Tokyo Disney Case
Executive Summary
Evidence from this case suggests that the traditional Japanese corporate governance stance has started to shift in order to include some elements of the Anglo-American way of corporate governance. It appears that a final decision has been made to build Disney Sea Park (despite unattractive ARR, but attractive NPV/IRR and ACFR) not only for the potential profits reaped for the company but also due to their responsibility to keep uphold the interests of its stakeholders (which would include its parent company, stockholders, landowners, suppliers, creditors, the local communities and government), whose livelihoods would be directly affected by this critical decision.
However, we also believe that the Japanese corporation Oriental Land (OL) was justified in exercising caution before investing the Disney Sea Park project. We base our reasons primarily due to the culture and norms of Japanese Corporate Governance practices.
The value of the investment is calculated using figures calculated in the period during 2000-2005 (note the project starts in 2000). Numbers used in the Appendix A and B are drawn directly from Case Exhibits 3-7. AAR will be calculated as indicated in Case Exhibit 2, and NPV and IRR calculations will be based on Discounted Cash Flows including Interest Payments (because in Exhibit 7, OL seems to include Interest in their calculations).
Case Background
The case describes how the OL management team was eager to expand the business beyond its Disneyland enterprise in Japan, and thus considers the investment in a new project - the Disneyland Sea Park.
Upon negotiating with Walt Disney (who are notoriously tough in their negotiation, demanding 10% royalty on entrance fees, 5% fee on food and novelty goods), OL management were initially skeptical in the project as it involved a huge risk for them – since they will not only solely invest in the land, but shoulder 100% of the construction cost as well.
In addition,
Evidence from this case suggests that the traditional Japanese corporate governance stance has started to shift in order to include some elements of the Anglo-American way of corporate governance. It appears that a final decision has been made to build Disney Sea Park (despite unattractive ARR, but attractive NPV/IRR and ACFR) not only for the potential profits reaped for the company but also due to their responsibility to keep uphold the interests of its stakeholders (which would include its parent company, stockholders, landowners, suppliers, creditors, the local communities and government), whose livelihoods would be directly affected by this critical decision.
However, we also believe that the Japanese corporation Oriental Land (OL) was justified in exercising caution before investing the Disney Sea Park project. We base our reasons primarily due to the culture and norms of Japanese Corporate Governance practices.
The value of the investment is calculated using figures calculated in the period during 2000-2005 (note the project starts in 2000). Numbers used in the Appendix A and B are drawn directly from Case Exhibits 3-7. AAR will be calculated as indicated in Case Exhibit 2, and NPV and IRR calculations will be based on Discounted Cash Flows including Interest Payments (because in Exhibit 7, OL seems to include Interest in their calculations).
Case Background
The case describes how the OL management team was eager to expand the business beyond its Disneyland enterprise in Japan, and thus considers the investment in a new project - the Disneyland Sea Park.
Upon negotiating with Walt Disney (who are notoriously tough in their negotiation, demanding 10% royalty on entrance fees, 5% fee on food and novelty goods), OL management were initially skeptical in the project as it involved a huge risk for them – since they will not only solely invest in the land, but shoulder 100% of the construction cost as well.
In addition,