1.0 Content

NOTOPICPAGES

1.0CONTENTS2

2.0INTRODUCTION3-7

3.0BODY: FACTORS AFFECTING BUSINESS POLICY7-21

4.0CONCLUSION21-24

5.0REFERENCES24

6.0COURSEWORK25-28

2.0 Introduction2.1Background of Hong Kong DisneyHong Kong Disneylandis located onreclaimed landinPenny's Bay,Lantau Island. It is the firsttheme parklocated inside theHong Kong Disneyland Resortand is owned and managed by theHong Kong International Theme Parks. The park opened to visitors on 12 September 2005. Disney attempted to avoid problems of cultural backlash by attempting to incorporateChinese culture, customs, and traditions when designing and building the resort, including adherence to the rules offeng shui. For instance, a bend was put in a walkway near the Hong Kong Disneyland Resort entrance so goodqienergy wouldn't flow into the South China Sea. The park consists of seven themed areas:Main Street, U.S.A.,Fantasyland,Adventureland,Tomorrowland,Grizzly Gulch,Mystic Point, andToy Story Land. The theme park's cast members speak in Cantonese, English, and Mandarin. Guide maps are printed in traditional and simplified Chinese as well as English, French, and Japanese.The park has a daily capacity of 34,000 visitors the least of all Disneyland parks. The park attracted 5.2million visitors in its first year, below its target of 5.6million. Visitor numbers fell 20% in the second year to 4million,inciting criticisms from local legislators.However, the park attendance slightly increased by 8% in the third year, attracting a total of 4.5million visitors in 2007. In 2009, the park attendance again increased by 2% to 4.8million visitors. The attendance continued to surge and received 5.23 million guests in the 2009/2010 fiscal year. Since the opening of Hong Kong Disneyland, the theme park has hosted over 25million guests.According toAECOMandTEA, Hong Kong Disneyland is the 14th most visited theme park in the world in 2012, with 6.7 million visitors.The park also turned a net profit of HK$109 million (US$13.97 million)for the year ended 29 September 2012, the first annual profit. Hong Kong Disneyland currently occupies 22.4 hectares (55acres); it will be expanded to 27.5 hectares (68acres)[8]when three new themed areas are completed. After the expansion, the park is expected to handle 7.92million to 8.92million visitors annually. The park capacity will increase to handle up to 10million visitors annually over a 15-year expansion period.Hong Kong Disneyland had the shortest construction period among all theDisneyland-style theme parks. On 12 January 2003, more than 400 guests celebrated thegroundbreakingof Hong Kong Disneyland after the finishing of land reclamation inPenny's Bay. The audience includedTung Chee Hwa, thenChief Executive of Hong Kong;Michael D. Eisner, former Chairman and CEO ofThe Walt Disney Company;Robert A. Iger, president of The Walt Disney Company; andJay Rasulo, former president ofWalt Disney Parks and Resorts.[10]On 23 September 2004, a special "castle topping ceremony" was held in the park to commemorate the placing of the tallest turret onSleeping Beauty Castle. Hong Kong Disneyland opened to the public at 13:00 local time on 12 September 2005.

Timeline 1998 August - The Walt Disney Company and the government of Hong Kong announce their intention to construct a themed entertainment park in Hong Kong, the second in Asia 1999 February - Penny's Bay, Lantau Island is announced as the future site of the Hong Kong Disneyland Resort 10 December - Disney and the Hong Kong Government sign an agreement for building the second Disney Resort in Asia 2003 January - Construction on Hong Kong Disneyland Resort begins 2004 22 November - Disney announces that the opening day of the park has been re-scheduled from 2006 to 12 September 2005 2005 12 September - Hong Kong Disneyland opens to the public at 13:00 local time 2006 June - HKDL announces to release Summer Passes to boost its first year attendance 13 July - Autopia, Stitch Encounter and UFO Zone opens in HKDL as first part of its expansion August - Exclusive treats are provided for Summer Pass holders so as to further boost the park's attendance 4 September - More than 60,000 Summer Passes have been sold since 1 July. However, Hong Kong Disneyland has missed its target of 5.6 million in the first year of operation, with only about 5 million guests entered the park since the opening 28 September - HKDL launches its annual pass 30 September - Disney's Halloween celebration held for the first time through 31 October 2006 14 December - HKDL announced three new attractions to be added to the park in 2007-2008 2007 26 June - HKDL revealed its attracttions for the park's 2007 summer - "Mickey's Summer Blast" and announcement of Mickey's Water Works Parade and Animation Academy's opening date- 14 July 2007 19 December - HKDL revealed 4 new attractions and entertainment venues to open in 2008 with"it's a small world": Muppet Mobile Lab, High School Musical Celebration, Turtle Talk with Crush and the Art of Animation 2008 28 April -"it's a small world"opens in HKDL as first extension of Fantasyland 2009 10 July - TheLegislative Council of Hong Kongapproved the three land expansion of HKDL 13 December - Groundbreaking ceremony for the construction of the three land expansion 2010 12 September - HKDL celebrates its 5th year milestone 2011 21 January - HKDL hosts the year-long 5th anniversary programme "Celebration in the Air" 18 November -Toy Story Landopens 2012 14 July -Grizzly Gulchopens 2013 17 May -Mystic Pointopens

