Case no, 2

HONG KONG DISNEYLAND

Submitted By: Group No. 4 Donny Thomas SMBA-10093 Diju Daniel SMBA -10095 Mugdha Joshi- SMBA10094 Sugandha Mehrotra SMBA 10097 Udita Sood- SMBA 10089

Submitted to: Dr. K Abdul Waheed, Associate Professor- Marketing Institute of Management Technology, Dubai.
INTRODUCTION

This is a report analysis of Hong Kong Disneyland. This analysis examines the effect of the national culture of Hong Kong in relation to the business operation and other several various factors that affects the business conduct of chosen industry. In addition, the report talks about the high points and low points of Hong Kong Disneyland. To what extent the theme park was a success, what were the different challenges faced, how they made an effort to overcome those challenges and so forth. The beginning for Hong Kong Disneyland was a rocky one including several controversies that generated some negative publicly. Hong Kong Disneyland was a theme park built and operated by a new-joint venture company, the Hong Kong International Theme Parks Ltd. (HKITP), as formed by the Hong Kong Special Administrative Region Government and the Walt Disney Company. Hong Kong Disneyland had been conducting business since the year 2006. HKD was the third park that that Disney had opened outside of the United States, following the Tokyo Disney Resort and Disneyland Resort Paris. The theme park in Tokyo had done tremendously well and surpassed everyones expectations. On the other hand, Disneyland Paris had fallen short of the expectations people had from it. The question now was what will be the destiny of this new venture. Whether, the outcome would resemble that of its successful Far Eastern Japanese cousin or that of the French park. This report will give a brief background about Disney. The analysis portion applying the different methods for strategic analysis in order to examine the remote and close environments of Hong Kong Disneyland will follow the background. The paper will use some cultural theories in order to provide a comprehensive background as to the cross cultural awareness of the company with the culture of a state.

BACKGROUND Hong Kong Disneyland is built and operated by a new-joint venture company, the Hong Kong International Theme Parks Ltd (HKITP), as formed by the Hong Kong Special Administrative Region Government and the Walt Disney Company on September 12,2006. It is the fifth (5th) Disneyland style Park, which located on a reclaimed area in Pennys Bay, Lantau Island.

Through its previous experiences, Disney had learnt that it would want to keep their stake and not loose majority of its stakes when dealing with International expansions. Thus, The Hong Kong government owned Disneys majority stock (51%) yet Disney maintained 49% stakes in HKD; hence, any movement on Hong Kong Political will have a big impact to its business. On the economic side, as in all business industries, the fall, or rise of economy whether macro or micro will greatly affect its conduct, hence it will also with Disney. It can be inferred that taxation issues is not an important issue because the government owns majority of its stocks the government will not therefore impose tax on its own business. As mentioned earlier, HKD was the third park that Disney had opened outside of the United States following the Tokyo Disney Resort and Disneyland Resort Paris. The Tokyo Disney Resort gained a huge success but Disneyland Paris was unable to create that powerful impact that Disney was expected it would.

DISNEY GOING GLOBAL The Walt Disney Company was founded in 1923 and was committed to deliver quality entertainment experiences for people of all ages. Disneys first venture was in its own land, Disneyland Resort at Anaheim, California in 1955. The companys second theme park was opened in Florida in 1971. Later on, Disney could a step ahead and decided to expand its territory and reach the foreign soil. Thus, marking its footprint first in Tokyo, followed by Paris and finally in Hong Kong. By 2006, Disneys business portfolio consisted of four major segments.

Tokyo Disney Resort: First venture in foreign land was established in 1983. The structure and design of the park was a replica of the park designed in California and Florida. The venture was solely financed by third parties and it cost US $ 1.4 billion to develop the Resort. Disney did not assume any ownership of the park to minimize risks. Disney was only designated as the designer and licensor. The adventure land was received well by the Japanese owing in part to the Japanese interest in the

western cultures and the Asian love of fantasy and costume. The secret was to provide an unadulterated American experience.

Disneyland Resort Paris: Disneys second attempt at international expansion came into operation in 1992. Disney was determined not to forgo complete ownership and the loss of profits that come along with it and repeat the mistake it made in case of Tokyo Disney Resort. Thus, Disney became one of the partners in this project. During the course of the project, overall construction cost was pushed to US $5 billion from US $ 1 billion. The park did not report profit until 1995. The major problem was that Disney once again replicated its brand image, culture, operations and designs to Disneyland Paris, in spite of the fact that cultural differences between the two countries existed. This was considered as American cultural imperialism the recruitment process and training programs were initially not adapted to the French business culture which created further problems.

Why such different outcomes for Tokyo and Paris Importantly the two counties perceive the American culture very differently. One is a diehard fan and the other sees it as an invasion. Disney failed to sense this difference. Just because it was a success in Tokyo, it decided to ignore most of the cultural differences between France and US and did not adapt Disneyland Paris according to the French people. This created a provider gap as the French expected something else and actually experienced a complete different theme park, far from their expectations. Moreover, it seemed that Disney was facing product myopia and it did not try to adapt its products and services to different countries, morals and values.

