microsoft word - mkt final hkd report
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Marketing Project on Disney opening up a facility in Hong KongTRANSCRIPT
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Table of Contents
Executive Summary p. 1 Company and Collaborators p. 2 Customers p. 4 Competitors p. 6 Segmenting p. 7 Targeting p. 10 Positioning p. 10 Alternative Options p. 11 Product p. 12 Price p. 13 Place p. 13 Promotion p. 13 Conclusion p. 15 Appendix p. 16 Works Cited p. 19
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Executive Summary In 1971, Orlando, Florida, became home to Walt Disney World. The extremely
successful venture led Disney to set its sights on expanding internationally, with Tokyo
Disneyland opening in 1983 and Paris Disneyland opening in 1992.1 In 1997, Disney
decided to launch its next venture in Lantau, Hong Kong because of its large tourist base,
well established hospitality industry, and growing economy.2
Hong Kong Disneyland (HKD) opened on September 12, 2005 to high
anticipation. However, it faced major problems in its first year of operation, failing to
reach its first year attendance target of 5.6 million people. The park also received
negative publicity and complaints from visitors that the park was too small.3 Disney
found that its main competitor, Ocean Park, poses a major threat because of its wide
variety of attractions and strong brand equity. In fact, since HKD opened, Ocean Park has
experienced a 6% increase in visitors; from 3.80 to 4.03 million.4 Disney needs to
changes its marketing mix to address these problems.
To effectively compete with Ocean Park, we recommend that Disney position
itself as the most convenient tourist destination for Chinese families because of its theme
park attractions, hotel accommodations, dining, transportation, and night-life
entertainment. To target Chinese families, Disney should add more attractions through
park expansion and use a competition-oriented pricing policy. We also suggest that HKD
distribute their product through Chinese travel agencies and use institutional and
competitive advertising to promote its theme park.
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Company and Collaborators
The Walt Disney Company is one of the largest and most recognizable media
conglomerates in the world, with global operations in the following areas: media
networks, studio entertainment, parks and resorts, and consumer products.5 Because
Disney has breadth in its portfolio, they have achieved high brand recognition in many
parts of the world and experience higher operating margins (9.6%) than the entertainment
industry average (6.1%).6 Disney has achieved brand equity by providing quality
entertainment for the entire family. Their theme parks are particularly well-known for
incorporating American culture, fantasy, and adventure. 7
The company took advantage of its large scale operations and international brand
recognition by pursuing market development in Hong Kong to tap into the lucrative
Asian leisure market.8 Specifically, its main objectives were to develop the Chinese
market for theme parks, become a leading family attraction in Asia, and increase its brand
familiarity among Chinese mainlanders.9 To achieve these goals, Disney created a
complete Disney experience that includes:
• A park with four themed lands: Mainstreet USA, Adventureland, Fantasyland,
and Tomorrowland, which feature dining, shopping, and attractions
• Direct transportation to the park: subway routes, a ferry terminal, and a
Disney Rail Line
• Two on-site hotels: Hong Kong Disneyland Hotel and Disney’s Hollywood
Hotel with services including spas, swimming pools, and gift shops
• Night-life: fire work shows, live music, bars, and more10
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To accommodate visitors, management at HKD researched Chinese culture to
cater to customer needs. The park was built in consideration of the ancient Chinese
philosophy of Feng Shui, which emphasizes space and orientation. For example,
architects shifted the front gates by 12 degrees to maximize prosperity.11 Management
also found that Chinese visitors typically spend more time eating at restaurants than
American visitors, and added 600 more dining seats to combat slow table turnover.12
HKD’s attention to culture is a strength for the company.
Politics
Disney collaborated with the Hong Kong Special Administrative Region (SAR)
government to form Hong Kong International Theme Parks.13 The Hong Kong SAR
government financed most of the $3.5 billion construction cost and holds a 57% stake in
the joint venture. The government anticipated that HKD would stimulate economic
growth and help solidify Hong Kong as one of Asia’s top tourist destinations.14 The
government’s dedication to recovering its large investment is a strength for HKD.
