Like every other successful American corporation, the Walt Disney Company embarked on a strong global expansion program that led to the opening of subsidiaries in Paris and Tokyo. The subsidiaries were referred to as Euro Disney, and despite the fact that the first subsidiary in Tokyo performed well, the one in France failed miserably leading to a general failure of Disney in Europe.
Reasons for the losses
There are many reasons given for the failure of Euro Disney, with the first one touching on culture and cultural differences. Coming from a background of the American culture, Euro Disney failed to take into consideration the cultural differences in the two societies. Most of the policies used in America and Tokyo were transferred to the French capital, and this contributed to the failure of the subsidiary. An example here is the policy touching on alcoholic beverages which were prohibited in the parks in Florida and California. In French culture, alcoholic beverages are important, and the failure of the management to realize this led to the rebellion by a large part of the French residents. Another example of how cultural differences resulted in the failure of the subsidiary is the approach to food and general feeding patterns. In Europe, the requirements such as breakfast were different, with the packages offered by the park not serving the public well . Besides, the difference in the importance attached to education was another problematic cultural issue. Unlike Americans who frequently took children from school to take them to mid-session holidays, the European parents had fewer vacations. The failure to recognize that the European people would not be “Americanized” contributed to the failure.
Poor management practices were another key factor that led to the failure of Euro Disney. The Disney Corporation made an attempt to apply the American management ideology to the European scene, and this did not succeed. The management proved to have failed to understand the European market and was driven by the assumption that the corporation would be ultimately successful. The failure of the park was an issue in the public domain, with the mainstream media being very negative about the operations. The Disney management made no effort to address this issue, and this portrayed them as not being fully understood their market. In the initial stages, the park in France was managed by Robert Fitzpatrick, who was viewed to have extensive knowledge of the European market . Despite the fact that the knowledgeability of the manager was challenged, the corporation made a worse mistake of replacing him after a short period. This move represented the impatient nature of the company, where it expected to swoop in and dominate as opposed to slowly learn how to navigate the market. According to many observers, many of the management decisions after and before the establishment of the park showed overconfidence in Disney’s formula for success. This led to the occurrence of many errors which ultimately led to failure.
Another issue contributing to the failure of Disney Europe was the failure in staffing. According to many observers, the short period that Euro Disney allocated for the recruitment and training of staff was not enough. First, the hiring process in itself was marred by concerns about being too choosy and, therefore, was extended for very extended periods of time as the right candidates were being pursued. After hiring, the company had the challenge of properly training the staff to be conversant with the Disney expectation of service. The process of turning the Europeans to take the model of an American citizen proved to be difficult. The company also faced criticism from its employees who viewed the company as too strict. With the employees not fully satisfied with their working conditions, production could not reach the optimum level. Many of the employees complained that the "Disney Look" was rigid and robbed them of individualism. The code of dressing was even contested in court as contravening the French labor law, and all these sideshows contributed to the failure of the park .
Another major issue that compromised the operations of the park in Paris was the environment and location. Before making the decision to establish Euro Disney in Paris, close to 200 locations had been reviewed. What made Paris more appealing, however, was the tourist pull that the city had. The assumption was that the whole of Europe would be pulled to the French capital, but environmental aspects were not considered. Paris, unlike the other subsidiaries of Disney, experienced extreme cold levels, and this negatively impacted on attendance rates . Despite the efforts put to protect visitors from the rain and the wind, visitors were still forced to stay away due to the harsh conditions. The extent of the problem can be seen from the fact that heavy discounts that were offered during the off season were not enough for improving the number of visitors. Disney also failed in choosing the location for the park. Motivated by the plans of the government to improve infrastructure, the park was established about 30 miles from the city. This meant that the people had too many options that were more convenient in the city. A better location close to the city would have improved the number of visitors.
Impact of budgetary assumptions
Budgeting and making of proper financial plans are the other important aspects of conducting a project. This is an area that Euro Disney miserably failed. Due to poor budgeting, the subsidiary has continued to make losses in all the years it has been operational in France. The poor budgeting arose from the faulty assumptions that the company made as it moved into Europe.
The budget Disney adopted in approaching the European market assumed that the company would control the designing and building of almost all the facilities. These were to be later sold at profits, and this meant that there was little room for risk. In the course of coming up with the park, management was too concerned with creating a perfect and state of the art park which did not regard the bottom line of the construction costs. Besides, the CEO ordered many changes to be made in construction, which were referred to as budget-breakers . All these made the venture very expensive, thus compromising its ability to make profits.
During the budgeting process, Disney Corporation made the assumption that the venture in Paris would be extremely successful. This resulted in making of very optimistic assumptions, especially in future projections. The financial and strategic errors in calculation proved to be costly to the company. For instance, projections that relied too much on the returns from the hotels and office parks around the establishment were not realized. Had the company assumed a balanced risk profile and became more controlled in the expectations, the losses incurred would have been reduced .
Before the establishment of Euro Disney, the company, in its financial plans failed to take into consideration of the impending European recession. Management was caught in the fanfare that surrounded the opening of the park. Once the recession took root, the income Euro Disney was severely compromised. First, the disposable income of the European families was drastically reduced, meaning that less could be spent on locations such as the Disney park. Also, the plan Disney had in developing real estate to sell later at a substantial profit was severely compromised. The collapse of the country’s real-estate market negatively impacted on the development agenda that the corporation had .
The other shortcoming in the financial planning on the side of Disney was faulty pricing strategies. The ticket prices that Euro Disney applied in this subsidiary did not serve the European customers well. The budgeting process did not take into consideration the multiplicity of the European currencies, making it cheaper for Europeans to visit the parks in America. The weak pricing structures meant that the facilities around the park were overpriced, with the hotel rooms being more expensive than four-star hotels in the center of Paris .
Other financial issues that were not taken into consideration in the planning process were labor costs and per-capita spending. The estimations before the establishment of the park were that the labor costs would only take about 13% of the total revenues. After the establishment had started running, however, the amount spent on labor increased to amount to up to 40% of the total income the establishment made. Another faulty assumption was that the spending per visitor would be comparable to other Disney facilities in Tokyo and America. This, however, was not the case, since the average Euro Disney guest spent 12% less than expected . Due to the high entry fees, visitors were reluctant or unable to spend more on gifts found within the park thus reducing the revenue.
In conclusion, it can be argued that various faulty budget-based assumptions made by Euro Disney contributed to its failure in the market. Given the multiplicity of factors that contributed to the failure of the venture, however, one cannot argue that challenging these assumptions would have led to better fortunes for the company. The other non-financial issues needed to have been addressed to ensure the success of Disney in Europe.
Works Cited
Spencer, Earl P. "Educator Insights: Euro Disney- What Happened? What Next?" Journal of international marketing 3.3 (1995): 103-114.
White, Gwen R. Euro Disney Project Management Failure 1Euro Disney Project Management Failure. 2008. 2 March 2016. < http://www.academia.edu/2478754/Euro_Disney_Project_Management_Failure>.
Yue, Wenhe. ""The Fretful Euro Disneyland."." International Journal of Marketing Studies 1.2 (2009): 87-91.
