The acquisition of Pixar Computer Animation Company (Pixar) by The Walt Disney Company (Disney) in 2006 proved to be a leading example of successful mergers in the business world. The two companies had struck a strategic partnership for 15 years before the merger, where they worked together on projects splitting the production costs and revenue. At the same time, Disney was allocated the role of distribution. The conflicts that emerged fueled by revenue allocation were solved by the $ 7.4 billion Pixar acquisition deal executed by Mr. Bob Iger, and Disney Pixar Animation Studio was born.
Effectiveness of Pixar’s Leadership
Pixar’s leadership’s effectiveness can be measured by highlighting the cultures engraved in the company’s employees’ work ethic. The core belief of top management was that people should always come first. The perks of such a company value are that it ensures the leadership’s responsibility is to protect the employees from the pursuance of excellence at all costs. The belief implies that the company’s sustainability stems from the management’s ability to mitigate the risks incurred by staff.
The effectiveness also emerges from the management favoring a brain trust strategy rather than the traditional corporate structure of top-down leadership. The executives preach the value of self-expression and diversity in thought as contributors to creativeness and innovation. This is best achieved by involving all employees in the discussion process despite their rank and eliminating obstacles that diminish the marketplace of ideas. Different opinions contribute to the overall quality of the film due to the different perceptive being outlined during the creative process. This leadership strategy aimed at motivating staff to be successful in their areas of expertise (Kremer, Villamor, and Aguinis, 2019). The company’s unwritten rule is that each employee’s success is based on the team members’ success, thus emphasizing collaborative work towards the organization’s goal
Pixar’s competitive advantage is its level of product differentiation in terms of innovation in film making. The technological advancement that gave the company a competitive edge over its rivals was three-dimensional (3D) computer-generated technology (Smith, Brown and Summers, 2018). This technology greatly improved viewer experience by producing films incorporating real life-like animations. The innovation propelled the company to being the most sought in the animation industry due to its superiority over the existing two dimensional (2D) animation technology being used by its rivals.
The 3D technology also resulted in reduced production time and lower labor intensity compared to the hand drawing film production used by rivals. The company’s technological advancement meant that human capital also contributed to its competitive advantage. The company emphasized hiring a highly talented pool of employees with an eye for innovation, thus positioning itself ahead. Pixar’s top executives were also innovators furthering the company’s vision of being leaders in technology use in the industry. Visionaries Steve Jobs and John Lasseter also contributed to the competitive advantage in intellectual property advancement to the firm.
Potential Challenges to Strategy
The innovation strategy implemented by Pixar is also not immune to challenges emanating from the market. With the innovative projects being released to the market, a challenge arises when it is difficult to predict the customer acceptance of the product. The estimated success of the new products can dwindle as they rely heavily on market acceptability. The reluctance of the audience to accept the new products leads to losses to the company, mainly due to the time and resources spent on the project.
Pixar is undoubtedly the king of animated movies producing blockbusters with each project. The company can continue rising even further and should explore growth options available such as market penetration and market development. The industry’s primary focus is the production of films; thus, Pixar should take advantage of this market niche by producing a series. This market penetration strategy is aimed at the existing customer base by offering them new attractive packages.
Market development aims at exploring new markets. Pixar’s film’s primary consumers are children and are often characterized by funny clips, leaving out a large segment of the market. The company should pursue a market development strategy by producing films that relate to contemporary issues in the world. This diversification into real issues animated films can be a game-changer in the industry as it can integrate both the funny clips and contemporary issues into a single film.
Porters Five Forces Model
This business model is a managerial tool used to analyze the external industry environment that impacts business performance. Disney’s external environment consists of mass media, theme parks, and entertainment industry. Porter’s five forces model analysis is based on industry rivalry, the threat of new entrants into the market, threat of substitutes, the bargaining power of buyers, and suppliers’ bargaining power.
Competition is high from rival firms in all revenue-generating departments; media industry and theme park business. The main competitors in the media industry are Time Warner Company and 21 Century Fox, while there are many established theme park competitors. The competition is based on external factors such as the many highly aggressive firms in the market and moderate product differentiation. Competing firms’ rivalry is by way of producing high-quality films that threaten the profitability of the company. However, the company still holds a strong presence in the market influenced by the brand’s reputation and brand loyalty significantly contributed by its rich cultural heritage dating a century ago.
The threat to new entrants in the market is low. The industry incorporates established conglomerates such as Disney, making it virtually impossible for new firms to enter. This is due to the high capital costs and technological advancements required to establish a formidable company to rival Disney. The cost of brand development and human capital is also high, further restricting new entrants.
The threat of substitute products is moderate. The firm understands the needs of the customer, thus provide high-quality products that reduce the risk of switching products. The consumers are also brand loyal, thus prefer products associated with the company. However, rival companies are catching up in terms of technology and are releasing quality projects rivaling those of Disney. The popularity of its theme parks rivals competitors, thus having a significant market share (Georgens, 2018). The moderate threat signifies that the company should enact policies that ensure high-quality products to increase its foothold.
The bargaining power of buyers is low influenced by the brand’s popularity and its differentiation in terms of products. The company has developed the brand to a household name, thus boasting loyal consumers who are less likely to switch to a rival product due to price differentiation. The increment of theme park fees shows Disney’s commanding presence as it was without a corresponding sharp decline in the number of attendees. The traditional brand loyalty is a significant asset in influencing the low bargaining power of buyers.
The bargaining power of suppliers is moderate due to many suppliers and a variety of suppliers. The industry dynamics are designed such that suppliers have moderate bargaining power. Disney suppliers include technology and media brands that are well known; thus, switching is not easy due to the scarcity of the same high-quality products from trustworthy brands.
Georgens, L. (2018). The magic of Disney’s parks and resorts: reasons for its sustainability.
Kremer, H., Villamor, I., & Aguinis, H. (2019). Innovation leadership: Best-practice recommendations for promoting employee creativity, voice, and knowledge sharing. Business Horizons, 62(1), 65-74.
Smith, S., Brown, N., & Summers, S. (Eds.). (2018). Toy Story: How Pixar Reinvented the Animated Feature. Bloomsbury Publishing, USA.