University of Economics - International Business

Walt Disney's International Strategy

Table of Contents
ABSTRACT ................................................................................................................................................ III
I. INTRODUCTION .................................................................................................................................... 1
II. THEORETICAL BACKGROUND ......................................................................................................... 3
II.1. International Business: ...................................................................................................................... 3
II.2. Entry Strategies: ................................................................................................................................ 3
II.3. Types of Entry Mode Decision ......................................................................................................... 4
III.3.1. Exporting .................................................................................................................................. 4
II.3.2. Turnkey Project .......................................................................................................................... 5
II.3.3. Licensing .................................................................................................................................... 5
II.3.4. Franchising ................................................................................................................................. 6
II.3.5. Joint Venture .............................................................................................................................. 6
II.3.6. Wholly owned subsidiaries ........................................................................................................ 6
III. WALT DISNEY‟S CASE ...................................................................................................................... 8
III.1. History and Development ................................................................................................................ 8
III.2. Organizational Structure .................................................................................................................. 9
III.3. Product Line ................................................................................................................................... 10
III.3.1. Media Networks: Walt Disney operates many fields such as ................................................. 10
III.3.2. Parks and Resorts:................................................................................................................... 10
III.3.3. Walt Disney Studios: .............................................................................................................. 11
III.3.4. Consumer Products: Through Disney licensing, Disney Publishing Worldwide and Disney
Store.................................................................................................................................................... 11
III.3.5. Consumer Standpoint of the Products .................................................................................... 11
III.4. Profits ............................................................................................................................................. 11
IV. ENTRY - MODE DECISION .............................................................................................................. 13
IV.1. PEST ANALYSIS IV.1.1. Japan .............................................................................................. 13
IV.1.2 China........................................................................................................................................ 14
 II
IV.1.3. France ..................................................................................................................................... 16
IV.2. ENTRY MODE ............................................................................................................................. 18
IV.2.1. Export ..................................................................................................................................... 18
IV.2.2. Licensing ................................................................................................................................ 19
IV.2.3. Joint Venture: ......................................................................................................................... 22
IV.2.4. Wholly owned subsidiaries ..................................................................................................... 26
V. Conclusion ............................................................................................................................................. 28
V.1. Benefits and drawbacks of entry modes in Walt Disney case......................................................... 28
V.2. Recommendation ............................................................................................................................ 29

References ....................................................................................................................................................
IV
 III

ABSTRACT
Expanding firm’s scale into the world is one of the most desirable goals to archive.
However, this will take a process to make it happen and it is difficult to enter a new
market. For those reasons, firms must make careful decisions before making an official
strategy entering a new market. Which market, when and on what scale will firm enter it
are the first three decisions organizations must consider before making an entrance.
Choosing an entry mode, that will be suitable for each firm’s condition and aiming goal,
is important since it will affect the result that firm will receive in the future. Strategic
alliance is one choice for firm when entering a new market. This report shows a real case
of Walt Disney and analyzes their current strategy. However, due to the shortage of time
and resources to analyze their cases, this report will only mention Disney’s main
strategies.
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I. INTRODUCTION
The world is “flattening”, which means that globalization has been the trend for forms all
over the world to keep up with. It means there are more and more foreign investments
from big companies entering into international markets. Reaching out for new market
outside of the original country will bring firms advantages such as larger market to serve,
new customers and opportunities. However, expanding to the world required firm to
calculate their strategy carefully because it will impact one firm‟s business situation not
only in the countries they reached for but also the original host country firm. Not many
organizations have success in entering new market. Walt Disney, one of the most
influential organizations in entertainment industry, has become an example of successful
globalized firm.

Therefore, the purpose of the research is to study entry strategy of Walt Disney as well as
the benefits of different entry modes from entering into foreign markets. Based on their
strong point and weakness, Disney has chosen appropriate solution for different market
segments. Analyzing their strategy to observe how the real-world work based on theories
can help deeper understand and in later usage of it, especially for this case, Disney took
entrant to: Tokyo, Hong Kong, Shanghai and Paris with different entry modes.

The first part of this research offers theoretical background. With respects to theoretical
review, an overview of international business, entry strategy as well as entry modes are
introduced in terms of foreign investment. Furthermore, comparisons among entry modes
also are discussed below.

The second part of the research mentions to Walt Disney history and development and
organizational structure. In this section, the case also shows description about business
line with products from licensing and Disneyland including a financial statement in
particular in profits from operating business.

