EXECUTIVE SUMMARY
This a report about the strategic management of Pixar Animation Studio (Pixar, for brevity). It will evaluate on how Pixar has turned into one of the competent business in the film industry with emphasis into its company resources. Furthermore, it will analyze on how Pixar will be sustain its creativity with by making its output more as compared to its conduct of business in the previous. It will also evaluate the capacity of Pixar to maintain its society in case it will do business without Disney.
The findings reveal that the Pixar’s success is attributed to its innovation of computer animation. The financial stability of Pixar was due to the cooperation and coordination of the company’s leader and employee. The company as it continues to make its animation more modern, it does lose its capacity to produce stories that are worth watching. This innovation has put Pixar’s name in the film industry. However, the contract of partnership of Disney and Pixar has put a restraint on the capacity of the latter to gain more profits. The contract provision is more on the benefits that Disney rather on the right of Pixar over its intellectual property.
The recommendation of the author is to offer Pixar to Disney, with the provisions that Pixar will benefit on that merger. It is the point of view of the writer that the rights of Pixar as to copyright, return of profits, and the use of its name must be protected and not be violated.
TABLE OF CONTENTS
Title Page
Executive Summary
Table of Contents
Introduction
Pixar’s Strategy
Pixar’s Resources
Basis of its Competitive Advantage
Increase Output without Sacrificing Quality
Commitment on the Competing-on-the-edge Approach
Recommendation
Bibliography
INTRODUCTION
This is a report about Pixar Animation Studio (Pixar, for brevity). Pixar is an American computer animation studio based on California, United States. The company is known for its produced films such as Toy Story, Finding Nemo, and Ratatouille (Wikipedia, 2008). Pixar is currently under a partnership agreement with Walt Disney Company (Disney, for brevity) for the former’s film or product distribution and marketing.
The scope of this report is the study on Pixar’s strategic management, basing on its technique on producing films based on the utilize computer animation, the need to have a committed storytellers and its dependency with Disney for distribution and marketing. Following that will be the critical assessment of Pixar’s resources, focusing on the financial, technological, organizational, human resource aspect of the company. Next, will be the basis of Pixar’s competitive advantage. The study will also touch on the strategy on the increase on its output without sacrificing quality; and whether the subject company will be capable on committing itself to a competing-on-the-edge approach. A recommendation will end the report in the report summarizing the whole document in relation to Pixar’s strategic management.
PIXAR’S STRATEGY
The success of a company depends upon the efficiency and effectiveness of its strategic management. Strategic management is defined as a set of managerial skills that should be used throughout the organization. According to Drejer (2002), the ultimate purpose of strategic management is to secure competitive advantage of the organization. However, theories in strategic management are on the process of constant change due to the development of the needs of the consumer, the birth of technology and the conduct of an economy. From this note, it is necessary to include a bit of Pixar’s background information.
Pixar was a product of artist and technologies. Edwin Catmull who loves animation teamed up with people of same interest. In 1979, the team of Catmull joined forces with George W. Lucas Jr., however their aim to make substantial progress in the art of computer animation did not generate profit, and Lucas was not willing to go beyond using computer animation for special effects. In 1985, Steve Jobs, after being ousted from Apple Corporation, bought Edwin Catmull’s unit. In 1991, Disney came into the picture after giving Pixar a contract that started with Toy Story, which has produced positive results. However, currently, the twelve (12) year contract will be expiring. Pixar also proclaimed its move on not renewing the partnership contract with Disney. Pixar acknowledge the contribution of Disney with its company because of Disney’s reluctance to agree with its proposition to have only a distribution agreement, wherein due to unequal share of profit, Disney, based on the proposition, will only act as a distributor of the Pixar’s films.
