CASE STUDY 01 DISNEYLAND VENTURE IN FRANCE BBA VI A 15-03-2012 INSTRUCTIONS:

Critically read the case study and apart from written answers of the questions given at the end of case study, also sum up few ideas from course content by developing conceptual relationship. a good

The Venture of Euro Disney

On April 12, 1992, Euro Disney was opened on time within its $4.4 billion budget. Situated in

Marne-la-Vallee, France on a site that is one-fifth the size of Paris and just 20 miles to its west, Euro Disney was much like other Disney theme parks with a wide array of rides, attractions, hotels, restaurants, entertainment facilities, a campground, and even a championship golf course. Euro Disney is 49 percent owned by Walt Disney Company of the U.S. The company originally project 11 million visitors in the first year of operation for Euro Disney, but reported that attendance for the parks first seven weeks had only been 1.5 million (it was expected that the majority of visitors have already been attracted to the park before the wet and colder fall and winter seasons, hence, attendance would have slow growth). The break-even point was estimated to be between seven and eight million. While the nearby French residents were projected to account for half of the parks attendance, they only make up an unexpectedly small portion of the entire attending body. Meanwhile, the Disney restaurants and hotels only registered occupancy rates of just 37 percent. With revenues for its first quarter of operations being only $489 million, Euro Disney had to declare that it would incur a loss for the fiscal year of 1992 (ending in September), causing shares of Euro Disney to drop by 31% since the opening of the park. Despite the frustrations, Disney managers remained optimistic about the European theme park. Chairman Michael Eisner claimed that attendance at Euro Disney already surpassed that of Disneys other three theme parks at comparable points in their history, while Euro Disney President Robert Firzpatrick stated that it was impossible to extrapolate meaningfully from the attendance figures at such an early point in parks operation. Disney Theme Parks In the early 1990s, about 71 percent of Walt Disney Attractions revenues came from theme parks (admissions and retail sales), 21 percent from hotels, and 8 percent from other sources. The Anaheim Disneyland was the companys first theme park, and was opened in 1955. The Orlando Disney World, opened in 1971, was home to the largest Disney property (the Walt Disney World Resort), and has been the most popular vacation destination in the U.S. The hotels at the Orlando Disney World were large money maker for the company; the three hotels there registered unheard-of occupancy rates of 92 percent versus 66 percent of the industry average. Importantly, Disney is more than a U.S. company, but also a symbol that is deeply tied to the American culture. The tradition of creative imagination went hand-in-hand with the theme of each Disney park and the unique experiences for visitors. The themed land was a carefully planned and orchestrated imaginary world where a variety of interests and tastes could be appealed to. Lands that the parks had in

common included Main Street, Frontierland, Tomorrowland, Fantasyland, and Adventureland. Encompassed within these were images of the most treasured elements of Americas past, the fascinations of technologies shaped the future, and the myths which helped shape the American cultural heritage. The rides and attractions in the parks were crafted and designed by professional Imagineers whose goal was to make each completely unique to the Disney theme park experience. Another cornerstone of the Disney theme park franchise was the rick heritage of the Disney cartoon characters, which were active in the parks in numerous ways, such as the roaming costumed characters in the park looking for photo opportunities and the memorable souvenirs featuring the characters. own appeal or personality to the public, making them very alive in the eyes of Americans. theme park also placed great emphasis on making guests feel like home. have. The Disney characters became a part of the childhood memories for Americans, and each character has his The Disney There were also plenty of They were

phones connecting to a central hotline that allows employees to answer questions that the guests might Visitors played a unique role that went beyond just spectators or ride-goers. considered important participants of a play and frequent interaction with staff members was highly expected. As a result, many attractions and rides were designed in a way that only came to life through visitor use. As Disney continued to introduce new attractions and refine old ones, visitor experiences remained positive and thrusting. Last but not least, high service quality lied right at the core of the Disney formula. Service standards,