Analysis:

As we have learnt that for any business to be success and attain profit, it is important to create a niche strategy. For HKD, the niche strategy adopted by the company was "that Chinese want to come to Disney because it is American. The strategic assets of HKD was product, practices and ideologies transferring into the Chinese context. The foreignness is the part of the appeal". The reason for Disneyland to pick China as the their 3rd International Venture was because firstly, the Chinese economy was booming. However, China's infrastructure was still sub standards by world's standards. Secondly, the Chinese currency renimnbi was not fully convertible. These factors increased the attractiveness of Hong Kong (the special administrative reason of China).Moreover, Hong Kong had World Class infrastructure and a reputation as an International Financial Centre. Another strong Completive Advantage was that Hong Kong was always been the Gateway to China. Strategic analysis using resource audit identifies the resources available to a business. Some of the resources of the company may be owned and other resources can be obtained from joint ventures or from supplier arrangements with other business. Focus will be to determine the value, extent, and use of its assets. On December of 1999 the Hong Kong Government, the Walt Disney Company, and the Hong Kong International Theme Parks Limited signed a project agreements on implementation of Hong Kong Disneyland. Disney is partly owned by the government of Hong Kong, which is holding the biggest part of the stocks, representing 51% while Walt Disney has only 49%. The government formulated the financing structure in order to inform the public on how the Government, as Disney majority stockholder, will allocate its resources for its funding with the establishment of Disney. Walt Disney revenues from advance theme park ticket sales are recognized when the tickets are used. Revenues from corporate sponsors at the theme parks are generally recognized over the period of the applicable agreements commencing with the opening of the related attraction. The parks, resorts and other property are carried at historical cost. Thus, it can be inferred that the extent of the value of its assets also derived on its long-term value. It does not only depend on the income on its current situation. Furthermore, Disney values the need to preserve its assets in order to prolong the benefit it can derived from such assets. ABILITY TO RAISE NEW FUNDS

We will here take into consideration the strength and reputation of the management team and the overall business and the strength of relationships with existing investors and lenders. There are series of criticisms in 2005 that put a bad input on the reputation of Disney. Also the food poisoning incident that happened in 2005 followed by the misunderstanding of preventing the entry, in order to conduct an investigation of the incident, of the representative of the Food and environmental Hygiene Department. However, according to Hong Kongs Financial Secretary Henry Tang, Hong Kong is becoming an important financial hub in all of Asia surpassing Tokyo, offering a diversity of experience may it be shopping, eating, or business. Thus, it can be inferred that Disney has opened opportunities to Hong Kong making it one of the hot spot for tourism and business opportunities. Furthermore, to prevent the happening of the friction that happened in Disneyland Resort Paris, Disney has taken into consideration to make it more into the local culture. The New York Times reported that the company even consulted experts for the date of its opening, and the proper positioning and location of Disney.

COMPETITORS ANALYSIS Analyzing the case , the only big competition of Disney in Hong Kong was the Ocean Park. Ocean Park was known as the "edutainment" and was a prime tourist attraction. It enjoyed a quasi monopoly position as the only theme park. Ocean Park has suffered tremendously after Disney was established. There are people clamor to see the magical land promised. The price is relatively lower than what Disney offers. The major competitive threat it poses is the attraction it offers to the public. It offers live entertainment, audience interaction with the animals for the price half of what Disney offers. Hence, Disney must see to it that it intensify its campaign on offering magical land. Disney must not put into the perception of the public that really dreams are high in its worth. HKD-Value Chain This analysis describes the activities that take place in a business and relates to an analysis of the competitive strength of the business. Michael Porter stated that the activities of a business

could be grouped under two headings: 1) Primary Activities, which has directly connection with creating and delivering a product and 2) the Support Activities, which are not directly involved in production but may increase the effectiveness and efficiency. HKD-core competencies Core Competencies are those matters that are needed to business in achieving competitive advantage. Over time companies may develop key areas of expertise, which are distinctive to the company and critical to the companys growth. We now address the core issues that an organization possesses in order to gain the competitive advantage. Considering the first Concern on whether the core competencies provide a full potential access to huge variety of market? We can analyze that the business conduct of Disney provides potential access to a wide variety of markets. Disney is family oriented business, however it offer programs to executive who would want to conduct its business meetings or conventions. It also has packages for those people who would want to get married in Disney, which will be magically inspired. Thus, it will be correct to say that the core competencies are present.

Another concern in the core competencies addresses the issue on whether there is a significant contribution to the perceived customer benefits of the end product? In the current Disneyland scenario, we can approve, however the only matter that has been subject to scrutiny is the price, which is relatively higher as opposed to the main competition of Disney, which is Ocean Park. Disney must make a way in order to lower its price without compromising the quality of its service. Another vital point of discussion lies in the fact is whether it is difficult for the competitors to imitate? Analyzing Disneyland case, we see the services that Disneyland provides; it is difficult to imitate thus adding them with huge competitive advantage. However, as to services the only problem is that there are several tourist spot in China, or Hong Kong that will offer that kind of service. However, imitations as regards to the way it entertain its market is difficult to imitate such the High school musical on stage.

