International Business Module Tutorial 12: Week 16 Beginning on 30 Jan 2012 February 2009 exam paper Case study

y and short questions Disneyland in Europe

Oct Sem 2011 Students Copy

Following the success of Disneyland in California and the Walt Disney World Resort in Florida, plans to build a similar theme park in Europe emerged in 1972. Upon the leadership of E. Cardon Walker, Tokyo Disneyland opened in 1983 in Japan with instant success, forming a catalyst for international expansion. By March 1985, the number of possible locations for the park had reduced to four - two in France and two in Spain. Both nations saw the potential economic advantages of a Disney theme park and competed by offering financing deals to Walt Disney Company (Disney). Finally, a site in the rural town was chosen because of its proximity to Paris and its central location in Western Europe. This location was estimated to be no more than a four-hour drive for 68 million people and no more than a two-hour flight for a further 300 million, which meant that a far greater number of people could have access to the park. The complex has been in operation since 12 April 1992. Disney management were optimistic about the project as their U.S. and Japan parks were extremely successful that on some days, it could not accommodate the large number of visitors. Unlike the U.S. parks, the Japan park was franchised to others and Disney management felt that it had given up too much profit with this arrangement. It was decided that this would not be the case at Euro Disneyland. The companys share of the venture was 49%. Its sources of funding were US$1.2 billion from other investors, US$900 million loan from the French government, US$1.6 billion business loan from the banks and the remaining balance from special partnerships formed. For its investment and management of the operation, Disney was to receive 10% of Euro Disneylands admission fees, 5% of food and merchandise revenues and 49% of all profits. The complex was a subject of controversy during the periods of negotiation and construction, when a number of prominent French figures voiced their opposition with French labour unions and others holding protests. A further setback followed when a number of problems developed by the time the park was ready to open and that proved to have a very dampening effect on the early operations. The concerns of the French people were that Euro Disneyland was nothing more than transplanting of the U.S. Disneyland into Europe. They felt that the park did not fit into the local culture and some accused Disney of cultural imperialism. Others objected to the fact that the French government had expropriated the necessary land and sold it without profit to Disney. Signs reading Dont gnaw away our national wealth, Disney go home began appearing along roadways. These negative feelings may well have accounted for the fact that on opening day, only 50,000 visitors showed up, in contrast to 500,000 expected. Soon after, operations at the park came under criticism from both visitors and employees. Many visitors were upset about the high prices. Because of the exchange rate, it was cheaper for the British visitors to fly to Florida than to go to Euro Disneyland. As for the employees, many objected to the pay rates and working conditions, and they also raised concerns about a variety of company policies from personal grooming to having to speak English in meetings, even if most people in attendance spoke French. Within the first month, 3,000 employees quit. Some other operating problems were a result of Disneys previous experiences. For example, in the U.S., liquor were not sold outside the hotels, and as such,
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International Business Module Tutorial 12: Week 16 Beginning on 30 Jan 2012

Oct Sem 2011 Students Copy

Euro Disneyland was kept alcohol-free, including in restaurants to maintain a family atmosphere. In Japan, this policy was accepted and worked very well but the Europeans were used to having outings with alcoholic beverages. As a result, park attendance, hotel occupancy and revenues fell well below the projections, and Euro Disneyland was soon into financial problems. In 1994, after years of heavy losses, the operation was in such bad shape that some people were predicting that the park would close. However, a variety of developments saved the operation. For one, a major investor injected half a billion of much needed cash into the park. Additionally, Disney waived its royalty fees and worked out a new loan repayment plan with the bank. These measures allowed Euro Disneyland to buy time while it restructured its marketing and general policies to fit the European market. In an effort to improve its public image, Euro Disneyland was renamed to Disneyland Paris in 1995 to make the park more French, which allowed it to capitalize on the romanticism that the word Paris conveys. Most importantly, the new name allowed for a new beginning, disassociating the park from the failure of Euro Disneyland. This was accompanied with measures designed to remedy its past failures. The park changed its offensive labour rules, reduced prices and began being more culturally conscious. Among other things, alcohol beverages were now allowed to be served just about anywhere in the park. The company also began making the park more appealing to local visitors by giving it a European focus. Disney Tomorrowland was replaced by Discoveryland, which was based on themes of Leornardo Da Vinci and Jules Verne. Its food services were designed to reflect the fables country of origin, offering French, German and Italian cuisines. The company also shot a 360-degree movie on French culture and showed it in the Visionarium exhibit. These changes were designed to draw more visitors and it seemed to have worked. Disneyland Paris reported a slight profit in 1996 and the park has continued to make money since then. The number of visitors continues to increase even in the face of rising prices and the early anti-Disney hostility has all but dissipated. QUESTION 1 (a) Explain in detail four (4) factors that contributed to the earlier failure of Euro Disneyland in France and state any two (2) measures that Disney took to address such failure eventually. Assessing the national business environment is one of the four-steps in the screening process for markets and sites. Explain with examples any three (3) factors that a company has to consider when assessing the national business environment. From the case above, do you think the Disney management has conducted an external environmental analysis before going forward with Euro Disneyland? Give one (1) reason to support your answer. What are the characteristics of a multinational enterprise displayed by Disney in its operation of the Euro Disneyland? Illustrate any three (3) characteristics with examples. Why did Disney take an ownership position in the Euro Disneyland instead of franchising it to the local companies to build and operate the park? Discuss in detail the advantages and disadvantages of the franchising mode of entry to Disney if it were to choose this same entry mode in Europe as in Japan.
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International Business Module Tutorial 12: Week 16 Beginning on 30 Jan 2012

Oct Sem 2011 Students Copy

QUESTION 2 Coca-Cola Company has operations in 200 countries and employs over 400,000 people and the companys human resource management strategy helps to explain a great deal of its success today. The company adopts a recruitment policy where it hires both local and foreign students in the U.S. and provides training to them before they are transferred to different geographic areas where their expertise are required. This multicultural emphasis is also found in its boards composition, where only four out of its twenty-one board members are Americans. (a) (b) Identify and define the staffing policy adopted by Coca-Cola Company and discuss in detail, two (2) advantages and two (2) disadvantages of this staffing policy. Analyse and explain in detail, any five (5) reasons that could lead to possible failure of key management staff assigned to the overseas operations in different geographic regions.

QUESTION 3 (a) Businesses that venture beyond national borders may encounter different forms of risks from countries that operate on different systems. Explain in detail and with examples, the three (3) types of risks faced by these international businesses. Although most countries are committed towards free trade, some governments still intervene in their import and export trade. List any four (4) motives for such government intervention.
(b)

Despite the signing of the ASEAN charter in November 2007, the member countries have made little progress in putting the charter into effect. Assuming that you are the international manager of a Singapore company, and seeing the deadlock in the ASEAN trading bloc, state briefly the four (4) strategies your company could adopt to access the markets of other economic blocs? Discuss two (2) positive and two (2) negative impacts on international business if your company has access to other economic blocs.

QUESTION 4 (a) Maxis Technologies produces and distributes electronic devices in the Singapore market. The company is doing so well that it is now contemplating to expand its sales to Malaysia and Indonesia. In your opinion, what are the three (3) basic entry decisions that Maxis Technologies must consider in its overseas expansion decisions? Elaborate your answers in detail. (b) In order to ensure a successful launch of its products in Malaysia and Indonesia, Maxis Technologies has decided to conduct a market research on the receptivity of its products in these two countries. Explain the two (2) research processes, including the related tools to use and the benefits of each process, in which Maxis Technologies could use to gather market information on both countries.