Case Study 3: Hong Kong Disneyland

November 26, 2013

1(A). Why was it important for Disney to work with the foreign governments where they want to open theme parks?
While it may not always be a good idea for a business to work with foreign governments, it was the appropriate course for Disney to take. Certain aspects of the parks that were opened in Tokyo, Paris, and Hong Kong best evidence this. Tokyo, by every standard, is considered a success (Young & Liu, 2007). Its success led to the construction of a sister park, DisneySea. Regrettably, Disney opted to not take ownership of the park. By working with the government of Tokyo, Disney did not have to invest any capitol to open a park abroad. However, Disney forfeited exponentially higher profits for its equivalent in risk.
Disney’s next venture, Disney Paris, was a collaboration with the French government. Similar to Disney Tokyo, it was important to work with the government for the purposes of immediate financial infusion. Unlike Tokyo’s government direct investment, the French government provided loans with interest rates (Young & Liu, 2007). The decision to work with the French government proved more important as construction costs went over by US$4 billion. This led to the French government restructuring Disney’s loan.
It was crucial for Disney to work with the government of Hong Kong for several reasons. Like the previously mentioned Parks, Hong Kong helped financially. However, the scope of this park can be considered greater since it involved a land reclamation project. Additionally, the Government helped with some of the marketing.

1(B). Does it help to have the foreign country as a partner in the venture? Why or why not.
It does help to have a foreign country as a partner in a venture. A government with access to large sums of income is able to use those resources to move a project forward. As seen with Disney Paris, Governments can also provide financing at interest rates below what is being offered in the general market. Furthermore, in times of economic uncertainty a Government will not readily allow its business partner to fail from fear of losing its investment. Maybe the biggest help that stems from a partnership with a foreign country is assistance with navigating, or altogether circumventing, legal and political hurdles. Considering the scale of the Hong Kong Park, one can assume that the Government made it possible for Disney to build there.

2. What are international norms of behavior, why do the Chinese not understand them, and why is this important for a successful Hong Kong Disney?
I am not quite sure what is meant by this question.

3. Based on the case narrative, identify two issues challenging Hong Kong Disney’s current operation. What would you recommend to Disney to solve those challenges?
Hong Kong Disney has one issue, itself/management. Management did not research the cultural demands that would be placed on it by the Chinese. This led to several criticisms at launch, which included the park being too small. Management also underestimated the impact of a successful initial launch, this, as well as the numerous blunders the followed, tainted the Disney brand. To its credit, Disney’s management did attempt to promote and market their product well. Where they failed was not supporting a key player in the Chinese tourism industry, the Mainland travel agents. Instead of allowing them to make a decent profit from selling admissions to Hong Kong Disney, the company disincentivized them from selling admissions by allowing marginal profits.

4. For its next expansion project, what country and city would you recommend as the next Disneyland? Be sure to explain your rationale in terms of why that country/city would be an attractive expansion strategy.
Disney should not undertake another expansion project by building a theme park in another country. This is not to say that the interest is nonexistent. It seemingly appears that other locations have one or a combination of the following problems: (1) insufficient resources, (2) poor or unreliable infrastructure, (3) overwhelming political risks, (4) insufficient population to support the project, and (5) cultural barriers. Considering these difficulties, the only three countries that come to mind are Russia, South Africa, and Brazil. Of these three, Brazil may be the best choice. The country has vast resources, an open culture, and a large population to support the Park. Additionally, visitors from the Caribbean and other South American countries may want to partake in the experience. Among the two biggest detractors are the infrastructural requirements and political risks.