Success or Failure in Product Market Extensions

I would say that many current companies still make the same mistakes that we see in the Cleopatra case. Often management becomes so confident in their product and skill that they do not do the necessary research required to be reasonably certain that the extension into a new market will work.

The Cleopatra Case reminded me of another market extension failure that occurred during the early 90s. I have a family member that happened to be part of the team that opened Euro Disneyland outside of Paris. He has nothing positive to say about the process and from the beginning he was skeptical that the Disney magic could work in the European market like it does in the US and Japan. He was right.

Disney failed to acknowledge several key issues when it desired to enter into the European market. First, the company generalized that all of Europe has the same culture and social preferences. In fact, Europe is an incredibly diverse section of the world. Even though it is relatively compact, by marketing to the entire European population, they were diluting the strength of the message and not really defining the market specifically enough to resonate strongly with the appropriate group of people. The old saying is that if you have something for everyone then you have nothing for anyone. The offering and marketing needed to be more specific.

Also, the entrance and launch team for Euro Disney didn't incorporate enough local talent. The launch was done mostly by Americans with their views of what Europeans want instead of developed by Europeans for Europeans. The company failed to acknowledge that the theme park culture is not as established in France or greater Europe and decided to market directly to children like it does in the US. In the US, this strategy is successful because adults often attach childhood memories to Disney, the same is not the case in Europe, as the vacation entertainment aspect of the Disney brand has not been developed over generations.

While it is true that US Disney theme parks enjoy a very large segment of international visitors, this is due to the fact that Disney is part of the American experience. When taking a trip internationally, many people want to experience what they think defines unique aspects of the country they are visiting. Disney is synonymous with the US just like the cowboy is. This is why international travelers visit in such large numbers. The same is the case for the US National Parks. Over Christmas break, I went to 5 national parks in Utah. There were far more foreign visitors than Americans. The international travelers wanted to experience the quintessential American West, part of the legend of Western movies. The "American West" is part of the international image of the US and drives lots of the leisure traveler visits in a similar way to US Disney Theme Parks.

The actual location of Euro Disney was also a problem. It is located about 30 minutes outside of Paris. With the strong cache of the Paris as a tourist destination, Disney put itself in direct competition with one of the most desired vacation spots in the world. Often consumers were more interested in exploring the historic and cultural significance of Paris on a trip rather than spending time and money at a new "American" commercial business in Europe. Disney works in Orlando and Anaheim because it is part of the American culture. Disney in Europe doesn't have the same feeling. It is often seen as an imposter to the native culture. Also, the initial price points for staying at a in-park hotel was the same as staying at a high end hotel in Paris. In comparison, the value proposition was not there. Most would prefer to stay in the city and visit the theme park for one day, if any.

Ultimately, Disney made some management changes, refocused their efforts on a smaller niche by changing the name to Disneyland Paris and adjusted their marketing, price points and in park offerings to better meet the needs of the local population. These changes did help turn the project around, but it still remains a losing venture for them. This example illustrates that its not just large home product companies that make missteps when extending into new regions. While the Euro Disneyland example is also several years old, it highlights that companies make the same type of mistakes every day and it is important to really analyze a market before entering it. Having the right management team in place is crucial to the overall success of any company.