Failure of European Disneyland Attractions and Analysis of Macro Environment

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Introduction

Many of Businesses in America make detailed assumptions about the potential of expand their business to other countries.One of the examples of the outcome to intercultural business is Disney Corporation’s European attempt. Euro Disney has a very difficult beginning experience in France. Due its lack on accurate information about the French and European preference and culture, further on their inability on forecasting external problems and inability on controlling both controllable and uncontrollable forces, Disney acquired a huge debt. Instead of analyzing and learning from its potential customers Disney chose to make assumptions, turned out that most of those assumptions were wrong.

Euro Disneyland First park of Disneyland opened in Anaheim, California, in 1955. Until 1992, the Walt Disney Company had experienced nothing but success in the theme park business. Following on from the success of the Disneyland theme park in Anaheim, Florida & Tokyo, Disney plans to build a European version first started around 1975, nine years after Walt Disney died. Initially Britain, Italy, Spain and France were all considered as possible locations. France was the best choice for Euro Disney, because it presented the best geographic location and also had many incentives from the French Government, cheap land, easy bank loans, and more than $1billion in incentives. Eventually the French location won, and a site was duly investigated at Marne-la-Vallee, partly because of its close proximity to Paris, and also its central positioning within Western Europe. A factor that was thought to be crucial to the park’s future success if it was to attract sufficient visitors. The proposed location put the park within 4-hours drive for around 68 million people, and 2 hours flight for a further 300 million or so. On March 24, 1987 Disney signs an agreement with the French authorities to create Euro Disney in France for the building of Disneyland theme park at marne-la_vallee. The park was built 4460 acres of farmland. Planned to open early 1992. There are many reasons for disneyland’s failure;

  • Environmental and Location Factors
  • Labor Laws
  • Competition
  • Financing
  • Cultural Differences

Cultural Differences

Hofstede’s Cultural Dimensions Theory

It is the name of the frame used to measure the level of intercultural communication of an entity, an institution, or an entity that constitutes an asset in a social structure, and is referred to by Geert Hosted for the first time. It can be said that the theory has been used by different disciplines for many different purposes. For example, intercultural social behaviors are used in different areas such as sociology, international management and marketing, communication. In addition to all these, it is also used to measure the extent to which people from many different cultures have come together to work on social networks, how to navigate on the internet, or how open a community is to different cultures.

Power Distance Index

It questions the ideas of members of an organization or social structure about power distribution and seeks to find which of the two extremes is closer in the form of equal or unbalanced distribution of power. The fact is that the ones who are close to the gentle are defending the power equally, and the defenders of those who are not evenly distributed the power are talking about the gentleness in the organizations. From this point of view, it can be argued that the organizing culture is developed in organizations with a close sense and that the democratic atmosphere is more open. When examined at the cultural level, it is seen that the close organizations are more open to different cultures.

There are some of the main cultural differences between the United States and France. United States the fairly low score on PowerDistance in combination with the most individualistic culture in the world. The American premise of “liberty and justice for all.”. France scores fairly high on Power Distance. Children are raised to be emotionally dependent, to a degree, on their parents. This dependency will be transferred to teachers and later on to superiors. It is, therefore, a society in which a fair degree of inequality is accepted. Power is not only centralized in companies and government, but also geographically.

Individualism Vs Collectivism

Aggregation is used to measure how involved individuals are. In societies where the concept of individuality is high, it can be said that individual interests and goals are ahead of social interests and targets. The fact that people feel themselves as a member of a group as an individual forms the basic two extremes of the index. In terms of intercultural flexibility, it can be said that the social organizations in which individuals are regarded as individuals and whose concept of belonging is low is more open to foreign cultures. US scores higher on Individualism. They just think of their own family. France is shown to be an individualist society. Parents make their children emotionally independent with regard to groups in which they belong. This means that one is only supposed to take care of oneself and one’s family.

Uncertainty avoidance

Indicator showing how pleasant a social organization is towards uncertainty or ambiguity. The capacity to accept uncertainty is anxious for any ambiguity in low societies, and it is expected that the rules or solutions will be created that make every situation more specific. However, it can be said that the cultural relations of the societies that accept the high uncertainties are higher. These cultures are more open to change and have higher levels of respect for new culture and new ideas.

The US scores well below average on the UncertaintyAvoidance dimension. As a consequence, the perceived context in which Americans find themselves will impact their behavior more than if the culture would have either scored higher or lower. France French culture scores high onUncertainty Avoidance. The French don’t like surprises. Structure and planning are required.