Despite these strengths, several problems threaten Disney’s success in Hong
Kong. Mainland China’s communist government, which is separate from Hong Kong’s
government, heavily regulates the media. For instance, the government bars foreign
television channels including the Disney Channel, posing a threat to Disney’s ability to
reach Chinese tourists.15 Moreover, during the Chinese Lunar Holidays (a popular
vacation time), Disney oversold tickets and turned down customers at the gates. Negative
publicity followed, tarnishing Disney’s reputation.2
Many guests have also complained that the park is too small, with limited
attractions.16 HKD has only one rollercoaster, and mainly features children’s rides such
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as Cinderella’s Carousel and Dumbo The Flying Elephant.16 The limited width of
attractions detracts from Disney’s ability to entertain non-families. Furthermore, HKD is
only 1% the size of the Orlando theme park.17 Another weakness of Disney is that
revenues from the studio entertainment division fell nearly 13% in fiscal year 2005.18
Disney needs to correct these weaknesses to provide a better quality product.
Economics
Hong Kong has the least restricted economy in the world, which gives Disney a
great opportunity to sell its products. Low personal and corporate tax rates give
consumers great buying power and make Hong Kong a shopping paradise for
consumers.19 In addition, inflation remains stable and earnings continue to increase.20
These measures indicate that the economic environment is advantageous for Disneyland.
The Chinese economy is also thriving. Over the past 25 years, China’s economy
evolved from a centrally planned economy (closed to international trade) to a market-
oriented economy with a fast growing private sector.21 The restructured economy has
contributed to a more than ten-fold increase in GDP growth since 1978. In China,
income is rising while inflation remains minimal.22 This results in an increase in spending
power, making the Chinese market extremely lucrative.
Customers
Disney attracts customers from the local Hong Kong area and tourists from
mainland China. Both groups have a collective culture, meaning they value
interdependence, place the community’s interests over individual interests, and spend
leisure time in groups.23
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Chinese Customers
Mainland Chinese tourists account for 75% of HKD’s customers.24 Mainland
Chinese save a minimal amount of their income—typically 20-23.8%—and spend a
majority of their income.25 Additionally, their disposable income has been increasing
over the past several years, further increasing China’s buying power.26
In addition, China is experiencing a surge in outbound travel. By 2020, China will
have 100 million outbound travelers and become the fourth largest source of outbound
travel in the world.27 Additionally, Hong Kong is predicted to be the most popular Asian
tourist destination, in comparison to Japan, Taiwan, and South Korea.28 China’s outbound
tourist market often forms tour groups, spends large amounts of money on vacations, and
travels heavily during official holiday periods—Chinese New Year, May Holiday, and
the National Day Holiday.29
Despite the increase in outbound tourism, the government does not allow the
Chinese to travel to the United States30. Therefore, Disney, which epitomizes American
culture, is appealing to Chinese tourists who desire western products in increasing
quantities but cannot easily access them.31
The popularity of package deals and travel agencies is increasing due to the
growth in the Chinese economy.32 Package deals are very popular with Chinese travelers;
approximately 61% of tourists staying overnight in Hong Kong buy package deals and
stay in hotels.33 Travel agencies are also becoming more popular because it is difficult for
families to obtain visas, and travel agents take care of all the troublesome procedures.34
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Hong Kong Customers
Local Hong Kongers account for over 20% of HKD’s customers.35 Hong Kongers
have the fourth highest cost of living in the world, making them sensitive to Disney’s
high prices. In addition, the Hong Kong government plans to introduce a new value-
added tax on consumer spending, potentially further decreasing local consumer
spending.36 It is convenient for locals to access the park due to their close proximity;
however, they have less need for Disney’s hotel and transportation accommodations.
Competitors
The theme park industry in Hong Kong faces high government regulation and
large start up costs.37 These barriers to entry have allowed only two major theme parks to
emerge: Ocean Park and Hong Kong Disney.