2.2 Disneys Theme Park StrategyHong Kong Disneyland will attract millions of tourists a year, create thousands of jobs, enrich the quality of life, and enhance Hong Kong's international image.The world-class theme park has the potential to provide Hong Kong with a net economic benefit of up to $148 billion over 40 years.It is estimated that attendance in the park's first year of operation will be over 5 million. This figure will gradually rise to around 10 million a year after 15 years.About 18 400 new jobs are expected to be created directly and indirectly on opening, rising to 35 800 over a 20 year period.Around 6 000 jobs are expected to be created during the construction of facilities for Phase I of Hong Kong Disneyland. In addition, some 10 000 jobs are expected to be created by the land reclamation and other infrastructural works funded by the Government.

3.0 Body3.1 Should Disney Land choose Hong Kong?Yes. The reason that Disney Land choose Hong Kong:Economic benefitsThe 'base case' scenario developed by Disney for Phase I of the theme park and evaluated by the Government puts the net economic benefit (in terms of additional value added or income over cost) at $148 billion over 40 years.The base case is based on several assumptions, including:* The park opens in 2005* The park's attendance in its first year of operation is estimated at 5.2 million* The park gradually reaches full annual capacity of 10 million after 15 yearsOther more conservative scenarios (e.g. less visitors, less spending by tourists, lower usage by local residents) put the net economic benefit in a range of between $80 billion and $128 billion. Any upside scenario would, of course, make the net benefits greater.

EmploymentThe 'base case' estimates that 18 400 jobs will be created directly or indirectly at opening, rising to 35 800 over 20 years. More conservative scenarios put jobs created in the range of 11 400 to 17 600 in Year 1, rising to 18 100 to 28 700 in Year 20.The number of jobs (in man-years) created during the construction phase of the theme park is around 6 000. The number of jobs (in man-years) created during the initial construction period for the land reclamation and infrastructural works funded by the Government is some 10 000.Nearly all employees at Hong Kong Disney will be Hong Kong people. Management of the park will initially be undertaken by about 40 Disney employees from around the world. But eventually about 35 local employees will be trained to take up these management duties.Staff training for key personnel will take place in Hong Kong and the United States. In the USA, trainees will receive hands-on experience at existing Disney theme parks.In Hong Kong, the company will develop suitable training packages for a wide spectrum of Hong Kong Disneyland employees. A 'Disney University' will be established as part of this process.Tourist spendingIt is estimated that Hong Kong Disney will attract 3.4 million incoming tourists in Year 1, rising to 7.3 million after 15 years.Of those, 1.4 million (Year 1) will be 'new' or 'additional' tourists induced to visit Hong Kong because of the Disney theme park. This figure will rise to 2.9 million in Year 15.It is estimated that additional spending by tourists will amount to $8.3 billion in Year 1, rising to $16.8 billion per annum in Year 20 and beyond.Corresponding figures for more conservative scenarios range from $5.5 to $7.8 billion in Year 1, to $8.7 to $12.9 billion in Year 20.Short-term benefitsThe Disney theme park and resort will cost an estimated $14.1 billion to build, which represents a new injection of capital expenditure into the local economy. The resulting generation of income and employment will also benefit the economy.Park Developer and OperatorHong Kong Disneyland will be built and operated by a new joint-venture company - Hong Kong International Theme Parks Ltd (HKITP) - to be formed by the Hong Kong Special Administrative Region Government (the Government) and The Walt Disney Company (Disney).The Government will own 57% of the shares in the company initially, while Disney will own 43% of the shares.Total equity of the company will be $5.7 billion, of which the Government will inject $3.25 billion (3.25 billion shares @ $1 a share) and Disney will inject $2.45 billion.It is envisaged that third party investors may be interested in investing in HKITP in the future. This will allow the Government and Disney to sell down their shares.However, Disney will be required to hold a minimum of 1.9 billion shares in the project.The Government will not be subject to a minimum holding requirement after the park's opening.A New Era in Hong Kong TourismThe building of Hong Kong Disneyland will herald a new era for Hong Kong's tourism industry, a mainstay of the economy. In 1998, tourism contributed 4% to GDP.The $14.1 billion project is a key component of a renewed and reinvigorated push to strengthen and consolidate Hong Kong's position as Asia's most popular international destination. Hong Kong Disneyland will be the 'jewel in the crown' of a new 280-hectare tourism, recreation and entertainment district to be developed at Penny's Bay on Lantau Island.

