• Category: Miscellaneous
  • Words: 1882
  • Grade: 90
The Walt Disney Company has grown into one of the largest companies in the world. They are a very diverse company with an interest in movies, television, clothing, toys, real estate, music, and entertainment. However, they are most commonly known as an innovator in the animated motion picture industry and a leader in amusement park entertainment. In 1955, Walt Disney opened his first amusement park in Anaheim, California. The park, Disneyland, drew bigger crowds than anyone had suspected. Since the park was located on only 100 acres of land, the surrounding property owners who built hotels to accommodate all of the guests at Disneyland made fortunes.

Then in 1971, Walt Disney built Disney World outside of Orlando, Florida. Once again, Disney underestimated the demand for accommodations. Even with 30,000 acres Disney was unable to take advantage of all the guests coming to their park.

However, one of the most costly misjudgments was the Tokyo Disney project in Japan. Before the park was to be built, Disney voiced concerns about investing in such a big venture on the other side of the world. Therefore, Disney passed most of the liability of the project onto to a Japanese consortium that ended up building, financing, and owning an extremely successful amusement park. In return for the Disney name, the Walt Disney Company gets 10% of gross earnings and 5% on food and merchandise.

Since the Tokyo Disney was so successful Walt Disney executives believed they had the expertise to develop a second foreign amusement park Disney was determined to make sure they did everything right this time, including choosing the right site. Europe was the obvious choice since the people were so familiar with Disney merchandise and entertainment Hundreds of sites throughout Europe were considered for the project, but in the end a 4,800 acre site about twenty miles outside of Paris, France was chosen. Disney was planning a mammoth project. Not only was there going to be an amusement park, but it was going to be a project that included golf courses, houses, malls, hotels, and office space. Eventually, when the project was fully developed, Disney planned to sell of much of the real estate for a handsome profit. Situation Analysis Throughout this century, amusement parks have increasingly become a very popular destination. They offer thrills and entertainment that can rarely be found elsewhere. Children as well as adults visit these parks in search of adventure. At Disney, their parks are marketed to all types of people as a place of fantasy where dreams come true.

One of the contributing reasons that Disney entered the European market was that there was little competition in the amusement park industry. The industry is highly cyclical and elastic, but there were no major amusement parks in Europe. Furthermore, the Euro Disney site was within a two hours' flight of approximately 310 million people and there were 17 million people that could get there by car in two hours. In addition, the underwater tunnel, between France and the United Kingdom, was to be completed in 1994. All of these statistics of a huge potential market were promising as the company was looking to expand. The largest competition that Euro Disney could foresee was the Louvre and the Eiffel Tower.

Before opening the doors to Euro Disney many issues of the external environment had to be addressed. The weather in France is not near as nice as the weather in Florida or California, but the weather in Tokyo was similar to Paris. With this in mind the American executives still believed if people flocked to the Tokyo Disney then they will do the same in Paris. Early on in the planning process Disney had to deal with irate farmers that lost their hundred-year-old beet farms. Much of the land that Euro Disney was to be built on belonged to these farmers, but the land was taken away from the farmers by the government in order to be sold at below market prices to Disney. The company worked with these farmers to avoid problems and eventually most of the farmers became pleased with the situation. An additional external problem that the Disney executives though about was the culture differences in France, but the executives were determined that they could operate a successful amusement park while adhering to American philosophies and standards. They thought they could simply copy its operations from the United States and Tokyo. Other external factors were the political and legal issues.

On March 23, 1987, Disney and the French national and local governments signed contracts detailing the terms of the Euro Disney project. A rapid transit railway system would be expanded from Paris to the amusement park. Highway interchanges would be provided to link Euro Disney with a main highway. Furthermore, the French were required to provide a special station for high speed trains within the park. Included in the contract was the stipulation that Disney be given favorable loan terms. The French government insisted that Disney was only allowed to own 49% of the park. The other 51% was to be controlled by French people or institutions. At this time, the project was valued at $1.8 billion. In return for all that Disney was to get, they promised new jobs and contracts for the local suppliers. Since the area was suffering from high unemployment at the time the additional 12,000 jobs were welcomed. All involved believed that economic benefits would be substantial. Michael Eisner headed the Walt Disney Company. He was extremely successful at increasing profits for Disney since taking the helm. It seemed that everything the company participated in became successful. Thus, the Disney executives and the rest of the world seemed to believe that the Euro Disney project would be a sure success. Problems At the end of the fiscal year in 1993, the Euro Disney project had incurred losses of over $1 billion.

