreign market, they are; ethnocentric predisposition, polycentric predisposition, regiocentric predisposition and geocentric predisposition. These four styles of strategic position differ in the dominance of culture in managing foreign subsidiaries. Regiocentric predisposition is suitable for Euro Disneyland to target European countries. For the fact that regiocentric predisposition adapts to regional culture. If Euro Disneyland had adopted a regiocentric approach, it could have blended in cultural values of the specific regions and combined the management style of these regions within its strategy, thus eliminating the culture gap between America and Europe (Hodgett & Luthans, pp. 283-284). 3.2.2 Human resource planning
The human resource planning did not respond to the company objectives. Although Disneyland targeted the neighbouring countries around France, they selected to use home country nationals in Euro Disneyland's highest management positions. This reflected that Euro Disneyland's centralised management. As a result of such centralisation in the management system most of the important decisions were made at the top level. Who are the people in the highest position? In Euro Disneyland, there were more than 23 U.S. expatriates who were placed in the highest management position. Thus its US senior managers made most of the decisions, while the European nationals are placed in the lower-levels of management (Hodgett & Luthans, p.244). This means that most of the important decisions do not get to the lower-level personnel involved. This centralisation in management and lack of consideration of the diversity and heterogeneity of the European market resulted in inadequate management of the employees.
Firstly, in recruiting the employees, hiring took place throughout Europe because Disneyland wanted multilingual staff (Ferguson, 1989). However, more than 85 percent of the employees were unskilled in customer service (Ferguson, 1989).
Secondly, European employees were not as accepting the Disney employment regulations as had been the case in the U.S. and Japan. In Paris, the French Cast Members found it annoying to accept the rigid scheduling (Deresky, 1997). For example, the schedule concerning the bus drivers was inappropriate. The parking places in French bus parking spaces is built very small, as a result, the bus drivers were irritated that they could not find an adequate place to park. Except for the parking spot, there were only 50 toilets in the park which was insufficient for more than 2,000 drivers during good seasons (Gumbel & Turner, 1994).
Disneyland arranged staff according to rules that they thought would be applicable. For example, they thought that Monday would be a light day for guests to go into the theme park and Friday a heavy one. However, in fact, it was the opposite, with Monday being a heavy day and Friday being a light one (Gumbel & Turner, 1994, p. A 12). 3.3 Solutions
To incorporate the strategic predisposition and human resource plan into the Euro company goal of catering for multinational needs, Disneyland should firstly switch from the ethnocentric predisposition to regiocentric predisposition. The emphasis would be on local responsiveness under this approach. The number of home-country executive would be reduced and more host-country nationals and third country nationals would be able to take part in the decision making process.
By using a regiocentric predisposition, the culture of the region is considered. Therefore Euro Disneyland is set up to be multinational responsive, which would allow it to meet the different demands and tastes of different European countries. The service can be standardized within the region if regional people are developed for key positions. The key issue of regiocentricity is to let Euro Disneyland develop its own managerial culture instead of having an emphasis of American management philosophy (Jane S., 1993). In addition, a reduction in U.S. executives allows local managers from a particular geographic region to handle operations in and around the area. Both the U.S. expatriate and the European region executives need to be trained. Through training, the ethnocentrism of expatriates can be overcome and thus create a better understanding of the value and customs of the host country and how to cooperate with local personnel (Hodgetts & Luthans, p.486). On the other hand, the European regional executives could gain international experience and knowledge from the expatriate as well. 4. What should Disney do differently when next considering foreign market entry?
Even though the Hong Kong Disney funpark is in the process of being built, Walt Disney Company is planning to build a new Disney theme park in Shanghai because China has the fastest market growth rate. The company already signed a nonbinding letter of intent with the Shanghai government, but the letter of intent does not ensure that the park will be built. However, the plan to build the theme park in Shanghai has been postponed until year 2010 (McMillan, 2002; Kahn, 2003: Orwall and Leggett, 2002). Therefore, it is necessary for the company to consider the following issues when it plans to enter to the Chinese market. 4.1 Choosing the target country
Lasserre (2003, pp.157-177) claimed that there are two fundamental questions that foreign investors should consider. These are market and industry opportunities, and country risks to foreign investors. 4.1.1. Market opportunities
By analysing the country's market opportunities, Disney will be able to determine the potential demand in the targeted country. Therefore, in order to analyse the country's opportunities, market size, market growth, and quality of demand should be considered (Lasserre, 2003, p.161).
Apart from market opportunities, industry opportunities should be measured as well. Thus, competitive climate, industry competitive structure, and investment incentives from governments should be taken into account (Lasserre, 2003, p.161). 4.1.2. Country risk analysis
The purpose of analysing country risk is to assess political, economic, and operational risks, which could affect Disney's performance.
Political risks
Political risks may occur from both internal and external events or regulations that result from governmental action. These risks could affect shareholder's value in terms of loss of capital or dividends (Lasserre, 2003, p.175).
Economic risks
By analysing economic risks, the company will be able to forecast the potential to make a profit in the targeted country. It is claimed that even though two countries have the same economic growth rate, it dose not mean that the potential for operational success will be at the same level (Lasserre, 2003, p.176).