The third part of the study is the main part discussing about Walt Disney‟s different entry
modes and their entry strategies when entering foreign markets including: Tokyo, Hong
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Kong, Shanghai and Paris with entry modes such as exporting, licensing, joint venture
and wholly owned subsidiary. They analyze differences in culture, economy and
demographics in foreign markets and PEST analysis in order to know host countries‟
advantages and disadvantages to have different strategies to enter into these markets.

Finally, a conclusion followed by the whole Disney case analysis is offered to summarize
entry strategies, recommendation for Disney future projects that they might conduct when
entering into international markets and pros and cons when approach those entry
strategies.
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II. THEORETICAL BACKGROUND

II.1. International Business:

Maximizing the profit and shareholder value is the main goal of firm‟s managers.
International expansion open new door for firm to earn greater returns since transferring
the product offerings derived from its core competencies to markets where indigenous
competitors lack those product offerings and competencies (Charles, 2012). By
comparing between the outstanding features of two local markets, company can format
and classify the groups of market and has the accordant strategy for each of them. Firm
can built the experience curve (experience curve express the relationship between
equation and efficiency or between efficiency gains and investment in the effort) and
identify necessary skills created within its foreign subsidiaries and leveraging those skills
within its global network of operations. International firms pursuing a global
standardization strategy focus on reaping the cost reductions that come from experience
curve effects and location economies (Charles, 2012). The lower cost such as labor cost
or material cost in foreign market help firm get higher profit and increase flexibility in
strategies.

II.2. Entry Strategies:

Any firm contemplating foreign expansion must first struggle with the issue of which
foreign markets to enter and the timing and scale of entry. The choice of which markets
to enter should be driven by an assessment of relative long run growth and profit
potential. There are some conditions that the firm‟s managers have to consider and
identify clearly before entering a new market. The first decision every firm need to make
before entering is choosing a favorable market. This function includes the long-run
economic benefits of market‟s factors such as the size, and the present wealth
(purchasing power of consumer), and the economics growth rates in future. About the
internal decision, managers have to balance between benefit, cost and risk in the new
market to maximize firm‟s return. Another factor which affects the orientation of foreign
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expansion is local ethics, political stable. The value firm can create in new market also
depend on the suitability of product with new customers and the nature of indigenous
competition. The timing of entry is an important condition which has to be considered.
Entry is early when an international business enters a foreign market before other foreign
firms and late when it enters after other international businesses have already established
themselves (Charles, 2012). The advantages of becoming a first-mover are that it will
help firm to build barrier to their rivals and building strong brand, as well as creating cost
advantage and switching cost for their customers. By contrary, being a pioneer means
firm have to study about and get new environment cost, promoting and establishing cost.
The last issue firm need to consider is the scale of entry and strategies commitments.
Entering a market on a large scale involves the commitment of significant resources.
Entering a market on a large scale enter requires commitment since it will create
longterm impact and hard to reserve. Not all firms have the resources necessary to enter
on a large scale, and even some large firms prefer to enter foreign markets on a small
scale and then build slowly as they become more familiar with the market. Small scale
enter allows firm to learn about the market before making an impact. However, this will
bring up opportunities for other rivals to enter.

II.3. Types of Entry Mode Decision

Once a firm decides to enter a foreign market, the question arises as to the best mode of
entry. There are six methods of entering a market, include exporting, turnkey projects,
and licensing, franchising, establishing joint ventures with a host-country firm, or setting
up a new wholly owned subsidiary in the host country (Charles, 2012). Each of which has
pros and cons that firm will take under consideration when choosing enter mode.

III.3.1. Exporting
In global world, many firms expand their business by exporting their product and service
to a foreign market before using another mode. Exporting has three advantages. It avoids
or ignores cost of manufacturing, minimize the cost of study about location and
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experience curve economics, which can boost the other entry modes easily for
international market. Exporting also has a number of drawbacks that are the transport cost
and trade barrier which cannot be avoided when the product is found abroad. Thus,
particularly for firms pursuing global or transnational strategies, it may be preferable to
manufacture where the mix of factor conditions is most favorable from a value creation
perspective and to export to the rest of the world from that location (Charles, 2012). The
second drawback to exporting is that the local marketing agency problems. To handle this
problem, firm cannot avoid and should facing.

II.3.2. Turnkey Project

Turnkey project is used in some manufacturing industries for instance the specialization
in design and construction field. In a turnkey project, the contractor agrees to handle
every detail of the project for a foreign client, including the training of operating
personnel. At completion of the contract, the foreign client is handed the "key" to a plant
that is ready for full operation-hence, the term turnkey. “This is a means of exporting
process technology to other countries” (Charles, 2012). Turnkey projects are a way of
earning great economic returns from technology skill but it create some potential
competitors and hard for new managers to build flexibility strategies.