Since opening in 1977, Ocean Park has had over 20 million visitors in its 29 years
of operation. Because it has been open for almost 30 years, it has high brand equity in
China and is well established, with 39% of mainland Chinese tourists visiting the park
during their stay in Hong Kong.38
Ocean Park offers superior attractions to HKD’s at a lower price. These include:
cable car rides, a culture show, a shark aquarium, roller coasters, Ocean Park Tower, a
Panda exhibit, the Dolphin Breeding exhibit, and the butterfly house.39 Ocean Park also
offers many photo opportunities, which is a very important part of Chinese culture.40
Furthermore, Ocean Park’s Water Paradise is the largest aquatic center in Asia and keeps
visitors coming back.41 The wide variety of attractions are geared towards everyone, and
do not target a specific age segment. Furthermore, Ocean Park offers a lower entrance fee
than HKD, at US$23.81 compared to US$37.96 for an adult weekday ticket (See
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Appendix C). The lower entrance fee appeals to price sensitive families, and poses a
threat to Disney.42
However, not everyone is happy with Ocean Park. Some visitors complain that
Ocean Park has under-maintained facilities.43 One visitor commented: “Ocean Park is
old. The aquarium and rides have been the same since I was born.”44 Also, Ocean Park
does not offer hotels, which gives HKD a competitive advantage in attracting tourists.
HKD also faces indirect competition from other leisure activities such as arcades,
bars, and clubs. Another indirect competitor, Victoria’s Peak offers a spectacular view of
the city and a multitude of entertainment, including dining and shopping.45 Other family
outings such as going to the zoo, cinema, or museums also indirectly compete with HKD.
Segmenting
We segmented the theme park market by family life cycle and geographic region.
“Local” refers to Hong Kongers while “Tourist” refers to mainland Chinese. Mainland
China’s population is much greater than Hong Kong’s, with 1.3 billion people compared
to 6.9 million, respectively. 22
Table 1: Market Segments based on Family Life Cycle and Geography
Family Life Cycle Geographic Region Families Parents with children ages 0-19 Local
Tourist
Teenagers ages 13-19 Local
Tourist
Young Professionals 20-30, no children Local
Tourist
Empty Nesters No children living at home Local
Tourist
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Chinese Families: This is the largest segment of overnight vacationers, accounting for
more than 40% of visitors. This group has a “little emperors” family structure due to the
one-child policy instituted in the late 1970s, in which each child is cherished and
indulged by two parents and four grandparents. Relative to older generations, this group
is more oriented towards brands and imported goods. With China's "little emperors'"
craving more Western merchandise, the opportunities for franchise businesses will cater
to a well funded and growing clientele.46
Chinese Teenagers: Moreover, trendy teens are highly brand conscious and demand
Western products.47 This segment does not usually travel to Hong Kong without parental
supervision, so HKD should not target them.48
Chinese Young Adults: Approximately 36% of the tourist market is between the ages of
20 and 29.49 Young Chinese adults have significant spending power; however, HKD’s
attractions are for children, so HKD should not target them.50
Chinese Empty Nesters: Enjoys a variety of leisure activities including playing with
Chinese tops, singing, mah jong, and practicing tai chi.51 They are fairly price-sensitive to
entertainment activities, as demonstrated when an increase in movie ticket price forced
many of them to stay at home and watch TV instead.52 This group accounts for only 3%
of Chinese outbound tourists so, HKD should not target them.
Hong Kong Families: The household size is smaller than most of the other Chinese
communities, at an average of 3.1 members per household. Approximately 90% of
households earn a per capita income of less than $24,000, which is rather low.53
Hong Kong Teenagers: Hong Kong teenagers spend their weekly allowance ($51.07 on
average) on eating out, going out with friends, and paying for clothes or shoes.54 This
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group is mainly focused on education and does not work because part-time jobs are rarely
available, increasing this segment’s price sensitivity.55
Hong Kong Young Adults: This group tends to be price sensitive with low disposable
income. They enjoy singing karaoke, watching movies, going shopping, and dining out
with friends. They go to exhibitions or other theme parks occasionally.56
Hong Kong Empty Nesters: Most Hong Kong empty-nesters are concerned about their
financial security as they reach retirement. They do not want to burden their children, so
they are careful with spending and are moderately price sensitive.57
Justification for Brand Map: Teenagers are more family-oriented than young adults
and empty nesters because they still rely on their parents’ income and live at home.
