business

Answer 1

In the article “Disney: Losing Magic in the Middle Kingdom” by Ali Farhoomand, Disney’s expansion into international markets lead to more challenges than success in efforts to create a fantasy land for the world to experience. Hong Kong Disneyland had faced negative media attention since its construction began and management made efforts to remediate criticisms and back lashes. However, the actions taken my management did little to lure a large crowd and Hong Kong Disneyland was near bankruptcy.

Before Hong Kong Disneyland had its grand opening, there was a rehearsal in which there were 30,000 people at maximum capacity. The results of this rehearsal were frustrated attendees due to a combination of factors including long lines and getting food. Despite urges from the government for Disney to reevaluate the park’s maximum capacity, Disney had only addressed the issue by adding more restaurant seats and food carts. Infamous for their impatience and high paced lifestyle, locals from Hong Kong are less willing to wait for hours for an attraction, thus Disneyland should have reviewed their maximum capacity more thoroughly and planned more efficiently on crowd control. Due to Disney’s unwillingness to review its maximum capacity and crowd control strategy, overcrowding continued to be a constant complaint from visitors thus becoming one of the many factors building in Disney’s negative reputation and declining attendance.

In less than one month into its grand opening, Hong Kong Disneyland had complaints from employees regarding unfair and inhumane treatment. Disney’s managing director, Don Robinson, responded to the complaints by stating, “long working hours were not harmful to the health of staff.” This statement from Disney illustrated a defensive stance in regards to its treatments of employees rather than making efforts to ensure employees were treated humanely by providing the basic needs for their safety and well-being. Because Disney chose to ignore the demands from its employees, Disney continued to face more criticism, negative press and face protest from former employees.

In addition to overcrowding, Hong Kong Disneyland tickets were expensive for locals, who often expect “value for money.”  Disney made efforts to discount their tickets for local residents, but had failed to bring in a crowd. Disney made another effort by offering a six-month valid ticket for non-peak days and increased the commission rate of unhappy agents from $1.3 to $3.8 per ticket. Although agents were happier with a more generous rate, the six-month valid tickets only added to Disney’s problems during the Golden Week of the Chinese New Year. Disney failed to properly estimate the large number of guests from the mainland and failed to listen to local management to use date-specific tickets. The large influx of people from the mainland had reached Hong Kong Disneyland’s maximum capacity in a short time that Disney had to close its gates. By closing the gates to valid ticket holders only resulted in more unsatisfied visitors, continued negative press and criticism, and continued low attendance rates after the New Year. Disney’s mistake in underestimating the number of visitors and locking its gate indicates management’s inability to make projection, take advice from local sources, and remediate its mistakes properly. After the Chinese New Year fiasco, Hong Kong Disneyland continued to experience low attendance rates and again, made another effort to lure back the crowd by offering a summer pass. Although the attendance rate increased, Hong Kong Disneyland still faced criticisms of overcrowding.

Overcrowding has been one of the main issues for Hong Kong Disneyland since its rehearsal prior to grand opening. However, Hong Kong Disneyland has yet to take action to review its maximum capacity and make strategic efforts on crowd control. Disney has made many attempts to lure crowds but visitors leave frustrated with being overcrowded by waiting in long lines for attractions and getting food. Instead of listening and adjusting to the local visitors and advisors, Disney’s management team from the US were confident that their strategy, but in the end only caused declining attendance and a lack of Disney fanatics. Thus, Disney’s excessive control from the US has proven less efficient and its disregard to local advisories led to much criticism and negative press. With many resignations and replacements in management, it is imperative for the new team to develop a new strategy and cohesive working team for Hong Kong Disneyland to overcome its hurdles and satisfy its current and future visitors

Answer 2

The following remedial actions were taken by management to turnaround the park:

Year 1

The park offered a 2-day ticket for the price of one for a 4 month period.

The park dedicated all days in the golden weeks as special days, i.e. date-specific tickets only.