II.3.3. Licensing
A licensing agreement is an arrangement whereby a licensor grants the rights to
intangible property to another entity (the licensee) for a specified period, and in return,
the licensor receives a royalty fee from the licensee (Charles, 2012). Intangible property
includes patents, inventions, formulas, processes, designs, copyrights, and trademarks.
Licensing agreement avoids lower development cost and risk for subsidiary; also get
moderate involvement and commitment. Licensing has three serious disadvantages: lack
of control over technology; inability to realize location and experience curve economic;
and inability to engage in global strategic coordination.
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II.3.4. Franchising
Franchising is basically a specialized form of licensing in which the franchiser not only
sells intangible property (normally a trademark) to the franchisee, but also insists that the
franchisee agree to abide by strict rules as to how it does business. The franchiser will
also often assist the franchisee to run the business on an ongoing basis (Charles, 2012).
The advantages of franchising are very similar to those if licensing. The firm can be
relieved cost and risks in foreign market. It is possible circumvention of impact barriers
and strong sales potential. Besides, there are drawbacks that lack of control over quality
and inability to engage in global strategic coordination.

II.3.5. Joint Venture

A joint venture entails establishing a firm that is jointly owned by two or more otherwise
independent firms. The most typical joint venture is a 50/50 venture, in which there are
two parties, each of which holds a 50% ownership stake and contributes a team of
managers to share operating control (Charles, 2012). Joint ventures have a number of
advantages. It accesses to local partners‟ knowledge about culture; share cost and risk;
political acceptable; and no ownership restriction. Despite these advantages, there are
major disadvantages with joint ventures. There is the lack of control; inability to realize
location and experience curve economic; and inability to engage in global strategic
coordination.

II.3.6. Wholly owned subsidiaries

The last method of entry modes is wholly owned subsidiaries. In a wholly owned
subsidiary, the firm owns 100% of the stock. Establishing a wholly owned subsidiary in a
foreign market can be done two ways. The firm either can set up a new operation in that
country, often referred to as a green field venture, or it can acquire an established firm in
that host nation and use that firm to promote its products. There are several clear
advantages of wholly owned subsidiaries: protection of technology; engage in global
strategic coordination; and realize local location and experience curve economic.
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Because of the impact of enter mode, firms must make careful decision. There are two
main factors that firm will first considerate when choosing an entry mode, which are their
core competencies and cost reduction pressure.
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III. WALT DISNEY‟S CASE

III.1. History and Development

In 1923, brothers Walt and Roy Disney established The Walt Disney Company beginning
as Cartoon Studio. The company constantly grew to become a leader in the American
animation industry and then widen its business scale with live-action film production,
television, and theme parks. With the strategy to moving forward, Disney expanded to
global market to enhance market share and brand reputation, revenue.

Once the 90s hit, Walt Disney World Resort expanded at an astonishing rate, to include
ten new themed resorts, Blizzard Beach water park, Disney‟s Animal Kingdom Park,
Disney/MGM Studios, three new Disney Vacation Club properties, two miniature golf
courses, new entertainment, shopping and dining experiences in the Downtown Disney
district, and Disney‟s Wide World of Sports Complex( Diszine.com) . In 1992, it opened
Disneyland Paris known as beautifully designed park with six uniquely designed resort
hotels and a campground in France, welcoming 11 million guests for the first year. In
2005, Company opened Hong Kong Disneyland and also celebrated its 50th anniversary
in a Happiest Celebration on Earth. In May 2006, Disney made a major acquisition of
Pixar Animation Studios for $7.4 billion. In 2009, Disney purchased Marvel
Entertainment for about $4 billion.

