School of Thoughts

1. The design school The design school is the most influential view of the strategy-formation process. It helps in proposing a model for strategy making which seeks to attain a match, or fit, between internal capabilities and external possibilities. In Disneys concept, there are two-stage approaches, internal capabilities (Strengths, weaknesses) and external possibilities (opportunities and threats). From the SWOT model, distinctive competences and key success factors can be derive to produce strategy for Disney. Moreover, SWOT will also help in the evaluation process of the choice of strategy which Disney has adopted. Furthermore, managerial values and social responsibility of the company will contribute to the creation of the best fit strategy and after the evaluation process, one can implement it. After the Success of Disney Tokyo the management of Disney saw an opportunity in the European market because of the huge market potential and demand there for their products. The decision seemed to be a positive move and was all supported by the Government of France. The major thread Disney had to face was that the French intellectuals had long shown antagonism towards American popular culture. To deal with this situation Euro Disney came up with few feasible strategies such as the park design incorporated adoptions of French and European culture. Although Disneys move to enter European market was a positive move but few managerial mistakes affected the company widely in the start of business and the company was not able to achieve the expected target and made a loss of FF 1.7 billion in the first year. There were a few success factors which contributed to the success of Disney. First, as the pioneer of theme parks, it has developed a strong brand name and good reputation. Paris was a popular attraction with great traffic and infrastructure too. The sophisticated management and merchandising techniques which developed over many years also benefited Disney a lot. The highly systematized operations management and human resource management helped Disney to get great control of the environment and select and train the best employees. In addition, Europe has been a strong market for Disneys products such as toys, books and comics, Disney generated lots of profits from that. There were 2 million European visitors visit Disney land every year. One of the reasons that Disney could not make profit was the high admission prices and hotel rates. People were finding Disney Florida a better and cheap place for holidays than
1

Euro Disney. To deal with this issue Euro Disney should decrease their hotel rates and admission prices which can also be backed by their strong financial packages. Moreover, they should offer different sort of packages to their loyal and potential customers which would help in retaining customers and result in repeat purchase. To achieve attendance target of 11 million, the development plan of phase 1A and 2 should be implemented as soon as possible. Strong marketing campaign should also be launched in order to boost effectiveness and create attention in the European market. Furthermore, as ADL suggested, a complete visit to the magic kingdom theme park would require more than one full day, which means visitors are likely to extend their stay. Disney should provide addition incentives for these customers in order to increase the penetration rate and satisfaction level. This can be done by improving the quality and capacity of Disneys hotel. If customers were satisfy about Disneys services and products, the level of Disneys brand name and quality of experience would also be enhanced. 2. The positioning school The positioning school has a limited number of basic strategies for example product differentiation and focus market scope (generic). The positioning school is to create a set of analytical tools dedicated to matching the right strategy to the conditions at hand. Tokyo Disney land was the major departure of the Walt Disney Company into the international market. The success of Disney was clear evidence to Disneys top management of the international potential of Disneys theme parks. Europe has always been a strong market for Disneys products and generated about one quarter of the revenue from Disney licensed consumer products. Paris was a major tourist
attraction which offers great market potential for Disneyland. It allows Euro Disney to achieve high capacity utilization, even with low market penetration rates then Disney California and Florida theme parks.

According to Porter, an industry is like a club in which firms gain admittance by overcoming certain barriers to entry such as economies of scale, basic capital requirements and customer loyalty to established brands. High barriers encourage a cosy club in which competition is friendly; low barriers lead to a highly competitive group in which little can be taken for granted. In Disneys case, though there were a few theme parks trying to threaten Disneys market position, Disney was still the market leader as the competitors were financial disasters. Apart from the unfavourable climate, French intellectual had a hostile attitude towards American culture since it is supported by wide spread nationalistic sentiment that saw the French language and French culture is treaded by the global hegemony. French media
2

