Euro Disney's Information In Starting

TMA 1

Euro disney

Q1 Identify the factors that contributed to EuroDisney's poor performance during the fisrt year of operation. To what extend do you consider these factors were foreseeable and controllable by either EuroDisney or the parent company Disney.

The poor performance of the EuroDisney during the first year of operation are having many factors, mainly they can be divided to be the internal factors and also the external factors.

For internal factors, actually these are faults or mistakes made by Disney management or excutive team. They are divided to three category:

1 Wrong decisions, Misunderstandings and unexpectations:

Wrongly expectations:

- 11 million visitors will generate over 100 million, pre-tax profit estimation is FFr 227 million and in 2001 will be raised to FFr3 billion, is expected, however, the fact is 9.2 million entrance in 1992 and their purchase will be 12 percent less then expected, only $33 per head.

- About food provision, no breakfast provided as the Disney Executives being informed that European do not eat breakfast, and therefore, the size of restaurants and breakfasts in the restaurants of the hotel and the park are decreased, resulted a long queue is lining up at the restaurants and waiting them to provide more than croissants and coffee. The solution by Disney is providing prepackaged breakfasts to rooms and restaurants.

- Visiting duration/ facilities provided for visitors is shorter than expected, it is becauses the park has not enough facilities for visitor to spend for several days, usually most of the visitors will stay for 2 days, usually they will arrive to the park or the hotel at the morning and then they will check out at the next morning before they go back to the park, the check-in and check-out time of the hotel was making the server overloaded. More computer terminals were installed to solve the problem

- Failure on the forecast number of visitors and the allocation right-level of staff, during the peak seasons and low-seasons, this is leading to lose projected revenue, and affecting the image of the park to the visitors.

- Ð'ÐŽÐ'§Hiring and firingÐ'ÐŽÐ'Ё policy of Disney is not more applicable in France, since the WorkerÐ'ÐŽÐ'¦s right is protected by the law, over-employed staff caused a financial burden to the park

Too optimistic assumptions and lack of contingency planning for changing of environment:

- MGM studios film tour site is closed and was expected to help the hotel revenue and also the restaurants

- Hotel near Disney is very favorable to visitors and tourists

- These assumptions are putting themselves, either in Financial and also investment, into a very danger place

Promotion failure:

- The initial promotion is only emphasizing the size and glitz of the park but not on DisneyÐ'ÐŽÐ'¦s magic. Facing effectiveless of the promotion, EuroDisney changed their promotion to be the traditional French fairy tale and stories characters and on to its Disney magic again

- Family packages and low-season hotel price cut providing to visitors are launched in the park gradually from 1994 to 1995 are some other moves provided as promotions. It is because the Disney plan to make EuroDisney to be affordable by everybody, however, the entrance fee of the park is still unchanged, it is still higher than Disney in US.

Investment:

Too high investment:

- Park construction cost is FFr 16 billion and FFr 5.7 billion is the hotel construction cost.

- Disney learn from mistake to build hotel surround the park and own the park, this burden the finance of the EuroDisney with management fee, royalties and also the huge investments

- 1992 will have 5200 hotel rooms and will be triple after the second theme park to be built in a few year in Paris

- Hugh office space, 70000sq meter was reserved and shopping malls, apartments, golf corses and vacation homes are also built by Disney, and to be sold for profit.

Overleveraged:

- Loan FFr 4.8 billion with low fixed rate of interest was made

- Making extra loans from dozens of banks to build the hotel surrounding the park

Cultural and anti-Disney idea:

Anti-Disney idea:

- Too much commitment to Disney project by the French government, such as writing off the construction costs, building rails and road to and from the park and selling 4800acres of land at 1971 agricultural prices. This leads the growth of the anti-Disney idea, French think the Disney project as a cultural Chernobyl, protestes against preferential sales price of local price and too much commitment on Disney project was reported.

- French stayed away, Disney was seen as American Imperialism, those characters and also the stories are made up, compared with those widespread French scorn and the lovable cartoon character from French traditional and culture.

Cultural Difference:

- Taking a short break during midsession is not usual within French, except there is a public holiday occurred over a weekend, leading regularly very high concentrated visitor flow during the holiday but a very low amount of visitors during the midsession.

- Short but frequent family trips is not common in European family but usually having a one-month family vacation in August, Disney failed to change this traditional vacation arrangement among the European. This means the EuroDisney will have its highest peak season within August but not all over the year.

- Living style of French is different form US, for example:

- Alcohol ban in park made the French feel uncertain, since they are the worldÐ'ÐŽÐ'¦s biggest consumer of wine, a wine after a meal is a must in their daily life

- Dress code of the park staff is unified over the world, contradition happened as all male staff should have clean shaven, neat and tidy look

- French can not accept leaving their pet at home when they are have vacation in other place, but Disney is not allowing the entrance of any pets.