The park introduced a summer pass.

The park offered sales incentive programs to tour agents during the summer.

Year 2

Expanded ticket distribution network to more than 60 agents.

Fostered stronger links with agents for better traffic forecasting.

The park launched annual passes.

The park started offering an introductory tour to student groups.

The park lowered prices for annual prices and half-day tour groups.

The park launched its first adult-oriented Halloween attraction

Year 3

The park looked to expand and increase focus on late teens and adults with two new adult-oriented rides.

These remedial actions show that park management did not learn from their initial mistakes. In the first two years of the campaign to turnaround the park, management focused on price cutting tactics. This, however, did not address the problems the park was facing.

The first mistake the park made was not understanding the local culture in Hong Kong. Perhaps management thought that because Disney movies and cartoons were regularly shown on TV and in the movie theaters, the population would be very receptive to a Disney park that replicated their successful parks in the US. This had worked in Japan and perhaps they thought that since both Japan and Hong Kong are in Asia, the results would be the same.

The real reasons why the park was suffering poor attendance was not because the tickets were too expensive (which is why simply cutting ticket prices or offering ticket specials was not an effective remedial action).  Hong Kong has a very different culture and looking at it in hindsight, it is easy to see why the original strategy failed. Unlike Japan, most women continued to work after marrying and having children. Furthermore, Hong Kong citizens lead very hectic lives and children spend their time outside of school taking extra classes, learning languages, learning to play music, but not enjoying leisure time. Additionally, a culture that considers 10 minutes to be a long wait in line is not likely to accept the 1-2 hour waiting times that are common for Disney rides.

Park management also failed to understand the second main target demographic, mainland China citizens. These tourists came to Hong Kong to shop for fine quality, expensive products that they could not purchase at home. They also typically only visited the city for a few days. Knowing this, it is not surprising that they were not thrilled about the idea of spending a large amount of that little time at a theme park that was very crowded and where most of the goods available for those who wished to shop for expensive quality products would be cheaply made goods produced in their homeland.

Park management also failed to establish a relationship with the local population. Since the government owned a majority stake in the park, the citizens of the city should have been regarded as important stakeholders. The destruction of coastlines, coral, sea walls and fish spawning grounds through the reclamation of land certainly got the park off on the wrong foot with this key group of stakeholders.

Park management recognized the importance of adapting to Chinese culture, but they did so very naively. Instead of empowering local managers who understood the culture to localize the park, they figured that consulting a feng shui master and making some minor adaptations to the color of hats and the cuisine offered would be sufficient.

When park management failed miserably at meeting their targets for attendance, they should have looked at these as the causes of their poor performance. They should have asked themselves how lowering ticket prices and offering promotions would address problems like poor relations with the local population and a poorly localized concept for the local culture. If they had done so, they would have realized that the tactics they used in years 1 and 2 of the turnaround would not solve their problems. Instead they should have focused on community outreach and building relationships with the locals who were expected to account for 40% of the park’s visitors. They also should have understood the relationship with ticketing agents and realized that their practices were not in line with what was customary. They also should have thought of new ways to entertain and deliver value to visitors. For example, they could have considered ways to offer “edutainment” to visitors while they stood in line, perhaps with monitors that showed programming that educated visitors about American culture and Disney’s role in it.

Answer 3

Farhoomand’s Harvard Business case, Disney: Losing Magic in the Middle Kingdom, illustrated a struggling entertainment amusement park located away from the heart of Hong Kong.  A large contributing factor is the lackluster and disappointing numbers from their first year of opening.  Hong Kong Disneyland faced criticisms from environmentalist, mainland residents and the government, yet they did little to curb the ever-growing backlash.  It was only in their second year did they begin to address their growing list of problems.  The three main problems they addressed dealt with tour operators, the Chinese culture and most of all the financial cost of the theme park to their visitors.

