Title:
Walt Disney World: An Executive Summary
Author:
Laura Rodriguez, International Business Honors - Undergraduate student
Email Address:
lrodr077@fiu.edu
Phone Number:
786 523 5550
Walt Disney World in China: An Executive Summary
Situation
The Walt Disney Company, founded in 1923 and based in Burbank, California,
operates as a diversified worldwide entertainment company in five main segments:
Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and
Interactive Media. Under the leadership of its new CEO, Bob Iger, Disney has
renewed its emphasis on its core strategy of creating and distributing attractive
content for children and syndicating this content through its various entertainment
channels. Historically, Disney had focused its attention on serving the American
market and exporting its products to the rest of the world; but as of late the Company
has begun to focus its attention on new emerging markets. However, due to
government rules aimed at protecting the public from what are perceived to be
unwelcome foreign cultural influences, awareness of the Disney brand in China lags
that of the rest of the world. The attendance levels for the Disney theme park in
Hong Kong (which opened in 2005) have been disappointing so far and the park has
been criticized for being too small (55 acres). Three new theme lands (Mystic Point,
Grizzly Trail, and Toy Story Land) will open in the few years to come, expanding the
park to 68 acres. Disney has obtained the permission to develop a new theme park
in Shanghai many believe will cannibalize the Hong Kong Disneyland business.
Recommendation
1. Expansion: Continue Hong Kong Park expansion and improvement of
infrastructure for areas surrounding the park. In 2009 Hong Kong Disneyland
announced plans to expand with three new themed areas, but the park should
continue to expand and add new attractions after this expansion. The current
expansion will allow for previous and new visitors to make second-time visits, and it
will motivate those who were reluctant to visit the park because of its size, to visit.
The infrastructure for areas surrounding the park should also continue to be
improved to facilitate access to the park.
2. Differentiation: Differentiate Hong Kong Disneyland from Shanghai
Disneyland. Some Chinese government officials fear that Shanghai Disneyland will
be a “devastating blow” to Hong Kong Disneyland and will make it harder to recoup
the billions of dollars that the government invested. Because of this the two parks
should have different themes and rides specifically tailored to each region.
3. Alliance: Create Hong Kong Disneyland and Shanghai Disneyland alliance.
Once the parks are differentiated, Disney should create an alliance between them by
offering its Shanghai Disneyland visitors a 25% discount on Hong Kong Disneyland
tickets for up to one year after they visit the Shanghai park.
4. Promotion: Cater Hong Kong Disneyland to tourists’ preferences and
improve relationship with Chinese Travel agencies. Hong Kong Disneyland
should offer entertainment activities off site: customers could buy a combo that
included tickets to the park and a one day Disney Guided Tour through the city’s
main attractions, such as the Lantau islands and the Cheung Sha Beach (Hong
Kong's longest beach). Additionally, Disneyland Hong Kong should open up more
boutiques catered to the local and foreign tourists’ shopping preferences. It is also
imperative that Disney improves its relationship with travel agents, who have been
steering away from bringing tourists to Hong Kong Disneyland because of the poor
incentives they received and the organizational problems caused by the park’s small
size and the large amount of tourists.
Financial Effect
The total net economic benefit of the expanded theme park over 40 years would range
from HK $64.7 billion to HK $117.3 billion, adding that the theme park already has
added 0.2 percent to the city's annual GDP since opening. Additionally, mainland
visitors have become the highest spenders among all markets, contributing HK $83.47
billion, which was about 70% of the total visitor spending, which is why it’s so important
to cater to their shopping preferences. The expansion, combined with the 25% discount
for Disneyland Shanghai visitors will allow for mainland visitors to make Hong Kong
Disneyland second-time visits, which will bring in more revenues. This would help
recuperate the initial investment made by Disneyland and the Hong Kong government.
Additionally, combining a differentiation and alliance approach between the two
Disneyland parks would prevent the cannibalization effect that could ultimately hurt
business at Hong Kong Disneyland. Moreover, opening more boutiques, electronics and
fashion stores is likely to appeal to the consumerist culture of the Hong Kong locals and
visitors. On the short term, providing additional services like Disney Guided Tours will
bring in more revenue as foreign tourists who visit Disney are likely to purchase the
Disney Guided Tour and Disneyland Tickets especially priced combo.
Basis for Recommendation
New attractions that are part of the expansion will help increase the park's current
reported attendance of about 4.5 million annually to 5.2 million, to 8.4 million visitors by
2015, when the expansion is completed.
Additionally, offering combos where tourists get a discount for the Hong Kong
Disneyland tickets once they visit the Shanghai Disneyland will motivate mainland
visitors to visit the revamped Hong Kong Disneyland. Moreover, making plans for an
alliance between the Hong Kong and the Shanghai park will appease government
officials who fear having to compete with Disneyland Shanghai for business.
Opening up more boutiques in the park would be beneficial because most of the tourists
visit the city for the shopping experience, as Hong Kong is known as a shopping mecca
and consumerism is ingrained in its culture. Also, if Disney offers Disney Guided Tours
to its visitors, the brand would better integrate with the local culture and gain
acceptance from Hong Kong citizens who reject Disneyland for being “too American”
and for not promoting Chinese culture.
Risks
Penetrating the Chinese market will be difficult because the Chinese culture of
collectivity conflicts with the American culture of individuality. Additionally, the local
citizens may reject Hong Kong Disneyland and Shanghai because they may perceive it
as a waste of taxpayer’s money, especially after the disappointing Hong Kong
Disneyland attendance levels.
Opening up more boutiques in the park may fail as part of the tactic to lure in more
visitors if they believe that they can find better bargains or knock-offs outside of the
park.
Moreover, the Disney Tour Guide combo has to be carefully planned so that it offers a
superior service catered to traveling families; otherwise, tourists will stick to the lower
priced tours offered by the locals.
Unless the parks are successfully differentiated and offer equally attractive and
innovative rides and shows, Disneyland Shanghai will cannibalize the sales for the
tickets of Disneyland Hong Kong and the initial investment made to build the Hong Kong
park will be hard to recuperate.
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