Walt Disney Co. faced the challenge of building a theme park in Europe. Disney’s mode of entry in Japan had been licensing. However, the firm chose direct investment in its European theme park, owning 49% with the remaining 51% held publicly. Besides the mode of entry, another important element in Disney’s decision was exactly where in Europe to locate. There are many factors in the site selection decision, and a company carefully must define and evaluate the criteria for choosing a location.
Global marketing strategist considers the geographical scale, cultural differences, language, and overall perspective needs; more particular decision criterion should focus specifically on the country, type of industry, the company and the product or services. In today’s growing diverse society it only makes since to take the global approach to marketing when determining strategies to gain market entrance. Walt Disney used these different marketing platforms to establish contact with different market segments capturing all ages both children and adult.
This is just one of the many reasons why they are so successful today. This case introduces strategies that Walt Disney took to gain entry into different markets specifically entrant to: Tokyo, Hong Kong and Paris. This case also describes the many challenges that were faced by the company and the uniqueness’s of each towards each entry area. Aside from the entry barriers or the differences between the markets “culture, economic situations” Walt Disney brought new opportunities (employment, market opportunities for local economy, new tourists) to the countries that they conducted business with.
Walt Disney has a very strong product offering (branding), quality culture climate, and provided part-time and full time jobs to the local economy. What were the lessons learned from previous entry opportunities: 1. Timing is everything – balance entrance with economic offsets 2. No risk equals low revenue returns 3. Be careful what you agree to 4. Minimized the design changes to reduce construction costs Country Specific: Local Economy -Loss of Jobs 6% Unemployment -Removal of British Colonial – decrease in tourist activity -Foreign exchanges – reduction of revenue going into the country – Hong Kong Government
Agreed to conditions of JV: -Royalties 5% -Base (2% Gross revenues) and Variable (2-8% EBITDA) Management fees —Refused free land to US —Expressed demand for paying taxes on profits —Intense negotiations Competition -Ocean Park. —Attracts 35,000 people a day Culture – Not reviewed in case Politics -Govt. needs away for bringing back the visitor to the country, but yet are no working with Walt Disney, to make the venture profitable. Barriers to Entry: -Construction – Project split into two phases – two theme parks and sets of hotel resorts —Phase I Infrastructure Costs -HK$13. 6 billion -Land Premium’s – HK$4 billion –Phase II Expansion – project 2014 Company – Walt Disney -Limitation on demands for agreement -Free land -Tax immunity Product or services -Fraud duplications of merchandise – negative impact on sales -Distribution methods for services -Disney films – Beijing Govt. involvement “quite censorship”. Cost analysis -Debs of the projected were dependant upon multiple levels of fall out monies: -Tourists – increased visitation – estimated projections suggest requirements for high tourists activity -Locals – their spending habits -Would the agreement pay the dividends http://manzanosbusinessblog. blogspot. om/2009/02/entry-modes-in-forein-markets. html The Walt Disney Company was one of those many American organizations to expand on foreign soil. Its first foreign venture proved to be so successful that the decision was made to further expand abroad. This next foreign expansion experience, named Euro Disneyland did not prove to be the successful venture that had been anticipated by its creators. Disney reported $36. 1 billion in revenue in 2009, down 4. 5% from 2008, and net income of $3. 3 billion, down 25%.  The company has suffered from declining advertising and theme park revenue amidst a global slowdown in demand.
Disneyland in particular, the first park ever to construct rides, shows and attractions around separate themes–the themes of Walt Disney’s motion pictures (Wikipedia. com, 2007)–was constructed and dedicated by Walt Disney to those people who want to “relive memories of the past and [that]…youth may savor,” (Wikipedia. com, Disneyland, 2007). Disneyland itself was not just built to entertain young children, but also to give their parents a vacation in a place that they could remember from their pasts and relate to in a way for them to enjoy the experience. Datamonitor, 2007, pg. 22). Building by numbers • • Bends in paths near entrances were designed, using advice from feng shui masters, to deter evil spirits. The park is filled with pools, lakes and water features, catering to the tradition that equates water with wealth and plenty • http://www. timesonline. co. uk/tol/news/world/asia/article6902338. ece After many years, it was soon realized that the target market is not only young children, but often includes the decision makers. These are usually the parents that take their kids to the movies and buy the merchandise.
Disney’s reach is global, with theme parks in China, France, Japan, and all around the United States. They also have Disney stores across the globe selling Disney consumer products throughout the United States and also globally, both within their Disney resorts and theme parks and in globally placed retailers. The Disney trademark is recognized all over the world, once again keeping consumers “Mickey Mouse minded,” and showing what kind of a leader Disney can be simply through the reach of its grasps. 1.
