Disney Case

In: Business and Management

Submitted By hiennguyen1222
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Explore the differences in the Japanese and western investment decision-making processes and the conflicts that arise from there a. Difference in financial theory: American’s companies believed that maximization shareholders wealth were realistic and necessary for the growth of the company. This means that the company’s only social responsibility is to maximize profits; its main responsibility is operate for the best interest of shareholders, the company’s true owners, by maximizing returns. Under this theory, when a firm distributes its wealth for other social causes, it is creating additional business costs at the expense of shareholders, resulting in lower net income.

According to this theory, the objective of a firm is to maximize its value to its shareholders. For a public company, value is represented by the market price of stock. Therefore, its main goal would be driving the stock price and dividends as high as possible. The practice, in turn, signals to management that long term profits are not as important as the present value of the company’s stocks and profits as the company’s value is being judged at market price of its stocks. Thus, all investment return is measured by the sum of cash flows, capital gains and dividends for a given level of risk.

Having this Western business philosophy, Walt Disney walked into the negotiation with only their shareholders’ interest in mind. They refused to compromise or lower the terms for Tokyo DisneySea Park. Walt Disney’s terms were so rigid that OL, the main Japanese investor in this contract, objected. Walt Disney was not willing to cough out anything for the construction of the park, but it imposed a 10% royalty on the admission fee and sales of foods and beverages Moreover, at the time of negotiation, Walt Disney’s financial position was weak, its movie and TV production divisions…...

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