The Cultural Hurdles In International Ventures Commerce Essay Example

model, Yip's global drivers, Hofstede's cultural analysis, among others. These theories form the basis for analyzing Euro Disneyland and its strategies.

Literature Review

International Business has become an integral part of today's business culture. Knowledge in global activities is highly important. Many scholars have contributed to the field of globalization and international business to enhance understanding. Notable contributors include Prahalad and Doz, Bartlett and Ghoshal, Porter, Ansoff, Hofstede, Edward Hall, and others. Each has provided valuable insights into various aspects of International Business. Porter's approach focuses on the industry and its participants but is limited to a particular country. According to Porter, international business is about competition among participants in the international arena (Porter, 1986). Though this perspective is limited, it emphasizes organizational strategy over internationalization factors. The contributions of Prahalad and Doz are significant for studying internationalization. Their Integration/Responsiveness (IR) model serves as a foundation for further exploration of global business. Bartlett and Ghoshal later refined this model, presenting four approaches that companies tend to adopt when entering foreign markets: International, Global, Multinational, and Multidomestic strategies.The multinational approach is considered one of the most important strategies for international markets, which Bartlett and Ghoshal refer to as a solution for cross-border business. When local responsiveness and cost pressure are high, a company adopts a multinational approach. This approach is becoming increasingly prevalent as global competition intensifies. Multinational companies recognize the significance of global competitiveness and flexibility in their international operations (Bartlett & Ghoshal, 2002). Another important contribution in this field is the identification and classification of globalization drivers into four sectors: cost, market, government, and competitive drivers (Yip, 2002). This classification provides a

clear understanding of the industry and foreign markets. Culture plays a crucial role in determining the nature of business strategy a company should pursue in order to succeed. Hofstede, Edward Hall, and Fons Trompenaars have made significant contributions to the cultural aspect of international business. Hofstede's four dimensions provide critical insight into the cultural differences between the host and target locations.The text discusses the four dimensions of cultural analysis according to Hofstede, which include power distance, individuality versus Bolshevism, uncertainness turning away index, and maleness versus muliebrity. These dimensions relate to aspects of authorization, group dynamics, risk-taking nature, and male domination in a given civilization (Hill, 2007).

The article then focuses on Walt Disney Productions Ltd, also known as Disney, being one of the largest players in the amusement business globally. In 1955, Disney ventured into the realm of theme parks and resorts with the opening of Disneyland in California. This venture was a tremendous commercial success and led to Disneyland becoming one of the largest theme parks in the world. Building on this success, Disney expanded internationally by franchising and opening Tokyo Disneyland in 1983. Following the success of Tokyo Disneyland, Disney opened Euro Disneyland in 1992 and Hong Kong Disneyland in 2005 (Disney).

The central focus of this article is on the Euro Disneyland venture in Paris in 1992. Initially targeted at both children and adults, Disneyland differentiated itself from its competitors in various ways.The subject park concern of Disney experienced significant growth, thanks to important advantages gained. In particular, there was an increase in the number of foreign visitors, particularly from Europe, in the 1980s. This led to Disney's decision to establish a subject

park in Europe, specifically by using Foreign Direct Investment (FDI). In Paris, Disney opened its own subsidiary called Euro Disneyland. This particular venture is known as a Greenfield venture. Euro Disneyland was launched with a lot of media hype and publicity, but faced failure during its first four years due to various factors. This article will examine the reasons behind Disney's initial failure in its foreign venture. Disney's entry strategy into Europe through FDI was primarily influenced by the trade offered by the French government and the advantageous location of Paris, which allowed easy access to concentrated wealth in Europe. This entry strategy can be categorized as a high control entry method, as Disney prioritized understanding European customers' preferences. This approach aligns with one of the nine entry mode proposals mentioned by Hill. Such an entry mode gave Disney an advantage in terms of easily transferring products and know-how, compared to joint ventures or takeovers which would have taken longer. However, the choice of location for Euro Disneyland has been subject to criticism.The majority of foreign visitors to Disneyland in California were British subjects (Spencer, 1995). However, when Americans opened Disneyland Paris, their perception that it would be the better option was proven wrong. The choice of France over Britain for its European venture still remains a significant question. Euro Disneyland was a replica of the Disneyland in California, with the entire theme park, organizational structure, and rides being the same. The parent company implemented the strategy and knowledge developed at their headquarters in California, following Bartlett and Ghoshal's global strategy. However, this caused significant disruption for Euro Disneyland due to the cultural gap between

