Practicum Case Final Write-up
Disney currently faces difficult decision regarding its relationship with Pixar. Although previous collaborations with Pixar have brought immense success for Disney in terms of revenue and recognition, Pixar’s CEO Steve Jobs has been trying to negotiate a fairer deal with no success. Disney wishes to stay with previous negotiation terms, as it is more favorable for Disney. Tension has increased between the two firms, and in response, Jobs began a searching for partnerships with other companies due to negotiation issues. This poses a threat for Disney, and Disney must make a decision on how to manage this current situation as soon as possible. Through our analysis, we offer five potential decisions that Disney can make regarding this issue. These options include the full-on acquisition of Pixar, continuing the current relationship through renegotiation of a fairer deal, creating strategic alliances with other companies, outsourcing technology of future films, and internal development of computer generated animation technology capabilities in-house.
To assist with the decision making process, we utilized numerous tools and frameworks in order to thoroughly analyze situation regarding the two firms and their external and internal factors. One of the tools we utilized was the Porter’s Five Forces analysis for both of the companies. This allowed us to better understand the industry that Disney and Pixar individually falls under, and the current situations and pressures that the firms face within their specific industry. Aside from external analysis, we also conducted internal analysis for both of the firms. We were able to recognize and pinpoint the similarities and differences between the organizational structure and core capabilities that Disney and Pixar individually operates under, and the synergies that exist between the two firms. Next, we delved deeper and analyzed the benefits and disadvantages of the acquisition, as well as other alternative options as mentioned previously. Finally, we compared the pros and cons for each option and arrived at the best possible decision for Disney regarding its current situation. After careful consideration, the final decision that we recommend for Disney is to go ahead with the full-on acquisition of Pixar. We believe that this is the best option considering the amount of value and talent that Pixar would bring into the firm as the leader in the computer generated animation industry. Considering the amount of success that previous collaborations brought, it is easy to see that the relationship with Pixar is a valuable resource that Disney should not risk damaging. Through the merge, Disney would receive access to Pixar’s top of the line technologic capabilities and talented human resource, while Pixar would benefit from Disney’s access to funding, vast distribution channels, and capabilities to produce merchandise. The other options previously mentioned each contains important flaws, and would not allow Disney and Pixar to fully exploit their synergies while bringing potential threat to Disney in the case that Pixar partners with a competitor.
Aside from the acquisition, we also recommend for Disney to extend a generous offer to Steve Jobs in order to keep him happy as the would-be majority shareholder of Disney, and to keep Pixar employees satisfied and engaged. This could be achieved by ensuring that Pixar and Disney remain two separate entities in terms of organizational structure, protecting the individuality of Pixar artists and maintaining the valuable culture that made Pixar what it is today.
HISTORY AND BACKGROUND
The official Walt Disney Company was created in 1923, when Walt Disney signed a contract with M. J. Winkler. The iconic Mickey was introduced through Steamboat Willis in 1928, and the first...
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