Disney Corporation Losses - EuroDisney Paris

Cultural Euro Disney

The word ‘management’ originated in America and ever since assumptions have been made about the universal acceptability and success of their business practices. There are a number of international ventures which have failed miserably due to Americans not considering the cultural aspects when entering into business in a new country.

Euro Disney is a perfect example of the failure of American business processes in another country. The primary aim of this article is to explain how Euro Disney suffered the costs of cultural miscalculations. Geert Hofstede’s work on culture has served as the theoretical basis of this article. His dimensions of culture have been used to explain differences in American and French cultures & the problems that occurred at Euro Disney.

American businesses make assumptions about the transferability of their business, management, marketing, economic and structural models of organizing which frequently fail to take into consideration cultural differences. An example of the consequences of such an approach to intercultural business practice can be found in the Disney Corporation’s recent European venture, now called Disneyland, Paris. Lack of cultural sensitivity and the negative infiltration strategy used by the Disney Corporation resulted in a great loss of time, money and reputation for which the corporation has only recently begun to compensate.

It is the primary thesis of this article that the initial losses experienced by the Disney Corporation may have been prevented if only its representatives had known then what they know now: simply put, that organizations are not distinct, separate entities capable of functioning outside their physical, social and cultural environments. That insight, of course, calls for a different approach to international business, one which begins with the most basic aspect of human organizations, namely effective, meaningful, communicative interactions between people.

As international business is becoming critically important in this world of globalization, so is the need to understand cultures, cross cultural psychology and people across nations. There is a lot of focus on cultural studies and plenty of research is done in this area. Yet, there is a lot of scope for further studies due to the gaps in the research. Today there are several models which help understand how people from different nations are expected to act; the one by Geert Hofstede has become the most influential (Hong, Zhang & Stump 2007, p. 60) The cultural dimensions by Geert Hofstede have served as the specific theoretical framework for this study.

Although there are many criticisms to the Hofsted’s model and his dimensions yet there is no other study that compares so many other national cultures in so much detail. Simply this is the best there is. (Mead chapter 2: pg 51) With the advancements in communication and technology, the physical distance between countries is diminishing (Angur et al. , 1994; Jandt, 1995; Samovar and Potter, 1995).

This physical distance is not the only thing that needs to be bridged in order to when practicing international commerce. Hofstede’s dimensions reflect a nations’ value system. From further reading into this dissertation have tried to show how American business management tends to assume that they have the best business people that lead to them having the best business practices. While they may work very successfully in their or cultural setting, they do not work across borders.

Importance of the study: Scope of the study:

Why did you choose this topic?

There are many studies that have been conducted in the area of cross cultural psychology, but none that have tried to connect the problems faced at Euro-Disney to Hofstede’s dimensions. These dimensions have served as the specific theoretical framework for this study.

Purpose, what are we trying to do

These dimensions reflect a nations’ value system. Power distance and Uncertainty Avoidance affects how an organization is structured and how it functions. The two main problems that an organization can face are

How to distribute power, and

How to avoid uncertainty.

Through this research, have tried to show how these two factors were taken for granted at Euro Disney.

Furthermore, this research aims at studying the implications of the four dimensions on the working of MNC’s and

How will it help others and how can they use it for further research

My work is a sincere effort to contribute to cultural literature. I hope it proves to be beneficial for further research studies.

Overview of the study:

• Chapter 3 (Case of Euro Disney): This chapter describes all the stages of the research process in carrying out the present study. In particular this chapter gives a clear definition of the research method employed including sampling and data analysis.
• Chapter 2 (Literature review): This chapter will begin by outlining the existing literature on the concepts of brands, brand image, private brands and consumers’ perceptions toward private brands. Also in an attempt to meet the main research objective, the other areas (sub-objectives of this research study) such as consumers’ attitudes & preferences, brand loyalty, brand awareness toward private brands and positioning strategies of private brands have been rigorously discussed, which will provide full support to this research study.
• Chapter 4 (Discussion): This chapter discusses the results of the research, in particular, presenting statements made by informants with regards to themes that emerged from the transcripts. The chapter ends with a summary taking into account the exploratory nature of the research, and the importance of insight.
• Chapter 5 (Conclusion & Recommendations): This chapter deals the conclusion of the present research study. It will be presented in light of research findings from Chapter 4. By referring to existing literature the discussion will highlight major findings in conjunction to identity development. At the end of the chapter, recommendations for further research will be given.

