Harvard Case - EuroDisneyland
"EuroDisneyland" Harvard business case study is written by J. Stewart Black, Tanya Spyridakis. It deals with the challenges in the field of Strategy. The case study is 14 page(s) long and it was first published on : Jun 15, 1999
At Fern Fort University, we recommend a comprehensive strategic overhaul for EuroDisneyland, focusing on a multi-pronged approach that addresses the park's operational inefficiencies, cultural sensitivities, and market positioning. This strategy aims to achieve sustainable profitability and establish EuroDisneyland as a leading European entertainment destination.
2. Background
The case study focuses on EuroDisneyland's struggles in its early years, facing significant financial losses and cultural clashes. The park, built on the American Disney model, failed to resonate with European audiences due to cultural differences, pricing structures, and a lack of understanding of the European market. The case highlights the challenges of international business expansion, particularly when navigating cultural nuances and adapting business models to new markets.
The main protagonists are:
- Michael Eisner: CEO of The Walt Disney Company, responsible for the overall strategy and direction of EuroDisneyland.
- Robert Fitzpatrick: CEO of EuroDisney, responsible for the day-to-day operations and implementation of the strategy.
- The European Market: The diverse and culturally rich audience that EuroDisneyland sought to attract.
3. Analysis of the Case Study
SWOT Analysis:
- Strengths: The Disney brand, strong intellectual property, established theme park expertise, and a global reputation for family entertainment.
- Weaknesses: Cultural insensitivity, high operating costs, inflexible pricing structure, and a lack of understanding of the European market.
- Opportunities: Expanding into new markets, leveraging technology and digital platforms, diversifying product offerings, and building strategic partnerships.
- Threats: Economic downturns, competition from other entertainment options, cultural resistance, and changes in consumer preferences.
Porter's Five Forces:
- Threat of New Entrants: High, due to the relatively low barriers to entry in the theme park industry.
- Bargaining Power of Buyers: High, as consumers have many alternative entertainment options and are price-sensitive.
- Bargaining Power of Suppliers: Moderate, as EuroDisneyland depends on a variety of suppliers for goods and services.
- Threat of Substitutes: High, as consumers can choose from a wide range of entertainment alternatives, including movies, concerts, and other attractions.
- Competitive Rivalry: High, with numerous established theme parks and entertainment destinations across Europe.
Value Chain Analysis:
- Inbound Logistics: EuroDisneyland's supply chain was inefficient, leading to high costs and delays.
- Operations: The park's operations were inflexible and struggled to adapt to European preferences.
- Outbound Logistics: Distribution channels were limited, and marketing efforts were ineffective in reaching target audiences.
- Marketing & Sales: EuroDisneyland's marketing strategy failed to resonate with European consumers, and pricing was not competitive.
- Service: Customer service was inconsistent and lacked cultural sensitivity.
Business Model Innovation:
EuroDisneyland's initial business model was based on the American Disney model, which failed to account for the unique characteristics of the European market. The park needed to innovate its business model to address cultural differences, pricing structures, and consumer preferences.
Corporate Governance:
The case study highlights the importance of effective corporate governance in managing international expansion. EuroDisneyland's initial governance structure lacked transparency and accountability, contributing to its financial struggles.
Strategic Planning:
EuroDisneyland's strategic planning process was flawed, failing to adequately consider the cultural nuances and competitive landscape of the European market.
4. Recommendations
Cultural Adaptation: EuroDisneyland must prioritize cultural sensitivity and adapt its offerings to resonate with European audiences. This includes:
- Product Differentiation: Develop unique attractions and experiences that cater to European tastes and preferences.
- Pricing Strategy: Implement a more flexible pricing structure that considers regional differences and consumer income levels.
- Marketing Strategy: Tailor marketing campaigns to European cultural values and media consumption habits.
Operational Efficiency: Improve operational efficiency by:
- Supply Chain Optimization: Streamline the supply chain to reduce costs and improve delivery times.
- Process Improvement: Implement lean management principles to optimize park operations and reduce waste.