In the period of updates and expansions over the nine decades, The Walt Disney
Company has achieved to become preeminent pioneer in the field of family
entertainment.
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III.2. Organizational Structure

Walt Disney Company

Disney Consumer Studio Entertainment Parks and Resorts Media Networks

product Broadcasting
Walt Disney Pictures Walt Disney World
Disney Hard Lines Miramax Films Disneyland Disney-ABC
Buena Vista Home Television
Disney Soft Lines Tokyo Disney
Entertainments
ESPN Inc
Disney Toys Buena Vista Theatrical Disneyland Paris
Productions Walt Disney Internet
Hong Kong Disneyland Group
Disney Publishing Walt Disney Records
Hollywood Records Disney Cruise Line ABC-Owned
Disney Press
Lyric Street Studios Disney Vacation Clubs Television Stations
Disney Editions Pixar Studios
ABC Radio

The Walt Disney Company has a cooperative multidivisional (M-form) organizational

structure that focuses on business type (Williams, 2018). It is likely to see Disney having
horizontal structure based on departmentalization which means it subdivides the company
business into subunits. It is obvious that company includes four business segments:
Disney consumer products, Studio Entertainment, Parks and Resorts, Media Networks
Broadcasting. Creating separate divisions helps Disney easily to control and manage
business. Each department is grouped by the characteristic of products that related to each
other‟s.
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III.3. Product Line

The Walt Disney Company is a company that offers a diversity of goods and
services, making it extremely unique. The company categorizes its operations into five
main categories: Media Networks, Parks and Resorts, Walt Disney Studios, Consumer
Products, and Disney Standpoint of the Products. Walt Disney receives royalties from
licensing or operating businesses through parks and resorts forms, these sectors including
(Products, 2018):

III.3.1. Media Networks: Walt Disney operates many fields such as

-ABC Television Network
-ABC Owned Television Stations Group
-ABC Entertainment Group
-Disney Channels Worldwide
-ABC Family
-Disney Media Distribution

III.3.2. Parks and Resorts:

-Disneyland Resort
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-Tokyo Disney Resort

-Disneyland Paris

-Hong Kong Disneyland

-Shanghai Disney Resort

-Disney Cruise Line

-Adventures by Disney

-Walt Disney Imagineering

III.3.3. Walt Disney Studios:

One successful film can be distributed all over the world, which is in a form of motion
pictures or DVD.

-Walt Disney Pictures Group

-Walt Disney Music Group

III.3.4. Consumer Products: Through Disney licensing, Disney Publishing Worldwide

and Disney Store.

III.3.5. Consumer Standpoint of the Products

III.4. Profits
The history, development and growth of Walt Disney Company over time The
Walt Disney Company has established a huge Disney empire. Walt Disney‟s profits will
be discussed below.

According to Walt Disney Annual Report, Walt Disney Co.‟s net income attributable to
the Walt Disney Company increased dramatically from $5,682 million to $9391 million
 12

during 4 years since Sep 29, 2012. Its profits derived from operating business when
market transaction costs are high and externally when low (Walt, 2018).

However, from 2016 to 2017, the amount of net income attributable decreased slightly to
$8980 million due to the cost of revenues peak a high cost in 2017. Overall, Walt Disney
still maintains profits helping them holding sustainable position of Disney empire.

Walt Disney Co., Consolidated Income Statement

USD $ in millions
12 months ended Sep 30, 2017 Oct 1, Oct 3, Sep 27, 2014 Sep 28, 2013 Sep 29,
2016 2015 2012
Revenues 55,137 55,632 52,465 48,813 45,041 42,278
Cost of revenues,
exclusive of
depreciation
and amortization -30,306 -29,993 -28,364 -26,420 -25,034 -23,468
Gross profit 24,831 25,639 24,101 22,393 20,007 18,810
Operating income 13,775 14,202 13,171 11,400 9,236 8,763
Interest income
(expense), net -385 -260 -117 23 -235 -369
Income before income
taxes 13,788 14,868 13,868 12,246 9,620 9,260
Income taxes -4,422 -5,078 -5,016 -4,242 -2,984 -3,087
Net income 9,366 9,790 8,852 8,004 6,636 6,173
Net income attributable
to noncontrolling
interests -386 -399 -470 -503 -500 -491
Net income
attributable to
The Walt Disney
Company (Disney) 8,980 9,391 8,382 7,501 6,136 5,682
Source: Walt Disney Co., Annual Reports
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IV. ENTRY - MODE DECISION

IV.1. PEST ANALYSIS IV.1.1. Japan

Political

Japan is a monarchy country. With the existing of royal family, Japan has five parties that
have strongest influence on politic of this country. The political status of Japan is
considered to be stable and have low crisis. In addition, this country support
globalization. They recently signed an Economics Partnership Agreements (EPAs) with
14 other countries (Export.gov, 2018). With these factors, Japan is an attractive
destination for investors.