The Government, in consultation with the Hong Kong Tourist Association (HKTA) and the tourism trade, has adopted a three-pronged strategy to rejuvenate the tourism sector:* Promote Hong Kong as a key tourist destination* Enhance the attractiveness of Hong Kong* Facilitate entry of visitors

Important decisions have been taken to achieve this goal. Among them :* The appointment in May 1999 of a Tourism Commissioner to provide a clearer focus for, and greater co-ordination of, tourism policy, projects and initiatives.* A $100 million loan to the Hong Kong Tourist Association to support the staging of a variety of international events in Hong Kong over a five-year period.* Streamlined entry requirements for visitors from the Mainland, Taiwan and Russia.

A number of other projects are being taken forward or are under consideration to enhance Hong Kong's attractiveness as a destination and to broaden the range of facilities and tourism experiences available in Hong Kong.These include:* An international wetland park at Mai Po Marshes in northwestern New Territories* A new world-class performing arts venue in Kowloon* A cable car system on Lantau Island, linking Tung Chung to the Big Buddha* A $500 million 'Adventure Bay' attraction at Ocean Park on Hong Kong Island* Development of a "Fisherman's Wharf" in Aberdeen* New waterfront promenades on both sides of the harbour* Improvements to tourist attractions in Central and WesternGreater emphasis is also being placed on attracting convention and exhibition business to Hong Kong, which boasts some of the best facilities in the world for such events. This type of visitor tends to stay twice as long and spends three times as much as a leisure visitor. The HKTA is also trying to develop the cruise market to attract high-yield visitors.

Arrivals and receiptsIn 1998, tourism receipts totalled $55 billion. Taking into account the business generated directly and indirectly for different sectors of the economy, this contributed 4% to GDP. Tourism receipts in the first half of the year amounted to $25.2 billion.Tourism arrivals have been growing healthily in the past year, following a significant drop in 1997 and 1998 due to the Asian financial turmoil.For the first nine months of 1999 there were 7.7 million visitor arrivals, an increase of 11 per cent over the same period in 1998. The HKTA estimates there will be 10.4 million visitor arrivals this year. The majority of visitors come from the mainland of China (27%), Taiwan (19%), Japan (10%), South and Southeast Asia (12%) and the USA (8%).