Operational risks
Government regulations, taxation system, unreliable infrastructure, and constraints for investment could affect Disney's bottom line. Hence, it is necessary to analyse operational risks as well (Lasserre, 2003, p.176).
After the targeted country has been chosen, the next step that Disney should take is to formulate strategy. 4.2 The Basic Steps in Formulating Strategy
Hodgetts and Luthans (2003, pp.259-262) stated that strategic planning for international management could be divided into three steps 4.2.1 Environmental scanning
Disney may obtain accurate forecasts of trends by observing the relate t o external changes such as economic competition, political stability, technology, and the demographic consumer data of each country (Hodgetts and Luthans, 2003, p.259).
The company may start by forecasting macroeconomic and industry performance considering issues such as per-capita income of the population and labour market of the targeted country. Then, predicting trends in monetary terms such as exchange rates and inflation rates. Next, Disney should forecast its' potential market share in a particular geographic area and compare these results to those of its competitors. Besides that Disney also has to consider political stability, government pressure and nationalism (Hodgetts and Luthans, 2003, pp.259-260).
For example, China is a large country with around 1,284.3 million population. Since economic reform began in 1978, income levels and standards of living have been improved. Moreover, the level of poverty has decreased. In 2002, the country's GDP per capita was US$ 1,058 ("China Fact Sheet", 2003; "Country, Economy and Regional information", 2003).
It is not only Disney that is interested in investing in China, but Universal is also interested in China. Universal already negotiated with the Shanghai government about its project and also talked about building another theme park in Beijing (Orwall and Leggett, 2002). 4.2.2 Internal resource analysis
Disney may choose either to conduct environmental scanning before an internal resource analysis or conduct them at the same time. By doing the analysis, Disney is able to evaluate its current managerial, technical, material and financial strengths and weaknesses. Later, Disney may use these assessments to determine its ability to operate in China. Moreover, an international analysis also identifies the key factors for success (KFS), which are factors that are necessary for the firm to compete effectively in a market (Hodgetts and Luthans, 2003, pp.260-261).
For instance, Disney's strengths are its experience in the business, low cost corporate strategy, and brand name. While its weaknesses are a very large number of workers, frequent change in top-management and high overhead expenses ("The Walt Disney Company-a case study", 1996). 4.2.3 Goal setting for strategy formulation
After completing environmental scanning and internal resource analysis, Disney will be able to formulate the specific goals for its strategic plans. Then, specific operational goals and controls will be developed (Hodgetts and Luthans, 2003, pp.261-262).
For example, the original mission of the company was to "nurture the imaginations of children around the world as well as to celebrate American values" ("The Walt Disney Company-a case study", 1996). However, the company has other goals that need to be achieved such as level of profits and return on assets/ investment (Hodgetts and Luthans, 2003, p.261).
Once the strategies have been formulated, the next step is to implement them. 4.3 Strategy Implementation
Hodgetts and Luthans (2003, pp.262-272) described that there are three general areas that the companies should be concerned with in implementing strategies. 4.3.1 The location of operation
In order to choose a location, Disney has to consider the country and the specific location within the country.
The country
Disney should consider the country's legal restrictions, restrictions on foreign investment, market size, and availability of the labour market. Moreover, Disney has to examine the benefits, for instance lower tax rates, free-land rental, infrastructure, and interest rates, which are offered by the host country as well (Hodgetts and Luthans, 2003, pp.263-264).
Local issues
After the country is chosen, Disney must choose the specific location by taking some local issues, such as accessibility to markets, competitors, availability of labour, cost of doing business, transportation, and electric power, into account (Hodgetts and Luthans, 2003, pp.264).
It is observed that the Chinese market is big enough for Disney to build theme parks in both China and Hong Kong; therefore it would not be a problem that the parks would be catering to the same prospective travellers. In the near future, Shanghai's transportation will be improved. It will include a future elevated-train line (Dolven and Orwall, 2002). 4.3.2 Mode of entry and ownership strategies
There are several kinds of forms of ownership, but there are two major forms that Disney may choose. However, the company need to understand that each method is suitable for different situations (Hodgetts and Luthans, 2003, pp.265-270).
Wholly owned subsidiary
Wholly owned subsidiary means that Disney will totally own and control its foreign subsidiaries. The company will be able to gain benefit from total control and its managerial will be more effective. However, Mahoney et al. (2001) asserted that Disney has to be prepared to be faced with the problems that may occur from using greenfield strategy. Firstly, the firm may encounter difficulties with many local and national regulations. Secondly, local people may have feeling against the company because they perceive that Disney is a foreign enterprise, which is trying to take advantage by refusing to have local partners (Hodgetts and Luthans, 2003, p.266).
Moreover, Lasserre (2003, p.194) asserted that recruitment, training, and management of local workers is necessary in order to meet the company's strict standards. In addition, if Disney considers using expatriates from headquarters, it is essential to choose the correct people, who are able to adapt to new cultures and to transfer knowledge quickly. Disney would not gain benefit from using expatriates if the expatriates have good knowledge about the country, but lack of cultural understanding.
