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Example research essay topic: Walt Disney Company Theme Park - 1,641 words

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... ney Company had to abide by the laws of France. An issue which the French were against was the installation of sprinklers in the hotels (McIntyre, 1990 b). Such an installation is not mandated by French law. The French believe the sprinklers are not necessary since .".. their hotels are built with superior construction, building materials and compartmentalization, and are equipped with smoke alarms that would quickly summon firefighters" (McIntyre, 1990 b, p. 143). 2 Thus, since Euro Disneyland was a French Company, the French did not believe they needed to install sprinklers.

The Walt Disney Company believed in such sprinkler installation and embarked on an education program to explain why they wanted the French contractors to install the sprinkler system. Once the Walt Disney Company presented a film on fires depicting how quickly flames can spread, explained about potential delays in firefighters arriving at a hotel, and discussed the difficulties in finding the location of the fire, the French approved the installation of the sprinklers. These are only two examples of many situations which were discussed by the Walt Disney Company and the French during their risk management meetings. In a wrap-up meeting of risk management issues in the construction of Euro Disneyland Stephen M. Wilder, director of corporate risk management at The Walt Disney Company believed, "The result of compromise and learning is a program that is far superior to what an American company or a French company would have done in isolation" (McIntyre, 1990 a, p. 141). Opening Day On April, 12, 1992, despite a few protests, the Walt Disney Company's fourth theme park, Euro Disneyland opened its doors to the public with essentially the same attractions as in the other Disney theme parks in California, Florida, and Japan (Introducing Walt d'Isigny, 1992).

Euro Disneyland executives hoped to attract 11 million guests a year, more than twice the number that visit the Eiffel Tower (Introducing Walt d'Isigny, 1992). Half of the guests were excepted to be French. Euro Disneyland was confident that with its superior investment, professionalism and French government assistance, it would succeed. If it did not, it would most likely be the fault of the weather and not of any French cultural chauvinism (Introducing Walt d'Isigny, 1992).

Unfortunately, the dream of succeeding did not become a reality and eventually Euro Disneyland brought in new management and made other changes in order to save Euro Disneyland (Gumbel & Turner, 1994). THE PROBLEMS Although Disney believed they had hit a "gold mine" by developing their fourth theme park just outside of Paris, in time they would learn this was not the case. Euro Disneyland's target of 11 million guests in the first year was met, but revenues did not roll in as had been planned. In fact, Euro Disneyland reported a $ 905 million loss for the fiscal year that ended in September 30, 1993 (Stern gold, 1994), and by December 31, 1993, Euro Disneyland had amassed cumulative loss of 6. 04 billion French francs or 1. 03 billion US dollars (Gumbel & Turner, 1994).

It should be noted, Euro Disneyland's first chairman, Robert Fitzpatrick, an American, won kudos for setting up the park, yet he stumbled over day-to-day operations. Fitzpatrick spoke French, knew Europe well and his wife was French. But he seemed to be .".. caught in the middle and quickly came to be regarded with suspicion by some on both sides" (Gumbel & Turner, 1994, A 12).

Numerous times he attempted to warn Disney executives that France should not be approached as if it were Florida, but his warnings were ignored. He was replaced in 1993 by Frenchman Philippe Bourguignon. The all-American enterprise suddenly had raced to put on a European face. ourguignon was responsible to .".. ensure the park goes native without losing the American feel that is its main draw" (Sasseen, 1993, p. 26). Although there was a change in the head of Euro Disneyland there are problems which it faced with the old management and still faces problems with the new management.

Among these problems are included their optimistic assumptions, staffing and training, cultural issues, interest rates, marketing, communication, and convention business. Optimistic Assumptions The Walt Disney Company, overly ambitious in their venture, made several strategic and financial miscalculations. In addition it gambled, incorrectly, that the 1980 's .".. boom in real estate would continue, letting it sell off assets (discussed below) and pay down the debt quickly" (Gumbel & Turner, 1994, p.

A 1). Further, it relied too heavily on debt when the interest rates were beginning to increase. Another costly assumption was that Disney believed it could change certain European habits. Budget - Breakers The Walt Disney Company wanted to build a state of the art, as near to perfect as possible, theme park.

