Htm 260 2nd term paper on Disney France PDF

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Paper that summarizes in detail the financial disaster Disney France faced after opening its park. The paper mentions issues such as implementing Disney culture to its employees, failing to anticipate Frances economic recession, and more are analyzed. Paper is properly cited and follows direction...

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Disney abroad In the wise words of Max McKeown, a notable management consultant, “All failure is failure to adapt, all success is successful adaptation”(World Press). This quote summarizes how navigating the global market is tricky, and there will most likely be mistakes. However, it is those failures that will be used to drive home the lessons learned and make the next decisions that much easier. International trade can increase a company’s sales and profits, can enhance its prestige, and create jobs. The benefits of taking its business globally was what attracted Disney to build multiple parks abroad, first in Tokyo and then in France. Lyn Burgoyne’s “Walt Disney Company's Euro Disneyland Venture: A study in corporate foreign expansion” takes a look into the human resource disaster that unfolded after opening its second Disney park abroad. While Disney found much success in the Japanese market, this economic prowess was not achieved to the same level in France for a variety of reasons including understanding the French culture, and improper budgeting. Distinct cultural differences between the French and American people were one reason for the financial problems encountered by Disneyland Paris. Disney was well known for its positive culture and for being a welcoming place with appeal to all ages and genders. Adapting to the French culture was one of Disney’s biggest mistakes after opening its second international park. Employee interactions at the two Disney parks in the United States, located in Orlando and Anaheim, are very similar. Disney is famous for its rigorous staffing and management training in order to promote its signature magical culture. Disney teaches its cast members to adhere to its strict 13 page manual of dress codes and to maintain the “Disney Look”(Burgoyne 6). The Disney look includes greeting guests with a smile and going above and beyond with respect to customer satisfaction. Implementing the Disney look in France was difficult because the European culture is vastly different than the lifestyle found in the United States. In the document

it discusses how the French were less likely to abide by a dress code, such as tolerance to facial hair and dyed hair. The French pride themselves on individuality and when Disney tried implementing a certain “company look” it was met with backlash by the new employees. Disney’s Human resource department was very obtuse for thinking they could just use the same employer training they use in the US without receiving backlash by its French workers. Dress code issues with the French staff was only the start of Disney’s problems in adapting to France’s cultural habits. Drinking and eating habits were other areas that Disney failed to consider before the opening of the Disneyland Paris. For example, Walt Disney “banned liquor from being served at Disneyland, and that rule remains in place today at the California park. Its Florida counterpart, the Magic Kingdom, relaxed the no-alcohol policy a few years ago” (Levine USA today). The document mentions how the French are more open to serving alcohol in public venues, such as having a glass of wine during lunch. Another example of the cultural differences which Disney failed to understand were the typical spending patterns of the French vs. the Americans, especially as it relates to merchandise purchasing. For instance, upon walking into Disney’s Magic Kingdom you enter a glorious street, called Main Street, which is filled with restaurants and stores all shamelessly selling the Disney brand. Tee-shirts, toys, food, all sporting the logo of different Disney movies, contribute significantly to Disney’s bottom line. It was assumed that this business plan, which is highly successful in the U.S. and Tokyo, would be replicated in France. However, Disney did not take into account the differences in spending patterns of the French. Walt Disney Company calculated that each guest would buy $33 worth of food and souvenirs per day per customer. In actuality, the merchandising sales were 12% less than plan, mainly due to the lower average income of the Europeans vs. the Japanese. In addition, it was found that French are more likely to spend their money over long vacations, and not four-day spending sprees.

Disney was correct in that its Euro park was seen as a multi-day getaway versus a typical one day trip. However, what Disney missed was that France was in the midst of a major recession affecting the real estate market. Disney had the goal of buying copious amounts of property to build large hotels to host French families on their multiple day vacations. Previously, Disney’s major mistake in Orlando was allowing other hotel chains to build lucrative properties surrounding their theme park. In fact, the Walt Disney Company owns only 14% of the hotel properties surrounding its park. To compensate for their missed opportunities in Orlando, Walt Disney Company bought more land than it needed in Paris. The total 4,800 acre property was intended to be used to develop the land and then sell it to prospective buyers. Disney planned to design and build future areas in the resort and then sell it off as completed commercial properties. Disney’s aspirations were so high that they “budgeted for real estate to account for 22% of revenues in 1992, 32% of revenues in 1993, 40% of revenues in 1994, and 45% in 1995”(Burgoyne). Unfortunately for Disney, France was going through a collapse of the real estate market due to bad economic times. Failing to anticipate France’s economic recession, plus the inherent cultural differences between the Americans and the French, lead to poor financial results early on. Other planning errors cost Disney considerably. For example, CEO Michael Eisner’s decision to make a last minute removal of two large steel staircases because they blocked a view of the Star Tours ride ended up costing $300,000 in construction costs. Euro Disney executives predicted its labor costs would be 13% of their revenues, but the 1992 figure was reported to be 24% and then up 40% by 1994 (Burgoyne). Euro Disneyland proved to be a financial burden for the Disney company, in large part due to the poor communication and preparedness moving its company globally. In 1994, the

