Entry into the China market can be very dependent on government benevolence and connections. Some industries are heavily regulated, censored, or supported. The government keeps a list of restricted and non-restricted industries, as well as a 5-year plan that highlights areas of focused development.
Disney, as a media company, fell into the restricted category. There initial attempts to make inroads into China largely fell flat. They had tried to start in Hong Kong by opening a Disney World there, but it had limited success both as a profitable park and as an entry point into the China market.
Disney Gets Creative
Disney has always been a creative company and one that often succeeds when they are told they can’t. Disney did not give up trying to enter the China market and, eventually, an interesting idea came along. What about opening up a chain of English language schools for children?
Disney already ran educational programming in its parks and through its publishing wing. Furthermore, inspiring children had always been a key component of its mission. More importantly, the education industry in China was one of the most unregulated out there and would be easy to get the necessary approvals.
Disney English is Born
With that, Disney English was born. Most people in the States are still unaware that Disney operates over 40 language learning schools for children in China ages 2-12, but they do. The school chain had high initial success, growing from 1 school in Shanghai to over 40 schools in 12 different cities just 4 years later. It looked to be a successful venture.
But the success of Disney English was actually its embodiment as a vehicle for Disney to fully enter the China market as a media company. Within 2 years, Disney broke ground on Shanghai Disneyland, a deal that had been sitting on the table for over a decade prior. In addition, Disney shows and movies began to show up everywhere. China only allows 34 foreign films a year into the country. Suddenly, a good number of those were Disney films. Old Disney cartoons also began to be shown every day on Shanghai’s expat-facing channel – ICS.
Due to media restrictions, Disney as a cultural entity had not really penetrated China. Whereas every American child has fond memories of Mickey and probably at least 4-7 Disney films, the same cultural currency and nostalgia cannot be found in the Chinese market. Disney English was just one more way to get into the hearts and minds of children and, hopefully, create the same cultural presence it now enjoys in much of the world. Talk about thinking long-term!
Disney English served as the entry point for the entire Walt Disney Company to make full progress into China. Having offices in Shanghai and Beijing, Disney was now able to do two things – build important government relationships and get an understanding of the China market.
Initially, the relationship-building aspect proved to be the most successful with quick expansion of entertainment, parks, and licensing throughout the country. If you’re looking to enter the China market this is an important lesson to learn. Having your initial venture be successful actually may not be as important as getting on the ground and building relationships for future growth.
Another side effect of being on the ground was the ability to learn quickly about what worked and didn’t work in China. This is never any easy process for foreign companies and Disney English certainly had its shares of ups-and-downs. After expanding to 44 locations and 3 regions, it shut down 11 of those centers just a year later.
Getting creative and playing the long game is a hallmark of Disney’s global strategy and certainly any company that also plans to enter the China market should be taking notes. Stay tuned for my next post that explores what some of Disney’s learning moments were.
Casey W. Xiao-Morris is China Business Consultant at Leverage China, LLC, specializing in capturing China’s market opportunities for American companies. Casey can be reached at cxmorris@LeverageChina.com