Euro Disney - Case Study

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1 Introduction – Euro Disney's Plans and Reality

When the International Offer of Shares for the Euro Disneyland S.C.A. (in the following called Euro Disney) was published in October 1989 the plans for this new enterprise of the Walt Disney group were ambiguous. The financial plans for the first year of operation projected total revenues of FF 5,482 million and a net profit after taxation of FF 204 million. For the following years the development should be even more impressive. At that time the plans were seen as a consequent application of the concepts of the existing Disney-designed theme parks.[1]

Just a short time after Euro Disney was opened in time on April 1992 it was obvious that reality would not meet the plans. In November 1992 the financial reports for the year ended 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 faced 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) forecasted a turnover of FF 6,801 Mio and a profit of FF 359 Mio.

The scope of this assignment is to find out if these financial results were an indication that principal factors in the planning process were wrong. For this the author will compare the plans and actual results for Euro Disney's first two years, analyse major premises Disney set when planning for Euro Disney and analyse the steps of the planning process. The base for this analysis will be mainly the profit and loss accounts.

2 Theory of the Planning Process

Normally there are several ways to reach an organisations goal. To determine the way to this goal which is for most organisations – except non-profit ones – the maximisation of profit, a plan is needed. Planning means to decide for one of the possible ways given.

The process of planning takes three steps:

1. Collection of information

2. Development of several alternative plans

3. Decision for one of these plans

In the first step it is important to gather as much information as possible to provide the best basis to decide for the plan that promises best results. Because of the future nature of planning there will not be complete information. This requires some estimations. Therefore all plans include more or less elements of uncertainty and risk.[2] Since planning is essentially about the future, the results and information from the past usually are only relevant as the basis from which to forecast.

On the basis of the information available and the projections of possible future developments it is possible to retrieve alternative plans for different scenarios. In spite of the uncertainty of the future, planning offers the means to evaluate alternative proposals. This should reduce uncertainty and risk.[3]

Planning is involved in various kinds of decisions, but especially important for major decisions concerning the overall future strategy and large investments. Such issues are very risky since they require a high spending of capital and have an long-term influence on the future development of the organisation. One example is the foundation and setting-up of a new company.

3 Comparison of Euro Disney's Plans and actual Results

A direct comparison between the plans for Euro Disney as given in the Offer of Shares and the results presented in the financial reports is not possible for the following reasons:

· The Offer of Shares refers to a complete year after the opening of the park, that means from April 1st to March 30th of the following year. The financial reports refer to the financial year beginning October 1st and ending September 30th of the following year.

· The details given in the Offer of Shares and in the financial reports refer to different...
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