On June 16, 2016, the world’s biggest Disneyland opened in Shanghai with a great deal of fanfare. It features a supersized 200-foot-tall castle. In comparison, the height for similar castles in Anaheim, California, and Orlando, Florida, is 77 feet and 180 feet, respectively. Approximately 80% of the Shanghai rides, such as the Tron Lightcycle Power Run roller coaster, are unique. Chinese elements are found throughout the theme park. The flagship restaurant, the Wandering Moon Teahouse, has sections representing different regions of China. Some old staples found in other Disney parks, such as Main Street USA, Jungle Cruise, and Space Mountain, have been banished—in fear of criticism about cultural imperialism. “Authentically Disney and distinctly Chinese” is an interesting tagline coined by Robert Iger, then-chairman and CEO of the Walt Disney Company (“Disney” hereafter). More than 330 million people live within a three-hour car drive or train ride. Disney is eager to turn them into lifelong customers not only for the $5.5-billion theme park, but also for its movies, games, toys, clothes, books, TV programs, cruises, and resorts.
Mickey’s journey to the Middle Kingdom has been a tortuous one. The two-decade courtship started in the late 1990s when Jiang Zemin was president of China and Michael Eisner was Disney’s chairman and CEO. At that time, Disney was starting to have some success in China with its cartoon series aired on Sunday evenings by major TV stations. Then Disney launched a movie about the exiled Tibetan spiritual leader the Dalai Lama, Kundun, which triggered the wrath of the Chinese government. “All of our business in China stopped overnight,” Eisner recalled.

Out of desperation, Disney hired as a consultant former Secretary of State Henry Kissinger, who had spearheaded American efforts to establish diplomatic ties with China in the 1970s and was regarded as a trustworthy friend by the Chinese. The government only agreed to reopen China after intense lobbying by Kissinger and humiliating apologies by Eisner, who admitted Kundun was “a stupid mistake” in meetings with Chinese officials. Financially, Kundun was indeed a stupid mistake. It burned through a $30 million budget to reap only $5 million box office receipts.

Eisner then introduced Iger, Disney’s international president at that time, as being in charge of negotiations for a theme park. The negotiations were slow and painful.
Looking back, Iger, who succeeded Eisner as CEO in 2005 and as chairman in 2012, recalled that he had “engaged with three [Chinese] presidents, a few premiers, a number of vice premiers, a number of [Communist] Party secretaries, and five or six mayors of Shanghai.” By 2009, the Chinese government finally gave its blessing, but only after Disney agreed to be a minority partner.

Disney took a 43% stake in the Shanghai Disney Resort. Shanghai Disney Resort would not only include the flagship Shanghai Disneyland, but also two additional theme parks, two themed hotels, shopping malls, and entertainment facilities. When completed, it would be three times the size of Hong Kong Disneyland. Disney’s joint venture (JV) partner, the state-owned Shanghai Shendi Group controlled by the Shanghai government, owned a 57% stake.
In the management company that actually ran the property, Disney gave up a 30% piece. In comparison, the Hong Kong government gave a 48% share to Disney for the JV that owned Hong Kong Disneyland, and the government itself took 52%. Disney gave up no management control in Hong Kong.
Why was Disney so eager to go to China? While China’s pull in terms of market size and potential is obvious, Disney is also pushed by its lackluster performance in other areas such as cable TV, movies, and some of its other theme parks. In April 2011, Shanghai Disneyland broke ground, with Iger and Chinese officials scooping up loose dirt, Mickey and Minnie Mouse frolicking in Chinese costumes, and a children’s choir singing When You Wish Upon a Star—in Mandarin. Despite such hoopla, there was no guarantee that Disney’s high-profile entry would be profitable.
Exhibit A: Disneyland Paris, which opened in 1992, is still struggling to be consistently profitable.
For Shanghai Disneyland, the attention to detail was meticulous.
In addition to the tremendous efforts to showcase local responsiveness with 80% of the rides being uniquely tailored to local interests, Iger also pretasted the food (such as waffles in the shape of Donald Duck) and decided which characters would appear in the parade. When first unveiled in March 2016, Shanghai Disneyland’s website registered five million hits within 30 minutes. The first two weeks of tickets sold out in hours.
Yet as Shanghai Disneyland celebrated its first Chinese New Year in January 2017, disappointing news came. In its first six months ending on December 31, 2016, 5.6 million guests came. Although impressive, these numbers fell far short of rosy initial projections of an estimated 15 million visitors for the first year. If attendance continued at its current pace, then the first full-year result would barely reach more than ten million. In the Disney universe, ten million visitors in the first year would not be too bad. Hong Kong only attracted seven million in 2015—its 11th year. In comparison, in 2015, Paris reported 15 million, Tokyo 17 million, Anaheim 18 million, and Orlando 19 million. While these sister parks are a lot more established, Shanghai Disneyland clearly has a long way to go.
In 2017, Shanghai Disneyland attendance reached 11 million. In 2018, the number reached 12 million. However, the number went down a little in 2019, and Disney had to lower ticket prices to drive attendance. Then the coronavirus hit. In January 2020, Shanghai Disneyland had to shut down. On May 11, Shanghai Disneyland reopened—
the first Disney theme park to reopen anywhere in the world. The Chinese government limited the park’s capacity to 24,000 visitors, less than one-third of its pre-COVID-19 capacity. Disney actually reduced ticket sales “far below”
the government’s limit to make sure that employees could enforce new safety rules, including temperature checks for visitors on arrival and maintaining social distance inside the park. The limited number of tickets that Disney put on sale during the week before reopening sold out within hours. Clearly, even without a vaccine, (at least some) people were eager to have a good time. Although fewer ticket sales meant decreased revenues, Disney shares climbed 8% in the week before May 5—investors in the bleak world of global shutdowns appreciated the glimmer of hope that the reopening of Shanghai Disneyland brought.

Even after the reopening, it remains to be seen how Shanghai Disneyland would be affected by the increasing geopolitical tension between China and the United States—intensifying in the first two years before the coronavirus and worsening during the virus outbreak thanks to the “blame game.” As the Magic Kingdom embarks on its residence in the Middle Kingdom, one thing is clear: This China business is not going to be Mickey Mousy.

Case Discussion Questions

1. Elaborate on Shanghai Disneyland’s tagline “Authentically Disney and distinctly Chinese,”
which was coined by Disney’s then chairman and CEO Bob Iger. Using the integration-responsiveness framework, how would you characterize Disney’s strategic choice?
2. How does Disney overcome its liability in China?
Will Disney prosper in China?
3. ON ETHICS: Given the ongoing US–China geopolitical tension (with a number of manifestations such as trade wars and diplomatic spats), how would you—as CEO of Shanghai Disneyland—respond to a Chinese online post calling for boycotts of your park? (Your nationality can be either American or Chinese.)