Disney in China

Executive Summary American businesses make assumptions about the transferability of their business, management, marketing, economic and structural models of organizing which frequently fail to take into consideration cultural differences. An example of the consequences of such an approach to intercultural business practice can be found in the Disney Corporation’s recent Chinese venture, now called Disneyland, Hong Kong. Lack of cultural sensitivity and the negative infiltration strategy used by the Disney Corporation resulted in a great loss of time, money and reputation for which the corporation has only recently begun to compensate.

After examining many struggles in Japan and France, especially in France, this paper examines how the strategy Disney used when entering China, a crucial venture for Disney’s success worldwide. Did Disney learn from the mistakes it made in Japan and France and implement those strategies in China? It is the primary aim of this paper that the initial losses experienced by the Disney Corporation in Tokyo, Paris and Hong Kong may have been prevented if only its representatives had known then what they know now: that organizations are not distinct, separate entities capable of functioning outside their physical, social and cultural environments.

This calls for a different approach to Disney’s international business strategy , one which begins with the most basic aspect of human organizations, namely effective, meaningful, communicative interactions between people. 1. The Walt Disney Company The Walt Disney Company is the second largest media and entertainment corporation in the world, after Time Warner, according to Forbes. Probably most noted for its cartoon-like movies and ostentatious theme parks, Disney has become a worldwide venture.

Founded on October 16, 1923 by brothers Walt and Roy Disney as a small animation studio, it has become one of the biggest studios worldwide, and is noted as having eleven theme parks worldwide and several television networks, including the American Broadcasting Company (or ABC). Disney’s corporate headquarters and primary production facilities are located in California at the Walt Disney Studios (Burbank) and its primary theme park (Disneyland) is also located in Anaheim, California. The company is a component of the Dow Jones Industrial Average. It had revenues of $34. 3 billion in 2006. 2.

Disney Theme Parks Worldwide Walt Disney Parks and Resorts is the division of The Walt Disney Company that conceives, builds and manages the company’s theme parks and vacation resorts, as well as a variety of additional family-oriented leisure enterprises. It is one of the four major units of the company, the other three being Consumer Products, Media Networks and Studio Entertainment. The Parks and Resorts division was founded in 1971 as Walt Disney Attractions when Disney’s second theme park, the Magic Kingdom at the Walt Disney World Resort in Florida, opened, joining the original Disneyland in California.

The chairman of Walt Disney Parks and Resorts is James A. “Jay” Rasulo, formerly the chairman of Disneyland Resort Paris. 2. 1 Success in Japan Tokyo Disney Resort, located in Urayasu, Chiba, Japan, opened in 1983. In 2001 the resort expanded with Tokyo DisneySea. There are several resort hotels on site, but only two are actually owned by the resort, which boasts the largest parking structure in the world. Tokyo Disney Resort is fully owned and operated by The Oriental Land Company and is licensed by the Walt Disney Company.

The resort was built by Walt Disney Imagineering, and Disney maintains a degree of control; Nick Franklin leads the Walt Disney Attractions Japan team at the Walt Disney Company, which communicates with the Oriental Land Company over all aspects of the Resort, and assigns Imagineers to the Resort. Standardization and transference of the American culture worked beautifully in Japan, turning it into a highly profitable venture, which continues to grow, leading to the opening of a second resort, Tokyo DisneySea.

Indeed, Disney’s success in Japan is evidenced by the fact that it is the only resort to contribute higher earnings (royalties) to The Walt Disney Company in the fiscal year 2003. 2. 1. 1 Cuteness a factor of success The overall appeal of Disney works the same as in other cultures but there appears to be an exaggerated and residual emotional attachment to the characters that makes it not uncommon for middle aged executives to have a Mickey Mouse pendant dangling from their cell phone or a fluffy Winnie the Pooh attached to their laptop case.

Mike Fiorelli, an expert on Japanese consumer trends thinks that the Disney ‘cute’ factor is very important to its success in Japan. Further than this, cute characters are also endowed with a relatively higher amount of trust by Japanese consumers. Japan is a culture affixated on cute characters (Hello Kitty and many anime characters). 2. 2 Struggles in Paris Disneyland Resort Paris, Disney’s second resort complex outside the United States, opened in 1992 as Euro Disney Resort. Located in Marne-la-Vallee, in the suburbs of Paris, France, it features two theme parks, a shopping complex and six Disney resort hotels.

