Harvard Case - Licensing Arrangement Or Joint Venture (4): An Ex Post Case Study Of Tokyo Disneyland
"Licensing Arrangement Or Joint Venture (4): An Ex Post Case Study Of Tokyo Disneyland" Harvard business case study is written by Mitsuru Misawa. It deals with the challenges in the field of General Management. The case study is 20 page(s) long and it was first published on : Nov 1, 2012
At Fern Fort University, we recommend that companies considering international expansion, especially in culturally sensitive markets like Japan, carefully evaluate the trade-offs between licensing arrangements and joint ventures. While licensing can provide a quick and relatively low-risk entry point, joint ventures offer deeper market penetration and access to local expertise, but require significant commitment and careful partner selection. This case study demonstrates the success of a joint venture approach in the context of Tokyo Disneyland, highlighting the importance of cultural understanding, strong partnerships, and a long-term strategic vision for international expansion.
2. Background
This case study examines the strategic decision of The Walt Disney Company (Disney) to enter the Japanese market through a joint venture with Oriental Land Company (OLC) to build and operate Tokyo Disneyland. The case explores the challenges and opportunities Disney faced in navigating a new cultural landscape, managing a complex partnership, and ensuring the success of a theme park in a foreign market.
The main protagonists in this case are:
- The Walt Disney Company: A global entertainment giant with a strong brand and established expertise in theme park development and operation.
- Oriental Land Company: A Japanese real estate company with deep understanding of the Japanese market, strong local connections, and financial resources.
3. Analysis of the Case Study
This case study can be analyzed through the lens of several strategic frameworks:
Strategic Framework:
- Internationalization Strategy: Disney adopted a joint venture approach for its international expansion, leveraging the local expertise and resources of OLC. This strategy allowed Disney to minimize risk and capitalize on OLC's understanding of the Japanese market.
- Corporate Social Responsibility: Disney demonstrated a commitment to corporate social responsibility by incorporating Japanese cultural elements into Tokyo Disneyland, ensuring the park resonated with local audiences.
- Competitive Advantage: Disney leveraged its strong brand, innovative theme park concepts, and operational expertise to create a competitive advantage in the Japanese market.
- SWOT Analysis:
- Strengths: Disney's strong brand, established theme park experience, and innovative concepts.
- Weaknesses: Lack of understanding of Japanese culture and market dynamics.
- Opportunities: Growing demand for entertainment and leisure activities in Japan.
- Threats: Competition from existing Japanese amusement parks and cultural differences.
Financial Framework:
- Return on Investment (ROI): The joint venture model proved highly successful, generating substantial ROI for both Disney and OLC.
- Financial Risk Mitigation: The joint venture structure allowed Disney to share financial risks and costs associated with developing and operating Tokyo Disneyland.
Marketing Framework:
- Brand Management: Disney successfully extended its brand into the Japanese market, leveraging its iconic characters and storytelling to appeal to local audiences.
- Cultural Adaptation: Disney carefully adapted its theme park concepts and marketing strategies to resonate with Japanese cultural preferences and sensibilities.
Operational Framework:
- Operations Management: Disney implemented efficient operations management practices, ensuring high-quality customer service and a seamless guest experience.
- Supply Chain Management: Disney established a robust supply chain to procure goods and services for Tokyo Disneyland, ensuring timely delivery and cost efficiency.
4. Recommendations
Based on the case study analysis, the following recommendations can be made for companies considering international expansion through joint ventures:
- Thorough Due Diligence: Conduct comprehensive due diligence on potential partners, evaluating their financial stability, market expertise, cultural understanding, and alignment with your company's values.
- Strong Partnership Agreement: Develop a detailed and legally binding partnership agreement that clearly defines roles, responsibilities, profit sharing, and dispute resolution mechanisms.
- Cultural Sensitivity: Invest in understanding the cultural nuances of the target market and adapt your products, services, and marketing strategies accordingly.
- Local Expertise: Leverage the expertise of local partners to navigate regulatory hurdles, understand consumer preferences, and build relationships with key stakeholders.
- Long-Term Vision: Establish a long-term strategic vision for the joint venture, considering future growth opportunities and potential challenges.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with the core competencies of both Disney and OLC, leveraging their strengths and ensuring a successful joint venture.
- External Customers and Internal Clients: The recommendations prioritize understanding and meeting the needs of both external customers (visitors) and internal clients (employees) within the Japanese market.
- Competitors: The recommendations consider the competitive landscape in Japan, ensuring the joint venture can effectively compete with existing amusement parks and entertainment options.
- Attractiveness ' Quantitative Measures: The case study demonstrates the strong financial performance of Tokyo Disneyland, highlighting the attractiveness of the joint venture model and its potential for high ROI.
- Assumptions: The recommendations are based on the assumption that companies carefully select partners, conduct thorough due diligence, and are committed to building long-term, mutually beneficial relationships.
6. Conclusion
The success of Tokyo Disneyland demonstrates the effectiveness of a joint venture approach for international expansion, especially in culturally sensitive markets. By leveraging the expertise of a local partner and adapting to local preferences, Disney was able to achieve significant success in the Japanese market. This case study provides valuable insights for companies considering international expansion, highlighting the importance of careful partner selection, cultural sensitivity, and a long-term strategic vision.
7. Discussion
Alternative approaches to international expansion include:
- Licensing: This approach offers lower risk and investment but provides limited control over the brand and operations.
- Wholly Owned Subsidiary: This approach offers complete control but requires significant investment and expertise in the target market.
The joint venture approach offers a balance between risk and control, allowing companies to leverage local expertise and market knowledge while maintaining a significant influence over the venture.
Risks and Key Assumptions:
- Partner Misalignment: The success of the joint venture depends on the alignment of goals, values, and operating philosophies between the partners.
- Cultural Misunderstandings: Failure to understand and adapt to local cultural nuances can lead to marketing missteps and customer dissatisfaction.
- Regulatory Challenges: Navigating regulatory frameworks and obtaining necessary permits in a foreign market can be complex and time-consuming.
8. Next Steps
To implement the recommendations, companies should:
- Develop a comprehensive due diligence process: This process should include financial analysis, market research, cultural assessment, and partner evaluation.
- Establish a clear partnership agreement: The agreement should outline roles, responsibilities, profit sharing, dispute resolution, and exit strategies.
- Invest in cultural training for employees: This training should focus on understanding Japanese cultural norms, business practices, and communication styles.
- Develop a long-term strategic plan: The plan should outline the joint venture's objectives, growth strategies, and contingency plans for potential challenges.
By following these steps, companies can increase their chances of success in international expansion through joint ventures.
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Case Description
In the late 1970s, Walt Disney Corporation sought to expand its enterprise to Japan. Oriental Land Corp, which represented the Japanese side of the negotiations, and Walt Disney had to decide on a licensing arrangement or a joint venture. The objective of this study is to examine the actual determinants, models and data of that investment choice. This case study is of value to governments and multinational enterprises that want to explore an optimal alliance with a foreign partner. Based on the law, the Japanese government intervened in the negotiations between the Oriental Land Corp and Walt Disney as to the form of the arrangement for Tokyo Disneyland. Thirty eight years later, it is worthwhile to examine the validity of their decisions and which arrangement benefited the project and the partners most. This case study presents ex post empirical evidence for this discussion. The efficacy and effectiveness of the law that allows the Japanese government to intervene are also questioned.
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