The success of Pixar in the cartoon film industry is attributed to its unique and modern way of making animated cartoons in the process called computer animation. As stated in their website, Pixar combines creative and technical industry to create original characters and stories in the new medium of computer animation. Pixar have seen the need to make a difference from all those cartoons animation that has been shown on television or on the movies throughout history, hence thru the innovation of science, the knowledge about computers, and the acceptance of creative people paved way to the success of Pixar.
Hence, Pixar’s success is not only based on computer animation, but thru the creative efforts of the company’s innovative culture. Catmull has been the tool to see to it that progress on the creative department is stable. In addition, to ensure that such will happen, Pixar new hire employees are expected to spend ten (10) weeks at Pixar University. As reported by Hempel (2003), Pixar University is the company’s secret weapon, because it is a professional development program that puts as much emphasis on employee education as it does on a company training. In addition, it is the primary purpose of the company, which is to build morale, spirit, and communication among employees.
As Roney (2004) stated in his book, comprehensive planning requires that each element of a business organization and each manager’s contribution be integrated rationally into the whole enterprise. Pixar has been functioning well because its focus is not only on the development of the company’s uniqueness which is computer animation, but it see to it that it storyline is also good. John Lasseter, the vice-president of the creative, was behind it. Lasseter make it sure that Pixar will developed great stories, in doing so, he tries to brainstorm with group of writers and directs them to forget about the constraints of technology.
Disney’s contribution to Pixar is thru marketing and distribution of its films and any associated merchandise such as toys and videos, which has been a great help with regard to Pixar’s financial, and production. Many claims that the hit of Pixar is because its name is attached to a company’s name that has been known worldwide. The capability of Disney’s name to attract number of viewers and consumers has ensured the success of Pixar into the film industry.
PIXAR’S RESOURCES
The resources of Pixar are also an achievement for the company. The main structure of the financial aspect of the company is based on the contract partnership with Disney. The extensive promotion of the movie and the uniqueness of the film itself has paved to the financial success of the company. The profit acquires in the success of the film was tremendous, as there was a strong cash flow. In addition, it is provided in the contract that Pixar was responsible for creation and production, while Disney handled marketing and distribution. The profits and distribution costs were split in a fifty-fifty basis (50-50), however, Disney exclusively owned all stories and sequel rights and collected distribution fee. Today, as Pixar has proclaimed its desire to end its good camaraderie with Disney, the probability of obtaining greater profits is yet to foresee because its name is no longer attached to Disney.
On its organizational aspect, as mentioned above, the leaders working inside the company such as Jobs, Catmull and Lasseter has put emphasis on teamwork and creativity. The employees are well informed and trained with regard to the objectives and goals of the company. The leadership of plays a significant role with the company’s progressive development however, thru the cooperation and dedication of the employees to the company, positive results exist.
BASIS OF ITS Competitive ADVANTAGE
The basis of Pixar’s competitive advantage is its effective operations management. According to Lowson (2002), operation management is the design, operation, and improvement of the internal and external systems, resources, and technologies that create and deliver the firm’s primary product and service combinations. As abovementioned, the extensive coordination of the management and the employees of Pixar have significantly contributed to the success of the company.
On this note, it is necessary to put also an emphasis to the value chain that help support the advantage in terms of Pixar’s competitiveness. As what Arnold and Cacciotti, (2001), say, Pixar is one of the companies that have with intellectual property and is beginning to develop consumer branding. The two authors has also said that the value chain describes the activities that create products and services that customer wants. They have provided a systematic diagram to illustrate the value chain. It can be inferred from the diagram that companies who started with innovation and intellectual property and converts into brand and customer relationships has capture the shareholder’s value in market capitalization and venture building.
It is a fact that Pixar is primarily the first to innovate into computer animation and uses such innovation as its intellectual property, in which the response of the consumers was tremendously positive. Such intellectual property has open Pixar into several brand and consumer relationships, which in turn has been a good sign on the continued effort of the shareholders to remain with the company.