3.2 Alternative choices of Walt Disney for building a new theme parkWhy Is Shanghai Important?In 2010, Disney signed an agreement with Shanghai company Shendi to build Shanghai Disney resort. After getting final approval from the Chinese government for incorporation of the related JV companies and conclusion of certain regulatory procedures, the company began construction in 2011. The incentive behind Disneys investment in the Shanghai resort could be the wealthy status of its residents, a growing middle class and a high population of about 25+ million. In addition to this, Shanghai has good connectivity with the rest of the country.Chinas theme park market is growing and the countrys theme parks & resorts attracted over 100 million visitors in 2011.The Chinese government has been encouraging domestic consumption which is one of the reasons why Chinese consumers are spending more on leisure including theme parks.The market potential is evident from the fact that Disney is not the only foreign company making a substantial investment in Shanghai. Dreamworks Animation SKG Inc and its Chinese JV partners are investing more than $3 billion in a theme park that is expected to open by 2016.However, adapting to local tastes will be important. According to consulting group AECOM, Chinese consumers have different preferences as compared to the western world.Disney will benefit more if the entertainment options at its theme park focus less on thrilling rides and more on shows centered around music, dance and animals.Disney has mentioned that it has paid special attention towards creating a good Chinese experience.Factors That Can Drive Future Growth For Shanghai ResortTheme parks are considered a destination for leisure activity and therefore the attendance is somewhat tied to the state of the economy and travel & tourism. Customers are more likely to travel when the economy is in a better state and discretionary spending is more viable. Chinas economy has been struggling for the past few quarters with the GDP growth slowing. However, we expect the economy to improve over the next few years, and Shanghai Disney Resorts long-term growth will be governed by the long-term GDP growth of China.One of the important trends influencing the growth of the theme parks industry is the concept of park-within-a-park, and the company can leverage this idea to drive growth in its park attendance in China. Disney and its competitors have been investing to create multiple themes inside their parks. In addition to this, Disney has also invested in technology upgrades and other services to improve visitor experience. Last year, it expanded and made some changes to its Magic Kingdom theme park in Florida that were aimed at reducing the wait time for customers and increasing overall sales. According to an estimate, Disney might have spent close to $300 million on this makeover.Such investments are necessary to drive attendance growth.Value Contribution Will Remain LowThe total cost for the Shanghai Disney Resort project (including hotels and restaurants) is estimated at more than $4 billion.According to theTheme Parks Indexreport, Hong Kong Disneyland had a total attendance of 5.9 mllion in 2011, while Tokyo Disneyland saw close to 14 million attendees and Magic Kingdom Florida saw 17 million visitors in the same year.Given that Shanghai will be in mainland China and have easier access to multiple big cities, we believe that its annual attendance will be much higher than that for Hong Kong Disneyland. Assuming that the parks annual attendance reaches about 10 million, we estimate its annual revenues could reach $1.4-$1.5 billion. This is based on the fact that Disneys U.S. theme parks & resorts were able to generate $9.6 billion in revenues in 2011 with 70 million visitors.Around $1.5 billion in revenues will imply an EBITDA (earnings before interest, taxes, depreciation and amortization) of close to $380-400 million based on overall EBITDA margins for Disneys theme parks & resorts business segment. This implies that it will take at least 10 years for the resort to recoup its initial investment. The actual time will be more if we account for maintenance and expansion related capital expenditure that the resort will incur after it opens.Perhaps Disney is expecting much higher attendance than this to make the investment worthwhile. However, the fact remains that the additional value that Disneys Shanghai resort will generate will remain relatively low. However, it will give the company an opportunity to connect with Chinese customers in a better way and cross-market other company products. Disney can promote movies, sell consumer goods, promote TV programming as well as online and other games through its theme parks.

3.3Research of Chinese Culture, Geography, and Demographics Chinese CultureThe teachings of Confucius which stress obedience and deference to elders and responsibility to community are a dominant part of the Chinese culture. The country is extremely large, so customs and traditions vary by geography and the more than 50 ethnic groups that reside in this country of 1.34 billion people. Here is a brief overview of Chinese culture.

*Statue of Confucius at Confucian Temple in Shanghai, China.

ReligionBecause China is a communist state, there is no official religion and more than half of the population claims no religious affiliation or identifies as atheist. About a quarter of the people practice Taoism and Confucianism and other traditional religions. There are also small numbers of Buddhists, Muslims and Christians. Although numerous Protestant and Catholic ministries have been active in the country since the early 19th century, they have made little progress in converting Chinese to these religions. LanguageThere are seven main dialects of Chinese Mandarin, Cantonese, Hakka, Wu, Min, Xiang and Gan. Ptnghu, the type of Mandarin based on the speech in the capital Beijing, is the official national language of mainland China. Many Chinese are also fluent in English. The written language is symbol-based.FoodLike other aspects of Chinese life, cuisine is heavily influenced by geography and ethnic diversity. Among the main styles of Chinese cooking are Cantonese, which features stir-fried dishes, and Sezchuan, which relies heavily on use of peanuts, sesame paste and ginger and is known for its spiciness.The Chinese word for rice is fan, which also means meal, and it is a staple of their diet, as are bean sprouts, cabbage and scallions. Because they do not consume a lot of meat occasionally pork or chicken tofu is a main source of protein for the Chinese.Tea is the beverage of choice.

