Global Business Expansion- A Case of Disney
Cultural Challenges for Disney in Asia
Asia
is known to be a conservative society, non-liberal, less advanced, and a
tradition driven part of the world with varied belief systems, philosophies,
and cultural values that strongly binds people to their cultural heritage.
Regardless of the region, every Asian country has its peculiar culturally
driven social environment that makes difficult for people to adapt western
thinking, life style, and philosophy of life. Studies conducted so far on the
socio-cultural differences between the west and the east clearly dictates that
contrary to the western society that is driven by rich philosophies of life,
liberty, inclination towards modernity, adventure, amusement, and an interest
in realization of best things of life; Asian societies are bonded to their traditional
roots that resists change and adaptation to new thugs of life. This probably
creates a stiff challenge for western businesses when operating in Asian
countries. Disney, a pioneer in entertainment and recreation does face similar
challenges to their expansion plan which requires appropriate measures to
overcome the issues and convert challenges into opportunities.
Secondly,
Asian societies are known for their middle income class and families that are
used to lower wages, longer work hours, and minimal inclination for amusement
and recreation activities. As most of the Asian countries are populated with
middle income groups’ people have an obvious tendency to save their hard earned
money for their kith and kin’s education and health which poses a challenge for
western firms, Disney in particular as recreational activities have never
attracted the attention of people or is perceived as a need for children or the
youth.
Disney’s Hong Kong Experience
Disney had to face several challenges operating its business in Hong Kong. Despite of several cultural adaptations that were adequate to convince people of the region at large, Disney encountered severe resistance and objections from people due to ignorance in adherence to environmental concerns, limited capacity of the theme parks, and lack of appropriate amenities for visitors. Disney, considering cultural interests and tastes served Shark fin soup, a favorite Chinese delicacy, however, that proved a disaster as it violated environmental norms and was thus prohibited. This angered the Chinese as Shark fin soup is their favorite delicacy thus a conflict between norms and culture caused severe disruptions in business. Additionally, limited capacity of the park restricted entry of high volume of crowd causing unnecessary delays, inconvenience resulting in disappointment. According to Chinese visitors, most of the theme park had 20 years older rides with no innovation and excitement for the younger generation that greatly disappointed visitors (Rein, 2008).As a result, Disney faced losses in reputation, capital and market share operating in Hong Kong. However, post seven consecutive years of losses, Disney for the first time recorded profits in 2012 by 13 percent which was achieved through government agreement for expansion of the parks in the region. The business has realized consistent profit since then
Cultural Variables and Location Selection
Various
cultural components that primarily include language, food, income, education,
life style, music, games, belief system, values, ethnicity, and religion play a
dominant role in determinant whether a location is appropriate for business in
question or not. Therefore, for a recreation and amusement business like
Disney, study of socio-cultural environment of the targeted region is
inevitable and imperative. From this perspective, prior setting up a business
Disney will need to ensure it understands the needs, interests and preferences
of the people of the preferred business location which would be the key
determinant of its success and growth (Whipp et al, 1989). For example, in a
country like India that regards cattle as sacred, setting up a theme park and
serving beef would prove disastrous and attract severe criticism and objection
from socio-cultural groups and even the political parties which could even put
the business in jeopardy. This, cultural variables significantly determine the
way a business would perform and profit in a given region.
Impact of Culture on Disney’s Location Selection
Being a western enterprise Walt Disney realized
that operating singlehandedly is inadequate due to lack of understanding of
targeted region’s socio-cultural components that eventually determines the success
and growth of its business. Thus, making prompt and precision decisions, Walt
Disney opened its new wing as Tokyo Disneyland that proved immensely beneficial
for the company’s success in Japan. Operating as Tokyo Disney Resort under the
name of Oriental Land (OL) Company, Disney swiftly bridged the gap of
socio-cultural differences between the two countries and cultures since the key
decision makers in the OL’s management were Japanese who were well aware of
their people’s interests, preferences, and dislikes that eventually manifested
in terms of increased profitability for the business (Lou, 2010). Outsourcing
of the business in the hands of Japanese proved immensely advantageous for Walt
Disney as the local management was not only in a position to select the right
location for the theme parks but also aptly understand and satisfy visitor
needs and preferences in terms of food, services, games, and varied other
components of entertainment. Thus, a fine blend of American and Japanese
attractions incorporated into the theme parks consequently insured increased
traffic, productivity and profitability for the company (Zhu and Xu,
2010).
Thus, it can be inferred that rather than invading the Japanese environment in the name of recreation and entertainment, Disney acting maturely and responsibly decided to outsource its business to Oriental Land (OL) that fully owned the business and operated it efficiently understanding Japanese socio-cultural needs and requirements. The success of the Tokyo theme park is mainly attributed to the management style, leadership style, localized business philosophies, and understanding and addressing the priorities, preferences and interests of local population. A key point to be borne in mind is that rather than adopting a monopolistic approach and dominating Tokyo’s industry, Walt Disney generated opportunities for the Japanese company and created jobs which proved to be a wise decision for consistent business growth and success .
Disney’s Potential to Succeed in Shanghai
As
per the reports, Disney’s proposal to Chinese government for establishing theme
parks and entertainment network in Shanghai seems to yield anticipated success
due to the fact that the company has learnt a rich lesson from its Hong Kong
experience. The proposal for joint venturing with the Chinese government with
43 percent stakes of Disney and 57 percent with the Chinese government seems to
be promising as the jointly owned business is bound to develop, function and
perform under the stringent norms of Chinese with no room for unnecessary
American influence into the Chinese socio-cultural environment. This simply
implies that that the jointly owned enterprise would not only adhere to the
Chinese socio-cultural environment but will ensure that the needs, interests
and preferences of people are aptly addressed which is a sure sign of success
and growth in the communist nation (Zhang, 2009).
Reflection
of varied Chinese socio-cultural components into the theme parks and shopping
malls by way of food, language, games, and other entertainment activities would
certainly boost visitor traffic by attracting millions of domestic and
international guests and ensure consistent profitability for the business. Additionally,
substantial reduction in labor costs, service costs and resource costs could be
realized by the joint venture which is a boon for the company. The partnership between Disney and Chinese
government will probe to be highly rewarding due to the fact that higher
Chinese stake in the business will insure strong control and management of
business compelling the business to adapt practices and strategies according to
Chinese culture and social norms. Thus, the probability of failure is
minimal.
Conclusion
Based
on the discussion and analysis of Disney business expansion plans in Asia it
can be concluded that the business has tremendous scope and opportunities in
the continent due to the increasing craze and interest of younger generation in
entertainment and recreation activities. Additionally, rise of globalization
and consistent exposure to western socio-cultural environment through business
has proved a boon for western businesses consequently generating tremendous business
opportunities across industries in Asia. Adaptability to socio-cultural
environment remains a key determining factor of success and growth for Disney.
This report strongly emphasizes and recommends on joint venture model of
business which are bound to prove consistently advantageous for the company due
to its ability to aptly understand the local socio-culture and attract domestic
crowd.