intelligentsia even viewed the park a horrifying step towards world homogenization. As a result, euro Disney quickly became a focal point for Anti-Americanism fuelled by multiple issues, such as farmers protesting US farm policy. French cultures differ greatly from the Japanese; it has been the most independent European powers in terms of its independent foreign policy and unwillingness to accept American leadership and world affairs. There were very few large theme parks to directly compete with euro Disneyland. Apart from this, the major events attracting large number of international visitors were Munich Briefest, the Pamplona bull running festival, Edinburgh culture festival, and Dutch Tulip festival, potential customers of euro Disneyland may shift towards them. Moreover, European cities such as London, Paris, Rome, Prague, Barcelona and others offered richness variety of culture. Every organization customers wish to get prices down with high quality, Euro Disney offered high quality products but with high prices. This did not help the cause of Euro Disney. Moreover, Europeans found Disneyland Florida a more attracting and cheaper place to visit during winter; they prefer to go on a two weeks of holiday to Florida then to come to EuroDisney for five days which costs more. Furthermore, the hotel rates were higher which affected the buying power of the customer; fewer visitors were staying in Disney theme hotels. Hotel occupancy rates were below 50% in contrast to the 60% figure projected Euro Disney had a huge support from the suppliers which helped in the construction and positioning of the park. Disney was incorporated with Euro Disney SCA and had an agreement with the SNCF (the French National railway Company) to provide TGV (the French high speed train) service to Euro Disney Land beginning in June 1994.The agreement provided motorway links to Paris, Strasbourg and two international airports serving Paris In addition, the French Government also supported euro Disney with offering them different incentive such as choosing a suitable location for the park. According to Hamel, a strategy cant be derived from analytical technology. The positioning school originally saw strategy formation as a process that consists of finding the position that can best withstand existing and potential competition. However, focusing on competition may narrow vision and creativity. For Disneys case, since there isnt any direct competitor who can threaten its position, and there was a great potential in the European market, it should lower the admission fees and develop new products in order to attract new customers. 3. The Power School Power relations surround organizations, they can also infuse them. Two branches can be derived from this school, the micro power regarding legitimate power within an organization and the macro power; the use of power by the organization. A strategy of a company is decided after negotiations between the power holders within in the company
3

and or between the company and its stake holders. According to Bolman and Deal, scarce resources and enduring differences give conflict a central role in organizational dynamics and make power the most important resource. In addition, goals and decisions emerge from bargaining, negotiation and jockeying for position among different stakeholders. Macro power reflects the interdependence between an organization and its environment; it is useful in analysing Disneys operation. Disney enjoyed the sophisticated infrastructure and economic resources of the city Paris, its success can be traced to the control of the environment to create a unique experience for visitors. It has also hired the Standford Research institute to analyse the demographical and traffic patterns in the development of los Angeles Disneyland and acquired 160 acres of land in Anaheim ,California in 1953. In addition, Disney has to deal with suppliers, buyers, competitors, investment banks, government regulators and pressure groups which target at their activities. It had strong financial backing from the French government and entered into several agreements with suppliers. For instance, Euro Disney was given FF13 billion for restructuring form the creditors bank which helped them become firmer financial looking organization. However, this also left them with a total borrowing of FF 15.9 billion. On the other hand, Disney did not have direct competitors which would threaten its position as the market leader and Europe was a market with great potential and infrastructure. Strategy from a macro power perspective consists managing the demands of these actors and second selectively making use of these actors for the organizations benefit. According to Preffer and salanclk, organizations can adapt and change to fit environmental requirements or can attempt to alter the environment so that it fits their capabilities. In developing the Tokyo Disney land, only minor changes were made to build the park in an American way. It is believed more Japanese would be attracted to it due to their admiration of western culture. However, French media, intellectuals were hostile towards American culture and saw the park as a horrifying step towards world homogenization, therefore, the design of the park incorporated many adaptations of French and European culture. Increasing interconnectedness of organization will make interorganizational effects mediated more by regulation and political negotiation than by impersonal market forces. According to the Stakeholder Strategy Formulation Process stated by Freeman, in the stakeholder behaviour analysis, there are three categories of behaviour for any stakeholder group on every issues; actual or observed behaviour, cooperative potential behaviours that could be observed in the future that could help the organization to achieve its objectives; for instance, Disney had rename the park as Disneyland Paris to help alleviate ambiguity and reduce conflicts over park identity. Competitive behaviour, which could prevent or help to prevent the organization to achieve its goals. The remaining process would be to empathize with the stakeholders position and search for possible coalitions among several stakeholders. For Euro Disney, changing the rule is the result of such strategy-formulation process.