*Chinese calligraphy. Chinese writing is based on symbols.

ArtsChinese art is greatly influenced by the countrys rich spiritual and mystical history. Many sculptures and paintings depict spiritual figures of Buddhism.Many musical instruments are integral to Chinese culture, including the flute-like xun and the guqin, which is in the zither family. The countrys musical history dates back to the beginning of its existence.Eastern-style martial arts were also developed in China, and it is the birthplace of kung fu, which translates to human achievement.Ancient Chinese were avid writers and philosophers especially during the the Ming and Qing dynasties and that is reflected in the countrys rich liturgical history.Customs and celebrationsThe largest festival also called the Spring Festival marks the beginning of the lunar new year. It falls between mid-January and mid-February and is a time to honor ancestors. During the 15-day celebration, children receive money in red envelopes for good luck and people thoroughly clean their homes to signify a fresh beginning. The holiday is marked fireworks and parades with dancers dressed as dragons.Many people make pilgrimages to Confucius' birthplace in Shandong Province on his birthday, Sept. 28. The birthday of Guanyin, the goddess of mercy, is observed by visiting Taoist temples. It falls between late March and late April. Similar celebrations mark the birthday of Mazu, the goddess of the sea (also known as Tianhou), in May or June. The Moon Festival is celebrated in September or October with fireworks, paper lanterns and moon gazing.

Chinese GeographyFor thousands of years, the ancient Chinese thought they were pretty much alone on the planet Earth. They knew there were people to the north, the Felt Tent People - the Mongols - but they did not know that other advanced ancient civilizations existed anywhere else.China's natural barriers to the west, south, and east helped to protect these early people from invasion. China's natural barriers include seas - the China Sea and the Yellow Sea, both located in the Pacific Ocean. These seas provide a huge coastline, which provided trade routes and easy access to food.

China's natural barriers also include mountains, deserts, and rivers.As you can see, China has many natural barriers, all of which helped to keep her isolated from the rest of the world for many thousands of years.