The value chain activity of Pixar is primarily, is on the attention to detail making animation more lifelike as regards to its marketing and sales, Pixar has a reliance on Disney’s brand name to attract family audiences, however because of the name of Pixar has created a different impression whenever Disney-Pixar will be used, the result of such with that name has made the its brand name strong. On its second part of the value-chain, the creation of new software help in the production process such as Luxo, which enables creation of the movie with a decrease on the need to use people. The recruitment of the individuals and training them in the Pixar University has make an efficient contribution to the company, it is because the company has able to have a consistency in their production standard. Lastly, on leadership, it can be inferred that thru its efficiency, the company has a sound financial position in the film industry.
INCREASE IN OUTPUT WITHOUT SACRIFICING QUALITY
The practice of Pixar in its creative department is that in every project to be done, the creative department dwells into minor details in order not to compromise its computer innovation. Therefore, Pixar has been known to its for the quality of its storytelling above everything else. However, because of its emphasis on every single detail, time usage was not the efficient. Hence, when the company decided to work with two- movies at the same time and as the result, the company must double its employment and create new divisions. However, the company can still maintain its strong creative edge by employing the necessary means and methods to enhance the creativity of the growing numbers of employees.
The dependency of Pixar on Disney for the success is attributed to the fact that the former’s name is attached to the latter’s name. However, it is the perception of the author that because Pixar made a name in the industry, its success may not wholly depend on Disney. Disney’s lack of innovation in computer innovation and Pixar’s successful use of computer innovation where Disney has been encouraged to enter a contract with Pixar. The consumer’s impression on Pixar even if it will go independently will still be related to Disney for a long time.
COMMITMENT TO A COMPETING-ON-THE-EDGE APPROACH
Pixar is capable of committing itself to a competing-on-the-edge approach because of its innovation to computer innovation. As it has been mentioned Pixar is the first in computer animation, which has, gave life to the characters on every cartoon movie set. It is inevitable that there would be other companies who would try copy or compete with Pixar. Pixar’s ability to be competent is proven to its capability to focus on small details that will have a big impact on the company.
Furthermore, because of Pixar’s long existence in the computer animation world, its experience and knowledge of the business aspect is enough for it to be number one in the business. Furthermore, there are still number of businesses in the film industry that has not yet turn into the technology that the Pixar has been using over the years.
RECOMMENDATION
The technology and the creativity of Pixar have enabled it to have a good name in the industry. Those factors were also the reason why Disney was confident enough to continue its contract. It is also the main reason why Disney had, in a way, manipulated the contract on the distribution of profits.
However, it is the recommendation of the writer to Pixar not to pursue its proposition to Disney on account that the latter will only be a distributor. The writer strongly recommends that it offer its company to Disney, with the provision that management will still be the same, the employees will not be removed, the right over the films produced and the name of Pixar will be attached into the name Disney. With these provisions, the company will not lose its organizational structure, and compromise its creativity. Furthermore, Pixar will have more say on how the system will progress and work.
BIBLIOGRAPHY
BOOKS
Arnold, R., & Cacciotti, J., 2001, Value Chain Disruption: Are You Prepared?, SDG Executive ebriefing, Boston.
Drejer, A., 2002, Strategic Management and Core Competencies: Theory and Application, Quorum, Westport CT.
Lowson, R., 2002, Strategic Operations Management: The New Competitive Advantage, Routledge, New York.
Roney, C., 2004, Strategic Management Methodology: Generally Accepted Principles for Practitioners, Praeger, Westport CT.
JOURNALS
Hempel, J., 2003, ‘Pixar University: Thinking Outside the Mouse’, SFGate Home Today’s Chronicle, 4 June.
ELECTRONIC RESOURCES
Pixar Animation Studios: Pixar; 2008; Pixar Animation Studios; viewed 14/05/2008; <http://www.wikipedia.com>.
Pixar: Wikipedia; 2008; Wikipedia: The Free Encyclopedia; viewed 14/05/2008; <http://en.wikipedia.org/wiki/Pixar>
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