In order to meet this goal the company frequently attempted to build and rebuild, with no regard for the "bottom-line" construction cost. Michael Eisner, the Chief Executive Officer of the Walt Disney Company, ordered several last-minute construction changes, known as budget-breakers, which further increased Euro Disneyland's debt (Gumbel & Turner, 1994). For example, one cold day before Euro Disneyland opened Eisner warmed himself by a Paris hotel lobby fireplace and ordered more than a dozen wood-burning fireplaces for Euro Disneyland despite the added construction cost and upkeep (Solomon, 1994). Another example of an Eisner budget-breaker was his decision to remove two steel staircases from Euro Disneyland's Discovery land.

He wanted them removed because they blocked a view of the Star Tours ride. It was estimated the cost to remove the staircases was approximately $ 300, 000 (Gumbel & Turner, 1994). European Recession Euro Disneyland executives and advisors failed to see the signs of the approaching European recession. "Between the glamour and the pressure of opening and the intensity of the project itself, we (the executives) didn't realize a major recession was coming" (Gumbel & Turner, 1994, p. A 12). As the recession began to develop the French real-estate market tumbled (discussed below), thus, destroying Euro Disneyland's hopes of selling their assets and receiving revenues. In addition, the recession caused French and European disposable incomes to shrink, causing families to think twice about taking an expensive trip to Euro Disneyland (France: Disney gears up, 1992).

Furthermore, Euro Disneyland did not realize the magnitude of the impending recession and when given numerous opportunities to sign partners who would share the risk or buy the existing hotels, Disney refused. Euro Disneyland did not want to give up any of the potential revenues once the recession was over (Gumbel & Turner, 1994). Real Estate Market The Walt Disney Company executives involved in the development of Euro Disneyland were determined they would not repeat two mistakes which they had made in past ventures. One mistake was allowing other companies to build lucrative hotels surrounding their theme park, as happened at Walt Disney World in Orlando, Florida, where the Walt Disney Company owns only 14 % of all hotels.

The other mistake was in letting another company own a Disney theme park, as in Tokyo, Japan, where Disney just collects royalties from an immensely profitable attraction (Solomon, 1994). Thus, in France the Walt Disney Company bought far more land then it needed in order to eventually build 700, 000 square meters of office space, a 750, 000 square meter corporate park, 2, 500 individual homes, a 95, 000 square meter shopping mall, 2, 400 apartments and 3, 000 time share apartments (de Quillacq, 1994). Euro Disneyland planned to develop the land and then sell it to prospective buyers, making a large profit. In addition, this would allow Euro Disneyland stringent control over designing and building of future areas within the resort and then the ability to sell off the completed commercial properties in due course and at a large profit.

In fact, Disney budgeted for real estate to account for 22 % of revenues in 1992, 32 % of revenues in 1993, 40 % of revenues in 1994, and 45 % in 1995 (de Quillacq, 1994). Euro Disneyland executives must have known rather rapidly that the financing structure for the resort was in trouble. Unfortunately, this revenue generating plan never really "got off the ground" due to the collapse of the real-estate market which, in turn, caused the demise of the planned development around the theme park (Turner, 1993, December; de Quillacq, 1994). Thus, Euro Disneyland did not receive revenue from property development as had been anticipated.

Operational Errors There were numerous errors made regarding the overall operation of Euro Disneyland. For example, from its American experience the Walt Disney Company thought Monday would be the light day for guests and Friday a heavy one, and allocated staff accordingly. In reality the reverse was the case. In fact to this day, the company still struggles to find the right level of staffing at a theme park where .".. the number of visitors per day in the high season can be 10 times the number in the low season" (Gumbel & Turner, 1994, p. A 12).

Furthermore, to add to the operation problem is the difference in employee acceptance of conditions of employment. In Orlando Cast Members are accustomed to and have learned to accept being sent home if they are not needed. However, in Paris, French Cast Members feel extremely irritated by and have a very difficult time accepting the inflexible scheduling (Gumbel & Turner, 1994). Another example of operational assumptions at Euro Disneyland involved the bus drivers.

The Walt Disney Company built the French bus parking spaces much too small. Bus drivers were unhappy as they had a very difficult time fitting their busses into their designated spots. In addition, the Walt Disney Company provided only 50 restroom facilities for bus drivers and on peak days there would be 2, 000 drivers (Gumbel & Turner, 1994). A final example of...


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