European and American clients, as illustrated in figure 1. The initial strategy of Euro Disneyland, as shown in figure 1, assumed low local responsiveness and high global integration due to minimal competition. However, this turned out to be costly for Disney as the need for local responsiveness was high due to cultural differences between the French and American clientele. The primary reason for Euro Disneyland's initial failure was the cultural differences.The Disney direction's assumption that merchandise successful in the US would also be successful in Europe proved to be incorrect. This resulted in a loss to Disney due to their high levels of self-reference criterion. The role of culture played a significant part in Euro Disneyland's performance. Customers were not allowed to bring their own food, and alcohol was restricted inside the park, which upset the French who enjoyed wine with their meals. Additionally, Europeans who were more passionate about smoking than Americans had to accept the fact that there were no cigarette stores inside the park. The dissatisfaction among customers was also fueled by the fact that the French, unlike Americans, did not like waiting in long lines. All of these factors contributed to the overall decrease in sales for Euro Disneyland, leading them to borrow $175 million in 1993 just to keep the park running. Their annual reports showed losses of FFr339 Million in 1992 and FFr 6.3 Billion in 1993. The French harbored negative feelings towards Euro Disneyland, as they saw the American approach as a form of cultural imperialism by measuring "Frenchness" according to American standards.According to Popkin (92), the French began viewing Euro Disneyland as a cultural Chernobyl. This perception

can be attributed to the ethnocentric beliefs of both the French and Americans, who both believe in their superiority (Hill, 2007). This ethnocentric perspective has hindered relationships with both clients and employees. From an employee standpoint, there was a significant difference in management styles between the French and Americans, which was reflected in the operations of Euro Disneyland. The park was managed by Americans who had less differentiation among employees and expected them to perform their duties without explicit instruction. This can be explained using Hofstede's power distance dimension. According to Hill (2007), Americans had a lower power distance index, which was demonstrated by Disney's management. In contrast, the French expected clear rules from their managers and had high levels of distinction among individuals, reflecting the high power distance index of the French in Hofstede's research. Bryman (1995) notes that smoking was prohibited for employees and strict dress codes and hair styles were enforced. The French, known for their more casual approach, did not approve of these rules leading to a high turnover rate. Bryman (1995) reports that by mid-1993, 50% of employees who joined Disney had already left.Unlike Americans, the Gallic and other Europeans are not large spenders and prefer to pass economically on longer holidays rather than short high-disbursement holidays. This preference for economic spending can be linked to the Gallic tendency to be safer with their finances, as reflected in Hofstede's uncertainty avoidance index. The index shows that the French have a higher score compared to Americans. Another cultural difference is the sense of timing. The Gallic are particularly concerned about timing and would enter amusement parks just before closing time, leave

early if they find it too crowded, and prioritize education over missing school to visit Disneyland. These factors resulted in decreased sales for Euro Disney and can be related to Trompenaars' orientation towards time dimension in cultural analysis, highlighting the huge difference between American expectations and French behavior regarding timing. Additionally, Disney faced other challenges, including incorrect timing, leading to initial difficulties.Euro Disneyland began its operations during a European recession, which caused a decrease in the number of customers and a blow to the cash flow. The pricing structure was also flawed, as Disney charged higher prices in Europe compared to the US. The availability of cheap airline packages to visit Disneyland in California made it a more profitable option. These factors resulted in a significant loss for Disney, leading to a bailout of $12 billion, with $6 billion paid by Walt Disney and the remainder by a group of 60 banks. In response to these mistakes, Disney took several corrective measures, including renaming Euro Disneyland to Disneyland Paris and making the products more localized. Prices were reduced by 22%, and plans were made for additional investment in Space Mountain. These actions led to a change in Disney's strategy from global to multinational, as demonstrated in Fig 2: Integration/Responsiveness Framework (Adapted from Bartlett & Ghoshal, 1989) - Disney's position after corrective measures. The figure shows that Disney became a multinational company due to its high local responsiveness and changes in management style.After experiencing several difficulties, Euro Disneyland finally had a European lead managing its team in Europe. They implemented ideas from the French, reduced the Americanization of the staff, and gave more freedom to the

