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CASE 2 1 THE NOT SO WONDERFUL WORLD OF DISNEY HAS DISNEY

LOOKED TO ITS PAST TO SECURE ITS FUTURE?


Introduction With over 15 million visitors in 2014,
Disneyland Paris is officially Europes most visited
tourist destination. And in 2015, Disney will open its
largest park ever in mainland China. But Disney
resorts have had a difficult history and heavy debt
across several of the theme parks continues to lead
many to ask what is the future of Disneyland?

on its year-long, temperate, and sunny Mediterranean


climate, but insufficient acreage of land was available
for development around Barcelona.

A Troubled History - In April 1992, EuroDisney


SCA opened its doors to European visitors. Located
by the river Marne some 20 miles east of Paris, it was
designed to be the biggest and most lavish theme
park that Walt Disney (Disney) had built to datebigger than Disneyland in Anaheim, California;
Disneyworld in Orlando, Florida; and Tokyo
Disneyland in Japan.
Much to Disney managements surprise, Europeans
failed to go goofy over Mickey, unlike their
Japanese counterparts. Between 1990 and early 1992,
some 14 million people had visited Tokyo
Disneyland, with three-quarters being repeat visitors.
A family of four staying overnight at a nearby hotel
would easily spend $600 on a visit to the park. In
contrast, at EuroDisney, families were reluctant to
spend the $280 a day needed to enjoy the attractions
of the park, including les hamburgers and les
milkshakes. Staying overnight was out of the
question for many because hotel rooms were so high
priced. For example, prices ranged from $110 to $380
a night at the Newport Bay Club, the largest of
EuroDisneys six new hotels and one of the biggest in
Europe. In comparison, a room in a top hotel in Paris
cost between $340 and $380 a night.
In 1994, financial losses were becoming so massive
at EuroDisney that Michael Eisner had to step in
personally in order to structure a rescue package.
EuroDisney was put back on firm ground. A two
-year window of financial peace was introduced, but
not until after some acrimonious dealings with
French banks had been settled and an unexpected
investment by a Saudi prince had been accepted.
A Real Estate Dream Come True - Expansion into
Europe was supposed to be Disneys major source of
growth in the 1990s. The Paris location was chosen
over 200 other potential sites stretching from
Portugal through Spain, France, Italy, and into
Greece. Spain thought it had the strongest bid based

In the end, the French governments generous


incentives, together with impressive data on regional
demographics, swayed Eisner to choose the Paris
location. It was calculated that some 310 million
people in Europe live within two hours air travel of
EuroDisney, and 17 million could reach the park
within two hours by car-better demographics than at
any other Disney site. Pessimistic talk about the
dismal winter weather of northern France was
countered with references to the success of Tokyo
Disneyland, where resolute visitors brave cold winds
and snow to enjoy their piece of Americana.
Furthermore, it was argued, Paris is Europes most
-popular city destination among tourists of all
nationalities.
Spills and Thrills - Disney had projected that the
new theme park would attract 11 millions visitors and
generate over $100 million in operating earnings
during the first year of operation. By summer 1994,
EuroDisney had lost more than $900 million since
opening. Attendance reached only 9.2 million in
1992, and visitors spent 12 percent less on purchases
than the estimated $33 per head. Ironically enough,
an unforeseen combination of transatlantic airfare
wars and currency movements resulted in trip to
Disneyworld in Orlando being cheaper that a trip to
Paris with guaranteed good weather and beautiful
Floridian beaches within easy reach. EuroDisney
management took steps to rectify immediate

problems in 1992 by cutting rates at two hotels up to


25 percent, introducing some cheaper meals at
restaurants, and launching a Paris ad blitz that
proclaimed California is only 20 miles from Paris.

An American Icon - One of the most worrying


aspects of EuroDisneys first year was that French
visitors stayed away; they had been expected to make
up 50 percent of the attendance figures. Two years
later, Dennis Speigel, president of the International
Theme Park Services consulting firm, based in
Cincinnati, Ohio, framed the problem in these words:
The French see EuroDisney as American
imperialism -plastics at its worst. French culture has
its own lovable cartoon characters such as Astrix,
the helmeted, pint-sized Gallic warrior who has a
theme park located near EuroDisney. Parc Astrix
went through a major renovation and expansion in
anticipation of competition from EuroDisney.
Early advertising by EuroDisney didnt help and
seemed to aggravate local French sentiment by
emphasizing glitz and size, rather than the variety of
rides and attractions. Disney managers also
succeeded in alienating many of their counterparts in
the government, the banks, the ad agencies and other
concerned organizations. A barnstorming, kick-thedoor-down attitude seemed to reign among the U.S.
decision makers.
Storm Clouds ahead Disney and its advisors failed
to see signs at the end of the 1980s of the
approaching European recession. Other dramatic
events included the Gulf War in 1991, which put a
heavy brake on vacation travel for the rest of that
year. Other external factors were high interest rates
and the devaluation of several currencies against the
franc. Difficulties were also encountered by
EuroDisney with regard to competition. Landmark
events took place in Spain in 1992. The worlds Fair