Why would the Walt Disney Company want to venture into global markets with its theme parks? Walt Disney Company has four main business ventures: consumer products, theme parks and resorts, media networks and studio entertainment. The theme parks and resorts that once started in California grew to one of the most profitable and loved venues internationally. Nearly 25% of their operating income comes from outside the United States and Canada. The markets of today are becoming more versatile to outsourcing and globalization.
The trend towards globalization is not immune to the entertainment business and The Walt Disney Company is revealing this by expanding outside of the United States and offering theme parks in France, Japan and China. Many companies throughout the United States and beyond are resorting to developing their business abroad. This is due to numerous factors such as the ability to cut costs through cheaper building material or labor, which leads to increase their revenues, functioning with more advantageous tax and labor laws, and expanding their market.
Every company, whether a service enterprise, a retail shop, a restaurant, or a theme park must have one objective in order to be in business. The foremost goal of every business is to make money. Companies, especially large, well established companies like the Walt Disney Company, use their profits to do many things: expand their market share; research and development; expansion; new product lines; and various activities that help attract more customers. Disney consumer products and theme parks are very essential to Disney’s ultimate goal of making money.
Domestic theme parks’ revenues depend on the number of visitors. A weaker dollar encourages more foreign travelers to visit the U. S. and more domestic travelers to stay within the country, but a stronger dollar makes products and services (including admissions to Disney’s theme parks) relatively more expensive. The more theme parks Walt Disney Company has abroad the more global tourists will be attracted. 2. What troubles has the company had to overcome in opening theme parks outside its U. S. home base? Global expansion was tricky for Walt Disney Company.
There were many challenges to overcome, such as economic, legal, political, social, and cultural barriers. The country specific criterion analyzes country specific exchange rates, regulations, policies, culture, customs and curtsies. The other criteria (industry, the company and the product or services) will be considered and compared to the specifics of the country entering. The Mode of entry is a specific strategy that is related to major decision or an approach that a company will take to enter into a market.
These choices are critical, because it effects future decision that the company will make; the financial performance relies on this decision. Resource commitment is the main distinction of the different types of entry modes: Licensing, Partnership or Joint Venture, Exporting; and Direct Investment. There are entry models that were used Walt Disney company in a foreign market: (1980) Tokyo – Licensing agreement (1992) Paris – Partnership Agreement (1998) Hong Kong – Joint Venture There were various errors made in the operations of Euro Disneyland which affected the French culture.
An example if this is the Walt Disney Company’s policy of serving no alcohol in its parks in California, Florida, and Tokyo which it extended to France. This caused astonishment and rebellion in France where a glass of wine for lunch is a given. After much consideration, in May 1993, the Walt Disney Company changed its policy and allowed wine and beer in the Euro Disneyland theme park. Although Euro Disneyland is located in Europe, the lessons learned and experiences gained can apply to any country on the globe.
For example, the Walt Disney Company failed to properly understand the eating habits of the Europeans. The lesson learned is that any meal providing company contemplating expansion into any foreign market should be intensely indoctrinated on all aspects of the eating habits of people in and near that country. 3. What steps might Disney take to ensure better success with a future Chinese theme park location? The castles of Disneyland will be built on farmland at the edge of a soulless business centre of Shanghai, rising to join countless skyscrapers and apartment blocks, and a sea of offices and shopping malls.
Although Shanghai is China’s richest city, less than two decades ago the business district, Pudong, was vegetable and paddy fields. The city is also facing tough competition from other areas and will welcome a boost from Mickey Mouse. With some 80 million people in the city and nearby areas, the park will have a regular supply of visitors. Disney has said that the Shanghai park will be a Magic Kingdom with Chinese characteristics — including Chinese food, a ban on characters wearing green caps (a sign in China of an unfaithful spouse), and feng shui experts making sure everything is positioned to bring good luck and prosperity.
Disney’s plans are ambitious: If further development of the resort happens as expected over the coming decades — still a big if — it will encompass more than 1,700 acres and have a capacity rivaling Disney World in Florida, which attracts about 45 million annual visitors. The company’s goal is to create an engine that will drive demand among China’s 1. 3 billion residents for other Disney products, from video games to Broadway-style shows to DVDs.
Details about rides are still being worked out, but there are to be a smattering of classic attractions and new rides developed specifically for Shanghai, perhaps incorporating Chinese stories and history. Sabrina, You are right about cultural and social barriers, that Disney Company had to overcome in order to be successful in global market. The problems with the EuroDisney project illustrate that even if a company has been successful in the past, as Disney had been with its California, Florida, and Tokyo theme parks, future success is not guaranteed, especially when moving into a different country and culture.
The appropriate adjustments for national differences always should be made. For example, Disney planners at the Hong Kong Magic Kingdom worked hard to ensure that the park complied with Chinese traditions of feng shui and auspicious. Also, a restaurant contains 2,238 lotus flowers, a lucky number in Chinese mythology, while a banquet hall has an area of 888 square metres. Eight is also a lucky number in China.