Joint venture
Joint venture occurs when two or more partners make an agreement to own and control an overseas business together. Recently, joint ventures have become popular due to the benefits that both the company and its partners gain. Ball et al. (2002) explained that there are several advantages of doing a joint venture. First, the parties are able to overcome political problems such as restrictive legislation easily by having help available from local partners. Second, The firm may reduce strong nationalism feeling by joining with local partners. However, disadvantages of joint ventures still remain. Firstly, profit must be divided with the partners. Secondly, the company might have less control (Hodgetts and Luthans, 2003, pp.266-267).
Licensing
Licensing is another way to enter market by giving an exclusive license, which allows another party to use a property right exchange with payment to the owner of the property right, in order to make or sell the goods in a particular geographic local (Hodgetts and Luthans, 2003, pp.268-269).
For Tokyo Disneyland, the company gave a license contract for 45 years to Oriental Land, which gives 10 per cent of admissions and 5 per cent of food and merchandise sales, plus a licensing fee in return to Disney. By using this method, Tokyo Disneyland has been successful and continues to return large profits to the company. On the other hand, only 49 per cent of Euro Disneyland was owned by Disney and 51 per cent was owned by the public such as Prince Alwaleed bin Talal of Saudi Arabia, who holds 17.3 per cent of the share (Ball et al., 2002, p.304; Hodgetts and Luthans, 2003, p.237; Prada, 2000).
Nevertheless, it is suggested that the company should know the country's policy about mode of entry before deciding to invest in that country. For example, China always encourages foreign companies to choose joint venture rather than the other methods. However, recently the Chinese government has been more flexible and allows investors to set up wholly owned subsidiaries (Lasserre, 2003, p.195).
According to the information, joint venture and licensing seems to be the appropriate ways for Disney to invest in Shanghai, because the Chinese government prefers the foreign investors cooperate with the local companies. 4.3.3 Strategies in functional areas
There are two major primary functional areas that are important for Disney in order to implement strategies
Marketing
Disney should realise that strategies that succeed in one country may not succeed in other countries. Therefore, the implementation of marketing strategy must be determined on an each country basis. Moreover, Disney should take into account that market analysis is essential for strategic planning (Hodgetts and Luthans, 2003, p.271).
Finance
Disney may choose either to transfer funds from one place in the world to the targeted country or borrow funds in the international money markets, which normally will be less expensive than borrowing from local sources. Nonetheless, there are some problems that may occur in transferring money. For instance, the problem of re-evaluation of currencies may make the company's profit decline (Hodgetts and Luthans, 2003, p.272). 5. Conclusion
In conclusion, with respect to the strategic predisposition, Euro Disneyland should shift from its original ethnocentric predisposition to a regiocentric predisposition. And at the upper management and decision making level, there should be not only be home country nationals, but also host-country nationals and third-country nationals. Training should be conducted on both the US expatriates and local executives so as to strengthen understanding of the local culture and also allow local executives to benefit from the expatriate international business experience. When next entering a foreign market, Disney should place an emphasis on host-country culture and environmental scanning in its management and business strategies as outlined in this paper. This will ensure that the problems experienced at Euro Disney in the early stages of operation are not repeated and that Disney's business continues to enjoy success in its new markets.
The purpose of this report is to analyse problems of Euro Disney's Land and recommends alternatives and solutions. 1.2 Scope
In examining the problems and recommending the solutions, the report considers causes of the problems. Not only does it provide alternatives and solutions, but also presents issues that Disney should consider when next entering a foreign market. 1.3 Method
In order to complete this report, information has been researched from academic journals, textbooks, newspapers and websites. 1.4 Assumptions
In preparing the last part of the report, it was assumed that Shanghai, China, would be the next site where Disney would choose to invest. 1.5 Background
The Walt Disney Company was founded by Walt and Roy Disney in 1922. At present, Disney, a multinational company, has become a world leader in family entertainment with over 58,000 employees and over 189,000 shareholders around the world ("The Walt Disney Company-a case study", 1996). Initially, Disney was considered as a specialist in animated films, but after the Second World War the company has diversified into several sectors of entertainment such as television, publishing, film, broadcasting, and theme parks. It is said that Disney's theme parks represent American mass culture. Between 1955 and 1992, Disneyland opened theme parks in California, Florida, Japan and France. In 1997, total revenue from these theme parks accounted for 17 per cent of the company's revenue ("Human resource practices at Disney", 2003). However, in the early stage of Euro Disney, there were several problems, which result in falling attendance and losing its revenue (Ball, McCulloch, Frantz, Geringer and Minor, 2002, p.304). The problems will be presented in the following part. 2. Primary Problems facing Euro Disney in the early stages of its operation in Europe 2.1 Cultural Issues 2.1.1 Human Resource Practices
Initially Disney placed its advertisements for work bids in English leaving smaller and medium sized French recruitment firms feeling like foreigners in their own land (Hodgetts & Luthans, 2003, p.243). Eventually Euro Disney recruited 14,000 'cast members' representing 75 nationalities and speaking 40 languages. However, Disney had never had to manage a multinational workforce before. Its two theme parks in the U.S. employ mostly Americans and its third park, Tokyo Disneyland, employs mostly Japanese (Skapinker, 1992). Therefore to employ the same Human Resource strategy as employed in the other parks was to prove problematic for Euro Disney.