in Seville and the 1992 Olympics in Barcelona were


huge attractions for European tourists.
Disney managements conviction that it knew best
was demonstrated by its much-trumpeted ban on
alcohol in the park. This proved insensitive to the
local culture because the French are the worlds
biggest consumers of wine. To them a meal without
un verre de rouge is unthinkable. Disney relented. It
also had to relax its rules on personal grooming of the
projected 12.000 cast members, the park employees.
Women were allowed to wear redder nail polish than
in the United States, but the taboo on mens facial
hair was maintained. We want the clean-shaven, neat
and tidy look, commented David Kannally, director
of Disney University s Paris branch.
The outstanding success record of Chairman Eisner
and President Wells in reviving Disney during the
1980s led people to believe that the duo could do
nothing wrong. There was a tendency to believe that
everything they touched would be perfect.
Telling and Selling Fairy Tales - Mistaken
assumptions by the Disney management team
affected construction design, marketing and pricing
policies, and park management, as well as initial
financing. For example, parking space for buses
proved much too small. Restroom facilities for
drivers could accommodate 50 people; on peak days
there were 200 drivers. With regard to demand for
meal service, Disney executives had been
erroneously informed that Europeans dont eat
breakfast. Restaurant breakfast service was
downsized accordingly, and guess what? Everybody
showed up for breakfast. We were trying to serve
2,500 breakfasts inn a 350-seat restaurant.
In promoting the new park to visitors, Disney did not
stress the entertainment value of a visit to the new
theme park. The emphasis on the size of the park
ruined the magic, said a Paris based ad agency
executive. But in early 1993, ads were changed to
feature Zorro, a French favorite; Mary Poppins; and
Aladdin, star of the huge money-making movie
success. A print ad campaign at that time featured
Aladdin, Cinderellas castle, and a little girl being
invited to enjoy a magic vacation. Early in 1994 the
decision was taken to add six new attractions and
Donald Ducks birthday was celebrated on June 9
all in the hope of positioning the park as the No. 1
European destination of short duration.
Tomorrowland - Faced with falling share prices and
crisis talk among shareholders, Disney was forced to

step forward in late 1993 to rescue the new park.


Disney announced that it would fund EuroDisney
until a financial restructuring could be worked out
with lenders. However, it was made clear by the
parent company, Disney, that it was not writing a
blank check.
Prince Charming Arrives - In June 1994,
EuroDisney received a new lifeline when a member
of the Saudi royal family agreed to invest up to $500
million for a 24 percent stake in the park. The prince
has a reputation in world markets as a bottom
fisher buying into potentially viable operations
during crises.

Theme Park Expansion: Hong Kong, 2005


Disney had one great success and one great failure in
its international expansion. Its next launch had to
succeed at all costs. This time Disney was prepared
for a long planning period. Disney now knew that it
must consider the various cultural nuances and
sensitivities of its host nation. The design of Hong
Kong Disneyland took into account Chinese cultural
aspects and planners went to great lengths to ensure
that it was well received by the local Hong Kong
population and their projected mainland Chinese
visitors.

Management and Name Changes Frenchman


Philippe Bourguignon took over at EuroDisney as
CEO in 1993 and has navigated the theme park back
to profitability. He was instrumental in the
negotiation with the firms bankers, cutting a deal
that he credits largely for bringing the park back into
the black.
Perhaps more important to the long-run success of the
venture were his changes in marketing. The panEuropean approach to marketing was dumped, and
national markets were targeted separately. This new
localization took into account the differing tourists
habits around the continent. Separate marketing
offices were opened in London, Frankfurt, Milan,
Brussels, Amsterdam, and Madrid, and each was
charged with tailoring advertising and packages to its
own market. Prices were cut by 20 percent for park
admission and 30 percent for some hotel room rates.
Special promotions were also run for the winter
months. The central theme of the new marketing and
operations approach is that people visit the park for
an authentic Disney day out. They may not be
completely sure what that means, except that it
entails something American. This is reflected in the
transformation of the parks name. The Euro in
Eurodisney was first shrunk in the logo, and the word
land added. Then in October 1994 the Euro was
eliminated completely; the park is now called
Disneyland Paris.
In 1996 Disneyland Paris became Frances most
visited tourist attraction, ahead of both the Louvre Art
Museum and the Eiffel Tower, 11.7 million visitors (a
9 percent increase from the previous year) allowed
the park to report another profitable year.

Cultural Nuances - Although people from Hong


Kong live with cutting edge technology, superstition
still plays a vital part in their culture. Numbers and
feng shui for example are taken seriously in all
aspects of everyday life and business. The Chinese,
in many cases, would attribute business failure to bad
feng shuihence few dare to ignore it and especially
not Disney after its experiences in Paris.

