Disney Report

EB3803 Shanghai Disney Case Study Report

1. Introduction

Disney has been constructing its Shanghai Disney Resort since 2009. And the first

phase is expected to be completed by December 2014. This report aims to investigate

and analyze the problems that are in store for the company, thus, recommendations on

strategies will be put forward to improve Disney’s this expansion to Shanghai. There

are mainly four sections included in this report. Firstly, a company analysis of Disney

will be carried out. Secondly, PESTLE factors related to Disney’s entry into Shanghai

will be discussed. Then, problems that may arise in this joint venture will be analyzed

while the mistakes that Disney has made in previous international expansion will be

considered. Finally, recommendations will be given to improve this Disney’s strategic

expansion to Shanghai.

2. Company Analysis

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Firstly, established by Walt Disney in 1923, Disney is an international brand with a

long history (The Walt Disney Company 2014). Before its first theme park opened,

Disney had created its popular animated films in which the world-wide famous

cartoon characters Mickey and Minnie appeared. All the achievements in animated

films made Disney’s core competence in its operation of theme resorts. And Disney

has been keeping on adding new adorable characters in its Disney cartoon family,

which enhances Disney’s strength of unique brand image. Besides, Disney’s other

strengths are the advanced technology, an excellent leader team etc.

Then, a broad differentiation strategy which is not transferable is applied by Disney.

Because of company’s wide geographic scale and the distinctive entertainment

services provided, this strategy makes it possible for Disney to differ with other

entertainment resorts. Since the unique Disney characters have been absorbed into the

resorts’ culture, it is hard for its competitors to copy. However, the weakness may be

reflected in some regions like mainland China where people are not that familiar with

Disney, because it takes time for customers there to recognize Disney’s differentiate

value.

Thirdly, as more countries are developing their economies rapidly, more people have

the demand for leisure consumption. This gives Disney a great opportunity to expand

to new markets. On the other hand, considering that the construction and operation of

Disney resort can not only stimulate the local economic growth but also improve the

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city status, most governments are willing to support the construction.

Lastly, the prime threat Disney may be faced is the clash between Disney’s

management style and the diverse local management styles in different regions. This

will negatively influence company’s decision-making process. It will be hard to

mobilize resources because local employees may not be qualified to prepare the

sufficient resources to implement the decision.

3. External Factors Need to Be Considered in Entry to Shanghai

As to the political factor, China has a stable government which can provide Disney a

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stable business environment. However, this will be Disney’s first time to enter a

market in socialism system which means a greater governmental control. Although

Shanghai is the most western city in China, all the land and infrastructure construction

are owned and managed by government. In order to make full use of them, Disney is

expected to communicate well with the Shanghai government. Moreover, Disney

needs to avoid the sensitive political speech which may worsen the relationship with

Chinese leaders. Besides, bureaucracy and red tape commonly exist in Shanghai, time

cost and other communication strategies should also be considered.

Legal factors when entering into Shanghai market can not be neglected. Since the law

system for intellectual property protection is not completed in China, pirate products

are rampant. This will bring a big loss in Disney’s sales of DVDs and toys which

charge higher prices in its resort stores. In fact, Disney has already suffered the loss

before because the pirate version of Disney movie ‘Mulan’ were available before it

was released in cinemas (Lopez 2002, p. 4).

Mainland China has a very different social environment with Hong Kong. People in

mainland China live and work in a more traditional way. This brings the challenges

both in satisfying customer needs and in managing the local employees. Then the

awareness of cross-cultural communication should be paid attention to.

4. Potential Problems in Shanghai Disney

4.1 Cooperation with Chinese government and company

Since there exist big differences in both communication contents and management

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styles Disney’s cooperation with Chinese government and company is faced with

great challenges. Firstly, Chinese government may limit Disney’s development in

China if Disney’s communication contents are considered “disharmonious”. In 1997,

Disney has created a movie named Kundun which told a story of Dalai Lama, and this

led to Chinese government’s strong objection to Disney at that time (Lopez 2002, p.

4). In this way, the similar disharmonious media contents in Disney’s products will

worsen its relationship with Chinese government. Secondly, different management

styles will also make the cooperation with Chinese companies difficult. According to

the cultural dimension index, China is much higher than America in power distance

(Ahlstrom & Bruton 2010, p. 47). This can be reflected in the differences in

leadership style and decision making process. Chinese employees will expect

Disney’s leader to make all the decisions, while Disney prefers consultative decision

making or even group decision making. This will confuse employees involved and

delay the implement of decisions.

4.2 Identification of customer demand

Because there is no existed reliable business model in China, it is hard for Disney to

identify customer demand and seek a balance of taste between local customers and

customers from neighbor countries. Firstly, it is inconclusive whether Shanghai

customers like a localized style resort or an original style Disneyland (Lee 2014, p. 4).

Although Tokyo Disney was successful as a replica of the California resort,

Disneyland Paris suffered low attendance due to cultural clashes (MacDonald 2013).

