Case Study of Euro Disney (Mgmt 322)
To this day, EuroDisney struggles to keep its doors open, while the American
and European theme parks continue to thrive. My paper for my
International Business course deals with the many problems that marked the
opening of EuroDisney ...
For years, the Disney theme park empire was built
upon three crown jewels located in California, Florida, and Japan. Combining
the familiar, family-friendly characters and images upon which the Disney
reputation was built, with clean and well-operated theme parks helped Disney set
new standards for efficient, friendly customer service in the theme park
industry, with its parks becoming major international tourist attractions. When
Disney expanded its theme park empire across the Atlantic, many expected Disney
winning streak would continue.
However, when Euro Disney opened in Paris in 1992,
the standard model of Disney theme parks, long considered to be a recipe for
guaranteed financial success, soon ran into trouble. Tackling the many problems
faced by Euro Disney operations has posed many new challenges to Disney, forcing
them to reconsider their cookie-cutter standard model for success. For the Euro
Disney theme park to survive, Disney must find ways to adapt their theme park
model in a manner which preserves the best of Disney while more closely fitting
the needs of the European market.
A
HISTORY OF SUCCESS
Disney’s theme parks in the United
States and Japan were models of success whose strong customer base made a
significant contribution to the overall bottom line of the Walt Disney Company.
After opening the first theme park in California in 1955, the Walt Disney
Company opened two more parks in Florida and in Tokyo, Japan, based upon a
successful formula in which Disney characters used to create a family-friendly
atmosphere in which theme park visitors were treated to excellent customer
service in a very clean environment.
Dependent upon its employees to provide
the high level of customer service that is at the heart of the Disney
experience, the company had created a careful screening process for applicants,
an intensive employee training program to insure they would meet the strict
standards of service, and a comprehensive communication program to keep
employees fully informed. Constantly under refinement, this process helped
insure Disney employees were able to conform to Disney’s standards and deliver
the high level of customer service their millions of annual guests have come to
expect.
On the heels of the strong success of
Tokyo Disneyland, which opened in 1983, and encouraged by strong sales of Disney
licensed products in the European market, Disney began work on opening a
European-based Disney theme park. After ten years of planning and development,
Euro Disney opened in Paris, France, in 1992, with high hopes that the Disney
magic, which had worked so well in the United States and Japan, was sure to
repeat itself in France.
THE
PROBLEMS FACING EURO-DISNEY
Early hopes for a similar success soured
soon after Euro Disney opened, and the experience of opening Euro Disney
delivered unexpected surprises to Disney management. The park soon encountered
several major problems:
Attendance: Disney’s consulting
firm, Arthur D. Little, has projected first year park attendance to range
between 11.7 and 17.8 million attendees. To be cautious, Disney used the low
range of Little’s figures and predicted eleven million attendees, with seven
million of those visitors attending in the six month period between the opening
of the park and September 30. While initial hotel bookings at the theme park
during the summer looked promising, in the summer months, as the theme park
entered its first winter, bookings dropped to twenty percent or less of monthly
projects. With the park located near Paris, it was expected that French
residents would comprise half of the visitors to the park, helping to act as a
“safety net” to poor response from other European nations. However, far fewer
French visitors were coming than projected, and it soon became clear this
“safety net” was not going to bolster Euro Disney’s sagging customer volume.
Staffing: In a service-oriented
business such as Disney with very exacting customer service standards, proper
staffing is crucial to an organization’s success. In spite of the importance of
having a top-notch workforce, many considerations crucial to developing that
effective workforce were overlooked at Euro Disney. Staffing shortages created
a negative cycle in which extra workloads on employees resulted in increased
turnover, which in turn hurt Disney’s ability to retain and develop its
employees. Poor union relations caused by reactions to Disney’s exacting
requirements for dress and appearance, such as a ban on facial hair and colored
stockings, as well as to Disney’s high standards of customer service, further
hurt their ability to attract employees.
Seeking to address the shortages created by this
high turnover, Disney management accelerated its complex training program. This
put more stress on new hires, and left them even less prepared to provide the
level of service expected of Disney employees. Communication barriers in the
workplace were created by language and cultural gaps between American management
and European employees. Also, planners failed to consider the impact of the
shortage of housing near the theme park upon their ability to attract workers.
Customer Service: Those who
visited other Disney parks were used to the clean and well-orchestrated
atmosphere of other Disney theme parks. However, those visitors were often
disappointed with their Euro Disney experiences. In many respects, Euro Disney
was failing to deliver the high level of customer service standard to Disney
theme parks, as well as failing to provide the service needs that were unique to
the European market.
Many employees failed to conform to the
high standards of customer service that were expected in Disney theme parks.
One employee described the high standards and rigorous training required by
Disney management as “brain washing”. Visitors complained of apathetic
employees who looked and acted more “like real people instead of ‘Disney’
people”. The strong work ethic that was commonplace among American and Japanese
workers was harder to find among Europeans, making it difficult for Disney to
find and retain employees who shared Disney’s corporate philosophies regarding
excellent customer service.
A failure to modify Disney’s standard
theme park program to better fit the unique needs of European customers was a
problem. Restaurants were not prepared for the eating habits and times of
European customers. By not selling alcoholic beverages in the park, Euro Disney
forced customers to leave the park to purchase them, and insulted the
deeply-held tradition of French wine-making. In many respects, there were clear
disconnects between Disney management and their customers.