Challenges faced by HKD 1. Lunar Fiasco

It was during this period that HKD faced a lot of problems just because they did not properly learn the cultural traditions and cultural habits of Chinese people. During the Lunar new year (Jan 28 Jan 31) they allowed numerous guests into the park through discounted tickets for those two days that the park could not accommodate the additional guests. The mainland tourist became annoyed due to this and reacted in a negative way which impacted the image of HKD, Bill Ernst, HKD executive vice president had later apologized for such a mishandling from their side. 2. Customer Complaints There were many customer complaints out forth against HKD management. The complaints were customers mistreatment by the staff, proper action was not taken at the tme of an emergency as one customer stated the his mother died because the on duty staff refused to call an ambulance at the time of an emergency. Even complaints that the safety of the people was not well insures by HKD, as a girl was hit by a falling debris and the HKD staff tried to calm the issue bu handing over Winnie the Pooh. 3. Working Conditions The pay was not upto the amount of work done alleged the character performers. They were to work for more than 12 hours without any proper breaks which caused injuries to many of the workers. Lauren Jordan reacted to this instance stating that there were only few who came forward feeling they were underpaid for the work they have got as a parade performwe was paid HK$ 9000/month and HK$11000/month for stage performers. However, the management had later decided to provide 40 minutes break for every 20 minutes session during the summer season. Cooling vests were designed for the character performers.

The complaints were also out forth by the executive staff as well and many of them had started with looking for another job.

ORGANIZATIONAL CULTURE In HKD case, Organizational Culture plays a very important role. As a company when ventures on foreign soils, it is very important for the company to understand the values and the culture of the Country before launching itself in an foreign land. Like we witnessed that the Tokyo Disney was very successful as they could relate Disneyland to a foreign destination and Welcomed the Walt Disney Concept in their country. On the Other side, we see that Paris Disneyland was viewed by the French as "Totally American" and gave a feeling of "invasion" & "Cultural Imperialism" to the French. On other such instances, the French could relate to the Mickey Mouse with their famous comic-"Le Journal Mickey" and the Japanese viewed the Mouse as a conservative and reliable enough to sell money market accounts in Japan. Thus, we can see the variations. Thus, it will be correct to say Consumer behavior varies and thus the Consumer expectation. What thus gets created is a Communication gap. Focusing on the case of HKD, We see that there is a huge Customer gap as the customer have an expectation before buying a service and what they experience is a different thing. Thus, it creates a gap as what the consumers perceive and receive are different. On the other hand, there is a provider's gap existence as well as what we can clearly see is a Myopia that Disneyland has for its product and services as its trying to create standardized format even though different countries have different moral systems and values. In case of HKD- Lunar New Year Fiasco there is an existence of Knowledge Gap as Disneyland was not prepared to manage such large foot falls and offered huge discounts understanding it will attract crowd being a holiday period (February 1-2). It thus, landed itself in huge fiasco and their services came under huge speculation. As we have learnt that, Organizational culture is the personality of an organization. Culture comprised of the assumptions, values, norms, and tangible signs of organization

members and their behaviors. Corporate culture can be looked at as a system. It may include feedbacks based on assumptions. After the Challenges that Disneyland faced, it went ahead to make changes in their system. Their new organizational culture is now addressing the need to be more family-oriented. Another very important aspect of the Culture is the Human Resource as the case mentions that Disney-Hong Kong reviewed its policies after the fiascos and send its employees for Training program to its International branches to familiarize the staff with the Disney characters and associate themselves with it. They encouraged them to enact their concepts in their languages to promote their Country's Disney land. Thus, they were nationalizing some acts Country wise so that they could attract more visitors and more and more people would talk about Disneyland. there would be more word of mouth and number of visitors would increase.

CONCLUSION After analyzing the case, it will be correct to say that Disneyland owes strong strategic assets-products, services and ideologies and it has been able to taper down the same to the Tokyo Disneyland, Disneyland Resort Paris and Hong Kong Disneyland. It thus owes a strong competitive advantage. The key internal strengths of the organization are its name, the quality of its service, and the programs that it offers to the public. It has been successful in providing good quality services internationally. Disney must be able to maintain its good services and must train their staff to be courteous and friendly. As they belong to the Service industry where customers are their main source of revenue. Thus, good training should be provided to the staff to maximize their attraction for the crowd. We also witness a few weakness that HKD faces: the price of tickets, the small space it occupied as compared to other Walt Disney theme parks and the fact that it is so magical. As we learnt that in order to overcome the Challenges, Disneyland started offering huge discount packages to Travel agency so that they would visit the theme park and then talk about it (Marketing through Word of Mouth).They even invited Taxi drivers with tickets at low prices to visit Theme park and later talk about it. Thus, with such efforts, HKD is trying to reduce the Providers and Customers gap that existed in the beginning of the start of Disneyland, Hongkong.

Thus, we see HKD is continuously improving on its policies to attract more crowd. Thus, innovating and evolving as an attractive tourist destination in China.