It is maintained and managed by Euro Disney S. C. A. , a company partially owned by the Walt Disney Company whose stock is traded on Euronext. Euro Disney, based near Paris, has been a financial sinkhole. Earlier this year, Euro Disney finalized a $2 billion restructuring plan, which included new capital and loan concessions, to rescue the operation. Among the park’s problems have been cultural faux pas that have turned off its European audience. When Euro Disney opened, for example, restaurants wouldn’t serve wine, an affront even to the French soil it was built on. 2. 2. 1.

Eurodisney’s Marketing Mishaps Another mistake in the Marketing Mix conception concerned the price. Some experts of theme parks predicted that the opening of such a amusement park in an European country would educate the market of the value with pay-one-price admission for a day of quality entertainment. It seems however that one of the problems with the park was the high prices. Disney has not been able to convince that a high price comes with more value than normal theme parks, such as authentic buildings, quality of the service provided and the many Disney figures walking around.

Euro Disney managers have underestimated how hard it is to change the behaviour of its customers spending habits. Indeed, not having the choice and paying only one price is not a European and surely not a French habit: people like enjoying various reductions and price variety. For instance, half-day tickets, reductions for large family, or packages “Visit + Hotel”, etc…are very appreciated on the European continent. 2. 2. 2. Too American? Even if some adaptations were made, the general orientation of the park was American.

For instance, restaurants did not offer the possibility to drink wine or beer – something inconceivable for French or German – and among the events proposed, the Halloween celebration was considered as “too much” by Europeans. The bad adaptation of the American model to the European customers was the main reason of those failures. It ignored the differences between the various customers inside Europe. This is clearly a problem of internationalization strategies and with customers’ expectations.

According to Gronroos, in order to understand customers, a firm has to get some information about the customers’ needs, the value system of customers and the internal value-generating processes of customers. Moreover, this is truer, when a firm wants to take root abroad, because it has to understand another culture, and other expectations. It is necessary for the company’s success. 3. Hong Kong Disneyland Hong Kong Disneyland is taking the Walt Disney Co. to a new place: the wonderful world of China. The $3. 6 billion park, scheduled to open Sept. 2, is Disney’s boldest attempt to make Mickey Mouse as well known as Chairman Mao in the burgeoning Chinese market. With 1. 3 billion increasingly wealthy people–290 million of them under 14, Disney’s prime audience–China is the Magic Kingdom for a consumer company, and Disney wants to sell them everything from Mickey Mouse toys to animated movies to kids’ magazines. “We know we have an addressable market just crying out for Disney products,” Walt Disney International president Andy Bird recently told investors. 3. 1 Learning from the Past

Disney made sure not to repeat those mistakes in Hong Kong. “We’ve come at it with an American sensibility, but we still appeal to local tastes,” says John Sorenson, one of Hong Kong Disneyland’s landscape architects. Mulan will have her own pavilion in the garden, designed like a Chinese temple. Mickey even has a new red-and-gold Chinese suit to wear. Restaurants boast local fare, such as Indian curries, Japanese sushi and Chinese mango pudding served in containers shaped like Mickey Mouse heads. The park’s designers brought in a feng shui master, who rotated the front ate, repositioned cash registers and ordered boulders set in key locations to ensure the park’s prosperity. He even chose the park’s “auspicious” opening date. New construction was often begun with a traditional good-luck ceremony featuring a carved suckling pig. (Ironically, Disney kicked up trouble not by being too American but by being too Chinese. Disney offered to serve shark-fin soup at banquets, but the local favorite got yanked from the menu in June after environmentalists, who blame consumption of the delicacy for endangering the global shark population, howled in protest. “Disney has learned that they can’t impose the American will–or Disney’s version of it–on another continent,” says Dennis McAlpine of McAlpine Associates, a securities-research firm specializing in media and entertainment. “They’ve bent over backward to make Hong Kong Disneyland blend in with the surroundings. ” 3. 2 Struggles in China 3. 2. 1 Overcrowding and Unattending problems Just before the grand opening, the park was criticized for overestimating the daily capacity limit. The problem became apparent on the charity preview day on 4 September 2005, when 29,000 locals visited the park.

The reported queue time for fast food stands exceeded 45 minutes and over 2 hours for rides. Before the park opened, some within the Disney Company were concerned that the park would not offer enough because of the small number of attractions present. Although the community, and the park’s biggest shareholder, the Hong Kong Government, put pressure on the park to lower the capacity, the park insisted on keeping the limit and only agreed to relieve the capacity problem by extending opening time by one hour or introducing more discounts during weekdays.