Literature Review

As Americans, the word “Euro” is believed to mean glamorous or exciting. For Europeans it turned out to be a term they associated with business, currency, and commerce. Renaming the park “Disneyland Paris” was a way of identifying it with one of the most romantic and exciting cities in the world (Eisner).

Culture 500-700

Layers of culture 200

Cultural studies & Cross cultural management 500-600

Importance of hrm in a cross cultural context

International Business and importance of CCM

Importance of culture in a international context 500

Theoretical background : Hofstede’s diemsions of culture 1300

Case 1100

Reasons 1000

Discussion :using hotsedes dimensions explaining differences cross continents and cultures 2000

Conclusion 600-700

limitations of the study, limitations of hofsted’s model

American business leaders often assume that physical distance is the only gulf that needs to be bridged in international commerce. (473 pg1. last line) As a matter of fact bridging this gap is just one of the steps in international business. It is much more complicated and a number of factors need to be kept in mind. According to Adler (1986:13)in 473 it is the lack of academic interrogations by cultural scholars that has lead to ‘American parochialism’ Culture

Culture is an umbrella word that encompasses a whole set of implicit, widely shared beliefs, traditions, values and expectations that characterize a particular group of people(Consumer behaviour in travel and tourism By Abraham Pizam, Yoel Mansfeld, p393).

There are as many definitions of culture as there are people who have tried to define it. While some phrase it in terms of ‘metal programs’ others define it as the characteristics a person possesses. Hofstede (1994) defines culture as ‘the collective programming of the mind which distinguishes the members of one group or category of people from another’ (p. 180). While according to Kroeber and Parsons, culture is transmitted and created content and patterns of values, ideas and other symbolically meaningful systems as factor in the shaping of human behaviour and the artifacts produced through behaviour(pdf 473 page 2)

According to Schein culture is ‘A pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you perceive, think, and feel in relation to those problems. ‘ Organizational Culture & Leadership by Edgar H Schein October 1996.

According to Schein Culture exists at three levels, artifacts, exposed values and basic assumptions. Pizam (1993) also believes that there are levels of culture in the society. Firms and organizations are a part of the society/system and thus culture has an impact on them. Pizam argues that organizations are ‘culture-bound, rather than being culture-free’ (Pizam, 1993: p. 219)-MMp2

Today there is growing importance of culture in cross border interactions. The role of human resources is very crucial as well. Effective human resource decisions and cultural sensitivity form two pillars for the success of an international business venture.

The phrase ‘Cross cultural management’ was first coined by …in the year….

There are examples of companies who failed due to HR’s ignorance and cultural miscalculations. Theoretical background:-

Hofstede’s Dimensions

Cultural dimensions by hall’s,trompenars, hofstede’s, globe study. Although there are many criticisms to the Hofsted’s model and his dimensions yet there is no other study that compares so many other national cultures in so much detail . Simply this is the best there is. ( Mead chapter 2: pg 51)

As international business is becoming critically important in this world of globalization, so is the need to understand cultures and people across nations. There is a lot of focus on cultural studies and plenty of research is done in this area still there is a lot of scope for further studies due to gaps in research. Today there are several models which help understand how people from different nations are expected to act, the one by Geert Hofstede has become the most influential (Hong, Zhang & Stump 2007, p. 60)

Hofstede’s Dimensions of national culture-

Power Distance Index (PDI): Large versus Small power distance

The basis for this dimension is the fact that inequality exists at all levels and areas of the society. Inequality exists in areas such as wealth, social status, power and prestige. The word ‘power distance’ is taken from the work of Mulder (Reference hofstede p71). According to Mulder’s Power Distance Reduction theory, subordinated try to reduce the gap in power between them and their superiors. On the other hand the superiors try to maintain or increase the power distance.

