Reference no: EM133259224

Euro Disney - managing the marketing environmental challenges Michael Eisner joined the Walt Disney company as the chairman of the board in 1984, after his successes at the ABC television network and Paramount. The same year, Tokyo Disney was completing its first year of operations after five years of planning and construction, when the Walt Disney Co. entered into an agreement with Oriental Land Company in Japan. More than 10 million people visited the park that year, spending $355 million. This was $155 million more than had been expected and was partially attributed to the average expenditure per visitor being $35, rather than the estimated $21. The timing of the Tokyo Disneyland opening coincided with a rise in income and leisure time among the Japanese. Tokyo Disneyland thus became quickly profitable. Growth continued, and by 1990 more than 14 million people visited the park, a figure slightly higher than the attendance at Disneyland in California and about half the attendance at Walt Disney World in Florida. Though Disney was not a financial partner in the Tokyo venture, it was reaping the profit from its franchise (10% royalty from admission and 5% from merchandise and food sales). Tokyo park was in some ways a paradox. Tokyo Disneyland is nearly a replica of the two parks in US. Signs are in English, and most food is American style. The management of the Oriental Land Company demanded this because they wanted visitors to feel they were getting the real thing and because they had noted that such 41 franchises as McDonald's have enormous success in Japan, as Japanese youth embraced American-style culture. Yet, a few changes were necessary, such as the addition of a Japanese restaurant. The product was readily accepted by the Japanese, an acceptance attributed by some to the enthusiastic assimilation of the Japanese to Western ways. The success of the Tokyo Disneyland led the company to consider expansion into Europe. In 1984, a few months after his arrival at Disney, Eisner decided to invent a Disney resort in Europe. In 1985, Disney announced that it had narrowed its locational choice to two countries, Spain and France. The park was scheduled to open in 1992 at either location. Since the park was estimated to provide about 40,000 permanent jobs and would draw large numbers of tourists, the two countries openly courted Disney. If Disney opted for a Spanish location, the park would have to be like the ones in the U.S, where the visitors are outside for almost all amusements. However, Disney had learnt from the Tokyo experience that the cold weather does not necessarily impede attendance. But the colder climate in Paris area would require more indoor shows. Furthermore, France would require more focus on technology and historical themes. After three years of discussions, the search culminated with the selection of a site at the heart of Europe: Marna-la-Vallee, France. Euro Disney was officially born. The total investment by 1992 was estimated at between $2.4 to 3 billion. Disney opted for a 49% stake. France was in full economic crisis and Disney was taking advantage of this crisis. In a real estate coup, the French Government sold Disney some very expensive land at a bargain price and. In spite of the economic benefits the park was expected to bring, many people in France feared that the Park would be one more step toward the replacement of the French culture with that of the US. Critics called EuroDisney "a cultural Chernobyl". Disney headed off the criticism by explaining in the French press that Walt Disney was of French Huguenot descent, with an original name of D'Isigny rather than Disney. Disney also agreed to make French the first language in the park, although relying heavily on visual symbols. Disney would build an attraction, Discovery Land, based on the science fiction of France's Jules Verne; and a movie theater featuring European history. Many concessions were made to soothe the French resistance. Disney admitted that it may have to alter its no-alcohol policy for this park, but it didn't. The 42 parks also emphasized that Pinocchio was Italian, Cinderalla was French and Peter Pan flew in London. The marketing campaign began in October 1991. The sales division began ambitious programs to inspire European families to mark the Euro Disney resort on their vacation agendas. The Sales division established a strong presence in all the major markets through special partnerships with leading companies in the travel industry. On April 12, 1992, Euro Disney hosted the biggest event in Disney history, the official opening of the Euro Disney resort. Looking at the future, Euro Disney had two primary objectives: to achieve profitability as quickly as possible and to better integrate Euro Disney into its European environment while reinforcing its greatest asset - Disney heritage. Disney announced plans to add a second theme park, the Disney MGM StudiosEurope, and a water park. Disney was so optimistic that it was negotiating the possibility of creation of creating a third theme park at the beginning of the new millennium. The Park admission fee cost the US $45 for an adult and $30 for a child under 11, a price about 50% higher than the corresponding Disney World price. The US Disney park's formula in terms of inelasticity of demand did not apply and the demand fell sharply (a 15% decrease in attendance for a 10% increase in price.) Attendance figures were kept secret, but this attitude reinforced the idea that even in terms of attendance, the objectives were not reached. The financial results were not as strong as hoped and the very difficult economic environment contributed to not meeting the ambitious objectives. As Eisner started an interview with Larry King, he quipped, "Everybody is giving us 42 reasons why we've made a mistake, because we have financial problems... We are not either responsible for the real estate crisis or the high French interest rate, which is dreadfully penalizing us. Not a single manager, whoever he be, could manage so many uncontrollable forces." 

QUESTIONS: 

1. Describe the situation
2. Main problem of the situation