PIXAR CASE

Throughout the case study, it is easy to find that Pixar has various tangible and intangible
elements of its working environment that makes it unique as an organization. There are also
some main key factors of its organizational culture and business model that set it apart from
other companies in the motion picture industry.
Now starting the first thing, Pixar has the qualified Human Resource which is an utmost
valuable asset to the company. By aiming to hire the best and the brightest people and
maintaining continuous innovations, Pixar positioned itself ahead of the competition,
especially when combining the relationship between art and technology. Most of its
technical employees are high level of knowledge and expertise as PhDs. This intellectual
asset is a soft asset contributing to Pixars competitive advantage in the industry.
In addition to its valuable human capital, Pixar focused on creating a culture of innovation
and collaboration. The blending of the Creative department and Technical department was
very crucial that could not just happen over a night. But it was the supportive trusting and
team-oriented culture that develop their collaboration when working in the same
organization. The below communication diagram reflects that point at Pixar.

(Source: Diagram of open communication at Pixar adapted from the Case Study)
Moreover, the top management encourages the employees by cultivating an open
communication as Pixar followed the two other basic operating principles: Open
communication and freedom to share ideas. These principles help to create an
egalitarian environment in the organization. Pixar encouraged the whole team to work
together in order to create a superior end product. If a team ran into an issue, the creative
head and a group of directors (as the creative brain trust) would be called to participate in

Page 1

a brainstorming discussion on how to improve or problem solving. Finally, the decision on

what to do was left to the team. This is an example of a bottom-up approach. That makes
their highly valued soft asset become more freedom, effective, innovative and loyal.
Needless to have employee contracts, Pixar still retained its employees year after year.
Employees will be assigned to work on research and development (R&D) projects if there
was no work needed for them in a film/movie. As employees are hired without blinding
contract, each Pixar employee would be harder working, happy and proud to be a part of the
company. By doing that Pixar possessed the huge intangible brand loyalty and it meant the
company would not be at risk of losing its talent. This brand loyalty is one of elements that
strongly offer a competitive advantage to the Pixar, comparing to other companies.
About the workplace design, Pixars office is not a cubicle, but rather a habitat-working
environment that its employees can decorate their workplace. Pixar also provides an opened
space, lounges, and game areas. Clearly, Pixar design the working environment that helps
employees feel more comfortable, funny and encourage the creativity of the employees.
This can be seen as the tangible element of Pixars working environment.
Another element is that Pixar has three proprietary (patented) technologies such as
RenderMan, Marionette, and Ringmaster softwares. These programs gave Pixar the
capability to easily change a scene or a character all through mathematical models. This
capability is really a huge time saver and subsequently a cost advantage. Therefore, the
quality of the films produced by Pixar was unmatchable. This also highly contributes to
Pixars competitive advantage in creating animated films.
As analyzed and discussed above, we can see clearly that three major capabilities (human
capital, collaborative culture, technological resources) are key aspects of Pixars
organizational culture and business model that set it ahead of other companies in the motion
picture industry.
In comparison to Pixar, Disney is a huge corporation in the industry for a long time. Disney
has a wide distribution channels and partnerships. Disney also enjoys benefits due to its
large size and large source of revenue. Disney has also a lot of valuable knowledge on the
movie industry. In addition, Disney has a large fan base and enjoys strong brand loyalty and
following from customers all over the world.

Page 2

Although having a large base of talented human resources is the similarity between Disney
and Pixar, they have also some differences especially in its own organizational culture.
Firstly, Disney is the big company that has a hierarchy management style. It can be
identified as high Power Distance. With a distant top management, the burden falls on the
middle managers and lower levels. Disney follows the top-down approach inside the
workplace, where managers tend to enforce the culture. It is considered a large bureaucracy.
In contrast with Pixars bottom-up structure as discussed above, top management
encouraged employees for innovative thinking.
Secondly, Disney is used to making its films on a tight schedule, and focuses on
profitability rather than the quality of the image itself. As the company follows a
hierarchical structure, the important decisions usually come from top-level management.
Working at Disney, employees has a lot pressures from the top management like: how to
keep the production schedule on track, what need to report, ask for permission, etc They
did not have a full power to decide anything important, or generate innovative thinking In
contrast, Pixar focuses more on the quality of its films, instead of focusing on revenue and
making more profits.
With no employee contracts, Pixar kept its employees for long time working. However, at
Disney, the top management usually controlled the decisions and oversaw the entire
production process and would hire and fire employees based on project demand. So, the
intangible brand loyalty is extremely difficult to imitate that offering a competitive
advantage to Disney, comparing to what Pixar has done successfully.

As discussed in the case study, Disney completed the acquisition of Pixar on May 5, 2006
for US $7.4 billion. The merger allows Disney and Pixar to exploit both financial and
organizational synergies.
From the financial perspective, the merger would increase Disneys stock price. It would
eliminate their argument regarding production and distribution fees. Financial performances

Page 3

would improve, driven by Pixar with its high growth rate, new improved films, and other
sources of revenue increase such as merchandising.
From an organizational aspect, the acquisition allows Disney and Pixar to concentrate on
individual strengths, which will turn into increased productivity and generate more sales.
Disney has good stories, knowledge of the merchandising industry, and strong distribution
channels while Pixar has the advanced technology and creativity. Both parties can market
its production together and get more profit. They could also exchange the valuable and
talented human resources that enable them to develop improved content and continue
producing top hit motion pictures in the future (like Toy Story, Finding Nemo, The
Incredibles in the past).
In addition, the merger brings blending cultures for both Disney and Pixar with some
outstanding characteristics described as follows:
-

The combined Disney-Pixar company is operated by Ed Catmull as the President of

the company, and John Lesseter as the Chief Creative Officer.

