Walt Disney Pixar Case Analysis
Lauren Patterson
October 7, 2013
Strategic Management 5301
Walt Disney-Pixar Analysis
The Walt Disney-Pixar merger carries a number of convincing advantages for Disney, but Pixar shareholders should be less enthusiastic about such a deal. Pixar’s resources and capabilities have set a standard that is extremely difficult to imitate. Through its highly talented employee pool, culture of creativity and collaboration, and proprietary 3D computer animation software, Pixar has created a competitive advantage in the animation film industry that yielded average total box office sales of $538 million with just six movies. Pixar shareholders should be wary of the potential breakdown of these resources and capabilities, which in essence are its core competencies. While a merger could mean more dollar signs for Pixar, it is more likely to result in the end of a firm whose resources and capabilities lend an advantage in the animation film industry. A renegotiated equity alliance that gives Pixar the chance to earn more than 40% of total profits of a film versus Disney’s 60%.would be a better strategic option for
Pixar.
Following the VRIO framework, Pixar’s capabilities help exploit opportunities to create value or neutralize threats from the environment. Pixar’s human capital is an extraordinarily valuable asset to the company. With an emphasis on hiring the best and the brightest (most of its technical employees have
PhDs) and maintaining a close eye on innovations in the academic world, Pixar positioned itself ahead of the competition when it came to the relationship between art and technology. Because of this operating principle that Pixar followed, the company stayed ahead of the curve and used the constant infusion of better technology to its advantage. This intellectual asset, a soft asset, is better suited for an equity alliance versus a merger. Soft assets largely involve people; studies show that employees of acquired companies become unproductive due to a feeling of
October 7, 2013
Strategic Management 5301
Walt Disney-Pixar Analysis
The Walt Disney-Pixar merger carries a number of convincing advantages for Disney, but Pixar shareholders should be less enthusiastic about such a deal. Pixar’s resources and capabilities have set a standard that is extremely difficult to imitate. Through its highly talented employee pool, culture of creativity and collaboration, and proprietary 3D computer animation software, Pixar has created a competitive advantage in the animation film industry that yielded average total box office sales of $538 million with just six movies. Pixar shareholders should be wary of the potential breakdown of these resources and capabilities, which in essence are its core competencies. While a merger could mean more dollar signs for Pixar, it is more likely to result in the end of a firm whose resources and capabilities lend an advantage in the animation film industry. A renegotiated equity alliance that gives Pixar the chance to earn more than 40% of total profits of a film versus Disney’s 60%.would be a better strategic option for
Pixar.
Following the VRIO framework, Pixar’s capabilities help exploit opportunities to create value or neutralize threats from the environment. Pixar’s human capital is an extraordinarily valuable asset to the company. With an emphasis on hiring the best and the brightest (most of its technical employees have
PhDs) and maintaining a close eye on innovations in the academic world, Pixar positioned itself ahead of the competition when it came to the relationship between art and technology. Because of this operating principle that Pixar followed, the company stayed ahead of the curve and used the constant infusion of better technology to its advantage. This intellectual asset, a soft asset, is better suited for an equity alliance versus a merger. Soft assets largely involve people; studies show that employees of acquired companies become unproductive due to a feeling of
Cited: Alcacer, Juan, David Collis, and Mary Furey. “Walt Disney and Pixar: To Acquire or Not to Acquire?” Harvard Business School. #9-709-462 January 2010. Dyer, Jeffrey H., Prashant Kale, and Harbir Singh. “When to Ally & When to Acquire.” Harvard Business Review. July 2004. Prahalad, C.K. and Gary Hamel. “The Core Competence of the Corporation.” Harvard Business Review. May – June 1990.