Economic

The economics of Japan is a high opportunity for firms around the world to come and
invest in. with the characteristic of a leader in term of economic, Japan economic status is
strong and stable. In addition, this country‟s GDP is also significantly high, rank third of
the world (Statisticstimes.com, 2018).
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Social

One threat that will reduce the attraction of Japan would be their population. Their
fertility decreases years after years, and it has become a trend in Japan for parents to have
little or none children. However, one opportunity for Walt Disney when entering Japan is
that this country has high demand for entertainment and relaxation.

Technology

Technology is one of the most potential opportunities for firms to choose this country.
Japan is known for being a high technology country. In the case of Walt Disney, the
advance in technology will contribute to their creation of products and services (such as
movie or theme park)

IV.1.2 China

Political
 15

China with their political system has created a barrier for foreign investors. Their
government established policy that upset countries around the world. The procedure in
this country is also a difficult for firm to enter and develop here.

Economic

China has growth significantly in the past years, which make them to be one of the largest
economics in the world. Their GDP also rank in the top 2 after the U.S
(Statisticstimes.com, 2018). However, their economic reduce its attraction due to its
instability and high inflation rate.

Social

Social factor of China is a huge opportunity due to its high population. 1,415,594,477 is
the current population of China, which rank number one of the world. This is an
opportunity for Walt Disney since their industry require audience and the larger the
population, the larger market Disney can aim for.

Technology

China technology has developed through learning from developed countries. Their
industry has developed so fast it created a threat to other countries. However, it is an
opportunity for firms such as Disney to enter and develop with high technology products
and services.
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IV.1.3. France

Political

France is a peaceful country with minimal crisis. The political status is stable among
other countries. This is a factor that attracts foreign investors as well as new entrance. In
addition, France government also support for globalization which allow firms to enter
this country easier.

Economic

France is a developed country with relatively high GDP. They rarely experience
economic crisis and GDP growth rate increases over times which indicate their economic
picture is bright for investors to enter. High GDP mean for Walt Disney is that their
customers have higher standard of living and paying power is also high, which lead to the
decision that France is a potential market.
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Social

France population is developed, which mean that most of the citizens are staying in cities
and 99% of them are literate. Their expectancy for enjoyment is high, which is an
opportunity for Disney to target this market.

Technology

The scientific and technological environment of France is brilliant. They ranked fourth
place in term of industrial power among the world. They are also known for exporting
pattern of inventions and ideas to others countries.
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IV.2. ENTRY MODE

IV.2.1. Export
Taking advantage of image of their movie characters and with the fact that their main
targeted consumers are children, Disney has created a business segment called Disney
Consumer Products and Interactive Media (DCPI) which focus on making goods, such as
toys, stuffed animal or clothes, based on their movie characters. All the goods that Disney
produced have been exporting to more than 40 countries around the world and bring 4.83
billion U.S. Dollar to Walt Disney ("The Walt Disney Company - revenue by operating
segment 2017 | Statistic", 2017). They can take advantage from these exports to learn
about the location and experience curve economics for future business around the world.
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IV.2.2. Licensing
Disney uses licensing mode to enter many foreign countries to do its business.
Licensing is also the successful marketing method when Walt Disney enters the new
market. Corporations with the local companies can help the company hire the study cost
about diverse business cultures. Disney permits other firms can use its brand name,
image, and services. Through it, the company can get the license fees and percentage of
their after-sales profits.
Walt Disney is very strict censorship in licensing. They will study the firms‟ growth
history and potential in future. The careful scan help Disney have the trustworthy
partnership and ignore scandals. With company was not allowed for licensing, Disney use
strong reactions that they will send the letter for warning and be dismantling or punishing
this one.
The growth of Disney Consumer Product on licensing (Revolvy, 2017)

Today, bringing
images of Disney
into consumers
1979 through many
kind of tangible
The Intergovernmental products
Philatelic Corporation of
New York was licensed by
1932 Walt Disney Productions
Setting standard for to make Disney character
character licensing stamps for several
1934 countries.
1929 Mickey was the first
Licensed the image licensed character on Post
of Micky Mouse on Toasties cereal box ($1,5
chilrens' writing millions)
tablet
Built this division
to handle
merchandising
a) Japanese market
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In 1983, Walt Disney put its first feet to the foreign market. Tokyo Disneyland is the
first international theme park. It is owned and operated by Oriental Land Company
Limited (OLC Group), which is the Japanese company in resort and hotel segmentation.
Walt Disney and OLC Group had a surprise meeting and come out with the licensing
agreement. At that time, Tokyo Bay is the wonderful land where Japanese government
called “leisure land”. From 1972 to 1973, the OLC‟s board of directors wants to exploit
this area, so they sent their study teams around the world to find the best project to build
an “Oriental Land” leisure facility. Walt Disney also wants to bring their brand name and
cartoon characters into the international market outside the United State. Therefore, two
firms signed the contract and try to bring their effort to build a new Disney theme park in
Japan (Inviting Disneyland…, 2017).
Nowadays, Walt Disney is very successful in Tokyo Disney Resort through licensing.
Disney allows OLC for using its intangible image or designs and tangible property. Walt
Disney takes license fee, includes about 10 percent of Tokyo Disneyland‟s admission
revenue and 5 percent food, beverage and souvenirs (Raz, 1999).
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Information from OLC Group

