PROBLEM STATEMENT

How might OL best evaluate investment projects with foreign partners, while taking into account the differences
between American and Japanese management practices?

ANALYSIS

METHOD PERSPECTIVE RESULTS

NPV and IRR American Positive
Average Accounting Return Negative
Japanese
(AAR) -1.05%
Average Cash Flow Return Positive
Combination
(ACFR) 79.10%

A quantitative evaluation of the investment would yield varying results, depending on the capital budgeting method
used. Relying on the traditional Japanese AAR would lead to outright rejection of DisneySea Park, which is why many
Japanese stakeholders were reluctant to approve the project. However, discounting cash flows using the NPV and IRR
methods would lead to a go signal for the investment. Furthermore, the ACFR method or “compromise method”
recommended by the Industrial Bank of Japan (IBJ) indicates a positive return as well. This third project analysis
method, which reconciles differences in Japanese and Western concepts of corporate governance, would be helpful in
resolving the conflict, in addition to the consideration of qualitative factors to be discussed in the next section.

RECOMMENDATION AND IMPLEMENTATION

Adapt and Adopt is a two-pronged strategy, where we try to position Oriental Land as a pioneer venture partner in the
international scene. In order to achieve mutuality given differences in business practice while at the same time,
maximizing stakeholder benefits, there is a need for Oriental Land to adapt to its current business environment, and
to adopt international standards into their project assessments and policies moving forward.
A. Evaluating the Current Scenario and Proposed Solution
In line with management decision, OL should accept the Tokyo Disney Sea project. They should adapt Walt
Disney’s perspective, strike a balance, and find an acceptable middle ground for both parties. While indeed, the
American investment style prioritizes shareholders and short-term returns rather than their collective and long-term
approach, overall, there is still merit in the project:
• Historically basing it on the initial venture, Tokyo Disneyland, the arrangement was profitable for both parties, and it
became a revolutionary introduction in the Japanese theme park industry.
• It creates synergy. The new project is seen to increase Disneyland sales
• It will create new jobs, which will help boost the economy, ultimately benefiting Oriental Land’s performance as a
leisure product. This goes well in line with Japanese firms’ value for patience and long term stakeholder wealth
maximisation.
It’s good business, simply put. With this, there should be a mutually-accepted compromise in the method to be used. To
achieve this, however, management must first convince its Board of Directors that there will be a need to adjust to
international standards given that Disney is a global brand. Likewise, there is a need to reframe what factors benefit
stakeholders such the impact of the venture to the economy.
B. Moving Forward: Proposed policies to avoid similar situations
1. Recruit experienced multinational consultants for the BOD
OL must have consultants or professionals who have multinational experiences in its BOD to be its bridge of
understanding for cross-cultural business practices. With the upcoming growth of directorship as a career, OL may
establish this policy with the help of headhunters, or it may develop an in-house program that exposes its talent to
international stints. This policy will ensure that potential areas of conflict in projects involving foreign firms are
discussed at the onset, so appropriate measures and reasonable negotiation can be taken.
2. Integrate international investment decision-making practices
OL must gradually employ international standards and best practices for future investment decisions, specifically for
joint projects with foreign firms. These include the use of NPV and IRR methods, and SWOT and PESTLE analysis.
This will expand the company’s risk perception and propensity. Establishing this will also make OL an attractive
partner for future joint projects not only to WD but to other foreign firms as well.