The biggest problem was that Disney failed to correctly analyze the external environment in which it attempted to compete. Disney just did not recognize all the economic and cultural differences between the United States and Europe. By failing to recognize the cultural differences between the two, Disney ended up clashing with the local culture. Most of the Europeans believed that there was a sense of cultural imperialism. Disney simply thought that they knew best and they refused to listen to suggestions. The employees were asked to portray an all American look, but the French usually refused because they felt they were being stripped of their individualism. Eventually, Euro Disneyland was taken to a French court because the employees felt the strict dress code violated French labor law.

The Disney executives later had to change there ethnocentric view in order to please the French employees. Disney was misinformed on many issues dealing with the operation of a business in a differing culture. Disney assumed that since they did not sell alcohol at their other three theme parks that the French would not have a problem with this policy, but the French were astonished when they learned they could not have a beer or glass of wine with their meals. In addition, the Disney executives were erroneous in thinking that the French did not eat breakfast.

Many times, the guests waited hours just to get a table in a restaurant. Disney thought that they could change the European's eating habits to be more like the American's, but this was not the case. Eventually, alcohol was allowed to be served and additional measures were taken to feed the guests. Another major problem in judging the European culture was in predicting their spending habits. The guests saw the prices for products, services, admissions, and accommodations as exorbitantly high. Disney made financial projections based on American vacationing habits. The company projected that the average guest would spend $33 a day on food and souvenirs. It turned out that the guests spent 12% less than was expected. This resulted in lower than expected revenues.

In addition, Euro Disney made a huge mistake when developing a marketing strategy for Europe. They wrongly emphasized glitz and size over the attractions. The marketing strategy was simply obsessed with portraying the park as big, with little emotional input in the advertisements. After realizing their mistake, Euro Disney portrayed the park as a place where guests would have a unique, extraordinary family experience they would never forget. Disney also failed to accurately predict the financial environment they were entering. About the time that Euro Disney was opening, the European economy was entering a recession. The repercussions of the recession were far reaching. Currency went through a phase of devaluation, interest rates went up, and the real estate market went into a slump.

This recession affected the number of visitors, and how much they spent, and also hurt profits in Euro Disney's real estate holdings. Many principles of marketing were used in this case. A differentiation strategy was used to set Euro Disney apart by emphasizing breathtaking rides, creative attractions, and promoting Disney characters. Another strategy used by Disney was the use of a cooperative strategy by working with French government. For example, due to laws in France, Disney was only able to own a portion of the company. In addition, Euro Disney used a restructuring strategy once the park was opened. They had to make some changes in order to improve their financial position. They replaced the chairman of Euro Disney with a Frenchman Philippe Bourguignon. Conclusion It is quite apparent that Disney entered into the Euro Disney project with a great amount confidence.

Their phenomenal success in a foreign market like Tokyo gave them a false sense of security that everything they touched would be golden. They never imagined all of the problems they ended up encountering in Paris. In hindsight, someone such as myself can say that I would have foreseen almost all of the problems that Disney faced. Economic factors such as a recession are hard to predict, but they should have foreseen all the problems with the clash in cultures between the United States and Europe. Since, Disney was so ethnocentric by believing that the Disney way was the only way, they ended up with a huge financial loss and a bruised ego With the bailout package in 1994, Euro Disney has been given a second chance. However, once Euro Disney has to start paying more royalties and interest that is due, their financial picture will soar. Eventually, maybe in ten or fifteen years, Europe will be ready for another Disney property or competing amusement park.

I believe that Disney would have encountered similar problems if they had chosen to build the project in Spain. The American executives would have been unprepared to accept the fact that Spain's culture was different than their own.

If I had been hired Euro Disney as a consultant I would have made some major changes. First of all, I would have learned more about the local culture and customs. Secondly, with what I had learned I would have integrated the local culture into the amusement park. This includes more local food and merchandise. Next, I would set up offices in major cities throughout Europe that would market Euro Disney to each individual culture. Finally, I would have customized the employee standards to reflect the local culture.
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