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 a good

conceptual relationship.

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

park’s 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 park’s 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 Disney’s 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

park’s operation.

Disney Theme Parks

In the early 1990’s, about 71 percent of Walt Disney Attraction’s revenues came from theme parks

(admissions and retail sales), 21 percent from hotels, and 8 percent from other sources. The Anaheim

Disneyland was the company’s 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 America’s 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. The

Disney characters became a part of the childhood memories for Americans, and each character has his

own appeal or “personality” to the public, making them very alive in the eyes of Americans. The Disney

theme park also placed great emphasis on making guests feel like home. There were also plenty of

phones connecting to a central hotline that allows employees to answer questions that the guests might

have. Visitors played a unique role that went beyond just spectators or ride-goers. They were 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, Disney’s 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 franchise’s 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 Disney’s 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 Disney’s 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. Employees were taught to understand the

challenge of guest service and extending oneself to guests. 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. Disney

management understood the value of treating employees in the same way the company wanted the

employees to treat guests. 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 clichés 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. Both the

French and the Spanish governments had offered tremendous help to Disney in locating a site for the park

and identifying tourist information. 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 world’s tourism capitals and

within a day’s 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

France to win the bid for a Disney theme park in Europe. Yet, the weather remained a critical concern 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. There were dozens

of articles in magazines throughout Europe, and a model of The Sleeping Beauty Castle was sent around

Europe to publicize the park. 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 Disney’s 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. Yet, most cast members

were paid roughly 15% above France’s minimum wage at that time. 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 Disney’s 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 Disney’s 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 Disney’s 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 park’s 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. Many visitors could not figure out whether it is going to be

an American park, a French park, or a European park. Attendance was much lower than expected, and the

company incurred financial loss. 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. It was reported that

many French visitors had been deterred from coming by the cost (including the admission costs, housing

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. Universal’s 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 Disney’s 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.

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. In retrospect, was France the best choice for the location of Euro-Disney?

4. Discuss the role of culture in the International venture of Disney world?