Case Analysis: Pixar
Outline and Grading Guide (150 points)
Choose a case from the textbook for this assignment from the following list.
Case 26 – Pixar
COMPANY NAME, WEBSITE, and INDUSTRY
State the company name, website address, and industry.
BACKGROUND and HISTORY
Briefly describe the company in the case analysis. What is their primary business, who were the officers or key players described in the case study? If the case study company is currently in business, list the company’s current CEO, total sales, and profit or loss for the last year where data is available. Identify key events or phases in the company’s history. Describe the performance of this company in the industry. Visit the company’s website and use https://finance.yahoo.com and/or some other financial search engine to find this data. (15 points)
NOTE: Make sure to use APA citations throughout the paper. The textbook should be cited if it is the source of information. If you are not familiar with APA citation, check out the tutorial APA Guidelines for Citing Sources at the end of the course Syllabus. There are videos to help you with the APA format and business research in the Week 1 Lecture.
ANALYSIS VIA PORTER’S FIVE FORCES MODEL
Analyze the competitive environment by listing the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services, and the intensity of rivalry among competitors in the industry (Chapter 2). Summarize your key points in a figure. (25 points)
How does this company create and sustain a competitive advantage? What strategy from the readings was undertaken by this company? Were they successful? Can all companies use this strategy? How is the strategy affected by the life cycle in the industry? Remember to reference Porter’s generic strategies identified in Chapter 5 of the textbook, THIS IS CRITICAL. (40 points)
Choose two specific strategies from this list.
Related Diversification (pages 206–214)
Achieving Competitive Advantage (pages 256–267)
Entry Mode (pages 267–272)
Entrepreneurial Strategy (pages 292–311)
External Governance Control (pages 340–347)
Linking Strategic Rewards (pages 366–372)
Creating Ambidextrous Organization Designs (pages 383–387)
Leadership (pages 392–416)
Apply them in detail to the organization. Be sure to think strategically and show the results clearly. Use the strategy as a sub-header for each section so it is clear what is being applied. (40 points)
COURSE OF ACTION RECOMMENDED
If you were in a position to advise this company, what strategy would you recommend to sustain competitive advantage and achieve future growth? Be specific and list the steps the company should take for successful implementation of your course of action. (15 points)
What do you think of this case study? Describe what you believe are the lessons learned from this case. (10 points)
When you have completed the paper using the above sections, insert a page break and have a separate reference page. The references should be listed in accordance with the APA guidelines as shown in the tutorial. (5 points)
• Use a title page.
• Font: Use Times New Roman, 12 point.
• Place your name in the upper left hand corner of the page.
• Each section of your paper should be headed by the bolded, capitalized item described above.
• Indent paragraphs.
• Insert page numbers bottom right.
• Paper length should be four to six double-spaced pages not including title page, references, or illustrations and tables.
• Use APA citations throughout the paper. If you are not familiar with APA citation, refer to tutorial, which is contained in the last section of our course Syllabus.
• Include a separate Reference page at the end of the paper.
• Please prepare reference page as follows.
Dess, G., Lumpkin, G., & Eisner, A. (2012). Strategic Management (6e). Boston: McGraw-Hill Irwin.
• Save your paper in the following format: Your last name, initials of your first and middle name, and the company discussed in the case study.
EXAMPLE: If your name is Edward R Jones and you are writing a case study on Google, then the file name for your paper would be jonesergoogle.doc.
• Place the paper in the Dropbox designated by the weekly assignment.
Note that the report is worth 150 points and points are allocated for each section as noted in the outline.
Case 26: Pixar*
When nominations for the Academy Awards were announced in January 2011, Toy Story 3 received nominations for best picture and for best animated feature. This represented the second consecutive film from Pixar Animation Studios that was nominated in both categories. The latest offering from the studio had already been heralded by almost all of the critics as soon as it had been released during the prior summer. It had also become the first animated feature to gross more than $1 billion in theatres worldwide, landing it in the top spot among the highest earning animated films of all time (see Exhibits 1). Although Pixar has not won for the best picture, it has already claimed four Oscars for best animation, which represents half of the eight trophies that have been handed out since the category was added in 2001.
