The entertainment industry has become extremely competitive in recent years, particularly, the production of animated film movies. Disney has taken the lead in the industry because the value they have created in the film world through diversification, the use of emotional imprint that has ensured customer loyalty and creating content that is family-friendly among other key influences have significantly impacted on its popularity. Pixar, a close competitor of Disney, is well renowned for the use of computer graphics imagery in their movies, particularly the use of 3D. Pixar has competed favourably with Disney mainly because they are able to operate around the edges of relationships, through developing their characters to have more depth, look more authentic and real to the audiences. The ability of Pixar to develop its own propriety software, one that could not be purchased anywhere else in the market made Pixar more competitive in the market. In 1991, Disney and Pixar signed a deal to produce the first of three full-length 3D CG animated movies. Disney full funded the production costs of the movie in return for owning the movie rights. Together, they produced the highest-grossing film released in the United States that year, Toy Story. The two film giants have much to benefit from a partnership.
From a personal perspective, both Pixar and Disney have a lot to gain from an exclusive relationship; several factors can attribute this. Firstly, there are many reasons why companies have strategic partnerships. In Disney and Pixar’s case, together, they generated over $1.5 billion in revenue. This alone strengthened their competitive position in the animation film world. The two firms can work together with Pixar providing technology to create 3D films, and Disney, on the other hand, can use its marketing power to provide a distribution channel for Pixar. Besides the two firms, strategic alliance through an exclusive relationship will give them a competitive advantage, especially since both firms have their temporary competitive advantages. Thus the relationship will be mutually benefiting compared to a partnership with other competitors like Dream works. Besides, the exclusive relationship will ensure that both firms share resources making production costs more affordable and profitable.
Moreover, a partnership will increase their market power and thus, they will be able to lower risks. Besides, Pixar and Disney will benefit from industry consolidation, lower costs and increased differentiation in the long run (Fornaciari). Operating independently is, however, not great particularly because both companies have different corporate structures with Disney believing in a top-down management system. At the same time, Pixar applies a more bottom-up type of management; this different company cultures will provide different results making the two companies competitors. Besides, issues relating to the balance of power can push the two giants to operate independently in the long run.
I believe for the exclusive relationship to be more valuable, Disney must acquire Disney mainly because the firm still uses 2D hand drawings as opposed to Pixar’s 3D computer software. Therefore it would not be wise for Disney to pursue the technology alone. This realization is based on the build-borrow-buy framework, which deals with analyzing the internal resources of an organization; therefore, Disney is low on innovative technology compared to Pixar. Another reason the Disney should acquire Pixar is because of their previous close relationships while working on Toy story. Besides, both firms have competitive advantages that influence the decision of Disney to buy or merge with Pixar. The business culture and relationship between Disney and Pixar can create successful film and beat new competitors in the firm, besides, acquiring the Pixar for Disney will see to it the two organizational cultures continues(Disney acquisition of Pixar). Disney being a big brand name in the film sector makes it easier to acquire Pixar. Therefore based on the history and notable works and films between the two firms, it is wise for Disney to construct excellent relationship rather than develop a new contract. Through the acquisition, both companies will be able to collaborate build on their strengths and work on their weaknesses. Overall, the “better off” test proves that Disney and Pixar working together adds value creation to both businesses.
For the acquisition process to be successful, Bob Iger and his team need to organize the business and create a combined entity. He can do this by establishing shared goals and communicating effectively. They also need to keep the key people from both Disney and Pixar and commit to one culture that will work well for both companies. Bob Iger and his team need to make sure that they are setting clear objectives and visions, so they do not miss any targets.
In conclusion, the exclusive relationship and acquisition of Pixar is excellent because both companies will be able to maintain their core competencies and benefit fully from the relationship. Besides, the relationship will support the future growth and realization of full potential strengths through eliminating potential competitors by continuously creating new films and sharing less percentage of new projects. The exclusive relationship is, therefore, a realistic way for Pixar to expand and attract new customer types under Disney.
Work Cited
“Disney’s Acquisition of Pixar.” Disney’s Acquisition of Pixar|Business Strategy|Case Study|Case Studies, www.icmrindia.org/casestudies/catalogue/Business Strategy/BSTR203.htm.
Fornaciari, Jacopo. “Disney & Pixar Acquisition: Case Analysis.” Academia.edu, www.academia.edu/9364657/Disney_and_Pixar_Acquisition_Case_Analysis.