EURO DISNEY FROM DREAM TO NIGHTMARE

GROUP 5 PRESENTATTION

Q1. Evaluate Disney’s decision to build a theme park in Europe.

The decision is still right due to these positive factors…• The attractiveness of theme park market: Choice of Paris- Paris is one of the most visited destination in Europe- It is the centre of transportation and a linkage among different destinations:

easy traveling choices for tourists- It has large population and there is a longer vocation time in Europe

countries, supporting the possibility of theme park visiting

Q1. continue…

• Disney’s competitive advantages- Disney’s financial resources- Disney’s worldwide famous and well known characters- Disney’s reputation and creditability regarding designing and operating from

existing theme parks (Tokyo, Florida)- The demand of Disney characters-related products in Europe, counted as ¼ of

licensed products total revenue, supporting the demand for localized theme park

• Superior support from French government- Favourable tax and VAT rate - Offer a below market interest rate - Financed the key infrastructure of the park: extending TGV, the Paris subway

and make EURO Disney the ended station - improve motorway - Land sold to Disney at the modest cost

Q1. continue…

Q2. Explain why Disney chose to enter Europe through a combination of equity ownership, a licensing contract, and a management contract, as compared with the relationship with its US theme parks (100% ownership) or with Tokyo Disneyland (pure licensing)?Disney’s choice of entry: This combination allows Disney to Optimize return through bothBottom line return from receiving dividends : Equity ownership Top line return paid out of revenues- A licensing contract allows Disney to collect loyalty fees (10% on admission and 5% on others)- A management contract: a fee on revenue and incentive

Minimize risk- This choice of entry gives Disney still gain upside even EURO Disney made loss - Equity stake allows Disney to take advantage from owning shares at modest

price and Land appreciated value- Versus Tokyo Disney, Disney can still hold control over EURO Disney’s

management and operation- Versus LA and Orlando Disney, EURO Disney SCA is a French owned company

which let Disney access to the necessary resources needed for the park (Land, infrastructure, transportation, government supports and policies)

Q2. continue….

Q3. In what ways did Disney adapt to a French and European context? How effective was this adaptation? Should Disney have adapted more or less?

Disney’s cultural adaptation • Product adaptationBecause Disney has a strong concept as their whole concept seem to drive the park, it is best to keep those mood and tone with other Disney parks. Therefore, the adjustment was done through the service offering.For example, - EURO Disney tried to serve the better standard cuisine, restaurants and

hotels, and customer interaction regarding the European culinary taste. However, European visitors behave just like US visitors where they prefer fast food sit-down lunch at the park.- Disney believes that Europeans will not bear any thing unsophisticated.

Q3. continue…

• Management adaptationHuman Relation: Employer-Employee relation, work norms, employment regulations which are very different from US.For example,- The recruitment process is based on the appearance such as height, weight, make-up and grooming.- Cast members must follow a strict code with respect to dress and appearance.

Q3. continue…Although Disney has spent a large resource in adapting, there were not a clear understanding of culture differences.Therefore, the adaptation was not effective regarding..- Misinterpret of European’s social and culinary taste It turned out that local visitors still prefer fast food over sophisticated meals during visiting the park.Restaurant wallpaper was covered in Moroccan leather. Insufficient breakfast facilities

- HR strategy:Recruitment process is too personal judged and Disney’s hiring practices violate the French labor law as

it attacks individual’s freedom. This finally produced a huge storm of protest by a French labor union. Work force flexibility was limited for French workers.The work hours are too long for French workers.Trainings are US based model where most of the managers are EXPAT and the trainings are done

overseas, resulting in a weak understanding in local market.

Q4. Advise Phillippe Bourguignon on what further actions he should take to improve the financial viability of Euro Disney and realize its potential for shareholder return

Consider what has go wrong at EURO Disney…Financial projection- Assumption based on the experiences from the existing parks (Tokyo and Florida) and it may not

a precise indicator for France- Using per capital expenditure to set the admission price is too optimistic: High price of

admission, food, and souvenirs* This cost Europeans higher than just visiting Orlando theme parks with a more comfortable climate. Operational difficulties - HR system and trainings are US based approach.- Long period of waiting line*This caused the transferring of Disney’s capabilities cost at higher operating expenses.* Cost incurred higher than estimated

Ineffective cultural adaptation- Misjudge the European cultures: Europeans will not tolerate any thing

unsophisticated (using the Moroccan leather wallpaper)- Design problems: absence of toilet facilities, breakfast facilities* Most of the cost overrun because of sophisticated decorations

Wrong Timing- EURO Disney opened just during the economy crisis where the demand was low.*Europeans then were not that enthusiastic with the theme park visiting*Revenue has not reached the projected target

Q 4.1 continue…

In order to reduce cost and boost up revenueHere are the recommendation….Disney has already done a good restart by changing the name to “Paris Disneyland” to reduce the controversy toward American culture image of Disney.• HR Management should be more decentralized to help cut cost: - Hiring procedure should be more technical and skills related not an appearance

based.- Outsourcing the local consultants is another interesting option to help Disney

understand more about local market and government regulations. - Training should be done in France in order to understand more about European

tourism, being more competitive.- Hiring more part-time workers during busy summer season.

Q 4.1 For Phillippe Bourguignon

• Readjust the financial modelthe assumption need to be reconsidered as to know a more precise target sales, costs and a more suitable admission price.• Reviewing of the culture adaptation to boost the attendance: Adding the localized feature theme inside the park is a good alternative to convey the message to the Europeans that this is their park. The increasing of popularity can extend the length of visitor stays• Continue Phase 2: this would bring- Economies of scope to operation: 2 theme parks can share cost of human

resource, marketing, administrator and maintenance- Utilizing the park space during winter: Being a destination resort can bring

more tourists• Renegotiate with the French governmentThis can help extend the obligation of those debt financing and interest

Q 4.1 For Phillippe Bourguignon

Q4.2 Advise Eisner on how Disney’s interest in Euro Disney can best the protected and furthered

• Although EURO Disney is a French owned company and not even a Disney subsidiary, Eisner who represents the whole Disney should ensure the public that Paris Disneyland is on the way renewed and Disney will also fully inject the venture.• Eisner’s public appearing can introduce the new name of

Paris Disneyland• Disney’s action can persuade the banks allow the

postpone the loan repayment and interest payments

GROUP 5: PresentationAroonroong Srivaddhanaprabha ID: 5749084

Kawin Phuangthong ID: 5749135

Tharinee Plucksataporn ID: 5749141

Yavaporn Wongcongsawat ID: 5749148

Ronarkrit Chinitsarayon ID: 5749205