Lack of local management and
autonomy: Until Euro Disney, every Disney theme park was locally owned and
operated, with the American theme parks run by the Walt Disney Company, and
Tokyo Disneyland operations by the Oriental Land Company. Euro Disney was the
first Disney park that had a significant amount of foreign ownership. While the
Walt Disney company owned a 49% share in Euro Disney, their role as the operator
of the theme park allowed for an arrangement in which they would receive between
seventy and eighty percent of the pre-taxable income generated by the park.
This resulted in management by remote control, in which decisions were often
made by people who were far removed from the day-to-day operations of the park,
and who did not have a strong understanding of the culture and the market. This
made it harder to accurately understand the European Disney market, as well as
reduced their ability to respond effectively to concerns by European
shareholders.
WHERE TO GO NEXT – RECOMMENDATIONS FOR SUCCESS
It is clear that Euro Disney has suffered some
setbacks in its first year of operation. However, these setbacks do not
necessarily equate defeat for an organization, and can become valuable learning
experiences. Upon reviewing the key problems faced by Euro Disney, there are
several issues which require attention. These include:
Improving customer service:
Disney has long prided itself on the quality of customer service offered by its
theme parks, and maintaining this standard is essential to its continued
success. While reaching the same levels of quality may be more difficult with
the European workforce, reaching this goal is crucial to its success of
duplicating the Disney model. Considering the relative scarcity of employees
who are willing to commit to meeting Disney’s expectations, greater efforts
should be made to identify and retain employees that are compatible with the
corporate values of Disney. In addition, accommodations and services should be
made to better fit the needs and desires of the multi-lingual and multi-cultural
European customer base.
Overcome workforce issues:
As part their overall effort to improve customer service, Disney must address
the problems affecting its workforce. This requires improving communications
with its employees, and improving overall morale among employees. The
organization should do a better job of better planning to meet staffing needs to
reduce the workload placed upon its employees, as well as addressing factors
which limit staffing options, such as lack of nearby housing, which reduces the
supply of employees. These improvements must go hand-in-hand with efforts to
increase Disney’s appeal to potential applicants and improve relations with
unions. Options to overcome the housing shortage should be explored to allow
workers to live closer to the theme park. In addition, Disney should make a
greater effort to increase the diversity of its workforce, to provide a better
level of service for visitors from outside of France.
Develop a better understanding of the
European market: Disney must better understand and
meet the different habits, expectations, and needs of the European theme park
visitors. Greater efforts should be made to build better relations with groups
opposed to the theme park, as well as those influenced by those groups, would
help reduce the negative publicity that has undone much of Disney’s marketing
efforts, especially in France. In addition, a greater role should be given to
European investors in planning and decision making, to provide more of a
“European” perspective in managing the operations of the theme park.
Maintain operational flexibility:
On an optimistic note, Disney executives showed great optimism about long-term
prospects, and have not allowed short-term problems to dampen their enthusiasm
for the long-term prospects of Euro Disney. As Disney is still in the “learning
process”, which is required to develop a greater knowledge base about the
European market, it is crucial this patient attitude be maintained. As the
organization is still dealing with a large range of unknowns, flexible
problem-solving attitudes should be encouraged to help allow Disney to learn and
adapt to its new environment. Disney has achieved a strong market position in
other locations, and there is no reason to believe the organization cannot
achieve a similar success in Europe, provided it is willing to make the same
long-term commitment.
Develop more realistic planning:
With no experience in the European market, Disney’s plans to move swiftly with a
second phase, which were based upon the presumption that the first phase would
meet expectations, were a risky gamble to undertake. With Disney’s lack of
experience in operating theme parks in Europe, problems and setbacks should have
been expected, and expectations regarding growth should have been more
cautious. Plans for a second phase should not have been allowed to advance
until such time that the problems facing the first phase were corrected, giving
them a more secure base of knowledge upon which plans and decisions could be
made. Otherwise, the company risks duplicating and compounding the problems
encountered with its first phase.
RECOMMENDATION: A MULTI-FACETED AND FLEXIBLE
APPROACH
Solving the problems faced by Euro
Disney requires a combination of the solutions outlined above. Disney should
place a greater effort to improve customer service to insure value for the
customers, improve the quality of its workforce, and commit itself to the
long-term efforts necessary to better address the diverse needs of the
multi-national clientele unique to the European market. Disney management
should also give European shareholders in decision-making processes.
As Disney was new to the European market, the
company should maintain a high level of flexibility in dealing with problems,
and accept many of those problems as part of the learning experiences required
to enable the company to fine-tune its European program. The second phase
should be put on hold until such time Disney could work out the problems
associated with the first phase in order to implement the lessons learned into
planning the new phase of the theme park.
CONCLUSION
By taking the move of entering the European market,
the Walt Disney Company has shown itself as willing to continue to boldly spread
Walt Disney’s magical vision. The opening year stumbles of Disney’s European
venture should not serve as monuments to failure, nor should they be buried and
forgotten. They should be remembered as valuable learning experiences that help
insure the magical experience of Disney will continue to be shared with many
millions of new families around the world. The key to the survival of Euro
Disney will rest upon the ability of the Disney to have the patience and
flexibility to develop a successful model that merges the magic of Disney and
the diverse mix of cultures found in the European market.