Euro Disney
Key Issues
First key issue Euro Disney faces is huge “Debt” ($2,862 million), which affects the entire organization because if the situation doesn’t change, long-term existence of the company is not secure. Euro Disney (started in 1992), because of highly capital intensive nature of the project had debt each year and even by the end of 2004 had serious financial difficulties. In 2004, company’s working capital was $77 billion showing that it had trouble meeting its financial obligations. Company would need to borrow additional $33 million (per cash flow statement, 2004) in order to keep up with $98 million a year in interest payments. Company’s debt to equity ratio of 765% shows that the company is highly leveraged, making it a very risky investment. In 2004, Euro Disney reported $145.2 million loss. This happened because of following factors: failure to modify Disney’s standard theme park program to better fit the unique needs of European customers, lack of local management, overestimated number of visitors, and overpriced tickets.
Disney Euro misjudged budget for building the park that caused them to invest more capital than planned and they did not identify real demands of Europeans and so used more capital converting their original (wrong) product to a product that was more appealing to Europeans (i.e. they removed high-end restaurants and replaced them with fast food centers in order to smooth out the demand between the two).
At Euro Disney, decisions were often made by people who were far away from the day-to-day operations of the park, and who did not have a strong understanding of European culture and the market. This made it harder to accurately understand European demands, as well as reduced their ability to respond effectively to concerns by European shareholders.
1st Solution: Focus on reducing debt – cut costs
Set quantifiable goals to cut costs by implementing job cuts, removing...
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