Young adults are employed and have a stable income which allows them to be more
individualistic. Empty nesters are even more individualistic because they live by
themselves.58 Chinese tourists are towards the all-inclusive portion of the brand map
because they visit Hong Kong overnight and look for a variety of accommodations.
Family Oriented
Individualistic
All-inclusive
Vacation
One-Day Visit
Ocean
Movie Theatres
5
1
5. Chinese Families 6. Chinese Teenagers 7. Chinese Young Adults 8. Chinese Empty Nesters
6 Zoo
2
3 7
8 4
1. HK Families 2. HK Teenagers 3. HK Young Adults 4. HK Empty Nesters
Disney
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Targeting
Disney should use a single target market approach to target mainland Chinese
families. This is the best group to target because it is the largest segment and is
experiencing growing disposable income. Our brand map shows that Disney currently
does the best job of catering towards this segment because Disney delivers a family
product geared towards children and offers all-inclusive accommodations. Our
positioning serves this segment well because Chinese tourists prefer package deals when
they travel, including hotel accommodations, meals, and tours.59
Disney should not target teenagers, young adults, and empty nesters from China
because Disney’s current attractions are for children. Moreover, Disney should not target
the Hong Kong market because this geographic segment does not need our hotel,
transportation, and meal accommodations, which is our main selling point.
Positioning
For Chinese families, HKD is the most convenient tourist destination because it offers
theme park attractions, hotels, transportation, dining, and night-life entertainment.
We want Chinese families to think of HKD as the most convenient tourist
destination because it can satisfy all of their entertainment needs at one location. Tourists
will get great value from a package deal. Economically, Disney will make it cheaper for
tourists to book an all-inclusive deal rather than pay for each expense separately.
Psychologically, customers will feel at ease knowing that everything is taken care of in
advance. The package deal is functional as well, because it is easier to book all plans
through one company rather than deal with multiple agents.
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Alternative Options
Many HKD visitors complain that the park is too small. In fact, HKD is the
smallest of all the Disney theme parks.60 Therefore, one alternative option is to expand
the park, allowing for more attractions, restaurants, and shopping areas. Although HKD
would face high start-up costs from this project, Disney could add more attractions and
increase attendance in the long run.
Another alternative option is to focus marketing efforts towards local Hong
Kongers. This segment would be easy to target because they may visit the park more
frequently, due to their close proximity. But, locals would have little reason to take
advantage of hotels or the all-inclusive packages that HKD offers.
Another alternative option is to target European and American travelers. This is a
flawed idea because we believe that these travelers are looking to experience authentic,
traditional Chinese culture, rather than a theme park that epitomizes western culture.
This group would be more likely to travel to Orlando or Paris Disneyland.
Product
• Create Animal Kingdom: A study found that Asians prefer a nature theme for theme
parks, compared to adventure, futurism, and other themes.61 Creating an Animal
Kingdom within the park would detract from Ocean Park’s popular animal exhibits
and cater to our customers’ preference for a nature theme. Moreover, Disney is
knowledgeable in this realm from its experience with building an Animal Kingdom in
Orlando, Florida. Animal Kingdom will include:
• Petting Zoo: We cannot compete with Ocean Park’s dominance in aquatic life;
therefore, we will have a petting zoo with farm animals, where visitors can get
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hands-on experience with animals. This will give Disney a competitive advantage
and diminish Ocean Park’s dominance in animal attractions because visitors can
only view animals behind glass in Ocean Park.