The PDI norm deals with the desirability or undesirability of dependence versus independence in society (Hofstede p. 93). Power distance is described as the degree to which there is unequal distribution of power in a society. This is accepted by the members of a society, organizations and nations which are less or more powerful. Behaviour of members of such institution is affected by the degree of power they posses.

A high power distance index is characterized by hierarchical orders, close supervision, autocratic decision making and unequal distribution of power. Everybody has a place in the system which needs no clarification or justification. According to Hofstede’s dimensions, Malaysia has the highest score on power distance (104) thus implying that the management would use a top-down information flow and there would be autocratic and paternalistic decision making.

In a low PDI society, subordinates with the senior management together make decisions and have strong work ethics. It is characterised by equal distribution of power. Sweden is low on PDI (31)Individualism versus Collectivism (IDV)

It deals with how members of a society view themselves compared to the rest of the society and is measured from completely collective (0) to completely individualistic (100).

Individualism stands for a preference for a loosely knit social framework in society wherein individuals are supposed to take care of themselves and their immediate families only.

Collectivism, on the other hand, stands for a preference for a tightly knit social framework in which individuals can expect their relatives, clan, or other in-group to look after them in exchange for unquestioning loyalty (it will be clear that the word “collectivism” is not used here to describe any particular political system).

Hofstede’s own definition is:Individualism pertains to societies in which the ties between the individuals are loose: everyone is expected to look after himself or herself and his or her immediate family. Collectivism as its opposite pertains to societies in which people from birth onward are integrated into strong, cohesive in-groups,

which throughout people’s lifetimes continue to protect them in exchange for unquestioning loyalty. ” Hofstede & Hofstede, 2005, p. 76

The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among individuals”: an extremely fundamental issue, regarding all societies in the world. It relates to people’s self-concept: ‘T’ or “we

Thus, typical traits of countries scoring high on individualism is a frequent use of the word I (in comparison to emitting it, like in Spanish), tendency to live in small households and the expectation on people to have personal opinions on most matters. The three highest scoring countries in the original study were USA (91), Australia (90) and Great Britain (89) whereas the lowest scoring countries were Guatemala (6), Ecuador (8) and Panama (11) (Hofstede & Hofstede, 2005, pp. 78-79).

Masculinity (MAS) versus Femininity

Masculinity stands for a preference in society for achievement, heroism,assertiveness, and material success. Its opposite, Femininity, stands for a preference for relationships, modesty, caring for the weak, and the quality of life.

Hofstede’s definition goes as follows; “A society is called masculine when emotional gender roles are clearly distinct: men are supposed to be assertive, tough, and focused on material success, whereas women are supposed to be more modest, tender, and concerned with the quality of life.

A society is called feminine when emotional gender roles overlap; both men and women are supposed to be modest, tender, and concerned with the quality of life. ”Hofstede & Hofstede, 2005, p. 120

Masculinity versus Femininity (MAS) is somewhat unluckily named, since the name tends to give people associations with highly political matters although the dimension doesn’t deal with those. A better name might have been Gender role stability, since this is what the dimension actually deals with.

This fundamental issue addressed by this dimension is the way in which a society allocates social (as opposed to biological) roles to the sexes.

Some societies strive for maximum social differentiation between the sexes. The norm is then that men are given the more outgoing, assertive roles and women the caring, nurturing roles. As in all societies most institutions are populated by men.

Such maximum-social-differentiation societies will permeate their institutions with an assertive mentality. Such societies become “performance societies” evident even from the values of their women. these societies are referred to as “masculine”. (In the English language, “male” and “female” are used for the biological distinctions between the sexes; “masculine” and “feminine” for the social distinction. A man can be feminine, but he cannot be female. )

Other societies strive for minimal social differentiation between the sexes. This means that some women can take assertive roles if they want to but especially that some men can take relationship-oriented, modest, caring roles if they want to.