The fundamental feng shui principle is to create


harmony between humanity and the earth. Feng shui
principles have been adopted in the placement,
orientation and design of the park. A geomancer, a
feng shui specialist, was consulted before the
construction of the theme park began and Feng shui
practices at Hong Kong Disneyland are prevalent. For
example, the main entrance gate of the theme park
was shifted 12 degrees to maximise good energy low.
Boulders have been placed throughout the theme park
to represent stability. To ensure a balance of the five
elements of feng shui, some areas have been
designated as no fire zones . This meant that Disney
had to ensure that there were no kitchens in these
areas. The theme park has no fourth floor as the
number four sounds the same as the word death
but the number eight, considered lucky, is used
extensively. Numbers play an important role in
Chinese culture and it is no coincidence that the
Summer Olympics in Beijing were scheduled to open
on 8/8/8 at 8 p.m.
Apart from lucky numbers, the Chinese love the
colour red due to its symbolic representation of
prosperity; that is why it is seen throughout the
theme park. Chinese taboo and superstition have
been taken into consideration as well. Certain
merchandise is not sold in the park. Clocks are
nowhere to be seen because giving a clock as a gift
is strictly forbidden in Chinese cultureit is a bad
omen and insinuates that one will go to a funeral.
Green hats are also not on sale. This is because a
man wearing a green hat symbolises that his
partner has committed adultery.
Besides feng shui, many adaptations have been
made to better suit Chinese visitors. Its employees
are culturally diverse and many speak a number of
languages. Hong Kong Disneyland is officially
trilingual with English and two dialects of Chinese
(Mandarin and Cantonese), which are used in all
signage and audio-recorded messages. Chinese food
is also abundant in the theme park. Although Western
food such as hotdogs, hamburgers and candyfloss is
served, lots of local delicacies can be enjoyed as well.

Disneys newest venture


Disney has now launched its theme parks in
three international markets. Each experience has
been unique. Tokyo Disneyland was clearly
beginners luck. Paris Disneyland proved to be one
of the companys biggest blunders. Changes have
been made, but the Paris operation has never
yielded their projected returns. Hong Kong
Disneyland is truly a marriage of East and West. Thus

far, the venture has been successful, but time will tell.
All eyes are now on Disneys next theme park
venture and its most risky investment yet an
estimated 15 billion theme park investment in
Shanghai China.

China 2014
As trite as the phrase think global, act local may be,
it nevertheless encapsulates plans for The Walt
Disney Companys approach to making a success of
its business in China. To that end, producing content
that has a cultural and emotional resonance with
Chinese consumers is seen as crucial.
Disney has placed a huge bet on Chinas shifting
approach to Westernized entertainment.

It wants to create an engine that will drive demand


among Chinas 1.3 billion residents for other
products, like Pixar films and princess dolls.
Like many global companies, Disney is putting its
faith in the rise of the Chinese consumer, and at the
same time it is counting on Shanghais specific
ambitions to become a world-class city.

Challenges Ahead
But many are sceptical about Disneys latest venture.
The Disney brand is also not as deeply ingrained in
China as in other parts of the world. China is the only
major country that does not have a Disney Channel,
the companys typical way of building its brand and
stoking demand for its experiences and products.
Even the concept of brand is a tough sell in China,
where cheap knockoffs proliferate overnight.
Notably, Disney did not identify which of its classic
rides Space Mountain, Its a Small World, Pirates
of the Caribbean it will bring to the Chinese
mainland. One reason may be those knockoffs: When
Disney unveiled detailed plans for Hong Kong

Disneyland, rival parks in Asia quickly installed


cheaper rides with striking similarities.
Disneys arrival in Shanghai has been contentious
among many Chinese locals. The city has 20 million
residents, Chinas biggest stock exchange and most
luxurious shopping malls, and two major airports. An
estimated 330 million people live within a three-hour
trip. But residents in the area where the park is being
built, have complained about poor treatment by
relocation companies. Relocation in China is a huge
problem because land prices are soaring with housing
prices, and the compensation given to residents often
is not enough. Many residents are ultimately forced
off the land.

American culture. Disney agreed to heavily


incorporate Chinese culture; dressing Mickey Mouse
in a kung fu robe would not do. Authentically
Disney but distinctly Chinese is how Robert Iger,
Disneys chief executive, described plans for the
Shanghai resort in an interview. But time will tell if
Disney has looked to the past to secure its future

Sources:
Not So Wonderful World of EuroDisney Things are
Better Now at Paris Disneyland Taken From:
Cateora and Graham, International Marketing,
McGrawHill

Disney is also walking a careful line with the Chinese


government, which approved the park, after two
decades of off-again, on-again talks, on the condition
that it would be sharply different from the
original Disney which has become a symbol of

Kweh, John and Cohen, Justin, (2006) Hong Kong


Disneyland: When Big Business Meets Feng Shui,
superstition and numerology, School of Marketing,
University of South Australia and Justin Cohen,
Ehrenberg-Bass Institute for Marketing Science,
University of South Australia
Barboza, David (2011) Disney plans lavish park in
Shanghai, New York Times