Chinese DemographicsOld before its timeIn most countries, demographic changes are easily anticipated. Fertility and mortality, two major factors driving changes in population size and age structure, do not change abruptly (except when altered by pandemic, war or famine). But this is not true for China, where the 2010 census showed that population growth has slowed far more quickly than most observers expected. From 2001-10, Chinas population inched up at just 0.57% annuallyonly about half the level of the previous decade, and only one-fifth of the level in 1970, when controlling population growth first became a priority. The census also showed that there are fewer young people and more old people than forecast. By 2010, nearly 14% of Chinese citizens were over 60, and nearly one in 10 were over 65. China is already an aging society.\The driving force of Chinas slowing population growth rate is its low fertility rate, which has languished well below the replacement level of 2.1 for two decades. The census confirms that Chinas total fertility ratethe average number of children born to each womanis among the lowest in the world, at only 1.4. This number puts China below the developed-world average of 1.7. At purchasing power parity, Chinas per-capita income is just a fifth or less of other large economies. But Chinas fertility level is far below that of the United States, the United Kingdom or France (all around 2.0), and is on par with those of Russia, Japan, Germany and Italyall countries with declining populations.For more than a decade, China has repeatedly failed to reach population targets supposedly put in place to control growthundershooting by a huge margin. For the 10th Five-Year Plan, the National Population and Family Planning Commission (NPFPC) set a population growth target of 62.6m, but China recorded an actual population gain of just 40.1m. For the 11th Five Year Plan, the population gain of 34.2m was far below the 52.4m target. In both cases, the margin of error was greater than 50%! The 12th Five Year Plan (2011-15) projects an annual growth rate of 0.72% and sets a population target of 1.39 bn, way above the forecasts of independent demographers. Unrealistic targets are easily met, and can therefore serve a political function. But inflated numbers also reflect real thinking among some of those in charge of birth control. NPFPCs skewed data have misled the public as well as top policy makers.Lost youthAs society ages faster than expected, Chinas future demographics need to be reassessed. Sustained low fertility means that the number of young workers will decline more sharply than projected. In 2010, there were 116m people aged 20 to 24; by 2020, the number will fall by 20% to 94m. But the actual number of workers will be considerably lower than 94m, thanks to rising participation in higher education. Annual higher-education enrollments tripled from 2.2m to 6.6m in 2001-10, while the number of college students (mostly aged 18 to 21) rose from 5.6m to 22.3m. Declining fertility levels reduced the availability of young workers, but this was exacerbated by the expansion of higher education. Sustained low fertility and rising college enrollments mean that the supply of young workers will continue to decline beyond 2020. The size of the young population aged 20-24 will only be 67m by 2030, less than 60% of the figure in 2010.As the share of young people falls and the share of elderly people rises, Chinese society will age rapidly. China already has 180m people aged over 60, and this is set to reach around 240m by 2020 and 360m by 2030. These are minimum numbers, which will only increase with rising life expectancy. Less certain are how fertility rates will affect the population age structure. Should Chinas currently low fertility of 1.4 children per couple be sustained, the population share of people aged over 60 could reach 20% by 2020 and 27% by 2030. Using the more conservative international definition of elderlypeople aged 65 plusone in five Chinese citizens will be elderly by 2030.Chinas aging process is happening far more quickly than in most other countries, largely thanks to the speed of its demographic transition from high death and birth rates to low death and birth rates. It took China only 50 years to increase life expectancy from 40 to 70 years, compared to 100 years in Western industrialized countries. China reduced its fertility level from five to two children per couple in just 25 years, just one-third of the time taken in the West. The impact on Chinas future age structure is clear: it will take less than 30 years for the share of the population aged over 65 to rise from the current 9% to 25%. In other aging countries like Italy, Germany, and Russia, it will take the best part of a century.This compression of demographic change into such a short period of time means that China will be the first major economy to grow old before it grows rich. At Chinas current level of population aging, with 9% of the total population over the age of 65, other societies had already achieved a much higher level of standard of living. Measured by per-capita purchasing power parity, income levels in Japan were twice as high, and those in South Korea nearly three times higher. Moreover, Chinas social infrastructureespecially its pension and health care systemis much weaker than those in most other aging societies. And no other countries must cope with such a large share of families supported by single children.