The Disney Appearance Code which is used in its other three parks was not well received by the French. Codes such as "wear proper underwear, use deodorant, maintain a height to weight equilibrium" proved to be rude and discriminatory in Europe (Deresky, 1997, p.130). Some appearance codes were seen as a 'violation of human dignity'. French law inhibits employers from restricting individual and collective liberties unless the restrictions can be justified by the nature of the task to be accomplished and are proportional to that end (Hodgetts and Luthans, 2003, pp. 242-243). 2.1.2 Other Cultural Issues
As with the other Disney parks alcohol was banned in the park by Euro Disney managers who misunderstood the European habit of drinking beer and wine as an integral part of the meal. Also, no provision was made for serving breakfast within the park (Deresky, 1997, p.129).
The Culture Ministry (France) objected to the English language names of attractions like Fantasyland and Pirates of the Carribean (Lever, 1992). Prior to opening, Euro Disney had received bad press from French reporters who had called it a "Cultural Chernobyl" (Deresky, 1997, p. 129). This reflects the public sentiment in France that Euro Disney is an example of American "neoprovincialism" (Hodgetts & Luthans, 2003, p. 240).
However, it was not only the French that experienced cultural difficulties at Euro Disney. Of the 30 million people situated within a day's travel of the park, just fewer than 50 percent were expected to come from neighbouring countries to France (Hodgetts & Luthans, 2003, p.239; Deresky, 1997, p.128). British tourists complained that the cost, language difficulties and weather at Euro Disney fell short of their expectation in comparison to Disney World in Florida (Deresky, 1997, p. 129). Others complained about the crowds while queuing for the rides. Given that different cultures
have different definitions of personal space, queuing with French crowds was an unpleasant experience for some foreign visitors (Hodgetts & Luthans, 2003, p.243). 2.2 Lack of Environmental Scanning
In the early stages of its operation in Europe, Euro Disney was threatened by serious cash flow problems during the slack winter season ("Euro Disney plans to chop 950 more jobs", 1993). Mr Michael Forsgren, Chief Financial Officer of Euro Disney said that good winter attendances would be crucial to Euro Disney's success (Skapinker, 1992). However, this ignored the fact that the French have set vacation dates, the French vacation during the month of August. For Disney to expect that Europeans would change their vacation habits was extremely arrogant on their part (Deresky, 1997, p.129).
Disappointing Hotel Occupancy rates and low sales of food and merchandise in the park added to the poor operation performance of Euro Disney (Cohen, 1993). It was found that the park was too expensive - in terms of entrance fees, meal prices, hotel rates and extra spending on souvenirs. The French considered the cost for a family too frivolous (Deresky, 1997, p.129).
In respect of souvenirs, the number of different items stocked was reduced to 17,000 from the 30,000 that Euro Disney had on its shelves when operations began. The company was surprised to find that visitors preferred garish Mickey & Minnie souvenirs to the more subtle items that it had thought would better suit European taste (Gumbel, 1994).
Disney negotiators did not adequately consider that the unemployment rate had been as high as 10 percent in some areas of France and French economic problems had hit the local construction industry (Hodgetts & Luthans, 2003, p.243). This led Walt Disney CEO Michael D. Eisner to blame Euro Disney's dismal performance on Europe's recession and the strong French franc (Sims, 1994). This same issue resulted in Euro Disney cutting 950 jobs ("Euro Disney plans to chop 950 more jobs", 1993). In addition, Euro Disney had initially hoped to sell some of its hotels to raise money, but those plans were thwarted by France's real estate slump (Gumbel, 1994). 2.3 Financial Structuring
The financial structure of Euro Disney SCA was that it was owned 49 percent by Walt Disney and 51 percent owned by a share offering to the public. The project was effectively a joint venture between Walt Disney and the public. The off balance sheet debt for Euro Disney was 16.65 billion francs (US3.14 billion). The heavy debt load made Euro Disney's bottom line very susceptible to swings in interest rates (Eichenwald, 1992). 2.4 Management Structure and Management Style
23 U.S. expatriates held most of the top jobs (Hodgetts & Luthans, 2003, p.243). This reinforced Disney's ethnocentric attitude to setting up operation in Europe.
Euro Disney's top management was not employed by Euro Disney, but instead was employed by a wholly owned subsidiary of Walt Disney known as Gerant. These executives' incentive bonuses, through stock options, are issued not in shares of Euro Disney, a move that would put them in the same position as the companies shareholders, but rather in shares of Walt Disney (Eichenwald, 1992).