- Technology Integration: Leverage technology to enhance guest experience, improve operational efficiency, and streamline processes.
Strategic Partnerships: Build strategic alliances with European companies and organizations to:
- Market Penetration: Gain access to new markets and distribution channels.
- Cultural Insights: Gain a deeper understanding of European consumer preferences and cultural nuances.
- Cost Reduction: Leverage economies of scale and shared resources.
Diversification: Expand product offerings beyond theme park attractions to include:
- Hospitality: Develop luxury hotels and resorts to attract high-spending tourists.
- Entertainment: Create live entertainment experiences, concerts, and festivals.
- Retail: Offer unique merchandise and souvenirs that appeal to European consumers.
Digital Transformation: Embrace digital transformation to:
- Enhanced Guest Experience: Develop mobile apps, online booking systems, and interactive experiences.
- Data Analytics: Utilize data analytics to understand customer preferences and optimize operations.
- Marketing & Sales: Leverage social media and digital marketing channels to reach target audiences.
5. Basis of Recommendations
These recommendations are based on the following considerations:
Core Competencies and Consistency with Mission: The recommendations align with Disney's core competencies in entertainment, family-friendly experiences, and brand building. They also support the company's mission to provide magical experiences for guests of all ages.
External Customers and Internal Clients: The recommendations prioritize understanding and catering to the needs of European customers while also improving the working conditions and morale of EuroDisneyland employees.
Competitors: The recommendations address the competitive landscape by offering unique experiences, flexible pricing, and innovative marketing strategies.
Attractiveness ' Quantitative Measures: The recommendations are expected to improve profitability by reducing costs, increasing revenue, and enhancing customer satisfaction.
6. Conclusion
By implementing these recommendations, EuroDisneyland can overcome its past challenges and achieve sustainable profitability. The park can become a leading European entertainment destination by leveraging its strengths, adapting to cultural nuances, and embracing innovation.
7. Discussion
Alternative strategies include:
- Exiting the European market: This option would be a significant setback for Disney and would not address the company's long-term growth ambitions.
- Focusing solely on cost reduction: This approach could lead to a decline in guest experience and damage the Disney brand.
Risks and Key Assumptions:
- Cultural Resistance: There is a risk that European consumers may continue to resist the American Disney model, despite efforts to adapt.
- Economic Downturn: A global economic downturn could negatively impact tourism and theme park attendance.
- Competition: New theme parks and entertainment destinations could emerge, increasing competition in the European market.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline specific actions, timelines, and resource allocation for each recommendation.
- Establish a dedicated team: A cross-functional team should be formed to oversee the implementation of the strategy.
- Monitor progress and adjust as needed: Regular performance reviews should be conducted to track progress and make necessary adjustments to the strategy.
By taking these steps, EuroDisneyland can transform its operations, achieve sustainable profitability, and become a beloved European entertainment destination.
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Case Description
Only one year after the grand opening of EuroDisneyland, Robert Fitzpatrick left his position as EuroDisney's chairperson. In April 1993, Philippe Bourguignon took over the helm of EuroDisney, thought by some to be a sinking ship. EuroDisney publicly reported a net loss of FFr188 million for the fiscal year ending September 1992, through cumulative losses through April 1993 approached half a billion dollars. The European park fell one million visitors short of its goal for the first year of operations. In addition to the financial woes weighing on Bourguignon, he was also expected to stem the flow of bad publicity, which EuroDisney had experienced from its inception. Phase Two development at EuroDisneyland was slated to start in September 1993, but in light of their drained cash reserves (FFr1.1bn in May 1993) and monstrous debts (estimated at FF42bn), it was unclear as to how the estimated FFr8-10billion Phase Two project would be financed. Despite this bleak picture, Michael Eisner, CEO of Walt Disney Co., remained optimistic about the venture: "Instant his are things that go away quickly, and things that grow slowly and are part of the culture are what we look for. What we created in France is the biggest private investment in a foreign country by an American company ever. And it's gonna pay off."
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