However, the park said local visitors tend to stay in the park for about nine hours per visit, implying that the mentioned practices would do little to solve the problem. The problem of overcrowding within the parks lines, doesn’t account for the extreme losses Hong Kong Disney has suffered from the continual unattendence problem. This means a daily average of less than 11,000, or about one-third of the park’s capacity of 34,000 attend the park each day. 3. 2. 2. Lack of Disney Prescence in China While Hong Kong’s relatively wealthy 6. million citizens are well versed in Disney’s cartoons-and-Cinderella culture, the brand is far less pervasive in mainland China. But the park’s success isn’t a sure thing. Disney faces a special hurdle in China. Until a few years ago, hardly anyone knew Mickey Mouse and Donald Duck even existed. Disney characters were banned for nearly 40 years after Mao’s takeover. Now Chinese kids are familiar with the classic characters–in part from pirated DVDs–but their knowledge of Disney lore is limited. “This is the first market where we’ve opened a park in which we don’t have a long-term relationship with our guests,” says Rasulo.

Many Western media and consumer-products companies have stopped exporting their Western goods, choosing instead to develop more locally tailored fare. Chinese consumers are drawn to luxury, but still want culturally relevant products. And sometimes the government demands Chinese goods: It recently proposed banning foreign-made cartoons on prime-time TV. 3. 2. 3. Too American, yet too stereotypically Chinese? While the Chinese like the Japanese want a true foreign, American, experience they are also a very proud culture rooted in tradition. Disney struggles to make an appealing park to these demands.

Still, most of the park looks as if it were airlifted from the U. S. Disney attempted to implement worldwide icons such as Britney Spears who doesn’t burn up the charts in China. Today, 70% of music and 90% of all programming on Viacom Inc. ‘s MTV China is made in China. At Yum Brand’s KFC, 85% of the menu is unique to China, with some cross-cultural hybrids, such “Dragon Twisters” with Peking duck sauce. Disney also struggled by overdoing the local appeal. Ironically, Disney kicked up trouble not by being too American but by being too Chinese.

Disney offered to serve shark-fin soup at banquets, but the local favorite got yanked from the menu in June after environmentalists, who blame consumption of the delicacy for endangering the global shark population, howled in protest. 4. Recommendations for Disney China Disney will have to stay on top of its game to appease the Chinese, they are a difficult sell but a very crucial one as the economy continues to rapidly grow. I have two points of advice for Disney for continuing on in China. To begin, Disney should of course remember their target market, young kids and truly appeal to that generation.

American children grew up with Disney, it is our culture, while the Chinese have not experienced this loyalty and love for Disney. Therefore, the Disney company must capitalize on that idea and truly sell their name to the Chinese children and parents. The next step for Disney in China is to expand and expand quickly. The Chinese want something grand and on an American scale, not something similar to the parks they already have in existence. “I wanted to forget the world and feel like I was in a fairytale,” he says. Instead, he complains, “it’s just not big enough” and “not very different from the amusement parks we have” in China.

His seven-year-old daughter Yaqin disagrees, calling the park “fantastic,” but her father grumbles: “If she wants to come again, “I’ll send her with somebody else. ” “We’re in for a long-term commitment,” says Robinson. “It’s not like just opening an office and selling a product. We have a castle. ” With all those grand plans, Disney realizes that the route to success in the world’s most populous country is still blocked by a few Chinese walls. “Our eyes are wide open to the fact that, while China is very exciting for us in terms of potential, it’s filled with great challenges,” Iger says.

Disney is wishing on a red star and hoping all its dreams come true. Bibliography: 1. Disney 2003 Annual Report, p. 59 2. https://www. cia. gov/library/publications/the-world-factbook/index. html Taken: 12/4/07 3. Fiorelli, Mike. September 6, 2007. www. japanmarketingnews. com Taken: 12/4/07 4. Muller, Joanne. October 27 2007. http://www. forbes. com/forbes/2003 Taken: 12/4/07 5. Shuman, Michael. June 11, 2005. Disney’s Great Leap into China. http://www. time. com/time/magazine/article/0,9171,1081379-2,00. html. Taken: 12/4/07 6. Shuman, Michael. May 8, 2006. Disney’s Hong Kong Headache. http://www. time. com/time/magazine. Taken: 12/5/07