Understanding the Corporate Strategy of Pixar Animation Studios

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Corporate Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
Evaluating the place of PIXAR to sustain the success in entertainment industry..................1
Three dimensional strategic analysis......................................................................................3
First mover and first mover advantage...................................................................................5
Process innovation..................................................................................................................6
REFERENCES................................................................................................................................9

INTRODUCTION
Corporate strategy is described as the tactic which firm uses with an aim to defeat its
competitor in the competitive business environment. Corporate strategy is an overall scope and
direction which enables employees with regard to work together towards the specifics goals and
objective (Porter and Kramer, 2006). The present report is based on the case scenario of PIXAR
Animation Ltd. which is a computer animation film studio located in California. This report
depicts the strategic decision making and three dimensional strategic analysis of the cited
organization along with the factors of sustaining competitive advantage.
Evaluating the place of PIXAR to sustain the success in entertainment industry
Strategic decision making in PIXAR is essential for creating and functioning the business
in an effectual manner. Strategic decision making helps in creating the mission and vision for the
organization and set the goals and objectives which company aims for achieving. Strategic
decision making and strategic planning describe the procedure of creating an organization's
mission and objectives. Along with this, an action plan is alos created in this decision making for
the purpose of achieving the goals and objectives of organization (Hillier, Grinblatt and Titman,
2011). Thus, effective decision making is beneficial for PIXAR to sustain success in
entertainment industry. Organizational environment of PIXAR is analyzed through VRIO
framework which provides the broad scope larger strategic scheme of cited. VRIO framework is
utilized for analyzing the PIXAR's internal resources and capabilities to find the sustainable
competitive advantage. These are as follows,
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VRIO
Framework
Valuable Rare Difficult to
imitate
Organization
Support
Competitive
Implications
Firm
Infrastructur
e (Finances)
YES NO NO YES Temporary
advantage
Human
Resource
(Culture)
YES NO NO YES Temporary
advantage
Brand Value YES YES YES YES Sustainable
advantage
Marketing &
Sales
YES NO YES YES Competitive
parity
Effective YES YES NO YES Competitive
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Illustration 1: VRIO Analysis
Source: VRIO Analysis, 2015.

Distribution
Network
parity
 Valuable: The first part of VRIO framework asks if resources ads the value by enabling
the cited firm to exploit opportunities or prevent itself from the threats. If Pixar gets the
positive answer than the resources can be considered valuable. The resources can be
valuable if they support the cited firm to increase the customer value. Pixar can create the
value by increasing the differentiation and decreasing the costs of the movies. The
resources which meet the conditions can provide the sustainable competitive advantage to
the firm. Rare: The resource which is acquired by few organizations can be considered as rare.
However, these valuable and rare resources provide temporary competitive advantage to
the firm. On the contrary, when few organizations have similar resources and use the
capability in similar way than it leads to competitive gestation. This is because
organizations are using identical resources to implement the strategies and organization
were failed to achieve the superior performance. Costly Imitate: Furthermore, the cost of imitation is high in order to attain the
competitive advantage for some reasons such as, unique historical conditions, casual
ambiguity, social complexity and patents. Due to unique historical conditions an
innovative firm like PIXAR gains low cost access to rare resources in specific time and
space.
 Organized to capture value: One the PIXAR realize the value, rarity and imitability of
resources and capability of the firm, the next step is to organize the company in a
effective manner by which firm can exploit those resources. If PIXR is successful to
organize the resources and capabilities than cited firm can enjoy the period of sustained
competitive advatnge.
Hence, it is concluded that organizational environment and its framework support PIXAR
to sustain success in the entertainment industry. Thus, firm needs to analyze the organizational
analysis in order to make strategic decision (Cheah and Garvin, 2004). The company has high
and effective prospects to work upon its policies regarding Human resource management and
internal organizational policies. These measures will help the business in enhancing growth and
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development within the market. The company can develop a process which is effective and
competitive for the growth of business. Every individual of the firm may be trained and
developed as the policies and procedures of the company. This will help the business in creating
a competitive edge within the market by developing an effective and positive organizational
culture.