park designs and ever operating detail were carefully managed to ensure that the plays and shows were flawlessly performed daily. Notably, Disneys stated goal was to exceed, not just satisfy, customer expectations every day. It was surveyed that in 1991, Disney was the most highly regarded brand (of 190 different brand names) in terms of quality among consumers nationwide, surpassing such well-known names as Mercedes-Benz and Hallmark. Service delivery had been constantly controlled and refined throughout the franchises history. About 610,000 customer letters was received by Disney each year, and management took serious actions to appreciate the positive feedback and correct imperfect deeds. Hiring the right employees was a top priority for the company and the training process was highly complex and comprehensive to ensure that employees deliver the quality service that the company guaranteed. Potential employees had to go through multiple rounds of interview before receiving the offer the work at the company. Interviewers range from directors and managers to general peer employees, and group interviews were also conducted to test candidates behaviors in a group setting. It was Disneys goal to recruit a large number of young and energetic people, many of high school and college age because such energy was critical to the Disney services. The Disney University was another integral element of the company service delivery system. Opened in 1961, the university was an in-house personnel development unit that oriented and trained employees about Disneys strict service standards and corporate culture. The orientation program also consisted of classroom instruction in the company policies, facilities,

resources, procedures, and extensive on-the-job training. challenge of guest service and extending oneself to guests.

Employees were taught to understand the Superior performance was emphasized and

expected. Ever employee was evaluated based on their energy level, enthusiasm, commitment and pride. Disney also maintained a variety of recognition programs for outstanding service delivery, including a wide arrays of service awards, banquets for long-time service, and other informal gatherings. employees to treat guests. Disney management understood the value of treating employees in the same way the company wanted the Because employees were highly valued at Disney, they are motivated to deliver high-quality services to the guests, and the virtuous cycle continued. Building Euro Disney

park, Disneyland, opened in Anaheim, California, in 1955. Its theme song, "It's a Small World After All," promoted "an idealized vision of America spiced with reassuring glimpses of exotic cultures all calculated to promote heartwarming feelings about living together as one happy family. There were dark tunnels and bumpy rides to scare the children a little but none of the terrors of the real world . . . The Disney characters that everyone knew from the cartoons and comic books were on hand to shepherd the guests and to direct them to the Mickey Mouse watches and Little Mermaid records. The Anaheim park was an instant success. In the 1970s, the triumph was repeated in Florida, and in 1983, Disney proved the Japanese also have an affinity for Mickey Mouse with the successful opening of Tokyo Disneyland. Having wooed the Japanese, Disney executives in 1986 turned their attention to France and, more specifically, to Paris, the self-proclaimed capital of European high culture and style. "Why did they pick France?" many asked. When word first got out that Disney wanted to build another international theme park, officials from more than 200 locations all over the world descended on Disney with pleas and cash inducements to work the Disney magic in their hometowns. But Paris was chosen because of demographics and subsidies. About 17 million Europeans live less than a two-hour drive from Paris. Another 310 million can fly there in the same time or less. Also, the French government was so eager to attract Disney that it offered the company more than $1 billion in various incentives, all in the expectation that the project would create 30,000 French jobs. From the beginning, cultural gaffes by Disney set the tone for the project. By late 1986, Disney was deep in negotiations with the French government. To the exasperation of the Disney team, headed by Joe Shapiro, the talks were taking far longer than expected. Jean-Rene Bernard, the chief French negotiator, said he was astonished when Mr. Shapiro, his patience depleted, ran to the door of the room and, in a very un-Gallic gesture, began kicking it repeatedly, shouting, "Get me something to break!" There was also snipping from Parisian intellectuals who attacked the transplantation of Disney's dream world as an assault on French culture; "a cultural Chernobyl," one prominent intellectual called it. The minister of culture announced he would boycott the opening, proclaiming it to be an unwelcome symbol of American clichs and a