Given the financial pressures on the Euro Disney project, payment for some contractors involved in the construction of the park was with held. This led to a growing resentment toward Euro Disney by local companies but Disney's main concern was staying within budget; it did not focus on building good relations with the host country (Deresky, 1997, p. 130). 3. Analysis of Major Factors and Alternatives 3.1 Major factors 3.1.1 Culture
Cultural differences contributed to the failure of Euro Disneyland in a number of important ways. Because of different preferences and tastes, European customers do not demand the same products as American customers do. Though the French government obliged Disney to respect the French culture, Disney failed to understand and to make adjustments in managing the culture difference (Deresky 1997, p 129).
According to Hofstede (cited in Hodgett & Luthans 2003, p 116), there are four dimensions of culture that explain how and why people from different countries behave uniquely. Since Euro Disney is located in France and targets European customers, such as British, Germans, Italians, and Spanish customers, French culture as well as other European cultures should be considered.
According to Hofstede (2003), the United States has the lowest power distance (PDI) at 40% compared to France at 62 % and European countries at 43 % and the lowest uncertainty avoidance (UAI) at 46% compared to France at 82% and European countries at 70%. Nevertheless, the United States has the highest masculinity (MAS) at 62% while France and other European countries are at 38% and 53% respectively. The United States has the highest score, 91%, among other nations in the dimension of individualism (IDV), whereas France and European countries are at 68% and 58% respectively.
Because France has had many European nationalities, such as Italian, Spanish, and Polish, to shape its culture, France is a melting pot that integrate various cultures into its own "republican model" (Roesler, 2001). It can be seen that all the dimensions of American culture are different from those of French and European cultures. Even French and European cultures are still dissimilar. It can be implied that the strategies that Disney applied in a pure transplant from the Untied States in many ways to create themes which would be reflected not only in the rides but in the surrounding infrastructure, the employees' appearance, and management styles are inappropriate (Peter, 1995).
The French are very sensitive of their presence and tremendously proud of their heritage. They are arrogant of their long history and important roles in world affairs, as well as being known as a world center for culture (France, 2003). To start a business relationship with the French, the corporations should first be aware of a basic fact about the diversities which are French history and geography (Roesler, 2001). Disney failed to realize how French value their custom and culture; thus, it reflected the French's attitude that the theme park is example of American neoprovincialism (Hodgett & Luthans 2003, p 240).
The globalization strategy, the distribution of product and services of a homogeneous type on a worldwide basis (Hodgett & Luthans 2003, p 141), is applied to the Euro Disney. According to Charles (2001), Disney tried to use the same teamwork model with its staff that had worked so well in America and Japan, but it ran into trouble in France. The French are against globalization as it may cause economic horrors because it ignores economic facts. Moreover, most French politicians scorn American capitalism and the American way of doing business. An example of this sentiment can be seen in the French attitude toward American entertainment, such as Hollywood films. The French ensured that the industry should not be treated in a particular way because it influences people's culture and mentality and they fear losing French identity (Roesler, 2001).
In order to understand the different customer tastes in different markets and respond to different national standards and regulations, national responsiveness is an appropriate strategy (Hodgett & Luthans 2003, p 141) which Disney should adopt especially in France where people are arrogant in their cultural identity. 3.1.2 Mismanagement
According to Hodgett and Luthans (2003, p 263), the corporations must consider three areas, which are location, ownership strategies, and functional strategies, in strategy implementation. From the Euro Disney case, it can be seen that the executives failed to apply these following areas in their strategic management.
The first consideration is the location of the Euro Disney. In choosing a location, the executives are allured by several incentives from the French government. Though France has central access to the European market, the poor climatic condition throughout the year is one of the important factors irritating the tourists. In this case, Spain would be the better solution for Disney's consideration (Deresky 1997, p 128; Peter, 1995). Furthermore, Disney should have considered why Europeans would choose to decide to go to a fake castle in Euro Disney rather than to a real thing in Florida (Peter, 1995).
In addition, the executives also failed to realize "the location issues" (Hodgett & Luthans 2003, p 264) in France, such as vacation date during August, banning alcohol in the park, appearance code, the way to greet the French name, and misunderstood the European breakfast norms; thus, the French believed the American did not give the respect to their culture (Burgoyne, 2001; Deresky 1997, pp 128 - 130).
The second issue is the executives were not successful in adopting functional strategies in areas such as marketing, production (service), and finance. According to Levitt and Ohmae (cited in Tung, 1995), the important differences in consumer tastes and preferences across countries for product standardization around the world still exist. Even where there is a demand, adaptations may have to be made to the product as well as the advertising message (Tung, 1995). Euro Disney executives advertised the park for its large size to capture French and European attention; nonetheless, the Europeans considered the benefits they will actually obtain from the park (Deresky 1997, p 129). In addition, the entrance fees, meal prices, hotel rates, and souvenir price are too expensive for the European during the recession period (Deresky 1997, p 129). The marketing also failed to recognize the customer's need, such as offering the inappropriate souvenirs (Deresky 1997, p 129).