• Dinosaur exhibit: Asians widely regard travel as an opportunity for learning and
personal enrichment.62 Therefore, Disney should build a dinosaur exhibit with an
educational focus in response to this preference to reinforce their position as a
family destination.
• African Safari: Families will travel through acres of wild life to observe exotic
animals in their natural habitat. They will travel together in a safari vehicle with a
tour guide, which complements Chinese tourists’ preference for group tours.
• More Photo Shops: Considering the importance of photography in Chinese culture,
we will add more photo shops, where visitors can pose for pictures with Disney
characters free of charge. This will cater to the Chinese photo-taking craze and
reinforce our position as a memorable family experience.
• Childcare Facilities and programs: We will build a day-care facility for toddlers at
the hotel so that adult guests can enjoy Disneyland’s nightlife. This reflects our
position of offering a variety of convenient services at HKD.
• Expand the park: Visitors have overwhelmingly complained that the park is too
small, with too little attractions to keep them entertained. HKD is 1% of the size of
Walt Disney in Orlando, (310 acres compared to 30,000 acres respectively).63
Increasing the park size will enhance our image as a world-class attraction and allow
for the changes listed above.
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Price
• Competition-oriented pricing: Disney should reduce the admission price for all age
groups by 25% to compete with Ocean Park’s low prices and appeal to price-sensitive
families. While our new prices (see Appendix D) are lower than before, the admission
fees are still higher than Ocean Park because Disney is a premium brand and still has
to cover its costs.
• Discount tickets for children ages 12-17: Currently, neither HKD nor Ocean Park
discounts this age group. We will encourage families with older children to visit the
park by charging this age group the same price as children ages 3-11. This unique
offering will diminish Ocean Park’s popularity among families.
Place
Given the popularity of Chinese travel agencies, HKD should use travel agents as
a channel for distributing tickets and packages to mainlanders. Dealer incentives, such as
sales commissions and agent-admission discounts, will encourage agents to sell HKD’s
vacation packages. As mentioned earlier, travel agencies take care of the complicated
visa procedures, which is consistent with our position of convenience.
Promotion
First, HKD must combat the negative publicity that it received from the Lunar
Holiday fiasco by using institutional advertisements to build up a good image of the
company. These advertisements would be strategically placed in the three most densely
populated areas of mainland China: Guangzhou, Shenzen, and Shanghai, where 20%,
11%, and 7% of the population resides, respectively.64
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Next, Disney should use competitive advertising on China’s popular railway
system, where more than 1.44 billion people travel annually.65 Advertisements should
specifically be placed on routes to the cities mentioned above and on the direct railway
route from mainland China to Hong Kong. This will attract mainland tourists visiting
Hong Kong. These advertisements should feature Disney’s hotels, transportation, dining,
and nightlife entertainment, rather than just the theme park, to reinforce our image as a
convenient tourist destination with a variety of entertainment offerings.
Mainland Chinese travel heavily to Hong Kong during holidays such as the
Spring Festival, Duan Wu, and the Mid-Autumn Festival.66 (See Appendix B) Therefore,
Disney should offer a discount to mainland tourists during these holiday seasons to
increase sales. However, Disney should make sure that management does not oversell
tickets, to prevent repeating the previous Lunar Holiday fiasco.
Most importantly, Disney should offer package deals to three-person families,
given that most families have one child due to the one-child policy.67 All packages will
include shuttle transportation to the park and childcare. We created the following three
packages for different lengths of stay (See Appendix E for price calculations).
• Package A: One night at hotel, two-day passes, two breakfasts - $417
• Package B: Two nights, three-day passes, three breakfasts - $697
• Package C: Three nights, four-day passes, four breakfasts - $978
HKD can also reach potential customers through non-Disney hotel concierges
around Hong Kong. Disney should encourage concierges to visit the park by providing
them with free passes. Concierges could then share their personal experiences with guests
and push the Disney product.
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Conclusion
By positioning HKD as the most convenient destination for mainland Chinese
tourists, we will utilize our competitive advantage of offering a variety of
accommodations. We strongly believe that if Disney follows our recommendations, it
will satisfy its customers at a profit.
