PIXAR ANIMATION STUDIOS CASE Study solved: (Dess, Lumpkin & Eisner)
BACKGROUND:
Pixar emerged as a successful brand name in the animation industry with the release of hits like Toy-story and Cars. With its long trail of blockbuster animation movies, Pixar has acquired the distinct status of a leading animation company. The brand had originated from the computer division of the Lucas Films. Ed Catmull was the head of the division. Steve Jobs bought it, naming it Pixar. He established it as a separate company. Since Jobs found out Pixar and gave it its independent identity, Pixar has come a long way and given us several matchless hits.
Disney acquired Pixar for 7.4 billion in the year 2006. Bob Iger was the CEO of Disney. However, Jobs feared that the creative culture of Pixar was going to be diluted after the acquisition. Bob Iger was already concerned in this regard. To ensure that Pixar’s creative culture could be sustained, Pixar was allowed to operate as an independent entity. Some key people from Pixar were assigned to manage the joint operations of Pixar and Disney.
Pixar’s releases have mostly been highly successful and grossed enormous sums at the box office. Toy story (1995) generated $362 million, and Toy Story 3 (2010) $1064. John Lasseter (Chief Creative Officer, Pixar and Disney) was with Pixar for a long time. Pixar’s record mostly remained flawless except that there were a few minor deviations here and there. In 2014 Disney reported an increase of 8% in its revenues in its quarter four earnings report. Revenues had touched $48.8 billion. Net income in 2014 had also increased 22% to a record $7.5 billion. EPS in the previous year was $3.38 which increased 26% to a record $4.26 compared (Walt Disney Company, 2014).
PORTER’S FIVE FORCES ANALYSIS OF PIXAR:
- Bargaining power of suppliers:
Pixar is a technology rich enterprise. In terms of engineering and human resources too, it has talented people on-board. Overall, Pixar is quite self-dependent, which reduces the bargaining power of its suppliers.
- Bargaining power of customers:
The bargaining power of customers is low to moderate. Pixar has a huge customer base. and its customers love the rich quality of its movies. Its large customer base is also a reason behind its huge revenues. Very few competitors can provide similar quality and experience. Due to these factors, the bargaining power of the customers is low.
- Threat of new entrants:
Pixar is a company entirely based on technology and talent. So, any new entrant would need to invest heavily in technology as well as human resources. Not just this, the large network of distributors as well as the marketing efforts, all will require a lot of investment and are difficult to imitate. Hiring skilled and experienced professionals and paying them is also an area that requires major investment and efforts.
Building a sustainable competitive advantage takes time. So, the barriers to the entry of new players are high. The result is that the threat of new entrants remains low. Moreover, the challenge posed by the likes of Disney and Pixar is impossible to survive unless one has a competitive edge in terms of technology and human resources.
- Threat of substitutes:
Pixar is unique in terms of its quality and technology. Its unique quality of animation cannot be substituted by the products from other brands. So, the threat of substitutes is also very low. Its new releases are eagerly awaited by the customers.
- Industry Rivalry:
Disney has already acquired most of the important brands in the animated movies industry. This has reduced the competition for Pixar. Very few competitors like Dream Works and The Jim Henson remain which can pose a competitive challenge. So, the industry rivalry for Pixar is pretty low.
Pixar is in a very strong position which becomes clear from the five forces analysis above. The threat of substitutes and new entrants is low for the brand. Most other factors are also favourable for Pixar. Very few brands pose a competitive threat to Pixar. Overall, the brand is in a position to rule the market.
STRATEGIES PIXAR USED:
Pixar’s technology is highly advanced. It enables the brand to produce life like animation. Its technology, imagination and the prowess of story-telling have enabled it to produce matchless movies. Pixar’s competitive advantage mainly comes from its excellent use of technology to produce life like animation. Lasseter’s role in this regard is of special importance.
According to Dess, Lumpkin and Eisner textbook, “For story development, Pixar has relied heavily on 43-year-old John Lasseter, who goes by the title of vice president of the creative. ……….. Lasseter has been the key to the appeal of all of Pixar’s films. Lasseter gets very 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 ensured that each of the studio’s films has been a commercial hit” (Dess, Lumpkin & Eisner, 2012).
Great leadership, passion and a unique competitive advantage – these are the reasons for which Pixar has been as successful. Steve Jobs and Lasseter both were exceptional leaders. It is their dedication and passion that Pixar acquired a unique place in the industry. Very few of its rivals are able to make their presence felt against the movies produced by Pixar. The sustainable competitive advantage Pixar has acquired is based on technology and skilled human resources.
Producing an animation is one thing, but to bring it alive is possible only for few. The dedication of staff, valuable technology, creative imagination – together all these factors make Pixar a matchless and strong force in the animation industry. Apart from it, the business strategy of Disney has also played a significant role where it acquired several smaller competitors strategically, reducing the size of the challenge before Pixar.
COURSE OF ACTION RECOMMENDED:
Despite all the success Pixar garnered and its high net revenue, its pace of film production has remained low. The dedication showed by Jobs, Lasseter and Catmull has brought it to a really strong position. Its high standards of animation quality can be a reason behind its low pace of production. However, along with sustaining its competitive advantage, Pixar should focus upon boosting its animation efforts. Sustaining the competitive advantage is crucial. With the death of Jobs, Pixar might have suffered a major loss. Technological development and hiring of able staff are two areas that require intense focus. This will enable Pixar to churn hits at a faster rate. More skilled staff means, Pixar can observe its high standards while producing superb movies in larger numbers. It is also essential to nurture the creative culture Steve Jobs established.
OPINION
Pixar is an exemplary case of leadership and competitive advantage. Simultaneously, it is an excellent example of great management strategy. The dedicated leadership of Jobs, Lasseter and Catmull and their passion is an inspiration for other companies. Apart from everything, it is Pixar’s high standards that differentiate it from other brands. Its focus on delivering unique quality has brought it to the leadership position in the field of animated movies.
So, the dedication showed by leaders and staff of Pixar is essential for growing and sustaining a major competitive advantage. It is also essential if a brand aims to deliver unique quality. On top of all are creativity and imagination which can definitely not be easily imitated. However, without the backup of excellent technology they cannot be turned into the life like phenomenon that Pixar’s animation movies are.
Sources:
Dess, G., Lumpkin, G., & Eisner, A. (2012). Strategic Management (6e). Boston: McGraw-Hill Irwin.