In service areas, Disney failed to realize the importance of breakfast norms and the habit having lunch at a set time; thus this resulted in downsizing their restaurants. As a result, the queues were very long and this disappointed the tourists (Burgoyne, 2001). The crowds and lack of personal space is meant to the French (Hodgetts & Luthans 2003, p 243).
Lastly, the financial performance has not been as the executives' expected and turned out to be a problem. Disney had an unclear view of how to plan the companies finances and has faced losses since the first fiscal year, and has steadily drained its cash reserves while piling up debt (Hodgetts & Luthans 2003, p 235); hence, Disney could not afford to invest more money and failed to pay the subcontractors involved in the construction of the park (Deresky 1997, p 130). 3.2 Alternatives for Euro Disney
The mismanagement of Euro Disneyland lays in not only misinterpreting the European culture but also an ineffective management plan. Disney planned to target Europe as a single market. However, Euro Disneyland's strategic plan was difficult to implement in the early stage of operations because of the complexity of the heterogeneous European market. One of the reasons that Disney chose France for its European location was due to its easy access to the European market for consumers from the Britain, Germany, Italy and Spain. However, the design of Euro Disneyland failed to meet the needs of tourists from these countries (Deresky, 1997). 3.2.1 Strategic predisposition
The strategic predisposition is unappropriated to cope with the multinational plan. Euro Disneyland used the parent company to guide strategic decisions by adapting American culture to the European market. When Euro Disneyland first set up in France, it was described as a "leading symbol of American cultural imperialism" (R.M.P., 1992). Disneyland tried to export American culture into Europe, this lead to Disneyland's failure in incorporating the local consumers taste in its strategy. Disneyland overlooked important cultural factors in managing its operations in Europe.
Before MNCs enter into foreign markets, there are four options for the company to start business in the foreign market, they are; ethnocentric predisposition, polycentric predisposition, regiocentric predisposition and geocentric predisposition. These four styles of strategic position differ in the dominance of culture in managing foreign subsidiaries. Regiocentric predisposition is suitable for Euro Disneyland to target European countries. For the fact that regiocentric predisposition adapts to regional culture. If Euro Disneyland had adopted a regiocentric approach, it could have blended in cultural values of the specific regions and combined the management style of these regions within its strategy, thus eliminating the culture gap between America and Europe (Hodgett & Luthans, pp. 283-284). 3.2.2 Human resource planning
The human resource planning did not respond to the company objectives. Although Disneyland targeted the neighbouring countries around France, they selected to use home country nationals in Euro Disneyland's highest management positions. This reflected that Euro Disneyland's centralised management. As a result of such centralisation in the management system most of the important decisions were made at the top level. Who are the people in the highest position? In Euro Disneyland, there were more than 23 U.S. expatriates who were placed in the highest management position. Thus its US senior managers made most of the decisions, while the European nationals are placed in the lower-levels of management (Hodgett & Luthans, p.244). This means that most of the important decisions do not get to the lower-level personnel involved. This centralisation in management and lack of consideration of the diversity and heterogeneity of the European market resulted in inadequate management of the employees.
Firstly, in recruiting the employees, hiring took place throughout Europe because Disneyland wanted multilingual staff (Ferguson, 1989). However, more than 85 percent of the employees were unskilled in customer service (Ferguson, 1989).
Secondly, European employees were not as accepting the Disney employment regulations as had been the case in the U.S. and Japan. In Paris, the French Cast Members found it annoying to accept the rigid scheduling (Deresky, 1997). For example, the schedule concerning the bus drivers was inappropriate. The parking places in French bus parking spaces is built very small, as a result, the bus drivers were irritated that they could not find an adequate place to park. Except for the parking spot, there were only 50 toilets in the park which was insufficient for more than 2,000 drivers during good seasons (Gumbel & Turner, 1994).
Disneyland arranged staff according to rules that they thought would be applicable. For example, they thought that Monday would be a light day for guests to go into the theme park and Friday a heavy one. However, in fact, it was the opposite, with Monday being a heavy day and Friday being a light one (Gumbel & Turner, 1994, p. A 12). 3.3 Solutions
To incorporate the strategic predisposition and human resource plan into the Euro company goal of catering for multinational needs, Disneyland should firstly switch from the ethnocentric predisposition to regiocentric predisposition. The emphasis would be on local responsiveness under this approach. The number of home-country executive would be reduced and more host-country nationals and third country nationals would be able to take part in the decision making process.
By using a regiocentric predisposition, the culture of the region is considered. Therefore Euro Disneyland is set up to be multinational responsive, which would allow it to meet the different demands and tastes of different European countries. The service can be standardized within the region if regional people are developed for key positions. The key issue of regiocentricity is to let Euro Disneyland develop its own managerial culture instead of having an emphasis of American management philosophy (Jane S., 1993). In addition, a reduction in U.S. executives allows local managers from a particular geographic region to handle operations in and around the area. Both the U.S. expatriate and the European region executives need to be trained. Through training, the ethnocentrism of expatriates can be overcome and thus create a better understanding of the value and customs of the host country and how to cooperate with local personnel (Hodgetts & Luthans, p.486). On the other hand, the European regional executives could gain international experience and knowledge from the expatriate as well. 4. What should Disney do differently when next considering foreign market entry?