The first major area of concern within Hong Kong Disneyland dealt with their indifference and ignorance towards China’s tour operators.  In the first year they only choose to align themselves with six tour distributors, which caused the lack of acknowledgement from visitors.  In their second year Disney expanded to more than 60 tourist agents and strengthened their ties with them (providing deeply discounted tickets to the agents themselves) to improve sales as well as marketing.  Additionally, Hong Kong Disney partnered with local airlines to promote vacation packages which included stays and visits to the theme park at a promotional price.  This was further pushed through the introduction of half day tour group’s tickets to fit the tight itineraries of mainland tourists. 

The combination of these three strategies allowed Hong Kong Disney to expand their customer base and increase their visitors because they went through traditional Chinese outlets.  Not all residents in this country have access to technology and the internet so this allows Hong Kong Disney to reach everyone at the simplest level, as it is still fairly common for Chinese visitors to utilize travel agents (even in this day and age due to forces of habit, trust and feasibility).  Additionally, providing incentives to the travel agents institutes a win-win strategy for both parties as Hong Kong Disney attains more visibility and the travel agents become fairly compensated for their increase in advertisement.  Most importantly, their strongest point was to partner with airlines.  As Hong Kong is located off of China, a flight is needed to reach the small island.  By creating promotions with airlines, Hong Kong Disney, is able to capture customers as they are deciding their entire vacation plans.  Additionally, the introduction of the half-day tour package allows the customer to fit Hong Kong Disney into their plans without having to sacrifice the traditional shopping plans and trips to Macau.

The second problem deals with Hong Kong Disneyland’s lack of concern to the Chinese culture. As China is heavily regulated by the government, a majority of the residents have no idea what Disney is and more importantly there is no association to them in the Chinese culture.  In the beginning, the only observance of Chinese culture and localization included feng shui-ing the park, including the Chinese lucky number “8” into their development plans, and the removal of green hats due to signs of infidelity.  All prior efforts were based upon suspicions and superstitions that many Chinese people have but are not related to encouraging or deterring visitors.  In an effort to correct this, in their second year Hong Kong Disney; provided an increase in Chinese translations, introduction of day tour guides to teach visitors about the Disney culture as well as creating a 10 min crash course exhibit in Disney history at the front of the park.  These allowed those unaware to Disney to create a small emotional connection to Disney culture, but this was only a small step in the right direction.  Instead of trying to force the Disney culture on the Chinese people Hong Kong Disney should have tried more to inject Chinese traditions into their theme park.  Their 2008 attempt for Chinese New Years provides a successful example, come only three years too late.  The best action would have been to introduce Chinese familiarities into the park (early on) which would have garnered more emotional attachment and an increase in visitors, something Hong Kong Disney failed at doing.  The Disney crash courses in history and culture provided little significance and the increase in Chinese subtitles should have been a no brainer when the park opened.  

The final problem deals with Hong Kong Disneyland’s cost of entry into the amusement park.  The country itself has a majority of their population living below the median income line, thus for Hong Kong Disney to try to charge a premium price for an “American” theme park was not a smart decision.  The introduction of their “annual pass” tried to capture those who wanted savings (however for a country that rarely vacations and is more focused on education it does not make sense that they would visit a theme park for “fun” more than once a year).  In addition, the park attempted to slash the prices for teenagers and young adults to increase their market share in that age group, however they underestimated the thought that most of that age group is focused on trying to get into college and making monies (not spending it).  For instance, Ocean Park touts their park as both educational and inexpensive.  Their focus on two important aspects of the Chinese culture allows them to steal away the customer base Hong Kong Disney has been trying to attain.

Overall the remedial actions taken by Hong Kong Disney has slowly pushed them towards the correct path but has not substantially increased their visitor count.  The main actions taken dealt with tour operators, the Chinese culture and most of all the financial cost of the theme park to their visitors.  The actions taken by Hong Kong Disney are about three years too late and if anything only maintained their customers instead of increasing them.