Even in these societies, most institutions are populated by men (maybe slightly less than in masculine societies). The minimum-social-differentiation societies in comparison with their opposite, the maximum-social-differentiation societies, will permeate their institutions with a caring, quality-of-life orientated mentality. Such societies become “welfare societies” in which caring for all members, even the weakest, is an important goat for men as well as women. such societies are referred to as “feminine”.

“Masculine” and “feminine” are relative qualifications: they express the relative frequency of values which in principle are present in both types of societies. The fact that even modern societies can be differentiated on the basis of the way they allocate their social sex role is not surprising in the light of anthropological research on non-literate, traditional societies in which the social sex role allocation is always one of the essential variables. Like the Individualism-Collectivism dimension, the Masculinity-Femininity dimension relates to people’s self-concept: who am l and what is my task in life?

MAS is the only dimension where there are systematic differences between the biological genders in how they answer. The difference is correlated with two factors; age (older people tend to score more on the feminine side) and how masculine the country is overall (in feminine cultures both genders tend to score equally, whereas men score much higher than women in masculine cultures) (Hofstede & Hofstede, 2005). Masculinity is represented by the high end of the scale.

The three highest scoring countries in the original study were Japan (95), Austria (79) and Venezuela (73) whereas the lowest scoring countries were Sweden (5), Norway (8) and the Netherlands (14). (Hofstede & Hofstede, 2005, pp. 120-121).

Uncertainty Avoidance Index (UAI)

Uncertainty Avoidance is the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity. This feeling leads them to beliefs promising certainty and to maintaining institutions protecting conformity.

Strong Uncertainty Avoidance societies maintain rigid codes of belief and behaviour and are intolerant towards deviant persons and ideas. They try to minimize the possibility of unstructured situations (situations that are novel, unknown, surprising, and different from usual) by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth; ‘there can only be one Truth and we have it’. People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy.

Weak Uncertainty Avoidance societies maintain a more relaxed atmosphere in which practice counts more than principles and deviance is more easily tolerated. They are more tolerant of opinions different from what they are used to; they try to have as few rules as possible, and on the philosophical and religious level they are relativist and allow many currents to flow side by side. People within these cultures are more phlegmatic and contemplative, and not expected by their environment to express emotions

The UAI deals with how people within a given culture handle anxiety. It needs to be stressed that UAI is not the same as risk avoidance – risk is focused on something specific whereas UAI deals with the unspecific general.

The definition of UAI is “the extent to which the members of a culture feel threatened by ambiguous or unknown situations” (Hofstede & Hofstede, 2005, p. 167).

The fundamental issue addressed by this dimension is how a society reacts on the fact that time only runs one way and that the future is unknown: whether it tries to control the future or to let it happen. Like Power Distance, Uncertainty Avoidance has consequences for the way people build their institutions and organizations.

Typical of countries with high UAI is a need for written and unwritten rules. The three highest scoring countries in the original study were Greece (112), Portugal (104) and Guatemala (101) whereas the lowest scoring countries were Singapore (8), Jamaica (13) and Denmark (23) (Hofstede & Hofstede, 2005).

Long-Term Orientation (LTO) versus Short-Term Orientation

This fifth dimension was found in a study among students in 23 countries around the world, using a questionnaire designed by Chinese scholars. It can be said to deal with Virtue regardless of Truth. Values associated with Long Term Orientation are thrift and perseverance; values associated with Short Term Orientation are respect for tradition, fulfilling social obligations, and protecting one’s ‘face’. Both the positively and the negatively rated values of this dimension are found in the teachings of Confucius, the most influential Chinese philosopher who lived around 500 B. C. ; however, the dimension also applies to countries without a Confucian heritage.