Three dimensional strategic analysis
The process of developing strategy for business is to research businesses and gather the
information about the market environment in which businesses are operating. Three dimensional
strategic analysis that need to be assessed are the financial strength, relative market share and
relative market strength. Description of these are as follows, Financial strengths: PIXAR is a strong organization financially. It has combined
artistry, storytelling and unique technology to develop profitable films of all times.
PIXAR has distribution agreement with Disney for the first movie. But recently, it is
decided that it won't be renewed because PIXAR has found better financial terms with
some other companies (Jensen and Zajac, 2004). This is proved a charismatic entry point
for the investors because doubt of the new distribution deal has changed in increased
revenue and sales of the cited organization. PIXAR has developed five full length
animated movies like, Toy Story, A Bug's Life, Toy Story 2, Monsters and Nemo etc..
These movies had extra ordinary success on the box office and videos. Moreover, the
film 'Nemo' is a winner of Oscar award. These movies helped PIXAR in achieving the
great success at box office with the increased revenue and profits. These movies have
financially strengthened PIXAR to sustain success in the entertainment industry (Ichijo,
2006). Moreover, with regards to the agreement with Disney, PIXAR had agreed on
sharing profits by 50/50 of feature films. With PIXAR's impressive track record and
financial strength, it is planning to implement the new agreement with distribution
partner with 100% ownership rights.
 Relative market share:
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Relative market share is an indicator of firm's market share against the leading competitor of the
business. Currently, PIXAR is a wholly owned subsidiary of Walt Disney. Recently, PIXAR has
opened new studio in Vancouver for expanding business in many other countries as well. In
today's competitive edge, PIXAR is owning large market share by its lucrative movies. PIXAR
released Toy Story 3 in June 2010 which has gained the immense success on the Box office by
making over $1.603 billion which is the highest grossing animated movie of all time (Omta and
Folstar, 2005). With its effectiveness of innovating storytelling, PIXAR gets the competitive
advantage.
 Relative market strengths: Main market strength of PIXAR is its content quality. PIXAR
possess effective story telling by which it creates successful movies for families as well
as all age group people. Furthermore, strengths of PIXAR are its intellectual properties,
promotion and marketing, efficient and talented employees and use of diversified
technology. All these factors help PIXAR in creating lucrative movies. These factors also
help company to sustain success in the entertainment industry.
Thus on the basis of the above analysis it can be clearly determined that the business unit
has an effective market demand within the market. The strong financial position and relative
market share has helped the firm in developing an edge within the market. The company thus
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Illustration 2: Market Share
(Source: Market Share, 2015)

may enhance its sustainability by adopting innovative and creative projects. Moreover, the
market development measures could be enhanced by strategies such as merger acquisition etc.
First mover and first mover advantage
PIXAR established itself in entertainment industry in 1979 by the name of Graphics
group which was the part of computer division of Lucas film. It was funded by Apple Inc. in
1986 and introduced as a corporation. But in 2006, The Walt Disney Company bought PIXAR at
the value of $704 Billion (Hofmann, 2010). With its effective storytelling, artistry and
technological creativity, it has made many movies like Toy Story 3, Finding Nemo, UP, The
Incredibles, Ratotouille, Monster inc., Wall E, Toy Story 2, Cars, A Bug's life and Toy Story etc.
which have achieved the great success at box office and earned lot of money. The creativity and
innovation in film making is providing sustainable competitive advantage to the cited
organization (Contractor, Kumar, Kundu and Pedersen, 2010). However, cited organization is
achieving great success in the entertainment industry. Benefits of its creativity and innovation are
as follows,
 PIXAR has lots of potential to make long lasting impression on the people through its
movies.
 Cited firm has more time to refine movies through making process with innovative
thinking and technological developments (Ferreira and Rezende, 2007).
 Also, they have benefit of controlling resources like strategic location, exclusive
contracts, talented employees and association with its stake holders like Apple inc. and
Disney.