Masculinity Vs Feminine

The index that determines how the roles between the sexes are emotionally distributed. In masculine societies, values are more based on competition, power, and concrete objects. On the other hand, values in feminine communities are based on relationships, quality of life and feelings. In feminine societies, the gender of the woman or the man has no precaution and is treated equally to the individual. In literature, the concepts of ‘numerical life’ (masculine) and ‘quality life (feminine)’ are used instead of ‘masculine’ or ‘feminine’ to disturb readers from some communities or cultural backgrounds.

US on Masculinity are high. This can be seen in the typical American behavioral patterns. This can be explained by the combination of a high Masculinity drive together with the most individualistic drive in the world. In other words, Americans, so to speak, all show their masculine drive individually. France has a somewhat feminine culture. At face value this may be indicated by its famous welfare system (securité sociale), the 35-hour working week, five weeks of holidays per year and its focus on the quality of life. French culture in terms of the model has, however, another unique characteristic. The upper class scores feminine while the working class scores masculine.

Uncertainty avoidance

Indicator showing how pleasant a social organization is towards uncertainty or ambiguity. The capacity to accept uncertainty is anxious for any ambiguity in low societies, and it is expected that the rules or solutions will be created that make every situation more specific. However, it can be said that the cultural relations of the societies that accept the high uncertainties are higher. These cultures are more open to change and have higher levels of respect for new culture and new ideas.The US scores well below average on the Uncertainty Avoidance dimension. As a consequence, the perceived context in which Americans find themselves will impact their behavior more than if the culture would have either scored higher or lower. French culture scores high on Uncertainty Avoidance. The French don’t like surprises. Structure and planning are required.

Pragmatism (long term orientation)

Confucian dynamism also means that the time horizons of social organizations are questioned and measured according to whether social organizations have long or short term expectations, goals or plans. Long-term focused community units are more interested in making plans for the future and their values are shaped according to these interests. For example, to save money, to be permanent or to adapt for the sake of their interests. On the other hand, it is possible to talk about short-term focused communities. The values in those days are very much past and focused now. For example, respect for the traditions from the past or the extent to which social responsibilities are fulfilled are important.

US Americans are prone to analyze new information to check whether it is true. Thus, the culture doesn’t make most Americans pragmatic, but this should not be confused with the fact that Americans are very practical, being reflected by the “can do” mentality mentioned above. France in this dimension, making it pragmatic. In societies with a pragmatic orientation, people believe that truth depends very much on situation, context and time. They show an ability to adapt traditions easily to changed conditions, a strong propensity to save and invest thriftiness, and perseverance in achieving result.

Trompenaars’ Research

Universalism versus Particularism- It talks about three major differences: Universalistic cultures are focusing on the rules, but Particularism cultures are focusing on relationships. Universalistic is only one truth or reality, while Particularism is a number of perspectives on reality. Universalistic people “treat all cases in the same way”, whereas in Particularism people “treat cases on their special merits and create private understandings”.

Based on above rules, it was believed that the rules, regulations and policies are universal and can be applied anywhere without modification. On the other hand French perceives distinct rules and regulations as part of their culture. Motivated by the success of its three theme parks, Disney did not realize that French were a part of a distinct culture and its methods may not work there.

Individualism versus Communitarianism

There are three different points between Individualism and Communitarianism in business decisions: People are living in “a communitarian society” in France while Americans are staying in the individual society. Lithe French prefer to work together and take part in social relations mutually, whereas people from the USA adore the individualism..It is normal phenomenon for Americans to make ranks between bosses and employees; however, the French people refuse it. In brief, the two prime dimensions could explain hardly the ethics in different cultures.

Specific versus Diffuse

This dimension mentions two differences between the USA and France

  1. 1. The USA’s culture is belonging to Explicit national cultures, which make a decision with “a low context manner”; while France is focusing on Implicit national cultures, which take a command with “a high context manner”.
  2. 2. The USA pays attention to a negotiation clearly, logically and persuasively, whereas France stresses on a discussion inaccurately and indirectly.

Achievement versus Ascription

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This dimension mentions two differences between the USA and France: “achievement versus ascription” and “doing versus being”. Americans focus on “achievement” and “doing” in the culture of their country, such as dividing their individualities from their jobs. In contrast, the French people prefer to stress “ascription and being”. Moreover, they are not only attending on “the highest esteem”, but also distinguishing features or ascribing to the single. So, there is no doubt that the USA stress the bloodline of the family and which school you graduated but the French emphasis the factors of their history. This dimension measures the method through which social status is accorded to a person. U.S. is certainly an achievement culture where a person is regarded based on his achievement. Example: Walt Disney.

