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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.

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            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 

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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 .

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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.