When Euro Disney announced to launch in France, they got huge support from the French government, and enjoyed the advantages of economy and infrastructure of the city Paris. Although there was some criticism of their recruiting policy and their idea of recruiting mix cultural employee was reviewed and later 70 % of the employees hired were French. Network, collective strategy and strategic resourcing are part of the contemporary vocabulary of strategic management. A firm like Disney negotiate through a network of relationship to come up with a collective strategy. According to Gulati, organizations do not operate in isolation, but in complex webs of interactions with other actors and organizations, including suppliers, competitors and customers. 4. The Culture school Organizational culture is often associated with collective cognition. It is the organizational mind. It is about the shared beliefs within an organization as well as tangible manifestations such as symbols and products. Culture has impacts on behaviour; Disney had a strict code of conduct listed in the employees handbook to ensure all staffs are behaving in a way that the organization desires in terms of appearance and dress. For example, no facial blemishes and long hair is approved and very limited jewellery is allowed. Behaviour on the job was governed by three major rules: First, we practice a friendly smile; Second, we use only friendly phrases; third, we are not stuffy. Disneys selection and training were closely modelled on Disneys US approach. Those measures to enhance the Euro Disney look however was criticised by the General confederation of Labour saying Disney was attacking on individual freedom. Moreover, in order to achieve the goal (a nationality mix that would match that of Euro Disneys customers, about 45% of whom were French.) In addition, in response to local pressure and greater availability of local applicants, 70% of employees were French. Disney is an organization with strong culture which according to Johnson,G those cultures are characterized by a set of taken for granted assumptions including the way people behave to each other and the language they use. Furthermore, Disney had a strong sense of ideology in which a strong set of beliefs were shared passionately by its members, which distinguish Disney from other competitors and create competitive advantages. It is vital for an organization to be clear about the environment and create different strategy responses in different countries in order to survive and stay competitive internationally. Disney has theme parks in all over the world, for instance, Los Angeles, Florida, Tokyo and Paris. In the development process of Euro Disney, several critical measures were executed in order to maintain the companys image and position in the hostile environment. French intellectuals had long shown antagonism towards American culture and were supported by wide spread nationalistic sentiment that saw French language and culture as treated by the global hegemony of the English language. Moreover, French was the most independent
5

Western European powers in terms of independent foreign policy; people were unwilling to accept American leadership and affairs. The situation was worsen with French Media intelligentsia viewed the park ( a cultural Chernobyl) a horrifying steps towards world homogenization. Due to the culture clash, Disney became a focal point of Anti-Americanism fuelled by multiple issues such as famers protest and was desperate to develop a feasible strategy. The organization decided to incorporate adoptions of French and European culture and many European heritages and French culture was emphasized. (Leonardo da Vinci and Gules Verne themes) The culture of France differs greatly from Japan. The Tokyo Disneyland had been conceived, built and operated on a wave of popular Japanese acclaim, since the Japanese admired the western culture; the park was built as a replica of USA Disney land. Strategy for a bigger firm involves striking a balance between the exploiting of existing resources and the development of new ones. Some organization may resist to strategic change, but it often lead them to a dead end. Therefore, it is important for managers to raise questions, challenge beliefs, suggest new ideas and undertake cultural audits. According to Bjorkman (1989), radical changes in strategy will conduct in 4 phrases. 1. Strategic drift (Radical changes took place during the development of Euro Disney and the company suffered from financial decline) 2. Unfreezing of current belief systems (While Disney was developing the Euro Disney land and had altered its strategies to fit the environment) 3. Experimentation and re-formulation ( Disney had great success in developing the Tokyo Disneyland, however, it was a different case in developing Euro Disney, mingling of new and old ideas occurred and confusion is usual) 4. Stabilization (Disney needs gradual feedback to increase employees commitment)

A firm should understand its core resources in order to sustain the benefits in face of competition. According to Barney (1991), there are 4 criteria: 1. Volubility (resources that are valuable to the company and can help to improve efficiency and effectiveness; for Disney, brand name and strong financial backing, support from government) 2. Rarity (the resource that is rare and in high demand; for Disney, sophisticated infrastructure in Paris and in other theme parks) 3. Inimitability (resources that are difficult to imitate; for Disney, operational experience and brand name)

