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Licensing Arrangement or Joint Venture (4): An Ex Post Case Study of Tokyo Disneyland  
 
Product Ref: 12/512C Company: Tokyo Disneyland (Oriental Land Corp.)

Product Type: Case Industry: Leisure Facilities

Related Product(s): Teaching Note
Authors: Mitsuru Misawa   
In the late 1970s, Walt Disney Corporation sought to expand its enterprise to Japan. Oriental Land Corp, which represented the Japanese side of the negotiations, and Walt Disney had to decide on a licensing arrangement or a joint venture. The objective of this study is to examine the actual determinants, models and data of that investment choice. This case study is of value to governments and multinational enterprises that want to explore an optimal alliance with a foreign partner. Based on the law, the Japanese government intervened in the negotiations between the Oriental Land Corp and Walt Disney as to the form of the arrangement for Tokyo Disneyland. Thirty eight years later, it is worthwhile to examine the validity of their decisions and which arrangement benefited the project and the partners most. This case study presents ex post empirical evidence for this discussion. The efficacy and effectiveness of the law that allows the Japanese government to intervene are also questioned.
Functional Area : Finance & Investments

Issues: 1. This is a private-sector decision, but the host government often intervenes in the decision to protect national interests. If the government intervened in this decision based on the law, the intervention and the validity of the law should be questioned.2. This case will teach the concept and application of capital budgeting, which is a core area in corporate finance. The emphasis is on how to conduct international capital budgeting: net present value (¡§NPV¡¨) and internal rate of return. In this case, the same theory is applied to determine NPV, based on the past actual data. To determine the NPV, the past data is compounded with an appropriate opportunity cost. 3. The model provided in this case will be of use to governmental decision-makers and multinational enterprises in evaluating whether their past investment decisions-specifically joint venture versus licensing agreement-were shrewd. Based on their findings, they have options to abandon current modes in favour of alternatives. Decision-makers will learn from both active and passive information gathering and can use it to make better decisions in the future. On this basis, this study can proceed to real option analysis.4. When the world economy faces serious difficulties, some corporations have found success in the marketing, production, financing and allocation of their resources in today¡¦s borderless environment. The case of Tokyo Disneyland will teach an interesting and noteworthy principle as the basis of its success, which is the contrarian position. ¡§Contrarian¡¨ denotes someone who moves in opposition to others. 5. This case will provide students with a background on Japanese corporate behavior and practice and will allow students to examine the cultivation of American and Japanese corporate business, and the impact of contrasting cultures, customs and values in the decision-making process. 6. This case will provide insights into the different viewpoints of joint venture investors and the licenser in the context of an international joint venture.
Length: 20 pages Country: Japan

Pub. Year: 2012 Level of Difficulty: 2
         
This product type is available in the following language(s):      English
         
Related Information: N/A
 
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