Hong Kong Disneyland: MNC Operations and Cultural Challenges

Introduction to Multinational Corporations

A multinational corporation is an enterprise that manages production establishments or delivers services in at least two countries (Wikipedia 2006). Multinational corporations, or MNCs, are horizontally integrated, vertically integrated, or diversified. Horizontally integrated MNCs manage production establishments located in different countries to produce the same or similar products. Vertically integrated MNCs do so to produce goods that serve as inputs for their production establishments in other countries. Diversified MNCs operate in different countries without being either horizontally or vertically integrated.

Of the 100 largest economies in the world, 51 are multinational corporations. MNCs exert enormous economic influence in politicians' representative districts and deploy extensive financial resources in public relations and political lobbying. MNCs also play an important role in globalization. Regions often compete among themselves to attract these corporations by offering incentives such as tax breaks, pledges of government assistance, improved infrastructure, or relaxed environmental and labor standards. This competition is designed to attract foreign investment.

The first MNC is believed to be either the Knights Templar, founded in 1118, or the Dutch East India Company. Examples of present-day multinationals include Apple Computer, AOL, Cadbury, Coca-Cola, Dell, Exxon, Ford, General Electric, General Motors, Google, Hewlett-Packard, HSBC, IBM, McDonald's, Pfizer, Walmart, and The Walt Disney Company (Wikipedia).

Hong Kong Disneyland: Company Background

Hong Kong Disneyland Resort was built by the government of Hong Kong and The Walt Disney Company (Wikipedia 2006). It opened on September 12, 2005. The resort consists of the Hong Kong Disneyland theme park, two hotels, and retail, dining, and entertainment facilities spread across 310 acres on Lantau Island. The two hotels are Disneyland Hotel and Disney's Hollywood Hotel. The resort stands on reclaimed land beside Penny's Bay at the northeast tip of Lantau Island in Hong Kong.

The Hong Kong International Theme Park Limited was created in 1999 with Disney's investment of US$316 million at a 43% equity stake, with the Hong Kong government owning the remaining 57% of the US$1.8 billion project. Through this venture, the Hong Kong government expected to provide 18,400 jobs to its people and 35,800 more over the following 20 years. It also expected to reap economic benefits amounting to an estimated HK$148 billion — roughly 6% of its gross domestic product — over 40 years of operation.

In an effort to avoid the problems experienced at Disneyland Paris, Disney worked to ensure that the Hong Kong park reflected local culture. Feng shui consultants assisted with the layout of the park and grounds. Incense was burned upon the completion of each building. One of the main ballrooms was designed to be 888 square meters, since 8 is a favored number in Chinese culture associated with good fortune, while the number 4 was deliberately avoided as it signifies bad luck. Disneyland employees speak English, Cantonese, and Mandarin, and underwent training at other Disney parks while the Hong Kong theme park was under construction.

Hong Kong Disneyland was the smallest among Disney's parks. Construction proceeded in two phases. The Hong Kong government stressed to both the public and to Disney that land adjacent to the resort was available for another theme park and additional hotels at no extra cost to Disney. Critics believed the government hinted at selling that land to Disney's rivals — NBC Universal, Six Flags, and Anheuser-Busch — though many observers considered this merely an attempt to extract more concessions from Disney, since the government did not genuinely intend to host a rival park. Construction of an additional Disney theme park was projected to begin soon, with an opening target of 2010 (Wikipedia).

Hong Kong as a Business Environment

The Hong Kong Special Administrative Region of the People's Republic of China is one of two special administrative regions of the PRC, the other being Macau (Wikipedia 2006). Hong Kong lies on the eastern side of the Pearl River Delta on the southeastern coast of China, facing the South China Sea to the south and bordering Guangdong Province to the north. It is among the world's most liberal economies and a major international center of finance and trade.

Hong Kong was a British colony from 1842 until its sovereignty was transferred to the PRC in 1997. Its Basic Law guarantees a relatively high degree of autonomy as a special administrative region until 50 years from the transfer of sovereignty — that is, until 2047. Under the "One Country, Two Systems" policy, Hong Kong retains its own legal system, currency, customs policy, culture, and immigration laws (Wikipedia).

