Since Disney purchased all of Pixar’s stock shares, the corporate action initiated by Disney is acquisition. The corporate action of Disney’s acquisition of Pixar was launched in 2006 when Disney acquired Pixar for $7.4 billion (Calandro, 2019; Joo, 2020). From the perspective of Cost Leadership Strategies, Disney’s decision for the acquisition was motivated by reduced costs for product diversification and an increase of competitive advantage by integrated 3D animation into its products (DePamphilis, 2019; Junni et al., 2015). The VRIO analysis indicates that being in a vulnerable position of rising competition from Pixar’s side, Disney eliminated the competitor and acquired a profitable 3D animation studio for further development and a higher level of presence in the entertainment market (Fisher, 2020). The Resource-Based View (RBV) on the corporate action on acquisition demonstrates that since Disney could not achieve high revenues in producing animated characters, Pixar’s resources were valuable for the company (Wills, 2017).
In terms of the SWOT analysis, the acquisition’s strengths are in the expanded product range, higher profit, and increased market dominance of Disney (Debruge, 2016; Yang, 2019). The weaknesses of Disney before acquisition included the competitive disadvantage in generating animated characters and 3D animation in general (Douglas, 2019; Wills, 2017). The acquisition of a promising and highly competitive animation company that had resources, technological potential, and creative ideas was a valuable opportunity for Disney to maintain its dominance in the competitive entertainment business. The threats are related to risks imposed on synergy and possible additional competition in the entertainment business (Barbosa, 2020; Bohas, 2016).
The financial indicators of the Walt Disney Company demonstrate the changes in its financial health over the years after the acquisition. The observed increase in revenue as derived from the annual reports of the company shows that Disney’s financial situation has significantly improved since 2016. Indeed, the revenue generated before the acquisition varied around $40,000 million and increased to over $60,000 million in 2020 (“Disney financial statements,” 2020; “Walt Disney Co.,” 2020; The Walt Disney Company, 2020; “The Walt Disney Company reports,” 2020). Technological, operational, and human resource aspects played a beneficial role in Disney’s product diversification and strategic competitive improvement (Nakajima, 2016; Wasko, 2020). In conclusion, Disney’s corporate action allowed for acquiring Pixar was an important beneficial strategic step that allowed the company to obtain improved competitive advantage and a higher level of market presence and revenue.
References
Barbosa, M. S. M. F. (2020). Equity research the Walt Disney Company [Doctoral dissertation, Instituto Superior de Economia e Gestão].
Bohas, A. (2016). The political economy of Disney. Palgrave Macmillan.
Calandro Jr, J. (2019). M&A deal-making: Disney, Marvel and the value of “hidden assets.” Strategy & Leadership, 1-9. Web.
Debruge, P. (2016). Disney’s Pixar acquisition: Bob Iger’s bold move that reanimated a studio. Variety. Web.
DePamphilis, D. (2019). Mergers, acquisitions, and other restructuring activities: An integrated approach to process, tools, cases, and solutions. Academic Press.
Disney financial statements 2005-2020 | DIS. (2020). Macrotrends. Web.
Douglas, C. (2019). It’s a small world after all: An international analysis of the Walt Disney Company. Journal of Undergraduate Research, 16, 1-6.
Fisher, G., Wisneski, J. E., & Bakker, R. M. (2020). Strategy in 3D: Essential tools to diagnose, decide, and deliver. Oxford University Press.
Joo, J. S. (2020). Disney’s acquisition of Fox and the changing media environment in the US. Journal of Convergence for Information Technology, 10(1), 28-34.
Junni, P., Sarala, R. M., Tarba, S. Y., & Weber, Y. (2015). The role of strategic agility in acquisitions. British Journal of Management, 26(4), 596-616.
Nakajima, M. (2016). Corporate strategy comparison Walt Disney and Oriental Land. Journal of Global Tourism Research, 1(1), 77-81.
Walt Disney Co. (2020). WSJ Markets. Web.
The Walt Disney Company. The Walt Disney Company reports third quarter and nine months earnings for fiscal 2020.[Data set]. Web.
The Walt Disney Company reports fourth quarter and full year earnings for fiscal 2020. The Business Wire. Web.
Wasko, J. (2020). Understanding Disney: The manufacture of fantasy. John Wiley & Sons.
Wills, J. (2017). Disney culture. Rutgers University Press.
Yang, J. (2019, August). Analysis of business operation management under the Harvard analytical framework: A case study of the Walt Disney Company. In 1st International Symposium on Economic Development and Management Innovation (EDMI 2019). Atlantis Press.