4.0 Conclusion StrengthsESPN and other Cable NetworksCable television remains a growing and highly lucrative sector within the entertainment landscape and Disney owns the perennially most-watched network in ESPN. In addition to the healthy advertising revenues this attracts, Disney has the leverage to boost affiliate contract rates significantly. As a result, operating income has increased nicely at ESPN, as well as Disneys other wholly-owned networks, Disney Channel and ABC Family.Investments in Parks and Resorts panning outDisney usually, and particularly within the past several years, spends heavily to upgrade and build vacation properties. In fact, related capital expenditures were $2.9 billion in fiscal 2012. Along with rising guest spending and attendance at its U.S.-based resorts, profits are benefiting from strength at newer operations including cruise lines, Hong Kong Disneyland and Aulani resort in Hawaii. New attractions should continue to keep the theme parks visitation increasing.Returning cash to shareholdersAfter spending for the parks, Disney had enough cash left to repurchase about 4% of outstanding shares and pay a $0.60 per share dividend, amounting to a modest yield. The enormous cash flows brought in by Disneys Media businesses facilitate these measures. WeaknessesThe ABC broadcast networkTraditional broadcast TV, in general, is giving way to cable and other new forms of media. ABC, specifically, is currently trending third among its peers, behind CBS(NYSE: CBS) and Comcasts (NASDAQ: CMCSA)NBC, and its ratings are falling on a year-over-year basis.CBS consistently tops the ratings chart, thanks to numerous popular primetime programs such as NCIS. The company overall is faring well, as earnings are also benefiting from a burgeoning cable TV unit. Its positive momentum approaching 2013 adds appeal to CBS shares.Declining DVD marketDisneys Home Entertainment revenues declined 9% in fiscal 2012. Still a large and wide-margined business for Disney, the ongoing slowdown stems from the rollout of low-priced DVD rental kiosks and alternative media outlets. Home Entertainment, for reference, contributed only 5% of total revenue in 2012, though. OpportunitiesLucasfilmDisney paid $4 billion to purchase Lucasfilm, approximately the same amount it shelled out for Marvel at the end of 2009. The Marvel purchase has spurred a slew of films, many high grossing, including 2012s top box office earner, The Avengers. Lucasfilm is certain to encourage the creation of further such blockbusters, with Star Wars: Episode 7 slated for 2015 followed by a sequel every two or three years. The integration should also support growth in Disneys consumer products segment through the marketing of acquired characters.International cableESPN and the Disney Channels are already available across the globe. Indeed, ESPN operates 27 international sports networks spanning 190 nations and 11 languages, while Disney Channel is available in 35 languages. The potential for profit expansion may well be considerable, nevertheless.On that note, each of Disneys major business lines has overseas possibilities. The recent buyout of UTV Software Communications should allow it to gain a presence in Indias film industry. Plus, it is in the process of developing Shanghai Disney Resort, on tap for 2015. ThreatsNew MediaDisney, like other entertainment conglomerates, has been unprofitable with its Interactive assets and, in fact, downsized its video game operation to some degree. Yet, games and interactive websites are apt to capture an incremental share of consumers attention. While Disney should effectively broadcast its programming online, its interactive businesses could well struggle persistently. Exclusive deals for film streaming, such as the recent agreement with Netflix, help to broaden distribution through these channels somewhat, however.Viacom's upstart animation studioDisney counts on gaining a large proportion of the young audience partly through its often very well-received animated films. Viacom (NASDAQ: VIA), owner of Paramount, is exiting its distribution arrangement with DreamWorks Animation and plans to launch an internal animated studio in 2014. The first film, The SpongeBob SquarePants Movie 2, is scheduled for that year. Viacom has access to characters through its Nickelodeon unit and should thus gain on Disney a bit. That said, its previous forays into full-length animation, namely Rango in 2011, have been lukewarm and Disney should still have a sizable edge.

In all, Disney is reliant on healthy profitability from its cable TV and theme park/resort businesses, two units where results have been improving. Its film unit is dependent on timing of releases and a quality slate. Management should take the correct initiatives to keep earnings on the upturn over the long run. DIS stock may well therefore be a good buy and hold selection.

5.0 References Text Book BBA 3001 (Global Business) http://en.m.wikipedia.org/wiki/Hong_Kong_Disneyland http://www.info.gov.hk/gia/general/199911/02/1102137.htm http://www.trefis.com/stock/dis/articles/181648/a-look-at-disneys-shanghai-resort-and-its-potential-value/2013-04-26 http://www.screamscape.com/html/shanghai_disneyland.htm http://www.livescience.com/28823-chinese-culture.html http://china.mrdonn.org/geography.html http://www.brookings.edu/research/articles/2012/06/china-demographics-wang http://en.wikipedia.org/wiki/Demographics_of_China http://beta.fool.com/dchurchwell/2012/12/31/swot-analysis-walt-disney-co/20189/

