Walt Disney and Pixar

Instructions:-

Walt Disney and Pixar

 Here are three questions about the case study, the answer must be first read the case then answers should be based on the case. Do not use any other internet resources, please. Quality and depth of answers to each question
Accuracy in describing the problems/issues. Use concepts and strategic tools to analyze the issues. Provide specific evidence to support your conclusions.
1.Which is greater: the value of Pixar and Disney in an exclusive relationship, or the sum of the value that each could create if they operated independently of one another or were allowed to form relationships with other companies? Why?
2. Assuming that Pixar and Disney are more valuable in an exclusive relationship, can that value be realized through a new contract? Or is common ownership required (i.e., must Disney acquire Pixar)?
3. If Disney does acquire Pixar, how should Bob Iger and his team organize and manage the combined entity? What challenges do you foresee, and how would you meet them?

Solution

Walt Disney and Pixar

Question 1

            To begin with, the Walt Disney Company was created in 1923 when Sir. Disney signed a contract with M. J. Winkler. This company is a world leader in the entertainment industry, an industry greatly competitive. On the other hand, Pixar was at the beginning a technology company named Lucasfilm’s Computer Division. This company managed to reach an important place in the industry thanks to Steve Jobs who purchased the company for $10 millions, he then renamed it “Pixar”.

 Both Disney and Pixar have strengths and weaknesses and by establishing a strong exclusive partnership I think they can complete each other. For example  Disney’s main strengths include its wide range of distribution channels such as movies, television, and DVD, this is something that Pixar does not have. On the other hand, Pixar has a cutting edge technology, indeed it makes the best animation films such like Toy Story 3 (2010), The Incredibles (2004), Toy Story 2 (1999), it has a strong brand logo, a high innovative technologies and also 3D- CG (computer generated) which represents the main weakness of Disney. If these two companies decided to operate independently or with other partners the result would not be as profitable for them. Disney would need an important effort and amount in capital to try to reach the same level of technologies that Pixar is using for his animation films. Moreover, to offset the lack of distribution capabilities of Pixar this company would have to find some partners but we know that Pixar cannot find better distributor than Disney. In my opinion it is greater for both companies to establish an exclusive relationship because it would be more profitable and interesting for both of them.

Question 2

            By establishing an exclusive relationship with each other, Disney and Pixar can fulfill their needs and as I said earlier they can complete and serve each other. The exclusive relationship between the two can sustain the future growth at full potential and it can also eliminate some potential competitors and even new entrants by creating new films. Thanks to this exclusive relationship, Disney can overcome the dangers for the future, for example one problem which worries this company is the delay in the use of technologies but working with Pixar this is not a problem anymore because this last one has a cutting-edge in this area. Moreover Pixar can use this relationship to expand and attract new costumers when Disney can benefit from an access to resources and technology that it is not used to have. This exclusive relationship can be realized through a new contract and common ownership is not especially required. Indeed if common ownership was required to establish this kind of relationship it would be a source of many problems. Each company has its own culture so the fact of mixing this two cultures would not be benefitial, moreover as Bob Iger’s said ”when we go to China, people know Disney because of the Snow White, Toy Storyand also The Lion King ” this means that Disney benefits from a huge brand company and maybe it wants to keep its original name, its authenticity and don’t especially want to change name in case of a merger. For these reasons it is better for these two companies to establish this relationship through  a new contract as long as each company respects the other one, it would be too risky to merge Disney and Pixar because there would not be any turning back possible if something went wrong.

Question 3

            As I said earlier, if Disney acquires Pixar it is not impossible that some problems concerning different company’s cultures appear. This clash of culture could be a huge threat for this merger and could cause a loss in the global productivity. Moreover a threat of « Brain Drain »from Pixar and then Disney could appear. To organize and manage the combined entity Bob Iger and his team should give some seats on Disney’s board to Pixar’s executive members in order to increase the ideas and the vision of this new company. The leadership of the organization should be then reinvented and transformed. To avoid each threat to appear Bob Iger should try to establish a common culture of this organisation, a culture made of the two different companies in a way that no culture clash comes up. Then he should give clear incentives to employees and keep talent, engineers in the firm. One of the big challenges that I see is whether or not this merger will deteriorate the quality of films by trying to mix each company’s old culture of animation or on the contrary continue to produce great animation films. An other one would be to know whether or not Disney and Pixar would lose their authenticity, their personal touch.

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