A 15-year partnership has created a good collaboration between Pixar and Disney
teams.

The acquisition led the collaboration without barriers from different companies with
different sets of shareholders.

The combined companies can focus on the same goal that is to delight the millions of
people worldwide especially family audiences with creative stories, characters, films
and theme parks.

Disney-Pixar can develop its strategic priorities.

The companies can benefit from both cultures focused on creativity and innovation
in the entertainment industry.

The merger will also bring great benefits to both parties as well as their stakeholders. This
can be identified as follows:
For Disney:
-

Disney can acquire core strengths of Pixar in producing computer motion pictures
that appeals to the customers worldwide.

Decrease competition to Disney. Especially, Disney cannot compete in term of

producing the animations that attract customers as much as Pixar. Meanwhile Pixar is

Page 4

the large player in the industry. Therefore, merging with Pixar will gain benefits to
Disney greatly.
-

Disney can increase its revenue by merging with Pixar. Disney has been declined in
the recent years. The investors begin shifting their interest in more rapid growth in
the media industry. Merging with Pixar will help them gain more stock price. Disney
can also get more profit from merchandise, theme park using the characters from
Pixars animation.

Disney access to technology. This is because traditionally Disney still uses handdrawn animation which was no longer successful. However, Pixar was involved in
developing computer generated imaging technology.

For Pixar
-

Pixar can focus on its core strengths in producing the computer animation and don't
have to invest in production line for making merchandise and home entertainment.
When both can concentrate on their strengths, they can increase the productivity and
in turn generate more sales.

Pixar also gain the benefit of being able to produce the other lines of products such
as apparels, toys, and so on. Because, Disney has the various lines to produce these
merchandises and have many distribution channel, Pixar will also gain from that
point.

For stakeholders
-

This meger will enable Both Disney and Pixar to collaborate without the barriers that
comes from producing the product from two different companies with different
shareholders and management teams.

In term of the revenue, stockholders get the higher share price from merging between
two parties.

In term of human resource, the team up of two big animation production companies
will enable better human resource. They can exchange the valuable human resource
between Disney and Pixar, which enables them to do better, produce more top hit
motion pictures.

Page 5

Moreover, there are also about 20 key strengths as advantages after the merger of Disney
and Pixar which detailed below:
1. Combine successful entertainment companies.
2. Produce increased profit.
3. Expand market share in global entertainment world.
4. Steve Jobs (a highly successful innovator) now a majority stakeholder of the
Disney/Pixar creative and visionary leadership team.
5. Bob Iger very experienced and successful at merging large companies.
6. Disney Company uses former Pixar characters and films as springboards (start-ups)
for new but related content in theme parks, merchandise, and television sales.
7. Productive 15-year partnership that existed between Disney and Pixar provides a
strong foundation including the collective spirit of creativity and imagination.
8. The move reflected Disneys desire to infuse the firms internal animation resources
with those from a proven animation company.
9. Provides ability of the two firms to combine their corporate cultures without losing
Pixars creative capabilities.
10. "Disney is the only company with animation in their DNA, and the only company
that we think has this incredible collection of unique assets likes the theme parks,
that are very attractive to us as well," Steve Jobs said on a conference call with
investors. "They're the only company who has Bob Iger, who we like a lot and have
grown to trust."
11. Both companies enjoyed a great exchange of talent, resources and learning.
12. The addition of Pixar significantly enhanced Disney animation, which is a critical
creative engine for driving growth across Disneys global businesses.
13. Pixars creative driving force, John Lasseter, infused Disney with a fresh spark and
creative spirit.
14. Disneys shares have significantly outperformed those of most of its competitors.
15. Disney and Pixar making the integration of two innovative cultures work- focuses on
the delicate task of uniting two unique cultures.

Page 6

16. The merger will have creative talent that will be difficult to match in the
entertainment industry because as a very strong international brand, the Disney-Pixar
combination will attract even more talent.
17. Reputation As a result of the merger Pixar had the best reputation in the business.
Its new relationship with Disney means Disneys reputation would provide synergy.
18. Competitive aggressiveness Now that Pixar is part of Disney, CEO Iger used the
combined assets of both organizations to attain competitive superiority.
19. Provides increased shareholder revenues with combined companies.
20. Selling price good for Pixar- reasonable for Disney at $7 billion plus.
However, there are also some potential challenges after merger such as:
First of all, Pixar and Disney cultures are very much different that could result in a clash.
Disney would be very carefully to consider either integrating Pixar into its organizational
culture or allowing Pixar to operate independently. The former option would be meant that
Disney has to disregard Pixars unique culture. Doing that way, Disney may encounter the
risk of losing talented human resource as keeping Pixars employees committed to Disneys
vision would be challenging.
Secondly, Steve Jobs is not an easy person to work under him. Working with him is also
identified a challenge to Disneys top management.
Possible plan of action
-

Disney should allow Pixar a fair right of autonomy and protect its work culture as it
is the main success factor of Pixar. This can also be achieved structurally by treating
Pixar as a separate subsidiary of Disney.

Disney must also retain the Pixars brand in order to protect its distinct identity and
to create a sense of association.

Disney must accept a gradual organizational shift to being more collaborative in

order to foster smoother integration with Pixars work environment. This will retain
Pixars talented employees and get them envision in the firms vision.

Disneys top management should do clever negotiation with Steve Jobs and offer the
fair deal in term of his ambitious vision and desires.

Page 7

By doing that, we do hope Disney and Pixar will overcome the challenge and become the
strongest corporate in the entertainment industry for a long future.

Page 8