The dimension was defined by Hofstede as:“ Long-term orientation (LTO) stands for the fostering of virtues oriented toward future rewards – in particular, perseverance and thrift. Its opposite pole, short-term orientation, stands for, the fostering of virtues related to the past and present – in particular, respect for tradition, preservation of “face”, and fulfilling social obligations. ” Hofstede & Hofstede, 2005, p. 210

Cultures that score high on LTO tend to have so called Confucian values and not surprisingly the three highest scoring countries in the Bond-Hofstede study were China (118), Hong Kong (96) and Taiwan (87). The lowest scoring countries were Pakistan (0), Nigeria (16) and the Philippines (19) (Hofstede & Hofstede, 2005).

The case of Euro Disney

It’s first of Walt Disney’s theme park, Disneyland, opened in Anaheim, California, in 1955. The Anaheim Park was an instantaneous success. The success story repeated itself with the opening of the theme park in Florida in 1970s, and with Tokyo Disneyland in Japan in 1983.

Japan’s success made the corporates believe that they knew everything about opening a theme park in another country and making it a success. So, in 1992, they turned to Paris, the self-proclaimed capital of European high culture and style. Paris was chosen out of 200 locations around the world because of its demographics and the subsidies Walt Disney was offered by the French government. The Greater Paris area was a high-density population zone (over 10 million) with people who had a relatively high level of disposable income. It also has the ability to attract substantial number of tourists. There was sufficient land available to meet the demand of the park and necessary supply of water and electricity was economical.

The French government was very enthusiastic about getting Disney to Paris because they believed that the project would create 30,000 French jobs. They also gave the company more than $1 billion in various incentives.

The Walt Disney had tasted nothing but success until 1992. From its very inception, Euro-Disney faced a number of problems. First was the allegation that Euro-Disney was an assault on the French culture. The cause: lack of cultural sensitivity. People looked at it as a symbol of American clichés. The French framers even blocked the entrance with their tractors on the day of its opening.

It was evident that the human resource department had done everything possible to ignore the aspects of cultural awareness and had misunderstood the French laws. They overlooked the traditions and habits of the French people when strategizing the park and how it would operate. The ethnocentric recruiting practice was one of their biggest mistakes. If a company follows ethnocentric hiring practices, the employees of a multinational company who are from the home country will be given preference.

Following this, Euro-Disney filled all important positions with employees from the home America. The chairman of Euro Disney was an American who was said to have strong ties with France. What they did not realize was the fact that because he had strong ties with France did not mean he thought like the French. Because of this, they went on to implement Euro-Disney without much consideration to local culture. They filed to credit the local employees for their contribution to the initial planning process. Recognizing performance is the basis for building an affinity to the workplace and a sense of belonging.

When operating in a culturally different environment, it is important that a company ‘act globally, but think locally’. This was Disney’s biggest mistake. They refused to acknowledge the fact that Europe and USA were both ‘Western cultures’, but starkly different in their cultures. The theme parks in America did not serve any alcohol, but for the French, serving a glass of wine with lunch was a given. While the French culture is feminine in nature, the American is Masculine. Disney assumed that Europeans would not take breakfast and so they downsized the operation, but surprisingly Europeans did want breakfast. More surprising was the fact that did not want the typical French breakfast. They wanted bacon and eggs!

Another big problem was the while Disney was successful in hitting the planned 9 million visitors a year mark, the visitors didn’t stay for as long as expected. Most stayed for a day or two as opposed to the four to five days that Disney had hoped for. Europeans thought of theme parks as a full day excursion and not as a weekend destination. The company had spent billions of dollars building the luxurious hotels but because people opted for day excursions, the occupancy levels at the hotels were always low. Because of this, Euro-Disneyland had cumulative losses of $2 billion at the end of 1994[1].

Almost everything that Walt Disney had projected for Euro-Disney was the complete opposite of the reality in Europe.

A puzzle of errors: miscalculating everything!

Here are the factors that led to the downfall of Euro-Disney from the very start. I have discussed these in detail as we move further into the dissertation.

