Walt Disney Case

This essay focusses on The Walt Disney USA and its foreign direct investment in France. The worldwide business system of Disney will be explored so that lessons can be learned from the triumphs and disappointments of Disney’s expansions to the global market focussing on the investment made in France. Further we will look into how the company makes decisions on investing in a foreign country and how they are formed in a certain way using relevant theories.

The Walt Disney Company is an American multinational mass media and entertainment conglomerate, headquartered at the Walt Disney Studios in Burbank, California. It revolutionized the concept of theme parks by creating Disneyland Anaheim in California. Today, the company thinks of theme parks

Encouraged by the strong sales of Disney licensed products in the European market, in 1986 Disney executives started to evaluate the alternative of opening a European-based theme park in the belief that Disney “magic”, which had been so successfully exported in Japan, was sure to repeat itself in Europe. Nevertheless, the theme park was not an immediate success. One prominent French intellectual defined the transplantation of Disney park as “a cultural Chernobyl” (Mnouchkine, 1992), and many cultural conflicts arose before and after the opening, on April 12th 1992, of the 5 billion dollar venture. The company invested billions in building luxury hotels next to the park, which turned out to be empty most of the times since visitors were not willing to spend additional money to visit an area that could be explored in a day trip from Paris (Grant, 2008). The European recession in 1992 caused property prices to drop, and prevented Euro Disney from sustaining revenues through land sales. In 1994, Prince al-Waleed, a billionaire from Saudi Arabia decided to purchase a 24% share, eventually decreased to 17% of the debt-ridden Euro Disney, allowing the company to withstand the European recession and continue building despite the increased debt ratio. It is worth mentioning that many analysts attribute Euro Disney’s future success to the Prince alWaleed’s investment (Disney

Other types, like a joint venture with a local company, would have allowed for different voices to be heard that could have avoided the initial business failure that Euro Disney was. In the this case, the choice of a wholly-owned subsidiary as an equity entry mode involved high costs for building the park, huge operational expenses, and high risks due to running the business in an unfamiliar environment. Nonetheless, this entry decision allowed the company to gain Ownership, Locational and Internalization advantages at the same time. The Ownership advantages of Disneyland Paris are mainly reputational and first mover advantages which render the theme park unique in the customer’s mind. Furthermore, given the uniqueness of the Disney product, there are no potential competitors in the European arena. These factors give the company the possibility to charge a premium price for the final customer. In terms of Locational advantages France offered unique transportation facilities, qualified labour and access to a big potential market, justifying an investment in the region over other options. The decision of pursuing a WOS allowed Disney to save on high transaction costs like the ones experienced in the licensing contract with Japan. This Internalization advantages were the prevention of knowledge leakages, the cost savings of not having to enforce a contract with a third party and