Euro Disneyland Case Study Solution

 

EURO DISNEYLAND CASE ANALYSIS

2

INTRODUCTION

Euro Disney, nowadays Disneyland Paris, is a holiday and recreation resort located in Mane-la-Valle, a new town close to Paris (Euro Disney, 2009). When the International offer of shares for the Euro Disneyland was issued in October 1989 the strategies for this new enterprise of the Walt Disney group were very optimistic. The financial plans for the first year of operation estimated total revenues of FF 5,482 million and a net profit after tax of FF 204 million. For the subsequent years the development was projected to be even more impressive. Just within a short time after Euro Disney was unwrapped in April 1992, it was noticeable that reality would not encounter the plans. In November 1992, the financial reports for the year ended in 30 September 1992 were published which included the first 172 opening days of Disneyland Paris. There the management had to announce a loss of FF 188 million. The second year was even worse. Although Euro Disney nearly met plans for guest attendance, they confronted a loss of FF 5,337 million whereas total turnover was FF 5,725 million. Plans for the second year of operation (1 April 1993 to 31 March 1994) predicted a turnover of FF 6,801 million and a profit of FF 359 million. (Recklies, n.d.)

Euro Disney started to have problems early, on 1980’s problems with negotiation and construction, on the 1990’s with French figures started to voice

against the park, with phrases

like “Cultural Chernobyl”

 (Euro Disney, 2009) .Euro Disney also had problems in the beginning of its operations, since the first day, problems related to cultural issues and operational issues oc

curred massively, affecting directly Euro Disney’s performance and attendance.

Objective

The main objective of this report is to understand how Euro Disney had this initial failure. How it could had a better initial experience, and to provide recommendations to students and

business men don’t committee the same errors.

Hofstede's cultural dimensions theory

Hofstede's cultural dimensions theory is a framework for cross-cultural communication, developed by Geert Hofstede. It describes the effects of a society's culture on the values of its members, and how these values relate to behavior, using a structure derived from factor analysis. The theory has been widely used in several fields as a paradigm for research, particularly in cross-cultural psychology, international management, and cross-cultural communication. (Hofstede's cultural dimensions theory, n.d.)

Dimensions of national cultures

Power distance index

Individualism vs. collectivism

Uncertainty avoidance index

Masculinity vs. femininity

Long-term orientation vs. short term orientation

Essay on Euro Disneyland Case Study

2226 WordsJun 14th, 20129 Pages

Euro Disneyland Case Study

1. INTRODUCTION: The primary objective of this case analysis is to evaluate the proposed Euro Disneyland (EDL) project by applying Capital Budgeting techniques such as Net Present Value, analyze financial and economic risks, measure exposures of Euro Disneyland (EDL) such as economic exposure, transaction exposure and translation exposure, and develop strategies to mitigate these exposures. The case findings reveal that Disney should invest in Euro Disneyland taking into account the benefits arising out of French government subsidies and …
2. BACKGROUND: In 1984, Disney management decided to develop a European theme park On March 24, 1987, the Walt Disney Company entered into the “Master Agreement” with the…show more content…

The operating income at all levels of attendance lies in the range of FF 1.4-FF2.1 billion; the incentives to Disney are 30% of total operating income. The resulting Net Income for lowest attendance lies in the range of FF 116.77 million to FF 241.82 million. The resulting Net Income for highest attendance lies in the range of FF 333.06 million to FF 460.49 million.The resulting Net Income for lowest attendance lies in the range of FF 249.92 million to FF 351.16 million.
3.1.3 NPV calculation for Euro Disneyland as a standalone project:
FCFE or Free Cash Flow to equity was calculated to Net Income using cost of capital as 15%. Since the majority of the cost of capital is contributed by $1500 million equity, free cash flow to equity was calculated to calculate NPV. The initial cash outlay is $1500 million. The range of NPV of Euro Disney land as a standalone project varies from $(932.42), ($760.18) and ($587.95) for the lowest, average and highest number of visitors visiting Euro Disney land. The negative NPV’s are due to low operating margins. The low operating margins are a result of higher cost associated with infrastructure and high operating cost. (See Exhibit…)

3.1.4 NPV calculation for Disney:
3.2 Should Disney go for this project based on NPV
Although the NPV are negative, the negative NPV’s are due to low operating margins. The low operating margins

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