consumer society. Unperturbed, Disney pushed ahead with the planned summer 1992 opening of the $5 billion park. Shortly after Euro-Disneyland opened, French farmers drove their tractors to the entrance and blocked it. This globally televised act of protest was aimed not at Disney but at the US government, which had been demanding that French agricultural subsidies be cut. Still, it focused world attention upon the loveless marriage of Disney and Paris. Then there were the operational errors. Disney's policy of serving no alcohol in the park, since reversed caused astonishment in a country where a glass of wine for lunch is a given. Disney thought that Monday would be a light day for visitors and Friday a heavy one and allocated staff accordingly, but the reality was the reverse. Another unpleasant surprise was the hotel breakfast debacle. "We were told that Europeans 'don't take breakfast,' so we downsized the restaurants," recalled one Disney executive. "And guess what? Everybody showed up for breakfast. We were trying to serve 2,500 breakfasts in a 350-seat restaurant at some of the hotels. The lines were horrendous. Moreover, they didn't want the typical French breakfast of croissants and coffee, which was our assumption. They wanted bacon and eggs." Lunch turned out to be another problem. "Everybody wanted lunch at 12:30. The crowds were huge. Our smiling cast members had to calm down surly patrons and engage in some 'behavior modification' to teach them that they could eat lunch at 11:00 AM or 2:00 PM." There were major staffing problems too. Disney tried to use the same teamwork model with its staff that had worked so well in America and Japan, but it ran into trouble in France. In the first nine weeks of Euro-Disneyland's operation, roughly 1,000 employees, 10 percent of the total, left. One former employee was a 22-yearold medical student from a nearby town who signed up for a weekend job. After two days of "brainwashing," as he called Disney's training, he left following a dispute with his supervisor over the timing of his lunch hour. Another former employee noted, "I don't think that they realize what Europeans are like. . . that we ask questions and don't think all the same way." One of the biggest problems, however, was that Europeans didn't stay at the park as long as Disney expected. While Disney succeeded in getting close to 9 million visitors a year through the park gates, in line with its plans, most stayed only a day or two. Few stayed the four to five days that Disney had hoped for. It seems that most Europeans regard theme parks as places for day excursions. A theme park is just not seen as a destination for an extended vacation. This was a big shock for Disney. The company had invested billions in building luxury hotels next to the park-hotels that the day-trippers didn't need and that stood half empty most of the time. To make matters worse, the French didn't show up in the expected numbers. In 1994, only 40 percent of the park's visitors

were French. One puzzled executive noted that many visitors were Americans living in Europe or, stranger still, Japanese on a European vacation! As a result, by the end of 1994 Euro-Disneyland had cumulative losses of $2 billion. At this point, Euro-Disney changed its strategy. First, the company changed the name to Disneyland Paris in an attempt to strengthen the park's identity. Second, food and fashion offerings changed. To quote one manager, "We opened with restaurants providing French-style food service, but we found that customers wanted selfservice like in the US parks. Similarly, products in the boutiques were initially toned down for the French market, but since then the range has changed to give it a more definite Disney image." Third, the prices for day tickets and hotel rooms were cut by one-third. The result was an attendance of 11.7 million in 1996, up from a low of 8.8 million in 1994.
The unusual success with Tokyo Disneyland prompted Disney to launch another international venture; this time, Disney chose Europe. The initial bidding process for locating Euro Disney involved Germany, Spain, France and a few others, out of which Spain and France were consider most seriously. and identifying tourist information. Both the French and the Spanish governments had offered tremendous help to Disney in locating a site for the park Specifically, Spain offered tax and labor incentives as well as up to 20,000 acres of land, while France offered to improve domestic transportation to supplement to construction of a Disney park in the country. To Disney, Spain had a better weather condition but France had a larger population base. Eventually, Disney chose France over Spain because Marne-la-Vallee (the eventual site offered by France to build the park) is situated near one of the worlds tourism capitals and within a days drive or train ride of more than 30 million people in France, Belgium, England, and Germany. The promised transportation development was another incentive for Disney. The planned opening of the Euro Tunnel in 1994 would also make the park accessible from England in four hours by cars. France, particularly Paris, had been a highly popular vacation destination, compared to other European cities. Roughly 50 million tourists visited France per year, spending an estimated $21 million. Europeans also tended to took more vacation annually than Americans; Disney hoped to benefit from European vacation practices. Still, the location of Marne-la-Vallee became the strongest advantage for Yet, the weather remained a critical concern France to win the bid for a Disney theme park in Europe.

for Disney, although the company was still optimistic about the future of Euro Disney, given the success of Tokyo Disneyland. Winter in central France could drop to 23 degrees Fahrenheit, and humidity could be fairly high. The park was a joint venture between The Walt Disney Company and a separate company called Euro Disney S.C.A., which owned the majority of the Euro Disney. Still, The Walt Disney Company had to invest $2.5 billion to build the park (making it the largest single foreign investment ever in France) and a reported $160 million in the equity of Euro Disney. These also entitled Disney to various revenue streams, including management fees, royalty fees and a hefty inventive management fee based on the cash

flow of the park.

