Disney What Do You Think

Disney

What do you think that motivated Disney to set up parks abroad, and what might be the pros and cons from the stand point of the Walt Disney Company?

Confronting possible market saturation in its domestic market, one of the largest sources of park and resort opportunities for Disney was to optimize operations on a world-wide scale.

The major thrust of Disney's global strategy is to use its global brand to target customers throughout the world. However, even with instant name recognition, the company faced enormous challenges in applying its domestic business model to work in many foreign markets where it has limited experience and faced threats of cultural clashes that impeded market acceptance in Europe.

To be successful, Disney is going to have to learn to act like a global company, one that adjusts products, prices and services to local markets. Nothing underscores the need to adopt a domestic business model to local market needs than the initial Euro Disney operations (later renamed Disneyland Resort Paris) which are often referred to as a "culture Chernobyl" for many reasons (Disneyland Resort Paris). There's ample evidence that standardized restaurant menus were not working well in France where there is a preference for red wine. Disney thought it was doing the right thing by offering French food in its restaurants, but discovered the French were actually expecting to experience American cuisine at this type of American resort. and, Disney has clung to charging entrance fees similar to those in the United States even though the Europeans/French appear to be more price sensitive.

There were operational errors made regarding the overall operation of Euro Disneyland as well (Burgoyne). Based on American consumer habits, Disney thought Monday would be the light day for guests and Friday a heavy one, and allocated staff accordingly. In reality the reverse situation occurred in Paris. There were also unanticipated differences in employee acceptance of employment practices. In Orlando, employees accept being sent home if they are not needed. However, in Paris, employees had a very difficult time accepting the inflexible scheduling. Euro Disneyland executives had estimated labor cost would be thirteen percent of their revenues. but, in 1992 the true figure was twenty-four percent and in 1993 it increased to forty percent.

Global brand recognition is a mixed blessing for Disney. While there are those who immediately recognize the name and may be drawn to a Disney park for this very reason, there are also those who associate it with anti-American feelings or dislike for large global corporations. Many French thought a Disney park in France would harm French culture with its American influence (Disneyland Resort Paris). Certainly, many of these cultural problems are beyond Disney's control, all it can really do is to be aware of local cultural sensitivities and consider them into its marketing and operational efforts.

To reduce risks, Disney can always form joint ventures. Relying on experienced partners abroad should help the company identify successful locations, sift through local tax and legal issues, obtain more community support and the knowledge to make necessary cultural adjustments to operations. but, in addition to having to give up a share of profits to partners, it will most likely be more difficult for the company to control expenses such as real estate and labor costs and to standardize operations where desirable.

2. Why do you suppose Disney made no financial investment in Japan, one of $140 million in France, and then one of over $300 million in Hong Kong?

Tokyo Disneyland opened in 1983 and represented Disney's first international park.

Because this was the first international effort, Disney's conservative management was cautious about the park's chances for success (Koepp, 1988). As such, according to Koepp, it allowed Asian investors to finance, build and own the $750 million park. Disney only asked for royalties of ten percent on admissions and five percent of food and souvenirs. Of course, risk concerns turned out to be unnecessary as Tokyo Disneyland was an immediate culture and financial success (Lopez, 2002). Disney has to watch financial benefits accrue mostly to the facility that owned the facility rather than its shareholders.