Pixar Competitive Background in Animation Case study Summary: Harvard Strategic Management
-Naga Rakesh Chinta
This case study analyses and differentiates the merger and acquisition strategy for the companies of Disney and Pixar, In the first section, you will find the brief analysis of the market share and competitor overview of the Animation, production and CG industry . In the next two sections, the detailed analysis of the companies Disney and Pixar are considered with respect to the acquisition regarding the view of each firm respectively. The fourth section explains complementary and counter-arguments and an analysis of a strategic merger and acquisition proposal for each company respectively. The final section: conclusion, interpretations, assumptions and suggestion showcase the final thoughts interpreted through the strategic merger and acquisition analysis.
Animation market analysis and prominence:
With the evident box-office hits of animation and 3D-Computer graphic films namely Toy story, Finding Nemo, there was a sudden competitive rise in the CG industry as a whole, production companies fought internal battles in-order to dominant the market. Pixar was one of the top contenders in this competitive market, followed by DreamWorks. Disney had a few box-office hits in 2D animation during this period of 2D animations: like snow white, 1934; but, was struggling to keep up with the technological computer rendering production studios, this is where the conflict arises and raised the argument: whether Disney should acquire Pixar or not. With the event of having a limited 5-film partnership, is it in Disney’s best interest to acquire Pixar? Will Pixar’s freedom and unchained creativity fit and be complementary to Disney’s governance or will be do more harm than good? This is the present dilemma in this case-study: Also, whether Disney has to acquire Pixar in-order to achieve competitive market advantage?
Overview of Pixar’s strategic background:
Pixar is one of the few studios which has successfully broke into the animation market after snow white release in 1937, It was an achievement by itself to secure consecutive box office hits, its first five animation films grossed over $350 million each putting pixar into one of the market leaders in animation. Due to the several reasons discussed here, Disney was competitively compelled to acquire pixar. By 2005, Pixar has developed 100 films, 44 out of these won Oscars in visual effects with the credit going to Renderman, with led to a total of 20 academy awards with prestige.It also had commercial success with many of its short films and commercials winning Oscars such as Tin toy, Geri’s Game.
Pixar had three proprietary technologies : RenderMan, Marionette, and Ringmaster. Pixar has been a powerful contender in the field of 3D animation productions in the film industry, one of the reasons for it’s effective advantage is due to it’s lead in technology which promotes inclusive creation of the 3D rendering which most of the market has no reach to for at least a few years.It was also claimed by Founder, Steve jobs: “We have 10 years of proprietary software systems that you cannot buy anything close to in the marketplace. You have to build them yourself.” Which adds to the fact that Pixar had technology in that field which surpasses Disney in a intuitive manner. Pixar was built with a foundation of Computer science, ex-disney employee George Lucas passionate for animation seeking betterment of the industry, joined Steve jobs in 1986 and created Pixar. Though during the initialization pixar struggled with funding and acquiring the technology to produce high CG films, they came to a stand as time passed.
Pixar’s self developed technology helped animators to manipulate thousands of motion control points within a single character, this allowed the resuage of animated images, which saved an enormous amount of time, human resources and reduced the competitive pressure from from the market. This allowed pixar to create some of the best grossing movies henceforth, namely Toy Story with a limited staff of 110 when compared to other Animation studio staff strengths of 500 plus employees working on a single film.This resulted to implement and characterize the saved time into focus of story development and fine tuning the visual details, henceforth Disney saw a competitive advantage in acquiring pixar.