Euro Disney was expected to create up to 28,000 jobs, easing the 10 percent

unemployment rate from the year prior to the opening of the park. It was also expected to boost the construction industry that was hit hard by economic crisis, as well as the real estate around the park area. Time Constraints In building the park, Disney also met a critical challenge in readying the park for its opening date, including everything from construction and operation, to marketing, to hiring and training employees for the park. Euro Disney was aggressively marketed by Disney as well as other firms. Europe to publicize the park. There were dozens of articles in magazines throughout Europe, and a model of The Sleeping Beauty Castle was sent around The Europe-wide campaign also included to promote the opening ceremony, which was broadcast live across Europe. Disney then hired and trained 14,000 employees for the opening of the park, and expected fill more temporary positions during the peak season. It was extremely challenging to ensure the new employees work in accordance to Disneys standard of customer service by the opening date. As a result, the management announced that a leading priority for Euro Disney was to indoctrinate all employees in the Disney service philosophy as well as operational policies and procedures. The Disney University was then opened at Euro Disney, with a goal to interview suitable candidates, select the best ones, and provided extensive training. Disney also attempted to hire employees of nationalities proportional to expected visitor counts (45% French, 30% other Europeans, 15% outside of Europe), but by the time of opening, it was 70 percent French. were paid roughly 15% above Frances minimum wage at that time. Yet, most cast members At the same time, Disney also

cross-trained managers and supervisors to ensure service quality and consistent managerial practices. While European managers were trained at other theme parks, foreign managers were also sent to Euro Disney to work. Although Euro Disney mainly hired Europeans to work in the park, most of the top jobs and management positions were held in the hands of American expatriates. Nonetheless, the hiring process was heavily criticized by applicants, the press, and even the French unions. The controversy revolved around Disneys grooming requirements. Disney enforced a strict dress code, a ban on facial hair and colored stockings, standards for neat hair and fingernails, and even a policy of appropriate undergarments. Applicants and labor leaders felt that requirements were excessive and much stricter than other employers. The efforts to force Disney loosen the standards were unsuccessful. On the other hand, the Marne-La-Vallee area did not have enough apartment space for the thousands of Disney employees, and the jobs generally did not pay well enough to make decent housing affordable to these employees. As a result, Disney had to build its own apartment and renting rooms in the park area, adding millions of investment dollars to the entire project. Another big challenge Disney faced was getting the French cast members to break their ancient cultural aversions to smiling and being consistently polite to park guests. The individualist French had to be molded into the squeaky-clean Disney image. While Disney successfully staffed and trained cast

members for the park by the time of the opening, more than 1,000 employees left their jobs within the first nine weeks of operation, about one-half of whom left voluntarily. The long hours and hectic pace of work at the park were also cited as major reasons for the turnover. One cast member explained that expatriate managers ceased to understand the European work habits and ethics, and the work mode was not one that the Euro Disney employees were used to in the past.