Jump into a new market with different culture, Walt Disney chose the right type of entry
mode: licensing with the local company. Products and services, which are made by OLC
Group, are more familiar with local customers within Japanese cultural style, not the
American style.

Information from Hofstede shows some difference in business culture between

Japan and US. From a cultural perspective, a licensing agreement was the right choice
given the large differences between the two cultures and Disney‟s lack of knowledge
about the country (Brage., 2017). Choosing this, Walt Disney can avoid some risk from
the entrance and they did not need to study the new market. They moved these risks to
license partner. At all, Tokyo Disney Resort is the success story about introducing the
brand name and creating the image in Asia market.
Besides that, licensing not only gives Walt Disney advantages but also there is the
drawback. Tokyo Disneyland is 100% operated by the Oriental Land Company Limited,
and Disney has no authorities to control or make decisions for the theme park growth.
They have just received the license fee.
b) Philippines market
After its success in Japan, Disney has expanded the license mode in many countries
around the world. Most recently in 2015, Disney and SM Prime Holdings (a Philipines
 22

group includes SM Supermalls, SM Markets, The SM Store, Toy Kingdom, and its
lifestyle and entertainment arm) went to the partnership to enter the Disney characters
into Philipines market. According to this agreement, SM Group became the Disney‟s
exclusive distribution channel to bring Disney image and stories to Filipinos. Group can
hold events which Disney is the donor to send the message about magic life.
They achieve the goal that bringing Disney, Marvel, Pixar, and Star Wars brands to life
through many leisure and entertainment properties.

IV.2.3. Joint Venture:

As the desire of Walt Disney, they want to expand business in foreign markets to
increase their sales. Instead of massively all fields that they are doing business, Walt Disney
step by step approaching and conquering the global market. Initially, they started entry
strategy through exporting and licensing agreement. For the next step, they continued to
practice joint venture. What is the reason for them to decide to choose joint venture for
countries later? The choice based on assessment of nation‟s long run profit potential needs
to analysis cautiously. The company recognizes advantages as well as disadvantages when
entering foreign market through by joint venture. It is believed that joint venture is the
successful entry mode for Walt Disney use to expand their global market. Furthermore,
Walt Disney can study hard to integrate Eastern culture and Western culture. In particular,
they started their customer access strategy through Pictures & Television and Parks and
Resorts.
For entering international markets, Walt Disney decides to use joint venture
approach to enter Japan, China and Hong Kong market. As joint venture mentioned
previously, the choice is assessed related to benefits, costs and risks. In terms of benefits,
in particular Disney pointed out their assessment through size of market (demographics,
present wealth (purchasing power) and likely future wealth (economic growth rates).
These analyses below will more focus on these case studies.
IV.2.3.a. Japanese market:
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As mentioned above, although Tokyo Disneyland is the first venture abroad, it is

owned and operated by a Japanese company, however, Oriental Land Company Limited
(OLCL) and Walt Disney just received royalty fees through by licensing entry mode.
Besides that, Tokyo Disneyland that also is the first international Disney theme park is
under managed totally by OLCL belonged to areas of Tokyo Bay. From partnering with
Tokyo Disneyland, account receivables that Disney received royalty fees are $573 million
(Raz, 1999). From lack of knowledge and experience about Japanese market, Disney
practiced a licensing agreement was the right choice and hence, they can avoid risks
arising from operating internationally. However, if the company took the joint venture
directly in Japanese market through studying carefully its market, they would not miss
out advantages as well opportunities since they could earn more profits from that entry
mode.
IV.2.3.b. Chinese market:
IV.2.3.b.1. Characteristics of Chinese market:
The large consumer market with the total population is 1,388,232,693. The
majority of population is children and labor force population. Moreover, China has the
fastest economic growth in the world (China, 2017). The demand for consumptions is
considerably diverse and also different across regions or ethnic groups. However, these
consumptions tend to be the same in large cities especially in the Chinese middle class.
Because Walt Disney most does business in entertainment field, a huge market like China
will be favorable for Disneyland taking advantage of investing Disneyland with these
attractive features. Besides that, Chinese firms want to boost their growing film industry
against India competitors. Therefore, it can motivate concerns toward China government
in terms of investing and promoting domestic film industry. As a result, it also is
favorable for Walt Disney Television. In terms of the costs serving investing in China,
that country offers lower-cost labor, known as more abundant resource. For those who
want to achieve this advantage can save the operating costs in particular for Walt Disney.
Moreover, regarding to the risks, it is considerably necessary for them to concern about.
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It is suggested that Chinese people usually over-estimate the importance of their culture.
They are kind of high national spirit (Chiến, 2012). Therefore, images and languages
related to Chinese culture may be noticed. For the unfamiliar market, joint venture with
local enterprise will be the best strategy for Walt Disney because they can capture
benefits from local partner„s knowledge of local market, culture, language and political
systems.