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The dilemma makes Disney stuck in choosing a resort style for Shanghai; moreover, it

will delay the decision about the design of buildings, parade shows, and cartoon

characters etc. Secondly, it will make the identification of customer demand more

complicated that customers from neighbor countries like Thailand and South Korea

are also Disney’s target groups. The neglect of their preferences which are different

from Chinese’s will not only hinder Disney’s expansion plan.

4.3 Control of excess customer volume

It is a big challenge for Disney to control a large number of visitors especially in

Chinese traditional festivals. In 2006 Spring Festival, Disney Hong Kong kept closed

to excess visitors for two days because the resort was filled. The event caused a

serious jam outside the gate and a strong dissatisfaction among the customers. The

same problem may also arise in Shanghai Disney. According to Shanghai Municipal

Health and Family Planning Commission, larger than it of Hong Kong, the population

of Shanghai reached 14.2 million (SHPFPC 2013) in the end of 2012 and over half of

it belongs to middle class which is Disney’s target group. Plus potential customers

from neighbor provinces and foreign countries, the large number of visitors will make

Disney’s facilities quite crowded. This will ruin guests’ interactive experience. And

the media exposure about the jam will lead to a disaster in public relations.

5. Recommendations

Firstly, in order to cooperate well with Chinese government and companies, Disney

need to establish a leader team whose members have similar managing experience in

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China or at least know local culture well. In this way, the leader is clear about how to

seek for a sufficient support from Shanghai government and how to manage the

Chinese employees effectively. According the success of Hong Kong Ocean Park, the

CEO Allan Zeman’s past Hong Kong developing experience and good knowledge of

local culture helped him a lot to make the park in a solid financial position

(Gallindoss 2013).

Secondly, Chinese elements can be added while the original Disney style needs to be

generally maintained. In this aspect, Disney Paris can be a good example for

Shanghai. Since some European rooted characters like Pinocchio and Peter Pan were

added in Paris, Chinese rooted characters like Mulan and Kong Fu Panda can also be

leading characters in Shanghai Disney family, along with other characters popular in

China such as the Lion King. To get closer to Chinese customers, all the characters

can be dressed in Chinese traditional costume and participate in traditional

ceremonies. Moreover, big events need to be arranged in big Chinese reunion festivals

like Spring Festival and Mid-autumn Festival. Zodiac animals and festival symbolic

animals can be added into the cartoon characters in these special days. On the other

hand, the activities with Chinese characteristics can also be new attractions for foreign

customers who seek for unique Disney experience. And because the original Disney

style is maintained, customers’ need for common Disney entertainment can also be

satisfied.

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Thirdly, Hong Kong Disney’s policy of ‘special days’ tickets can also be applied to

Shanghai Disney to control the large customer volume. Different from the common

tickets which are in six months’ validity, the ‘special days’ tickets can only be valid

on the specified days. The policy can also help Shanghai Disney control the customer

volume in the peak time. Besides, to improve the possible crowded situation, opening

hours should be extended and more service staff need to arranged to maintain order in

the busy period. In addition, Disney should try to guide the media to describe the

scene of loaded people as ‘popular’ or ‘lively’ instead of ‘crowded’ to maintain its

image of fun and entertainment.

6. Conclusion

Disney’s entry to Shanghai is filled with both opportunities and challenges. Chinese

government’s support and the big customer demand for leisure activities makes

Shanghai an attractive site for a Disney resort. However, potential problems also exist.

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The three main problems lie on the cooperation with Chinese government and

companies, the identification of customer demand, and the control of excess customer

volume. In order to solve the problems, three recommendations are put forward

separately. They can concluded as the appointment of leaders who know Chinese

culture well, maintenance of original Disney style with Chinese elements added, and

‘special days’ tickets policy assisted with longer opening hour and public relations

guide for media. By using the strategies suggested, Shanghai Disney is expected to

move on well on this international expansion.

(Word count: 1691)

7. Reference List

Ahlstrom, D& Bruton, GD 2010, International Management: Strategy and Culture in

the Emerging World, South-West Cengage Learning, USA.

Gallindoss, A 2013, ‘Allan Zeman’s Heart Is in Hong Kong’, Jewish Business News,

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July 7th 2013, accessed 24 April 2014,

<http://jewishbusinessnews.com/2013/07/07/allan-zemans-heart-is-in-hong-kong

Lee, C 2014, ‘A Case-Study of Shanghai Disney Resort’, SCOPE, City University of

Hong Kong

Lopez, RH 2002, ‘Disney in Asia, Again?’, Case Studies, Pace University

McDonald, B 2013, France: What’s Right, What’s Wrong and What’s Next at

Disneyland Paris, Los Angeles Times, accessed 25 April 2014,

<http://articles.latimes.com/2013/nov/05/news/la-trb-disneyland-paris-walt-

disney-studios-20130920>

Shanghai Municipal Health and Family Planning Commission 2013, Current

Demographic Situation of Shanghai, Shanghai Government, accessed 26 April

2014, < http://www.popinfo.gov.cn/spfpen/>

The Walt Disney Company 2014, accessed 25 April 2014,

< http://thewaltdisneycompany.com/about-disney/disney-history>

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