6.0 Coursework1. Explain carefully the SIX reasons for international business growth.Our brief history of international business provides clear and dramatic documentation of the rate of international business growth in recent years. But why has this growth has this growth occurred? And why is international business activity likely to continue to escalate during the next several years? Several factors have contributed to this growth: market expansion, resource acquisition, competitive forces, technological changes, social changes, and changes in government trade and investment policies.Market expansion is perhaps the most significant catalyst for international business growth. As the productive capacities of firms factories outgrow the size of their home markets, firms often internationalize their operations to seek new marketing opportunities. In many smaller economies, such as those of Singapore, Switzerland, and the Netherlands, firms quickly recognized that they had to look beyond national boundaries if they were to continue to grow. For example, one of the international businesses was Nestle. Because its home country, Switzerland, is so small, Nestl6 was shipping milk to sixteen different countries as early as 1875. In contrast, the large size of the U.S. market initially caused many U.S. firms to remain content to sell only within that market. This attitude is disappearing as more U.S. companies recognize the rich commercial opportunities available outside the United States.International business activity also is growing as firms seek to facilitate resource acquisition. These resources may be materials, labor, capital, or technology. In some cases, organizations must go to foreign sources because certain products or services are either scarce or unavailable locally. For example, U.S. grocery wholesalers buy coffee and bananas from South America, Japanese firms buy forest products from Canada, and firms worldwide buy oil from the Middle East and Africa. In other cases, firms simply find it easier and/ or more economical to buy from other countries. For example, firms in many countries buy their communications equipment from Northern Telecom because they can obtain a complete system relatively inexpensively, which is easier than buying from multiple vendors and then assembling the components, Some firms move their manufacturing facilities abroad because of cheaper labor; for example, Sony and Matsushita Electric have stereo assembly plants in Malaysia. And with the development of the global capital market, many firms are seeking capital from foreign investors and lenders. For example, Disney used European investors for over half of the financing for its European theme park outside Paris.Competitive forces also spur growth in international business activity. Because of economies of scale and the financial strength that comet with larger organizational size, smaller firms often have difficulty competing with larger ones. Thus, when a firms competitors begin to grow by expanding into new foreign markets, that firm may have little choice but to follow suit. For example, Mazda struggled for years because it lacked the resources of its larger domestic competitors Toyota and Nissan. It entered the U.S. market in order to keep pace with these Japanese rivals. It the early 1990, Mazda aggressively introduced several new models that exploit market niches (such as the Miata convertible) and increased its worldwide automobile production. It adopted these tactics to increase its market share, sales, and profits, with the eventual foal of putting it on an equal footing with its major competitors. Similarly, the H.J. Heinz Company, U.S. Good processing firm, increased its international presence largely because felt the need to keep pace with its primary competitors Nestle, Kellogg, and Philip Morris each of which has operations in many foreign market. Avivid demonstration of this need to keep up with ones competitors can be seen in Central and Eastern Europe, especially Russia. As these formerly inaccessible market opened, literally thousands of businesses raced to capture new customers. Each one realized that if it felt behind its competitors, it might have a difficult time over catching up.Technological changes particularly in communications, transportation, and information processing are another important cause of the growth in international business activity. Think about the difficulties of conducting business internationally when the primary form of transportation was the sailing ship. The primary form of data processing was pencil and paper, and the primary form of communication was the letter delivered by a postman on horseback. Transportation improvements in the 150 yeas from sailing ship to steamship to seaplane to modern jet airliners mean that a manager in London no longer needs to spend weeks travelling in order to confer with colleagues in Bombay, Toronto, or New York. The increasing ability of computers to rapidly handle and process vast quantities of information allows firms to manage offices and factories located in every corner of the globe. Exxon, for example, relies on it computers to adjust continuously the output of its refineries and the sailings of its tanker fleet in order to meet changes in worldwide demand for its products. Changes its communication technology, such as the advent of facsimile transmission and electronic mail, enable a manager in Tokyo to receive reports from colleagues in Amsterdam, Abidjan, and Auckland in minutes rather than days. These technological advances snake managing distant businesses far easier today than executives would have dreamed possible just a few decades ago and so have facilitated expansion into international market.Social changes also have served to increase international business activity. Products and services too strongly identified with a particular culture were once shunned in certain societies. During the 1950s, for example, U.S. consumers avoided Japanese products, partly because they perceived those products to be of poor quality and partly because of lingering resentment from World War II. Similarly, Kellogg struggled in its attempts to open market in Europe and Pacific Asia partly because many people in those regions traditionally did not eat pro-ceased cereals for breakfast: Europeans ate bread and natural grains, and fish was die choice in much of Asia. But because of long and intensive advertising campaigns, Kellogg is now finding its products becoming more accepted abroad. Today, as consumersworldwide tune into MTV and CNN, they are more likely than in the past to seek out foreign-made products. This global awareness boosts sales of such products as exotic bottled waters from France, television sets from Japan, and expensive cars from Germany. See Going Global for another example of this phenomenon.Finally, changes its government trade and investment policies have expanded growth opportunities for international businesses. In the past fifty years, countries have negotiated reductions in import tariffs (taxes placed on imported goods) and eliminated barriers to FDI within their borders. Many of the reductions were negotiated through the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), Geneva-based organizations to which most of the worlds major trading countries belong. Regional accords, such as the EU and the North American Free Trade Agreement (NAFTA), also have resulted in relaxed trade and investment barriers among theirmembers. Consequently, international business has become more important to the worlds economy.

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