4 .Sustainability [resources that competitors find it hard to get a substitute; for Disney, agreements with different companies such as Euro Disney SCA and express commuter rail network (RER)] Having a resource bundle that is different than ones industry competitors is a necessary but not sufficient condition for attaining sustainable competitive advantages. However, for Disney, it entered into several agreements and licenses for example with RER and SNCF which limited the competition and created hurdles and difficulties for existing and new competitor. Disney also enjoyed the favourable location of Paris with its sophisticated infrastructure and resources which is hard for competitors to imitate and allowed it to successfully attained sustainable competitive advantage. 5. The School of planning The motto for the school of planning is predict and prepare ( Ackoff, 1983:59). Swot is the most commonly used model in the school of design. For the case of the planning school, process has to be open ended and divergent so that imagination can flourish while implementation should be more close ended and convergent. (Mintzberg, et al, 2009) In Disneys case the planning started with highlighting the objectives. After the success of Tokyo Disney, the company decided to enter the European market with the objective of increasing their market share and to maintain their market position as the market leader in theme park sector. Furthermore, Disneys products were quite popular in European market and generated a large amount of profit for the company. Disney wanted to increase their revenue form that market because of the potential. (Mintzberg, et al, 2009) The master plan refers to the whole works-objectives, budgets, strategies, programs which are brought together into a system of operating plans. The plan comes in different stages first is the strategic plan, corporate development plan, divestment plan, diversification plan. Acquisition and merger plan, research and development plan, basic research plan, product R&D plan, Market and R&D plan, R&D and financial plan, operations plan, product plan, marketing plan, financial plan, administration plan. There are four hierarchies which play a critical role in a planning process, which include budgets, strategies, objectives and programmes. The objective hierarchies are broken down into small parts to enhance efficiency which are performed by specialized management teams. (Mintzberg, et al, 2009) Disney was in crisis by early 1994 and was facing mounting losses, rising debt, and doubts about companys capacity of covering its interest payment. There were rumours that the park might be forced to close. At this stage the company had to come up with a strong scenario planning. Scenario planning is useful to explore the future. The Scenario planning begins with highlighting and identifying the main issues and decision but to do so the mangers need to share a common view. (Mintzberg, et al, 2009) In Euro Disney case the common view was that how to make Euro Disney a profitable Organization. This whole
7

exercise can be seen as one creative activity which is carried out by the strategy planners of and organization. Euro Disney management came up with a restructuring strategy to get out of this crisis situation Disney Management had to come up with a strong restructuring plan which would help the company in achieving the highlighted objectives. The plan included the following points.
A $1.1 billion rights offering of which Disney agreed to take up 41% The provision by Disney of $225 million in lease financing at an interest rate of 1% The cancellation by Disney of $210 million in receivables from Euro Disneyland The agreement by Disney to waive royalties and management fees for five years The agreement that Disney would receive warrants for the purchase of 28 million Euro Disneyland shares and would receive a development fee of $225 million once the second phase of the development project was launched. Euro Disneylands lenders agreed to underwrite 51% of the Euro Disney rights offering, to forgive certain interest charges until September 2003, and to defer all principal payments for three years. In return, Euro Disneyland issued the lenders 10-year warrants for the purchase of up to 40 million shares of Euro Disneyland stock

The company also needed a strong strategic control. This would help in keeping the organization in their intended strategic track. Euro Disney should make spate departments for the strategic control process. The departments should include. (Mintzberg, et al, 2009) Strategic planning This department would keep on overhead check on all the activities being carried out in the Restructuring process. The headquarters of the company will be involved in this.

(Mintzberg, et al, 2009)

Financial Control This department will monitor the financial issues and will maintain control through smallterm budgeting. (Mintzberg, et al, 2009) Strategic control This includes hybrid style and will help in providing the strategically views on the process and also provide business unit autonomy and promotion of corporate interests but strategies must be ultimately approved by the headquarters. (Mintzberg, et al, 2009)

Furthermore, the planning should be carried out in a formalized way. A company should start with predicting the course of action and the environment to control it, this is also known as the Fallacy of predetermination. The Fallacy of detachment is next which talks about the managerial jobs while planning. The management needs to keep a strong check throughout the whole process to starting from planning to implementation and finally feedback. This is followed by the fallacy of formalization which takes into account that the innovation taken place will it be acceptable by the system and if the management accepts the new planning process. Last comes the grand fallacy of strategic planning which includes the analysis process and feedback if any changes are required in the planning. (Mintzberg, et al, 2009) 8