Still beset by high costs and low attendances, Euro Disney will find it hard to hit its target of breakeven by the end of September 1996. Costs in the year were reduced by FF 500m by introducing more flexible labour agreements (more part-timers, increased job sharing and the use of more students

in the peak season) as well as outsourcing contracts in the hotel operation. But the company admits that the lion’s share of cost reductions has now been realized. Now it hopes attendances are rising. . . Getting people to spend more once they are at the park might be more difficult. Euro Disney is pinning its hopes on economic recovery in Europe. It’ll have to start paying interest, management fees and royalties again in five years’ time. Management will not say whether it’ll be able to cope then. 1 “Euro Disney,” Financial Times’ Lex column, 30 October 1996(14ED)

1. Miscalculation of drinking habits.

Misunderstanding French drinking habits was a serious problem faced by Euro Disney. The management decided to continue with their policy of not serving alcohol in their theme park. Though it worked well in other places but the same did not hold true for Euro Disney. It rather proved to be disastrous because a French meal is incomplete without a wine. Wine is an essential part of the French Culture and is famous all over the world. This miscalculation became a cause of astonishment and consequently the company had to change its policy and serve alcohol.

2. Misunderstanding of breakfast and food norms.

Disney’s fault of ignoring the cultural differences in food made them commit another blunder. Disney believed that like Americans French would also prefer snacks and hence they downsized their restaurants. This proved to be a wrong decision because French preferred to sit down and eat complete meals rather than carrying away snacks in their hand like Americans. In fact, the data shows that they were trying to serve 2,500 breakfasts in a 350-seat restaurant at some of the hotels. Further, guests wanted bacon and eggs rather than just coffee and croissants (Burgoyne, 1995).

This difference between the company’s thinking and the actual French culture lead to long lines in front of the restaurants and on top of it when French were denied wine it complicated the matter even further and on the whole French did not have a pleasant “Disney experience”.

3. Misunderstanding of vacation habits.

The Walt Disney’s thinking of Americanize European habits put them into another trouble. The company miscalculated the vacation time because the Europeans preferred few longer holidays in comparison with the Americans who took several short breaks. So the company’s theory of Americanizing brought loss to them.

4. Miscalculation of per-capita spending.

Insufficient market research lead to miscalculation of the per capita spending by the visitors at the park. While the Americans and Japanese who never left the park empty handed, the Europeans did. The European visitors wanted to spend more time on the rides rather than shopping for food and souvenirs which resulted in lower expected revenue. As a matter of Fact spending was about 12% less than predicted. [ ]

5. Miscalculation of transportation preferences.

There was a big miscalculation in the transport preferences which was again due to the non- understanding of the differences in the American and the European culture. While availability of boats, trams and trains proved to be beneficial to carry visitors in America from their hotels to the park but with the Europeans this was not the case. Most of the Europeans preferred to walk . Also, as per the calculation it was assumed that most of the Europeans would travel by their own vehicles and hence a lot of parking space was allotted for the cars.

Whereas most of the Europeans came by buses and bicycles and the facilities for the bus drivers to park their buses and the rest came out be inadequate and as a result the company was forced to reduce the space for parking lots and provide more space for the buses and the bicycles.

6. Misunderstanding of French labor laws.

7. Violation of French labor law.

8. Miscalculation of risk factor

9. Incorrect global staffing policies and hr orientations :Ethnocentric and polycentric

2. Misunderstanding French traditions and habits: celebrating Halloween instead of French festivals.

3. Nationalistic sentiments of French people: Change in name from Euro Disney to Disneyland Paris

4. Staffing and training problems

5. Rigid Disney dress code

6. Operational errors

7. Labour costs

8. Labour disputes

9. communication problems

10. cultural operational issues

Power distance

· Incorrect global staffing policies and hr orientations: Ethnocentric and polycentric

The French were confused when Disney appointed mostly American-born managers into the front-line supervisory positions at Euro Disneyland – many of whom were not fluent in the French language.

Individualism

· Rigid Disney dress code

· threatening highly individualistic French cultural traditions

Individualism is the cultural dimension that measures to what extent people to look after themselves and their immediate family members only

America’s individualism score of 91 is the highest in the world. France’s score of 71 is also high, 65% more than t