Exhibit 1: Leading Animated Films
Sources: Internet Movie Database (IMDb), imdb.com; and Variety.
The recent string of successful releases—Ratatouille, Wall-E and Up—suggests that Pixar has continued to flourish despite its 2006 acquisition by the Walt Disney Company for the hefty sum of $7.4 billon. The deal was finalized by Steve Jobs, the Apple Computer chief executive who also heads the computer animation firm. Jobs had developed a production and distribution pact with Disney, under which the two firms split the profits that Pixar films generated from ticket sales, video sales, and merchandising royalties. But the deal was set to expire after the release of Cars in the summer of 2006. Disney CEO Bob Iger worked hard to clinch the deal to acquire Pixar, whose track record has made it one of the world’s most successful animation companies.
Both Jobs and Iger realized, however, that they must try and protect Pixar’s creative culture while they also try to carry some of this over to Disney’s animation efforts. Even though Pixar has continued to operate independently of Disney’s own animation studios, its key talent has overseen the combined activities of both Pixar and Disney. As part of the deal, Jobs gained considerable influence over Disney by assuming the position of a nonindependent director and becoming its largest individual stockholder.
In order to ensure that Pixar manages to preserve its free-wheeling entrepreneurial culture, Jobs sits on a committee that includes other top talent from the animation studio, whose key task is to protect its unique approach to making movies. Pixar’s lengthy process of crafting a film stands in stark contrast to the production line approach that has been pursued by Disney. This contrast in culture is best reflected in the Oscars that the employees at Pixar have displayed proudly, but which have been painstakingly dressed in Barbie doll clothing.
Above all, everyone at Pixar remains committed to making films that are original in concept and execution, despite the risks involved. They have begun to make some sequels, but only when they are able to come up with a new and compelling story that can make use of the old characters. However, it is not clear how long Pixar can keep generating hits, given their reliance on a high level of creativity. These concerns have continued to grow since no other studio has managed to generate such an unbroken string of successful films.
Pushing for Computer-Animated Films
The roots of Pixar stretch back to 1975 with the founding of a vocational school in Old Westbury, New York, called the New York Institute of Technology. It was there that Edwin E. Catmull, a straitlaced Mormon from Salt Lake City who loved animation but couldn’t draw, teamed up with the people who would later form the core of Pixar. “It was artists and technologists from the very start,” recalled Alvy Ray Smith, who worked with Catmull during those years. “It was like a fairy tale.”1
By 1979, Catmull and his team decided to join forces with famous Hollywood director George W. Lucas Jr. They were hopeful that this would allow them to pursue their dream of making animated films. As part of Lucas’s filmmaking facility in San Rafael, California, Catmull’s group of aspiring animators was able to make substantial progress in the art of computer animation. But the unit was not able to generate any profits, and Lucas was not willing to let it grow beyond using computer animation for special effects.
Catmull finally turned in 1985 to Jobs, who had just been ousted from Apple. Jobs was reluctant to invest in a firm that wanted to make full-length feature films using computer animation. But a year later, Jobs did decide to buy Catmull’s unit for just $10 million, which represented a third of Lucas’s asking price. While the newly named Pixar Animation Studios tried to push the boundaries of computer animation over the next five years, Jobs ended up having to invest an additional $50 million—more than 25 percent of his total wealth at the time. “There were times that we all despaired, but fortunately not all at the same time,” said Jobs.2
Still, Catmull’s team did continue to make substantial breakthroughs in the development of computer-generated full-length feature films (see Exhibits 2). In 1991 Disney ended up giving Pixar a three-film contract that started with Toy Story. When the movie was finally released in 1995, its success surprised everyone in the film industry. Rather than the nice little film Disney had expected, Toy Story became the sensation of 1995. It rose to the rank of the third highest grossing animated film of all time, earning $362 million in worldwide box-office revenues.