Theme Park Operations Euro Disney initially consisted of a theme park (although still somewhat smaller than Disneys Florida parks) and extensive lodging and recreation facilities, such as golf courses, hotels, resorts, restaurants, shops and aquatic park. The park was intended to continue Disneys traditional design in that it shared the many features and attractions of other Disney parks. Extensive market research was conducted and the cultural adaptation was expressed in such things as park designs, grooming standards for employees, and eating habits. Because research showed that Disneyland was among the top three tourist spots for Europeans when they traveled to the U.S., Euro Disney placed great emphasis on making the park extremely American to guests. The hotels, rides, and interior gardens were named in a way that carried a heavy western flavor, in attempt to appeal to the European appetite for an American experience. However, the park received much concerns that the American experience for guests would become too Americanized. The French intellectual community and the media voiced harsh criticisms, decrying the threat of cultural imperialism by Euro Disney. It was felt that the emergence of Disney in Europe would encourage unhealthy American brand of consumerism. For others, Euro Disney had become the symbol of America and anti-American parties, particularly farmers, protested against Euro Disney to indicate their discontent with the policies that the U.S. supported at that time. Still, Euro Disney incorporated some traditional European elements in order to accommodate the preferences of European guests and certain French cultural requirements. In the midst of extreme Americanism in the park layout, Euro Disney turned to be relatively international in other aspects. The park featured food from across the world. Many restaurants, although showcased American dishes, were adapted to the European preference of less-spicy food. One of the parks, the Fantasyland, carried only European dishes, which have a variety of origins (Germany, Italy, etc). Meanwhile, there were other concerns raised by the French government regarding the operation of Euro Disney. While Disney assured that French would be primary language of the park, most signs were actually bilingual, as were the parks employees. More importantly, Disney followed one of its two major traditions of not serving wine, although wine to the Europeans (particularly the French) was like cheese to the Americans. It was felt that this was a departure from the important French culture and lunch habits, causing weak attendance initially. There were also issues with visitors waiting long lines for rides or food, since there was not tolerance for such practices in France or Europe.

The Results Unlike Tokyo Disneyland, Euro Disney did not experience the exceeding-expectation turnout in terms of admissions and revenues. A major criticism was that park was neither international nor French in nature, and it failed to satisfy either party completely. and the company incurred financial loss. Many visitors could not figure out whether it is going to Attendance was much lower than expected, be an American park, a French park, or a European park.

Even if revenues could be brought in line with projections for

the balance of the year, the park still would not be profitable for another five years or so. There were comments about Euro Disney being out of character for the French population, because the French were too individualist and private to appreciate the standardized and crowded Disney theme park experience. While the Disney style of service was one with which Americans have grown up, there were several styles of service in Europe, and unbridled enthusiasm was not a marked feature of them. Meanwhile, the cost of the experience was thought to be an issue for some visitors. costs, and souvenirs). In regards to visitor reaction, there were mixed opinions about the experience at Euro Disney. Most positive feedback, which came mainly from other parts of Europe and the world, revolved around the originality of the park and the unique experience around the same area. For those who could not afford to go to the U.S., Euro Disney gave them an identical Disney experience like that in America. However, the park ceased to please many local French visitors, who frequently complained about the long lines, poor service, and operational glitches. Moving Forward Even though Euro Disney had a rocky start, there was precedence that tough start did not become catastrophic in the theme park business. Universals Florida theme park had had a disastrous opening due to technical difficulties, but it quickly came back and was considered rather successful down the stretch. Management believed that it was still too premature to determine the impact of poor fall weather, and that the attendance figure of over 30,000 per day was rather respectable. If this number were annualized, the projected 11 million visitors during the first year of operation would be met. Although the local French population had not attended as planned, visitation from the rest of Europe was running higher than expected. The coming winter months were clearly important to Euro Disneys chances for financial rebounce, if not success. However, the weather would still pose great challenge to the attendance. Euro Disney must also find a way to promote the park in such a way that there would be cut costs in public relations and operations, while providing affordable entertainment to visitors. It was reported that many French visitors had been deterred from coming by the cost (including the admission costs, housing

Facing with problems such as inconsistent service standards, high cost levels and employee turnover, Euro Disney also had to re-consider the Phase II expansion of the park that was planned at the same time the park was built. The scope of investment and construction, timing and nature of the Phase II would imitate that of Phase I. Perhaps Euro Disney could learn from the Phase I experience and improve the chance of success for Phase II.

Case study Discussion Questions:

1. What assumptions did Disney make about the tastes and preferences of French consumers? Which of these assumptions were correct? Which were not? 2. How might Disney have had a more favorable initial experience in France? What steps

might it have taken to reduce the mistakes associated with the launch of Euro-Disney? 3. 4. In retrospect, was France the best choice for the location of Euro-Disney? Discuss the role of culture in the International venture of Disney world?