A Critical Analysis of Walt Disney Corporation Management



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Analysis of Euro Disney

Dallas Baptist University

Introduction

From the outset, poor business decisions, miscalculations and cultural differences (roadblocks) have plagued Euro Disney. The Walt Disney Corporation had a vision to build a new theme park in Europe, located in Paris that would dwarf their other elaborate parks in Florida and California. This very vision could have been a warning sign to many, as the CEO Michael Eisner yearned for this park to be bigger, more elaborate and most of all more profitable than its sister parks in the United States.

Problem Analysis

The Walt Disney Corporation went into the Euro Disney project with high hopes, as its new management team had never failed to improve the company’s revenues in the past. This thinking brought about certain overconfidence among the executives namely Michael Eisner, the CEO. Blinded by delusions of grandeur, Eisner began a quest to build the most lavish theme park ever seen to the world. Eisner quickly began engaging Disney’s most creative and innovative developer teams to assist him in this magical creation. Soon thereafter, he began to shrug off recommendations of his executives and listening more to his developer teams and park architects.

The financial shortfalls have also been a large burden for Disney to bare with its new park in Paris. Just as Disney set out to build the most lavish theme park that the world had ever seen they also began aggressively developing the outlying areas. The corporation bought up large sects of land and began building multimillion-dollar properties including an 18-hole golf course similar to the ones found around the Florida and California parks. Soon thereafter, they added on to the course with another nine holes that would connect 600 new luxury homes, which were never built. The company went into the deal too aggressively without making sound economic decisions based on the European economy at the time.

The European culture also troubled the American corporation and its ability to associate with the people of the surrounding nations. One such problem that could have been easily avoided was the allowance of alcohol to be served in the park. The standard practice of the Disney Corporation is to establish and promote a wholesome family atmosphere in its parks, which includes the no alcoholic beverage policy. While this policy has never been challenged in the Florida and California parks, the management had underestimated the importance of the beverages to the Europeans and their lifestyle. The majority of the European countries consume alcohol liberally and it is not seen as taboo among their society, France was no different. Disney’s management quickly reversed the prohibitive policy and soon allowed the beverages to be served inside the park. This example is only one of the cultural differences encountered by Disney. Had they performed proper research prior to the venture they might have better understood the European view on this matter.

Another such difference came to them concerning labor issues with the park workers. It was not uncommon to tell employees at the American theme parks that they would not be needed to work if the park was not busy that day. This was not necessarily the case in France. The Europeans are used to a more stable set of work hours than Americans and would not tolerate this type of treatment from Disney. Again, if proper research were performed this situation may have been avoided as well.

Disney selected a very strategic location for the theme park. According to data published by The World Tourism Organization in 1999, France ranked number one in the world as the top destination for international tourists holding 11% of the market share (World Tourism Organization). Euro Disney has virtually no direct competition from other theme parks in Europe. This fact bodes well for the park, as it will provide a single choice for travelers when deciding on vacation at a family entertainment venue. The only real competition that Euro Disney will face would possibly come from Parisian landmarks such as the Eiffel Tower or the Louvre. Although these attractions draw a considerable number of visitors each year, they demographically target different patrons than the Disney theme park.

The Disney name has been around since 1923, and with 78 years of marketing, it has gained global recognition as the premier family entertainment provider. This brand recognition, as well as annual revenues exceeding $8.5 billion (USD), places the company in a very unique and stable position that has allowed it to take certain risks such as the Euro Disney project.

Expert Opinion

Michael Porter outlined five major forces that pose a threat to an organization and stated that they should be taken into account “…to better understand the industry context in which the firm operates” (). The five forces are: Barriers to entry, Threat of substitutes, Supplier power, Customer power and Level of rivalry (Jones, p. 245). First, the barriers to entry are relatively high in the family entertainment industry. The Disney Corporation has developed a very unique corner in the business that makes it very difficult for new competitors to enter the market. Second, the threat of substitutes must be evaluated. In Disney’s situation, the threat of a substitute in this case is relatively low. While there are many theme parks located in the United States, such as Six Flags owned by AOL-Time Warner, they may not necessarily have the global recognition that the Disney parks have. The suppliers’ power when dealing with Disney is relatively high. Since Disney is such a specialized organization, it demands many unique products most likely from a select group of companies, which also means Disney could face a significant cost to switch to other suppliers. The power of the buyers is relatively high as well, in that they are buying a service that is not a necessity for life. Since the theme park is dependent upon the spending of the consumers on such intangible items such as gifts, concessions and admission tickets, it must adapt to their spending habits to meet their demands. The last point Porter emphasizes is the level of rivalry the organization may face. In the case of Euro Disney, this is relatively low risk since there is not a direct competitor located in France. Factors such as brand identification, high switching costs and extremely high exit barriers prevent other firms from entering into respectful competition with Disney (). As stated previously, these five forces should be taken into consideration to make intelligent and logical business decisions as they relate to outside sources.

Geert Hofstede stated that there are four dimensions of national culture that should be examined when planning global expansion:

Power Distance, that is the extent to which the members of a society accept that power in institutions and organizations is distributed unequally.

Uncertainty Avoidance, that is the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity, which leads them to support beliefs promising certainty and to maintain institutions protecting conformity.

Individualism, which stands for a preference for a loosely knit social framework in society in which individuals are supposed to take care of themselves and their immediate families only; as opposed to Collectivism, which stands for a preference for a tightly knit social framework in which individuals can expect their relatives, clan, or other in-group to look after them, in exchange for unquestioning loyalty.