IV.2.3.b.2. Disney‟s selection of joint venture with Chinese firm:

According to those advantages above, Shanghai Disney Resort located in Pudong
New District is the best enterprise to partner with a joint venture. As a part of the
agreement, Shanghai Shendi Group holds 57% of the shares and Disney remaining 43%
(Does, 2016).

Owners' captital in Disneyland

43% Disney
Shanghai Shendi Group
57%

Why choose Shanghai Shendi Group?

• Favorable geographical location in Shanghai
• Favorable transportation for its customers all over the world
Walt Disney has partnered with Shanghai Media Group (SMG) to develop
Disneybranded movies since 2014. Why choose Shanghai Media Group?
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• One of the largest media and entertainment company in China

• The most valuable business portfolio (TV, radio, media outlets, production and
distribution, …)
IV.2.3.c. Hong Kong market:
According to the assessment of Disney‟s strategic decision for expanding their
product into Hong Kong, Disney has partnered with Hong Kong government into a joint
venture to build their third international theme park. In 2005, Hong Kong Disneyland
finally opened and managed by Hong Kong International Theme Parks. From Hong Kong
joining, Disney eased some financial concerns of company expansion with the total
invested capital of $3.59 billion dollars. Besides that, economic growth and increase in
local consumer spending are highly significant influence as their expectation from that
market (Disneyland, 2017). One direct competitor in particular Ocean Park and
involvement of the regional government Hong Kong was very attractive market
opportunity. On the other hand, when analyzing of past market entry experience from
Japan, the achievement of Tokyo Disneyland implies that licensing is not the best strategy
for Disney makes benefits. They only charge a fee for the license and then cover the
licensing fee, thus missing out the opportunity to increase revenue by limiting their
shareholdings. Setting up a joint venture with the Hong Kong government allows Disney
to avoid cultural mistakes while being able to make the best entry and receiving the
higher returns. Partnering the joint venture with Hong Kong government, Disney owned
48%, 52% own by Hong Kong government (Hong, 2016).
 26

IV.2.4. Wholly owned subsidiaries

IV.2.4.a. Chinese market:
Besides the building of Disney Store and Disney land in Shanghai, Walt Disney also
created some English teaching school for children in China. It is the new market
segmentation of Walt Disney.
According to the information in the market research department, in parallel with fast
growth in economics, the demand for Chinese English education is higher, and children
are the main concern of society. Disney decides to set up about 5 to 10 “Disney Magic
English” centers (in Beijing and Shanghai); not only adopting this need but also raises the
total revenue from Disney‟s different segmentations. This program includes helping
Chinese children know about all Disney characters, relevant vocabulary, basic grammar
and common topics about Disney conversation (Disney English, 2017). Based on the
competitive advantage in technology, Walt Disney has applied it into teaching system,
such as using 3D imaging technology about animation cartoon characters; children
answer questions by touching the answers on the electronic screen; and study lessons
through illusive tutors like Mickey or Donald.
With children who have already watch Disney‟s cartoons and films, they are
interested in learning English through class‟s images and wonderful machines. If not, the
“Magic English” program becomes the well-done effective advertising channel that
influences their thinking about the magic world. These children will go home and watch
Disney cartoons on TV or go to the cinema. This activity can increase the total revenue
and bring profit for the company.
IV.2.4.a. France market:
After success in Japan, France is the second country Walt Disney chose to entrance.
The boards of directors want to have executive authorities, so they chose the wholly
owned subsidiaries; they owned 100 percent of the stock.
In 1987, Walt Disney entered the European market with Disneyland Paris. At that
present, there are some local entertain companies here, but no international firm. It is a
 27