company decided to enact a rescue plan to save the struggling new theme park. The first area addressed was unwriting 51% of the shares that were owned by shareholders to repurchase them at below market prices. By doing this “the Walt Disney Company agreed to spend about $508 million to bail out its 49% shares as well as buy certain Euro Disneyland park assets for 1.4 billion francs (about $240 million) and lease them back at terms favorable to Euro Disneyland” (Burgoyne 9). This was the start to Disney cutting its exorbitant debt in half. Other than confusing Wall Street methods to cut its debt, Disney found some success with its bold marketing decisions. This pivot began by changing its name from Euro Disneyland and putting more of an emphasis on its true location calling it “Disneyland Paris.” Disney also was able to cut its debt by eliminating 8.6% of its total workforce (Burgoyne 10). This turnaround didn't just involve paying closer attention to the balance sheets, but also towards improving employee relations. One of the most successful hospitality entrepreneurs, Danny Meyer said “put employees first...the best way to ensure a great customer experience is to put your employees first” (Cutrone Inc). Disney decided to follow this method by steering away from implementing its American working practices and using more of a French approach. This updated approach used French job classifications, including working a maximum week and annualized hourly work schedules. After reading about Disney’s struggles in France it is more critical for international human resource management to understand the cultural environment. Disney seemed to have ambitious plans when coming to Paris believing they had the perfect location because of its close proximity to Paris and having “17 million people that can reach the Euro Disneyland resort within two hours by car and 310 million can fly” (Burgoyne 2). However, besides the great location, Disney ignored key problems, such as understanding their new consumer and their employees. A huge reason why Disney did not meet its targeted revenue points was due to a number of factors including France was in the midst of a recession when Euro Disney first

opened. If I were management, I would change a host of things in how Disney approached their theme park foray into Europe. First I would start with the questions, why France, what do we the company want to see different in France than in other parks? Asking these fundamental questions before exploring into uncharted territory is essential for any business to see successful results. It was evident from the reading that Disney had the numbers to back it up and that there was a market for its brand in France because of the success its films in their country, as well being an ideal location for its great transportation network. However, what Disney failed to do was have the knowledge of its consumer down to a tee. What I would have done was have hired Disney employers to spend an extended period of time living in France, trying as much as possible to assimilate into the culture. Having Disney staff learning the ins and outs of the French people exploring what they like and what they don’t. Asking questions such as, would a Disney theme park be good for the region is crucial. Furthermore, I would delegate my staff to ask questions what would the people want to see at the park, including park amenities, food options, would it be an overnight adventure or just a one day stay. Having this information would have allowed Disney to gain insight on what to build into its park as well know how much property would be needed to buy. Since I was a kid I have been with my family to Disney World Orlando numerous times. As a kid and still to this day I am enchanted by the glorious structures and layout of the park. Before this reading of the economic turmoil that Disney faced after opening Disneyland Paris I never thought about all the strategic planning that goes on behind the scenes. After reading about all the cultural mishaps that went on I am much more aware of the staggering difficulties that a business can face oversees. What makes Disney such a profitable franchise in the states is that it doesn’t just understand its consumer but also its employees. I believe Disney got to carried away with its domestic success and pushed to hard in making Disney a worldwide

mecca. Disney Human Resources failed its company by forcing a completely different culture onto not just its staff, but also its new consumers. In conclusion I do not believe Disney should have went overseas and instead should have capitalized on building its empire in the United States even furthur where a market already exists.

Works Cited Delaney, Laurel. “20 Factors to Consider Before Going Global.” Entrepreneur , 15 Dec. 2004, www.entrepreneur.com/article/75138.

Cutrone, Carolyn. “Danny Meyer to 'Treps: Put Your Employees First, Customers Will Follow.” Inc.com, Inc., www.inc.com/carolyn-cutrone/danny-meyer-speaks-at-inc-business-owners-council.html.

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