Masculinity, which stands for a preference for achievement, heroism, assertiveness, and material success; as opposed to Femininity, which stands for a preference for relationships, modesty, caring for the weak, and the quality of life. In a masculine society even the women prefer assertiveness (at least in men); in a feminine society, even the men prefer modesty (Fulk, online).

Hofstede developed these thoughts to give organizations a model in which to measure National cultural distance - the degree to which the cultural norms in one country are different from those in another country. It becomes increasingly important for companies to possess a diverse set of routines and procedures if they intend to compete in a diverse world (Morosini, pp. 137-159).

Recommendations

When doing business internationally it is important for the firm and its management to consider the values and norms of the countries they are operating in. It is not always safe to assume that a management technique that works in the United States will work in every culture around the globe (Jones, p. 126). Hofstede’s Model of National Culture will help firms determine some of these differences that may occur abroad and enable the managers to be more perceptive to the behavior that is appropriate and inappropriate for conducting business in these countries. Disney did realize that there would be some cultural backlash from the outset, and their decision to hire Robert Fitzpatrick was a step in the right direction. Philippe Bourguignon, a native Frenchman, was later brought on board to be the company’s new Chief Executive replacing Mr. Fitzpatrick. It is essential to have a culturally diverse executive team in place when operating globally in order to ensure the management systems and behavioral differences match those in the country. With the insight of this diverse team, a plan should be developed to incorporate traditional European festivities into the schedule of the park. Examples of these international festivals may include an Octoberfest for the German visitors, Bastille Day for the French or a Carnevale celebration for Italians.

It is important for the executive level of management to make decisions without the bias of personal experience, beliefs or past performance. Several of these biases are obvious when looking at the decisions made by the Disney Corporation. First, decisions should not be made based on the prior experiences or beliefs when there is evidence that this information is wrong (Jones, p. 210). For example, Disney imposes “…a rigid code of employee appearance that imposes a well-scrubbed, all-American look on all 12,000 ‘cast members’…. Employees…may not smoke, chew gum or dye their hair an unusual shade; all must use deodorant and wear ‘proper underwear’ (Phillips, p. 47). The French culture and hygiene standards do not necessarily fall in line with the American standards projected by Disney. Proper research should be performed in the foreign market to avoid situations such as this.

It is also very important that the top-level management not “overestimate their ability to control activities and events” surrounding them (Jones, p. 211). Illusion of control can plague a manager and bias their decision-making ability at times. Michael Eisner may have suffered from this bias when deciding on how and where to build the park. One such decision was Disney thought “that it could predict future living patterns in Paris” (Gumbel, pp. A1-A12). Eisner was determined that by building the park on the East Side of Paris that he would attract not only commercial development but also residential. This too proved to be a fallacy in the decision making process since the majority of the Parisians live in the western part of the city (Gumbel, pp. A1-A12).

Since the business of theme parks and entertainment have such high fixed costs, the park must rely on good attendance in order for the company to make a profit. Steps are being made in the right direction to increase attendance, but still more emphasis should be placed on this aspect of the business. Disney could develop a packaged vacation deal that would include things such as air and/or rail fare, lodging and admission tickets to promote longer stays at the park. Incentives could be given for staying additional nights at the Disney hotels, such as stay four nights and the fifth night is free. This will allow the visitors to visit the park an extra day promoting more spending on items inside the gates. Disney could also reduce the rates during the off-season to encourage travelers to visit during the colder months of the year. A global marketing campaign targeting consumers of all nationalities and ethnic backgrounds could also promote attendance. With the proper marketing and advertising developed, the potential visitors will be able to see what it is they are missing by not going. The advertisements used would need to cater specifically to each culture targeted and their values they hold in order to reach the maximum audience.

Conclusion

With the proper research and adaptation to the European culture, the Disney Empire will thrive abroad just as it has at home. It is essential however, that in the future, the managers as well as the executive teams evaluate the risk factors involved in global projects. By performing this evaluation, the company will be less prone to failure from cultural backlash.

The Walt Disney Corporation is poised to remain the global leader in the family entertainment sector well into the future. They have established themselves over the past 78 years in a number of diverse fields such as films, theme parks and merchandise in a way that they are able to withstand many economic hardships.

BIBLIOGRAPHY

Corliss, Richard. “Voila! Euro Disney opens near Paris, France,” Time, 20 April 1992, 82-84.

Fulk, Janet. “Hofstede on national culture and org culture,” University of Southern California. Research Computing Facility Web Pages on-line. Available from ; Internet; accessed 16 November 2001.

Gumbel, Peter and Richard Turner, "Mouse Trap," Wall Street Journal, 10 March 1994, A1-A12.

Jones, Gareth R., Jennifer M. George and Charles W.L. Hill. Contemporary Management, 2nd ed. Boston: McGraw-Hill, 2000.

Morosini, Piero, Scott Shane and Harbir Singh. “National cultural distance and cross-border acquisition performance,” Journal of International Business Studies 23, no.1 (Spring 1998): 137-159.

Phillips, Andrew. “Where’s the magic? Problems plague Euro Disney’s First Year,” Maclean’s 106, no.18 (May 3): 47.

. “Porter’s Five Forces,” . Available from ; Internet; accessed 10 November 2001.

World Tourism Organization. Tourism Highlights 2000, 2nd ed. Madrid, Spain: August 2000.

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