good chance for Disney to create the acquisition strategy. It allowed Disney to gain the
ownership, location, and internalization advantages (Brage, 2017)
First, Walt Disney is the famous brand name in the United State, so it has its own
reputation, which tends to the ownership advantage. The first moved advantage helps
Disney have the special place in customer‟s mind. Disneyland Paris becomes the
international theme park unique in France. There is no potential competition. This is
freerisk rate and Disney can charge the premium price of ticket or services easily.
Second, there are some local resorts in Europe, so it is available in transportation and the
highly skilled workers. Walt Disney could save their transport facilities cost and the cost
of selecting and training new labor. They do not need to move all of their technology
from the US to France, it is the transaction cost. Thanks for these savings, Disney
invested more in building magic castle and statue of Mickey, Donald, Belle, Goofy or
other images. The beautiful sight-seeing in Disneyland Paris have accessed a big
potential market and it can become the available place to do films and cartoons. Finally,
Walt Disney invested directly into Europe market and they built their own resort. There is
the cost saving in no using “third party”. The wholly owned subsidiaries mode gives
Disney the opportunity to control and make decisions in all activities of Disneyland Paris.
Moreover, Disneyland Paris has met some difficult challenges when they applied their
system in France. The choices of wholly owned subsidiaries entry mode ignore the
opportunity to share the cost. For example, they have to study the unfamiliar
environment. At that time, there is the limitation in market research technology, Walt
Disney believed that the European culture as same as American culture, based on the few
information they had. Thus, there are some mistakes that the Europeans cannot fit with
American Style in Disneyland; it tends to the false business working here. In addition,
this entry mode involves the high cost of building and operating the theme park; it is high
risk in running the business and competing with local competitions.
 28

V. Conclusion
The mission of The Walt Disney Company is to be one of the world‟s leading producers
and providers of entertainment and information. Disney knows the relevance to treat
every market that they do business in individually. Each market is unique, which has a
unique set of characteristics such as how people consume media, the different landscape
in which they do it. Therefore, it is important to study market individually to tailor and
make the products that will be supplied in that market to suit the need of the consumers.
Disney want to make sure that they are able to give customers products that are relevant
to them in the manner they want to receive them whether it be online or through mobile
or any other media. Try best to increase more possibility in which consumers have ability
to take Disney‟s products. Various approaches that Disney chooses to enter the new
markets are licensing, exporting, joint ventures, and strategic alliances.
Especially, Disney has a very healthy licensing business all over the world which greatly
contributes to their revenues.

V.1. Benefits and drawbacks of entry modes in Walt Disney case

V.1.1. Exporting

Exporting is an easy way for Walt Disney to enter new markets. It plays an important role
on increasing Disney‟s profit. In addition, exporting also help Walt Disney in building its
brand image in other countries and become an iconic entertaining firm. However,
Disney‟s image is easily to be stolen or used illegally. For that reason, in markets that do
not protect the copyright law, Disney will hard to compete with counterfeit products.

V.1.2. Licensing

Walt Disney takes advantages from its image to licensing and creates an extra-revenue
from licensing and royaltee fee. Besides, Walt Disney cannot totally manage the licensees
use its image in which activity and how they use it.

V.1.3. Joint Venture

 29

By corporating local organization, Disney can save the cost and time to study deeply on
foreign market. One advantage of joint venture entry mode is that Disney can understand
the local perspectives from their alliances. On the other hand, Disney may lack of control
over management in the new market and they do not have opportunities to learn location
and experience curve economic.

V.1.4. Wholly owned subsidiary

It is a suitable entry mode with totally management and ability to understand a new
market. They can obtain total revenue of a new project in the new market. However, they
also have to bear all risks and costs.

V.2. Recommendation
In the 21th century, the development and application of entry mode strategy provide with
a much more convenient and benefit way for foreign firms when entering into
international markets. The strategy of entry mode has changed business operations
developing the whole global economy and Walt Disney is a successful case for who
wants to follow this strategy. However, there also exist constraints that Disney as well as
foreign companies needs to overcome to maximize their profits such as expanding more
markets with their knowledge of foreign culture, demographics as well as prohibiting
entities violating licensing through strict laws. When deciding to invest in any country,
the most important thing that investors need to follow is to assess its long run profits and
potentials of these countries. Therefore, they can choose which markets to enter before
decide to use entry mode strategy in order to match the countries they intend to invest.
 IV

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