Euro Disneyland created an environment that was not acceptable by the European culture itself. Cultural differences between the US and France has been ignored by Disney. One of the themes of Euro-Disneyland was American. Like other Disneyland in other places, Disney followed one of its two major traditions of not serving wine, despite the attitude among the French that alcohol was a fundamental right. And also restaurants were all American foods. The only exception is Fantasyland which re-created European fables. The recipes in American restaurants were also indistinctly adapted for European tastes. As a consequence, different regional American food was introduced to Americanize the Disneyland in Europe.

Cultural Operational Errors were a major problem for Euro Disney; it affected Disney’s performance and attendance.Another error was the breakfast in Euro Disney’s hotels, based on assumptions Disney downsized the restaurants, because they assume that Europeans didn’t eat breakfast, when the truth was that they ate. If Disney instead of decide to make assumption to base their operations had research and tried to understand the Europeans preferences (instead of trying to make them change their habits), Disney would fix those problems even before the theme park was launched, it would increase customer satisfaction.

Environmental and Location Factors

As the park was being constructed, Disney became concerned that the original plans, based on the Magic Kingdom in California, were too spurious for this land of real castles, kings, and queens. As a result, enhancements were ordered, and the park, originally budgeted at $2.0 billion ended up costing $3.8 billion.This pushed Euro Disney’s break-even parameters sharply higher, perhaps beyond its ability to deliver. The nasty cold and rain between November and March depressed attendance far below expectations. Disney seemed to have greatly underestimated the importance of warm weather on winter attendance. Its Florida and California experiences were not discounted enough, especially in winter. Europeans take school much more seriously. They are far less likely than Americans to pull their kids out of school for frivolous reasons, like visiting a theme park. This further erodes Euro Disney attendance, especially during the long 10-month period when schools are in session.

Marketing

There are some steps that any company should contemplate before entering a new market in order to flourish. Unfortunately for Euro Disney, those footsteps were not followed, instead Disney tried to “force” the entry of its product (the theme park), and anticipated it to be easy money. Market Analysis and Market Research are the first and most vital steps that a company must take before entering a new market. Each country, each city in the world has its own individualism, its own culture, and it is vital to companies to appreciate the culture and the people they will deal with. Disney lacked of accurate information about French culture and French customer’s preferences, instead of doing a Market Research and learns from its potential customers. If Disney would have done a proper Market Analysis and Market Research they would have been able to anticipate many cultural divergences they had. In marketing the park Europe was treated as one country when it has a larger range of language and culture than the US or Japan. While the attempt was to give the park a European flavour, the advertising campaign was typically American. Most advertising was aimed at children while the adults make the final decision on whether to go or not. In America this may work because Disney theme parks are long established and adults associate the whole experience with childhood memories. In Europe however theme parks are un-established so more marketing effort is required to convince people that Euro Disney will surpass everyones expectations.

Management

The Management seem to be overpowered by their reputation for success with no scepticism about the European market. The opposition to Euro Disney was disregarded despite the fact that mainstream newspapers seemed support the protest. Disney ignored the description of Euro Disney as a cultural abomination, which could have highlighted the need for further cultural integration. The attitude of Disney management is confidently dismissive making them appear out of touch with the cultural differences. There were reasons for failure due to marketing and administration decisions made before and after the launch of the park. The whole concept of trying to sell an American product to Europe, while trying to adapt some features of the park to suit a wide variety of cultural tastes, doomed the project. Overconfidence in the formerly foolproof Disney formula meant that in planning the park not much attention was paid to many important details. In this sense the administrative errors in the project planning were the main reasons for failure. The inappropriate marketing of Euro Disney contributed greatly to the poor attendance but ultimately the park itself was not going to make the groundbreaking impression needed to create a new market.

Develop Alternatives

Disney was so blind by their success in Japan that they didn’t stop to consider their previous experiences and how they need to adjust them in order to better attend its French and European customers. Decision for one Plan After developing several business scenarios and analyzing them Disney should be able to select one, or make a combination with the best aspects of all of them. Disney should have considered all uncontrollable forces that was around them; for example French (as well as other European culture), over-valued Franc due to recession. If a business plan was made considering all of those factors, Disney would probably had more realistic numbers (attendance, revenues) and should be able to deal with the cultural differences between American and Europe, especially in France. Instead Disney chose a business plan that underestimated the influence of cultural differences, and saw Disney’s theme park as a monopoly due its quality and uniqueness. They just ignored and didn’t give enough attention to the competitors offering different type of entertainment. All those assumptions made Disney’s expectation way too high, with overpriced admission fees, food and beverages, merchandise and with an attendance too high.

