16 Pages Posted: 21 Oct 2008
This case concerns the troubles that Euro Disney experienced from the start. Euro Disney claimed that the major cause of its poor financial performance was the European recession and the strong French franc. The timing of the park's opening could not have been more inopportune. If the recession had been the only cause of Euro Disney's problems, the financial restructuring would only need to carry the park forward to better economic times. Only when Europeans began spending freely again would investors learn the answers to some uncomfortable questions: Was the whole idea of Euro Disney misconceived? Were there other fundamental cultural problems that could inhibit the park's success? Would Euro Disney fail to recover even though other European companies did? And, if so, why was the Disney theme-park concept successful in Japan and not in France?
EURO DISNEY OR EURO DISASTER?
In March 1994, the Walt Disney Company and Euro Disney S.C.A. announced a financial restructuring plan for Euro Disney that was meant to ensure the future viability of the European theme park. The park had been performing below expectations since its opening in April 1992. Plagued with heavy debt ($ 3.5 billion), image problems, foreign-exchange developments, and a deep European recession, the theme park had never achieved the level of success initially envisioned by Disney and the management of the theme park. In November 1993, worse news arrived when Euro Disney reported a loss of $ 900 million for the fiscal year ending September 30, 1993. The park was in serious trouble and faced a possible cash crisis early the following year.
Struggling to avert bankruptcy and possible closure, the park looked to the Walt Disney Company, which had a 49% stake in Euro Disney, for help. Disney's venture into the European market was the company's “first real financial disappointment” in an industry in which the company was viewed as the leader. Disney's other theme parks in the United States and Japan had been huge successes. What were the reasons for Disney's failure in Europe?
When Michael Eisner, chair and chief executive officer (CEO) of the Walt Disney Company, and Frank Wells, its president, came to Disney in 1984, they concentrated predominantly on expanding Disney's domestic market. They were able to revive a stagnating company, increasing annual revenues from $ 1.5 billion in 1984, to $ 8.5 billion a decade later. During the same period, the value of Disney's stock increased 1,500%. The challenge in the early 1990s was to expand the business internationally. Disney realized that foreign markets represented the highest potential for
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Keywords: capital structure, international case, diversity case, 10K form, diversity, international, cross-cultural behavior
Suggested Citation: Suggested Citation
Grayson, Leslie and Sheikholeslami, Golnar and Amano, Kunihiko and Falck, Thomas and Kleinclaus, Virginia, Euro Disney or Euro Disaster?. Darden Case No. UVA-G-0477. Available at SSRN: https://ssrn.com/abstract=909929
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