employees, resulting in lower employee turnover. The products were tailored to suit the complex European market. A significant cultural adaptation took place, starting with renaming Euro Disneyland to Disneyland Paris. The product strategy changed from standardized product/customized message to customized product/customized message, as classified by Keegan (Rodrigues, 2009). This change appealed more to European clients who felt less Americanized. The introduction of additional features like Space Mountain and other attractions helped Euro Disneyland meet its sales targets. The share price of Euro Disneyland provides a summary of the company's situation from 1989 to 1995. Figure 3 shows the graph representing the fluctuations in share price for Disney's shares. According to Curwen (1995), the share price experienced a steady decline from 1991 after the company's annual report announcement.Until the $12 billion bailout and subsequent closure of Space Mountain in 1995, the European audience responded positively to Disney's European venture, which was reflected in increased gross revenues and stock prices. The success of Disney in Europe can be attributed to its adaptation to European culture and significant changes in management.

In terms of recommendations, despite its long-standing success, Disney has made costly mistakes with its theme parks and resorts. For example, franchising Disney in Tokyo resulted in overwhelming response but only 10% profit for Disney. Similarly, choosing Paris as a location proved to be imperfect. Critics question whether Disney will ever make the right decisions regarding location.

To avoid such mistakes, it is advised that Disney make better choices regarding locations. Location decisions should not be solely driven by the bargaining power of the host country, as seen in France where subsidies were given to Disney. While this

may initially save money for Disney, it could lead to significant losses if the necessary sales are not achieved. Additionally, entry modes should also be carefully determined based on each location.Despite the initial advantages of being the first entry into a new market, there are significant risks involved. In certain provinces, companies often maintain strict control over activities. While this may work well for a typical industry, it presents challenges for Disney as an amusement park company that requires a local touch. This was evident in Euro Disneyland. Additionally, pricing agreements offered by various agencies around the world make it highly lucrative and susceptible to change. Therefore, it is recommended that Disney become a multinational company, responsive to local needs and cost-effective. The management approach should be region-centric rather than ethnocentric to simplify human resource management. The ethnocentric approach in Euro Disney led to high employee turnover.

Decision

International business is a profitable option for growth and profits, but it involves high risks. Thorough planning and market research are necessary before entering unfamiliar territories. Disney initially benefited from being the first to enter Europe, but their ethnocentric approach resulted in significant losses. An ethnocentric approach is suitable when the product is highly standardized and the home company has expertise in the products.The introduction of standardized merchandise into the market initially follows the international strategy and later the global strategy, as categorized by Bartlett and Ghoshal. This is because minimal local responsiveness is required and the initial cost concerns are low at entry. However, indigenous companies may acquire technical knowledge and result in cost pressures. Therefore, a transition from international to global strategy occurs at entry.

A more region-centric approach that considers cultural differences, as mentioned by Hofstede, combined with a multinational approach would be ideal for a company with high pricing pressure and high local responsiveness. This approach would have been ideal for Disney, instead of the traditional ethnocentric global approach, considering the nature of its products and the industry. Culture plays a critical role in deciding the location, entry mode, and strategy of international business ventures. Having in-depth knowledge of cultural differences and understanding the cultural demands and desires of potential markets would be advantageous and may prove crucial for the success of the organization's international venture.