essay

Walt Disney Company and Pixar Inc.

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Disney’s competitive position was its brand. Disney is well known globally as the best family-oriented animation producer. It has a lot of animations that have sold well, thanks to its brand name. Because of its brand, Disney has attracted a high willingness to pay.

Pixar, on the other hand, has its competitive position in 3-D computer generation models. 3-D computer-generated models use mathematical models to mimic camera angles and to draw and re-draw cells. Such a model saves a lot of time in the production of animations. It also saves a lot of financial resources as only a few employees were used. Because of their investment in the production studio, Pixar has attracted a big willingness to pay. They produce 3-D animations that are of quality (Alcacer, Collis & Furey, 2009).

Walt Disney’s strategic positioning includes product positioning, brand positioning, and business positioning. Walt Disney’s brand positioning is to promote happiness through its brand. It also emphasizes on paying attention to the consumers' needs to improve the product and promote happiness. Their product positioning involves providing their customers with goods and services that attract their attention and makes them happy. Their business positioning is to improve their business and introduce more products and services. In Pixar’s strategic positioning, they promote a great story first before the animation. That ensures that all their animations have great stories. Their stories focus on how they make people feel. At Pixar, the top priority is its employees. That is because they help come up with the ideas and they develop the ideas. Pixar also encourages self-expression and diversity of thoughts. That motivates its employees thus making them more productive.

The willingness to pay shows the maximum amount that a customer is willing to pay for a product (Grönroos, 2020). Therefore, when coming up with a pricing strategy, the company should consider the willingness to pay. Willingness to pay is affected by several factors. Some of those factors include the quality of a product, the economic state of a country, the seasonality of a product, the rareness of the product among others. A company can conduct customer research, use customer surveys or market data to analyze the willingness to pay.

With the relationship with Pixar, Disney was better-off compared to Pixar. Before the contract, Disney’s 2D and 3D animations did not perform as they were expected. However, after they agreed with Pixar, the first five animations that were made were a success in the box office. They earned more than $3.5 billion to Walt Disney in revenues. Along the way, Pixar discovered that they did most of the work but Disney earned most of the revenues. Therefore, Pixar should get a better deal as the contract with Disney did not favor them (KOCHNEV, 2016).

The better-off test can be used in the case of Walt Disney and Pixar. Pixar had a big impact on the competitive advantage of Walt Disney in the market for animations. Before their contract, most of Walt Disney’s animations had under-performed. However, after their contract, Walt Disney’s animations which had been produced by Pixar sold very well. There were all successful.

Pixar and Disney were more valuable based on the revenues generated by their animations. However, the value was not realized through common ownership. It was realized through the segregation of duties. Disney funded the production cost fully and sold the animations. Pixar on the other hand, produced the animations.

Using an ownership test, the ownership of Pixar would increase the competitive advantage of Walt Disney in the market. Pixar’s unmatched animations would sell very well when Walt Disney used its strong marketing and distribution networks. An example of a company that can be subjected to the ownership test is General Electric. It owns several subsidiaries that compete competitively in the market. One of its subsidiaries that compete with United Technologies Corporation is General Electric Aviation.

References

Alcacer, J., Collis, D. J., & Furey, M. (2009). The Walt Disney Company and Pixar Inc.: To Acquire or Not to Acquire?. Harvard Business School Case, 709-462.

Grönroos, C. (2020). Ensuring customer willingness to pay. The Routledge Handbook of Service Research Insights and Ideas, 46.

KOCHNEV, M. (2016). Companies ‘mergers and acquisitions in an example of The Walt Disney Company and Pixar (Doctoral dissertation, Masaryk University, Faculty of Economics and Administration).

Appendices

Assumptions in the analysis of Walt Disney and Pixar

1. It is assumed that the assumption was carried out before Walt Disney’s acquisition of Pixar.

2. It is assumed that the two companies face the same challenges that they faced at the time of the analysis.

3. It is assumed that the two companies relate in the same way they related during the time of the analysis.

4. It is assumed that the two companies have the same market dynamic they had in the time of the analysis.

5. From the case, it is assumed that Walt Disney had a higher competitive advantage and strategic position compared to Pixar because of their strong brand. On the other hand, Pixar had a higher willingness to pay because of the quality of their animations

Descriptions

The willingness to pay - it is a concept that shows the maximum amount of money that a customer is willing to pay for a product or service.

Competitive position- it is the value that a brand, product, or service offers compared to other players in the market.

Strategic positioning- it is the way that a business or company distinguishes itself in a valuable way to earn a competitive advantage over its competitors.

A better-off test- it shows the impact a corporation has on the competitive advantage of other businesses in the market.

An ownership test- it tests whether the ownership of a business unit in a company produces a bigger competitive advantage in the market compared to any other alternative.

Willingness to pay

The price elasticity of demand can be used to show how different customers are willing to pay for a product. Elasticity of demand shows the responsiveness of demand when the price of a product changes. When coming up with the willingness to pay, a number of techniques are used. They include

a. Attribute valuation- it involves conducting market surveys that show how and why a customer would pay for a particular product.

b. Revealed preference- The actual purchases of a customer are used to determine their willingness to pay

c. Discrete choice- uses the individual attributes of new products to identify customers’ willingness to pay.