Exhibit 2: Milestones
Within days, Jobs had decided to take Pixar public. When the shares, priced at $22, shot past $33, Jobs called his best friend, Oracle CEO Lawrence J. Ellison, to tell him he had company in the billionaire’s club. With Pixar’s sudden success, Jobs returned to strike a new deal with Disney. Early in 1996, at a lunch with Walt Disney chief Michael D. Eisner, Jobs made his demands: an equal share of the profits, equal billing on merchandise and on-screen credits, and guarantees that Disney would market Pixar films as they did Disney’s own.
Boosting the Creative Component
With the success of Toy Story, Jobs realized that he had hit something big. He had obviously tapped into his Silicon Valley roots and turned to computers to forge a unique style of creative moviemaking. In each of their subsequent films, Pixar has continued to develop computer animation that has allowed for more lifelike backgrounds, texture, and movement than ever before. For example, because real leaves are translucent, Pixar’s engineers developed special software algorithms that both reflect and absorb light, creating luminous scenes among jungles of clover.
In spite of the significance of these advancements in computer animation, Jobs was well aware that successful feature films would require a strong creative spark. He understood that it would be the marriage of technology with creativity that would allow Pixar to rise above most of its competition. To get that, Jobs fostered a campuslike environment within the newly formed outfit similar to the freewheeling, charged atmosphere in the early days of his beloved Apple, where he also returned as acting CEO. “It’s not simply the technology that makes Pixar,” said Dick Cook, president of Walt Disney Studios.3
Even though Jobs has played a crucial supportive role, it is Catmull, now elevated to the position of Pixar’s president, who has been mainly responsible for ensuring that the firm’s technological achievements help to pump up the firm’s creative efforts. He has been the keeper of the company’s unique innovative culture, which has blended Silicon Valley techies, Hollywood production honchos, and artsy animation experts. In the pursuit of Catmull’s vision, this eclectic group has transformed their office cubicles into tiki huts, circus tents, and cardboard castles, with bookshelves that are stuffed with toys and desks that are adorned with colorful iMac computers.
Catmull has also been working hard to build upon this pursuit of creative innovation by creating programs to develop the employees. Employees are encouraged to devote up to four hours a week, every week, to further their education at Pixar University. The in-house training program offers 110 different courses that cover subjects such as live improvisation, creative writing, painting, drawing, sculpting, and cinematography. The school’s dean is Randall E. Nelson, a former juggler who has been known to perform his act using chain saws so students in animation classes have something compelling to draw.
It is such an emphasis on the creative use of technology that has kept Pixar on the cutting edge. The firm has turned out ever more lifelike short films, including 1998’s Oscar-winning Geri’s Game, which used a technology called subdivision surfaces. This makes realistic simulation of human skin and clothing possible. “They’re absolute geniuses,” gushed Jules Roman, cofounder and CEO of rival Tippett Studio. “They’re the people who created computer animation really.”4
Becoming Accomplished Storytellers
A considerable part of Pixar’s creative energy goes into story development. Jobs understands that a film works only if its story can move the hearts and minds of families around the world. His goal is to develop Pixar into an animated movie studio that becomes known for the quality of its storytelling above everything else. As he put it, “We want to create some great stories and characters that endure with each generation.”5
For story development, Pixar relies heavily on 43-year-old John Lasseter, who goes by the title of vice president of the creative. Known for his Hawaiian shirts and irrepressible playfulness, Lasseter has been the key to the appeal of all of Pixar’s films. Lasseter gets passionate about developing great stories and then harnessing computers to tell these stories. Most of Pixar’s employees believe it is this passion that has allowed the studio to ensure that each of its films has been a commercial hit. In fact, Lasseter is being regarded as the Walt Disney for the 21st century.
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Case Analysis: Pixar