Even though the Hong Kong Disney funpark is in the process of being built, Walt Disney Company is planning to build a new Disney theme park in Shanghai because China has the fastest market growth rate. The company already signed a nonbinding letter of intent with the Shanghai government, but the letter of intent does not ensure that the park will be built. However, the plan to build the theme park in Shanghai has been postponed until year 2010 (McMillan, 2002; Kahn, 2003: Orwall and Leggett, 2002). Therefore, it is necessary for the company to consider the following issues when it plans to enter to the Chinese market. 4.1 Choosing the target country
Lasserre (2003, pp.157-177) claimed that there are two fundamental questions that foreign investors should consider. These are market and industry opportunities, and country risks to foreign investors. 4.1.1. Market opportunities
By analysing the country's market opportunities, Disney will be able to determine the potential demand in the targeted country. Therefore, in order to analyse the country's opportunities, market size, market growth, and quality of demand should be considered (Lasserre, 2003, p.161).
Apart from market opportunities, industry opportunities should be measured as well. Thus, competitive climate, industry competitive structure, and investment incentives from governments should be taken into account (Lasserre, 2003, p.161). 4.1.2. Country risk analysis
The purpose of analysing country risk is to assess political, economic, and operational risks, which could affect Disney's performance.
Political risks
Political risks may occur from both internal and external events or regulations that result from governmental action. These risks could affect shareholder's value in terms of loss of capital or dividends (Lasserre, 2003, p.175).
Economic risks
By analysing economic risks, the company will be able to forecast the potential to make a profit in the targeted country. It is claimed that even though two countries have the same economic growth rate, it dose not mean that the potential for operational success will be at the same level (Lasserre, 2003, p.176).
Operational risks
Government regulations, taxation system, unreliable infrastructure, and constraints for investment could affect Disney's bottom line. Hence, it is necessary to analyse operational risks as well (Lasserre, 2003, p.176).
After the targeted country has been chosen, the next step that Disney should take is to formulate strategy. 4.2 The Basic Steps in Formulating Strategy
Hodgetts and Luthans (2003, pp.259-262) stated that strategic planning for international management could be divided into three steps 4.2.1 Environmental scanning
Disney may obtain accurate forecasts of trends by observing the relate t o external changes such as economic competition, political stability, technology, and the demographic consumer data of each country (Hodgetts and Luthans, 2003, p.259).
The company may start by forecasting macroeconomic and industry performance considering issues such as per-capita income of the population and labour market of the targeted country. Then, predicting trends in monetary terms such as exchange rates and inflation rates. Next, Disney should forecast its' potential market share in a particular geographic area and compare these results to those of its competitors. Besides that Disney also has to consider political stability, government pressure and nationalism (Hodgetts and Luthans, 2003, pp.259-260).
For example, China is a large country with around 1,284.3 million population. Since economic reform began in 1978, income levels and standards of living have been improved. Moreover, the level of poverty has decreased. In 2002, the country's GDP per capita was US$ 1,058 ("China Fact Sheet", 2003; "Country, Economy and Regional information", 2003).
It is not only Disney that is interested in investing in China, but Universal is also interested in China. Universal already negotiated with the Shanghai government about its project and also talked about building another theme park in Beijing (Orwall and Leggett, 2002). 4.2.2 Internal resource analysis
Disney may choose either to conduct environmental scanning before an internal resource analysis or conduct them at the same time. By doing the analysis, Disney is able to evaluate its current managerial, technical, material and financial strengths and weaknesses. Later, Disney may use these assessments to determine its ability to operate in China. Moreover, an international analysis also identifies the key factors for success (KFS), which are factors that are necessary for the firm to compete effectively in a market (Hodgetts and Luthans, 2003, pp.260-261).
For instance, Disney's strengths are its experience in the business, low cost corporate strategy, and brand name. While its weaknesses are a very large number of workers, frequent change in top-management and high overhead expenses ("The Walt Disney Company-a case study", 1996). 4.2.3 Goal setting for strategy formulation
After completing environmental scanning and internal resource analysis, Disney will be able to formulate the specific goals for its strategic plans. Then, specific operational goals and controls will be developed (Hodgetts and Luthans, 2003, pp.261-262).
For example, the original mission of the company was to "nurture the imaginations of children around the world as well as to celebrate American values" ("The Walt Disney Company-a case study", 1996). However, the company has other goals that need to be achieved such as level of profits and return on assets/ investment (Hodgetts and Luthans, 2003, p.261).
Once the strategies have been formulated, the next step is to implement them. 4.3 Strategy Implementation
Hodgetts and Luthans (2003, pp.262-272) described that there are three general areas that the companies should be concerned with in implementing strategies. 4.3.1 The location of operation
In order to choose a location, Disney has to consider the country and the specific location within the country.
The country
Disney should consider the country's legal restrictions, restrictions on foreign investment, market size, and availability of the labour market. Moreover, Disney has to examine the benefits, for instance lower tax rates, free-land rental, infrastructure, and interest rates, which are offered by the host country as well (Hodgetts and Luthans, 2003, pp.263-264).
