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The Walt Disney Company and Pixar Inc. Case Solution & Answer

The Walt Disney Company and Pixar Inc.

Partnership

The partnership is also possible for Disney with Pixar or with other studios. But in this case, Disney pays half of its profit to other partners.

Alternatives for the Pixar

Here are some alternatives which Pixar can adopt if they are not want to Acquire by Disney.

New Contract with Disney

If the Acquisition with Disney is not possible Pixar can make a new contract with Disney. It can be difficult because again coming in a new contract with the same company can create excuses but Pixar can generate revenue from Disney through this new contract.

Licensing:

Pixar can adopt the alternative of licensing. Pixar can allow the licensee to use the intellectual property and animation ideas to Disney or any other studio of United States by demanding a huge package of profit.

Franchising:

Pixar can distribute its products through franchising. This is also a very good international business strategy that generates good revenue for Pixar.

Value of Acquisition

Acquisition creates value more than the other alternative. The combined value is much more than any separate value. Combined companies have two different ideas regarding any single problem which creates innovation and credibility in products. Different expertise employees make the management more effective in decision making and problem-solving. Disney needs to own Pixar because the animation team of Pixar is an expert in that field and the Pixar association has to experience in the movies industry.  In the year 1937 when Disney launched the Snow White movie, Pixar launched 5 movies which were blockbuster movies and earn about $350 million. (Joo, J. S. (2020). Pixar uses the 3D animation from its system without the help of any external party. The acquisition of Disney with Pixar create again for both parties. Disney gets the competitive edge and more revenue with Pixar’s technology.

Pros and Cons of Acquisition in student Perspective:

The advantages and disadvantages of Acquisition according to the student point of view are enlisted below.

Advantages

  • Chance for generating power in the market.
  • Reducing every cost, especially labor cost, training, and appraisal costs.
  • Increase in the level of income.
  • Time management
  • Production level increases.

Disadvantages:

  • Employees feel rough organizational culture.
  • Lacking in differentiation
  • Similar vision and mission statement
  • The inside outcome can be reduced in the association.

Pixar Shareholder perspective about Acquisition:

Shareholders of Pixar voted for the acquisition with Disney. All the shareholders want that company must come under the same roof as Disney as that is the beneficial decision for Pixar. The amount was about $7.5 billion of shareholders they all agree on one decision. The prime shareholder was the chief executive officer of Pixar having 7% of the shares.

Two tests of Value Creation:

  1. Better off test
  2. Ownership test

Better off Test:

We analyze the better-off test by checking the revenue of Disney and Pixar which they generate from their movies in 2003. Pixar earns revenue of an average of $1025 million from their 5 movies. And Disney earn operating income in 2003 was $3174 million.

As shown in the results the earnings of Disney is much greater than that of Pixar and every year Disney earns more and more revenue that’s why Disney is the best buyer for Pixar.

Exhibit 03 Disney and Pixar which has the more value

Ownership Test:

Disney owns Pixar on the basis that Disney has limited liability, strong financial health, brand image, valuable market share, experienced employees, and strong marketing tools. Disney owns Pixar which will create a competitive edge for the organization, increase the number of products and also get an advantage from Animation technology of Pixar.

And if Disney is not acquiring Pixar because Disney has the other alternatives of the joint venture, partnership, strategic alliances, and merger and licensing. These all projects are less worth than the Acquisition.

Conclusion:

The current situation of Disney is very good. The financial condition of the company is also strong the Disney can easily acquire Pixar. The animation technology of Pixar is very competitive whereas the brand value and marketing strategies of Disney are strong in the market. Disney and Pixar both are beneficial from this acquisition but mostly the value of Pixar increases. The Alternatives for Disney are also available but the acquisition has more profit in long run as compared to other alternatives.

Recommendations:

By considering the advantages and disadvantages of Disney and Pixar I recommended that Pixar should be acquired by Disney. In this Acquisition, both the studios must manage the diversity of the organization and make good relations with employees of both studios. Because the employees are the valuable assets of an organization. Disney must manage the revenue in the way from which the situation of concession with Pixar never faced. For gaining and retaining competitive advantage I recommend acquisition rather than other alternatives……….

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