Operational Plan

After gathering information about French and European customers, their preferences, their culture, their age, their income, their expectations, and to develop a business plan on how to run the business and which scenario they think was the most accurate one, Disney should have developed an effective operational plan. The Operational Plan should have focused on, who will run the park? Who will be responsible for the staff? Who will make the decisions? As Disney was entering in France and most of the employees would be French or Europeans, the ideal was to put key French managers, to deal with the staff, and probably a French chairman, as well as human resources managers. Those managers would have more experience and know-how, how to deal with the staff, with investors and executives, and with the media, that could be a Disney’s marketing tool instead of an “attack base”. Decision Making is something that most of the times should be taken quickly and efficient, so those decisions should be taken in France, not on US as Disney did. If Disney had these aspects they would probably have foreseen most of the cultural and operational, problems that occurred and could have easily avoided it.

The business performance of Euro Disneyland was not that great and stable. It couldn’t have right assumptions on the European market and there has been cruel European recession such as increase in interest rates and French currency value. The preliminary plan was not ample and accurate in providing resolutions to Disney problems and concerns that arisen.

A major criticism on Euro Disneyland was that it is neither international nor French in nature, and it failed to satisfy Europeans at all. Many of the visitors could not figure it out the theme of Euro Disneyland that whether it is going to be a European park, an American park, or a French park. In the meantime, the cost for Euro Disneyland was also an issue for some visitors. Many of the French visitors had been discouraged from coming because of the cost such as housing cost, souvenirs, admission cost and so forth. Attendance was kept on decreasing and the company of course, had great financial loss.

External Analysis Macro Environment (P.e.s.t)

The components of the macro environment are the political-legal environment, the economic environment, the socio-cultural environment, and the technological environment in which Disneyland operates.

Political-legal environment

The French labour law dictates that a person should work for 35 hours a week but may not exceed 48 hours a week. Overtime has to be paid for the first-eight hours and is worth 25% of their base hourly wage and after that its worth 50%. Concluding that in theory Disneyland Paris would have to employ two employees for one position to be efficient and not to break any labour laws.

Socio-cultural environment

Euro Disney marketers have recognized a trend. People are going to theme parks during the weekends for adults as well as children entertainment. Euro Disney mistake has been the failure to recognize the cultural differences between Americans and French people. Locating the Theme Park near Paris and acquiring agricultural land as well as imposing the U.S spirit undeniably negatively affects French citizens. The French people’s lifestyle deeply depends on the gratitude to their traditional agriculture. Thus, the land takeover by an American Company mainly does not provide pleasure to them.

Economic Environment

Euro Disney mainly failed to recognize the recession period in Europe. Recession usually means higher level of unemployment. The unemployment further changes the way people spend their money since they have less disposable income, particularly when people are unemployed they do not spend money on luxury especially on entertainment. Indeed, this should have been considered as a factor that could lower the number and spending power of customers.

I addition, the European recession Euro Disney marketers have made significant mistake by over pricing its products and tickets. The higher price forced consumers to switch to its lower priced competitors. Indeed, Euro Disney has missed consumer price sensitivity, thus have failed to attract customers.

Technological environment

The major technological problem has been the particular location where the Theme Park has been built. The climate has brought to a standstill the operation of the business. Although the idea to build a Theme Park has been in correspondence with the existing need on the market the weather should have been considered. In practical terms, the transfer of the idea to fit the market needs indeed could not been suitable since the weather conditions have not been considered. Probably, a closed type of Theme Park could have been suitable for the weather changes.

Porter’s 5 Forces

  • Competition: Intense, Walt Disney competes with several large players such as Merlin Group, Universal Studios and Parquets Reunidos along with some regional players.
  • Substitutes: Low, Substitutes include zoos and museums which don’t match the theme park emergence.
  • Threat of entry: Medium, It takes significant investment to enter the market.
  • Suppler Power: Medium, Suppliers include equipment manufacturers, construction companies and vendors. Bargaining power for technology suppliers and construction companies is medium as technologies are capital intensive and require support and maintenance. Food, toys and doting vendors have low power.
  • Buyer Power: Low, low end-consumers. Their power is low as prices are controlled by theme parks.

Conclusion

The desire of a company to expand overseas is becoming more and more popular, buts sometimes it comes at the expense of bad research and non attentiveness. The executives made many errors including lack of cultural research, last minute changes to the project which increased the costs and assuming that one park was successful so would the others. Unfortunately all of these items led to disaster for Disneyland but they were able to come back and make the park relatively successful. When a company expands in another country, the company must review all aspects of culture, risks, economics and lifestyles. Not doing this leads to project failure. The failure of Euro Disney can be used as a learning tool of what not to do for other companies that are considering expansion to a foreign market.

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