Local issues
After the country is chosen, Disney must choose the specific location by taking some local issues, such as accessibility to markets, competitors, availability of labour, cost of doing business, transportation, and electric power, into account (Hodgetts and Luthans, 2003, pp.264).
It is observed that the Chinese market is big enough for Disney to build theme parks in both China and Hong Kong; therefore it would not be a problem that the parks would be catering to the same prospective travellers. In the near future, Shanghai's transportation will be improved. It will include a future elevated-train line (Dolven and Orwall, 2002). 4.3.2 Mode of entry and ownership strategies
There are several kinds of forms of ownership, but there are two major forms that Disney may choose. However, the company need to understand that each method is suitable for different situations (Hodgetts and Luthans, 2003, pp.265-270).
Wholly owned subsidiary
Wholly owned subsidiary means that Disney will totally own and control its foreign subsidiaries. The company will be able to gain benefit from total control and its managerial will be more effective. However, Mahoney et al. (2001) asserted that Disney has to be prepared to be faced with the problems that may occur from using greenfield strategy. Firstly, the firm may encounter difficulties with many local and national regulations. Secondly, local people may have feeling against the company because they perceive that Disney is a foreign enterprise, which is trying to take advantage by refusing to have local partners (Hodgetts and Luthans, 2003, p.266).
Moreover, Lasserre (2003, p.194) asserted that recruitment, training, and management of local workers is necessary in order to meet the company's strict standards. In addition, if Disney considers using expatriates from headquarters, it is essential to choose the correct people, who are able to adapt to new cultures and to transfer knowledge quickly. Disney would not gain benefit from using expatriates if the expatriates have good knowledge about the country, but lack of cultural understanding.
Joint venture
Joint venture occurs when two or more partners make an agreement to own and control an overseas business together. Recently, joint ventures have become popular due to the benefits that both the company and its partners gain. Ball et al. (2002) explained that there are several advantages of doing a joint venture. First, the parties are able to overcome political problems such as restrictive legislation easily by having help available from local partners. Second, The firm may reduce strong nationalism feeling by joining with local partners. However, disadvantages of joint ventures still remain. Firstly, profit must be divided with the partners. Secondly, the company might have less control (Hodgetts and Luthans, 2003, pp.266-267).
Licensing
Licensing is another way to enter market by giving an exclusive license, which allows another party to use a property right exchange with payment to the owner of the property right, in order to make or sell the goods in a particular geographic local (Hodgetts and Luthans, 2003, pp.268-269).
For Tokyo Disneyland, the company gave a license contract for 45 years to Oriental Land, which gives 10 per cent of admissions and 5 per cent of food and merchandise sales, plus a licensing fee in return to Disney. By using this method, Tokyo Disneyland has been successful and continues to return large profits to the company. On the other hand, only 49 per cent of Euro Disneyland was owned by Disney and 51 per cent was owned by the public such as Prince Alwaleed bin Talal of Saudi Arabia, who holds 17.3 per cent of the share (Ball et al., 2002, p.304; Hodgetts and Luthans, 2003, p.237; Prada, 2000).
Nevertheless, it is suggested that the company should know the country's policy about mode of entry before deciding to invest in that country. For example, China always encourages foreign companies to choose joint venture rather than the other methods. However, recently the Chinese government has been more flexible and allows investors to set up wholly owned subsidiaries (Lasserre, 2003, p.195).
According to the information, joint venture and licensing seems to be the appropriate ways for Disney to invest in Shanghai, because the Chinese government prefers the foreign investors cooperate with the local companies. 4.3.3 Strategies in functional areas
There are two major primary functional areas that are important for Disney in order to implement strategies
Marketing
Disney should realise that strategies that succeed in one country may not succeed in other countries. Therefore, the implementation of marketing strategy must be determined on an each country basis. Moreover, Disney should take into account that market analysis is essential for strategic planning (Hodgetts and Luthans, 2003, p.271).
Finance
Disney may choose either to transfer funds from one place in the world to the targeted country or borrow funds in the international money markets, which normally will be less expensive than borrowing from local sources. Nonetheless, there are some problems that may occur in transferring money. For instance, the problem of re-evaluation of currencies may make the company's profit decline (Hodgetts and Luthans, 2003, p.272). 5. Conclusion
In conclusion, with respect to the strategic predisposition, Euro Disneyland should shift from its original ethnocentric predisposition to a regiocentric predisposition. And at the upper management and decision making level, there should be not only be home country nationals, but also host-country nationals and third-country nationals. Training should be conducted on both the US expatriates and local executives so as to strengthen understanding of the local culture and also allow local executives to benefit from the expatriate international business experience. When next entering a foreign market, Disney should place an emphasis on host-country culture and environmental scanning in its management and business strategies as outlined in this paper. This will ensure that the problems experienced at Euro Disney in the early stages of operation are not repeated and that Disney's business continues to enjoy success in its new markets.
Published: Fri, Nov 30 2012 @ 7:02:28
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