Conclusion and Recommendations

The media and local watchdog groups identified additional concerns (Wikipedia 2006). Disney employees were reported to be lax in enforcing non-smoking policies, apparently out of fear of offending guests. Sanitation was also a problem, with some visitors urinating on flowerbeds and even near food facilities. Local newspapers carried photo essays documenting this behavior for days. Other visitors observed that Disney staff did nothing to enforce civic responsibility within the park. Cast members were reported to receive low wages. It was also reported that fish in the waters near Ma Wan had died as a result of land reclamation, which caused measurable environmental damage. Further reports indicated that ancient commercial vessels and bones on the sea floor had been buried under landfill. Critics noted that the park refused to adopt the more ecologically sound fireworks-launching technology developed and used at the original Disneyland in the United States — a matter of particular concern to residents of the neighboring Discovery Bay area. Several reports of food poisoning were received by the health department, which conducted inspections of the park, demonstrating that even a large and profitable MNC such as Hong Kong Disneyland was not above the law (Wikipedia).

In response to these and other crises (BBC News 2006; Bowring and Yung 2005), management planned to expand the park and introduce additional attractions. Autopia was to be added to Adventureland, Fantasyland, and Tomorrowland, and Pirates of the Caribbean was to be constructed in 2009 or 2010 (Great Holidays and Hotels). Meanwhile, Shanghai Mayor Han Zheng publicly expressed support for an excellent Disneyland in Shanghai and confirmed that preparations were underway (Zhi Ping, ed. 2004). Disney President and CEO Robert Iger also acknowledged ongoing negotiations with the Shanghai Municipal Government, with theme park construction already in progress. Reports indicated that Disney's Shanghai location would occupy 6 square kilometers — significantly larger than Hong Kong Disneyland. Negotiators were said to have met with Shanghai-based developer Lujiazui Group to discuss schedules and cooperation, with initial agreements reached for a joint company registered in Shanghai at a ratio of 51% for the US side and 49% for Shanghai. The US side would contribute brand, technology, and capital, while the Shanghai side would supply land. The agreed site was a resort park in a town approximately 5 kilometers from the Shanghai International Airport in the Pudong area. When completed, the Shanghai park would be the sixth Disneyland in the world and the fourth outside the United States (Zhi Ping).

Shanghai is not the only Chinese city applying for a Disneyland resort (Zhi Ping, ed. 2004). Reactions to the prospect have been mixed. On the positive side, it was argued that a commercial project of this scale would generate substantial profits for the local economy and significantly enhance the city's attractiveness to tourists. On the negative side, critics contended that Disneyland represented a wasteful and luxurious consumption of resources inconsistent with China's average living standards. Since many Chinese citizens remain in poverty, critics believed the government should direct financial resources toward improving living standards rather than subsidizing a leisure resort. Others pointed out that a new park close to Hong Kong Disneyland would make the investment repetitive and unnecessary. Some maintained that if another Disneyland were to be built, it should be located in an economically underdeveloped region to extend entertainment access to those who would otherwise never have the opportunity. Still others viewed such a park as a form of "cultural invasion" by American entertainment concepts into Chinese culture. However, another perspective welcomed the Disneyland model as an example of transnational and trans-regional cultural communication — an irreversible and positive trend in today's world (Zhi Ping).

Disneyland could satisfy the entertainment demands of city residents and visitors from surrounding regions while simultaneously upgrading the local service industry (Zhi Ping 2004). A Disneyland and improvements to people's living standards are not necessarily in conflict. While governments are obligated to narrow the gap between rich and poor, they must also respond to public demand for leisure. Disneyland is not exclusively for the wealthy — it can be enjoyed by all who are interested. Nor does a Disneyland require an unlimited supply of Hollywood films, as it simply adds a new form of entertainment. As a global brand of resort theme park representing joy and novelty, Disneyland holds appeal across all ages and walks of life.

Planners and managers should take negative opinions seriously and work to remedy or preempt problems by addressing several key factors. First, they must ensure that Disneyland is profitable, or at least reaches break-even in a reasonable period, because the park's success would stimulate neighboring industries and create employment for local residents. Second, ticket prices should be set at reasonable levels, with discounts available for children and young people.

A third recommendation is that government departments should use the media and the internet to inform the public that cultural exchange among countries is an unavoidable global trend, and that this form of cultural engagement should be encouraged as long as it complies with Chinese law. The Chinese should not only regulate foreign investment in entertainment according to their laws, but also maintain an open and developmental approach to their own entertainment industry. It is appropriate for them to absorb positive elements from other cultures and adapt these to their own context. Alternatively, they can create more distinctive cultural products — with enduring appeal and grounded in fundamental Chinese cultural characteristics — to meet domestic demand for mental stimulation (Zhi Ping). Hong Kong Disneyland represents both the promise and the complexity of such cross-cultural ventures, and the lessons it offers are directly applicable to any future expansion in mainland China.