It has been concluded that first mover image of PIXAR helps to sustain success in the
entertainment industry. Moreover, PIXAR is still creating lucrative movies after its collaboration
with Disney. The resource retaining and development has helped the business in creating a wide
and effective impact on the organizational growth. The internal strength has helped the business
in developing a wide measure of success and development for the firm. The company thus has
the capability of retaining a competitive edge within the market by maintaining innovation and
creativity within the firm.
Process innovation
PIXAR is well known for its innovation and creativity. The success of PIXAR totally rely
upon its innovating thinking. Instead of this, it comes from the commitment to the actual process
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of creativity (Arora, Fosfuri and Gambardella, 2004). The legendary animation studio has helped
PIXAR to be more innovative. Cited firm makes movies with the efficient use of technology and
creative story telling which help to create more profitable movies. The continued success of
PIXAR clearly indicates that it has continued to turn out the films and process of innovation even
after acquiring by The Walt Disney in year 2006. Through its innovation and talented workforce,
it has managed to settle some the concerns arose at PIXAR instead of its unique and creative
culture. Because of this uniqueness and creativity, PIXAR makes creative films which hits the
box office and helps PIXAR to sustain in the entertainment industry (Elkington, 2006). However,
PIXAR faces pressure from the competitors. But at the same time, its creativity and collaboration
with Disney that support cited firm in sustaining success in the entertainment industry. The core
competency of PIXAR is story telling which comes from cited firm's culture and process.
Moreover, intellectual guidance provided by the key people to its workforce helps to sustain
success in the entertainment industry.
It is evident that Pixar was the company that started in the year 1995 with the success of Toy
Story. The film received a dramatic amount of international success. It has been debated that
whether success was due to film’s store or due to animation. It was the first film created by using
computers only. Pixar was the only one which was in the limelight. It is impossible to create
such kind of market and to keep it all too some extent. After three years, another company
named DreamWorks got into the action with the movie Antz in 1997. That film also achieved
high level of success at the international level (Jensen and Zajac, 2004). DreamWorks has made
efforts to give tough competition to Pixar in terms of animation quality. Every market remains a
two horse race and in which nothing happens unless something exceptional happens. In terms of
animated CGI films, Pixar remains on the top and DreamWorks comes on the second position.
DreamWorks has been identified as the largest competitor for Pixar by far. Animation industry is
certainly one of the fastest and prospering industries across the world. There has been lot of
developments and advancements in the field of technology. Earlier the animation movies were
aimed only at children and were produced in a reasonable budget. The use of technology was
limited.
Today more special effects have been added and the budget has been increased. An entire
team of animators looks after all the activities and a big sum of money is spent. These films are
not just limited to children but even audience, youngsters, family can enjoy such type of
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entertainment (Purce, 2014). The best example for that is Avatar movie which was made with a
very high budget and was equipped with the latest technologies. Animation industry has come a
long way from traditional 2 dimensional images to the 3 dimensional. 3D animation software is
one of the latest and most advanced trends in the industry and it highly affects the business
practices of Pixar. Similarly, there are many other movies have been produced with special
effects that successfully attracts the large number of people. The 3D animated movies are made
in increased budget. However, the corporate strategy of Pixar is to attract the customers through
their innovative and creative films. Thus, the firm need to increase the budget of movie making.
Through innovative and creative movies Pixar can increase the revenue and gain the sustainable
competitive advantage. Thus, on the basis of above analysis it can be determined that the
company has an effective capability to succeed and grow in the long run process. The use of
updated technologies and implementation of well developed planning will help the company in
creating an effective impact on organizational growth.
CONCLUSION
Hence, it has been concluded that to sustain success in entertainment industry, it is
essential to develop a corporate strategy by analyzing the internal and external factors of
business environment. Currently PIXAR is attaining huge success in entertainment industry
because of its creativity and innovation. This report describes the success factors of PIXAR
which are its content quality, promotion and marketing of movies, diversification, technological
growth as well as business location. Moreover, to sustain success in entertainment industry, it is
important to consider the factors related to creativity and innovation.
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REFERENCES
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Purce, J., 2014. The impact of corporate strategy on human resource management. New
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Online
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