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Appendix A: Increasing Number of Mainland China Outbound Departures68
Appendix B: Visitor Arrivals to Hong Kong By Month69
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Appendix C: Disney vs. Ocean Park Current Pricing Policy HKD uses a flexible price policy since they offer the same product and quantities to different customers at different prices.70 Prices differ based on age and time of the week. Ocean Park’s prices are lower in all age groups and they don’t differentiate between weekdays and weekends.71
Park Disneyland Hong Kong Ocean Park
Type Week Weekend/Peak Days*
General Admission
Adults US$37.96 US$45.04 US$23.81
Children (3-11 yrs) US$27.02 US$32.17 US$11.97
Senior Citizens (65 yrs +) US$21.88 US$25.74 Free (w/ HK ID)
Children (under 3yrs) Free Free Free
* Peak days will include Hong Kong public holidays, summer school holidays (i.e. July and August) and the Golden Weeks (1st week in May and October every year). (7)
Appendix D: Recommendations for New Pricing Policy: Reduce all ticket prices by 25% and discount ages 12-17
Park Disneyland Hong Kong
Type Week Weekend/Peak Days*
Adults US$28.50 US$33.75
Children (3-11 yrs) US$20.25 US$24.00
Children (12-17 yrs) US$20.25 US$24.00
Senior Citizens (65 yrs +) US$16.50 US$19.50
Children (under 3yrs) Free Free
* Peak days will include Hong Kong public holidays, summer school holidays (i.e. July and August) and the Golden Weeks (1st week in May and October every year). (7)
Appendix E: Package Deal Prices
One-Night Two-Night
Three-Night
Hotel $170 $340 $510
Transportation $27 $27 $27
Theme Park Admissions $148 $222 $297
Breakfast $72 $108 $144
Total $417 $697 $978
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Appendix F: Justification for Price Calculations
Appendix:
One-Night Two-Night Three-Night Hotel Calculation $170/Night $170/Night*2=$340 $170/Night*3=$510
Transportation $27/Round Trip $27/Round Trip $27/Round Trip
Theme Park Admission:
Weekday Average Price $77.22 $77.22 $77.22
Weekend Average Price $91.50 $91.50 $91.50
Total Average Price $84.40 $84.40 $84.40
$84.40*2=$168.80(1-.12)=$148
$84.40*3=$253.2(1-.120)=$222
$84.40*4=$337.6(1-.12)=$297
Breakfast $36*2=$72 $36*3=$108 $36*4=$144
Total $417 $697 $978 Justification: We calculated the average price between weekday and weekend prices for two adults and one child. Then, we multiplied that number by the number of days that the family would enter the park, and discounted this by 12% due to a bulk quantity discount. We calculated the hotel costs from websites advertising the cost of room and travel.72 Breakfasts were calculated at $12/personx3 people = $36 per breakfast per day.
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1 “Hong Kong Disneyland Resort.” Wikipedia. 22 Nov. 2006
<http://en.wikipedia.org/wiki/Hong_Kong_Disneyland_Resort#Transport>.
2 Bradsher, Keith. "Mickey's Ticket Mistake: Hong Kong Disneyland is Mobbed." The
New York Times 3 Feb. 2006. 5 Dec. 2006
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emc=rss>.
3 Hui, Sylvia. “Hong Kong Disneyland's Anniversary.” Yahoo! News. 12 Sept. 2006. 20
Nov. 2006
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6 “The Walt Disney Company.” (2)
7 "This Day in Disney History." Mickey news. 5 Dec. 2006. 5 Dec. 2006
<http://www.mickeynews.com/History/>.
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9 Schuman, Michael. "Disney's Hong Kong Headache." Time 8 May 2006. 22 Nov. 2006
<http://www.time.com/time/asia/magazine/article/0,13673,501060515-
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49 Hong Kong. Hong Kong Tourism Board. (4)
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