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Disney & Pixar

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Ngoc Quyen Vo

on 9 November 2013

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Transcript of Disney & Pixar

The Walt Disney Company and Pixar Inc.
To Acquire or Not to Acquire?

CONTENTS
1. Intro
History, relationship
2. Analysis
SWOT, Porter's Five Forces
3. Questions
4. Conclusion
Team 4:
Daewon Kwon, Chanwoo Cho, Eunsun Cho, Bokyung Kang, Ngoc Quyen Vo, Sunjoo Choi

1. History
Relationship
1. 1986: Collaboration on CAPS
2. 1991: Feature Film Agreement
3. 1996: Co-Production Agreement
Walt Disney
Pixar Inc
Half of Production cost
Marketing cost
Distribution Cost

Distribution fee (12.5% of revenues)
Half of box office revenues
Other revenues
Film rights
The decision-maker about release dates, sequel
Half of Production cost
Distribution fee (12.5% of revenues)

Half of “remaining” revenues
Half of other revenues
~60% of total revenues
~40% of total revenues
2. Research
Porter's Five Forces
SWOT Analysis
3.Questions
Financial risks
How to overcome these challenges?
$7 Billion
loss because of wrong evaluation
ex.: AT&T acquiring NCR; Time Warners acquiring AOL
Q3. If Disney does acquire Pixar, how should Bob Iger and his team organize and manage the combined entity? What challenges do you foresee, how would you meet them?
Q1. Which is greater?
1. the value of Pixar and Disney in an exclusive relationship,
2. the sum of the value that each could have if they operated independently of one another
3. the sum of value if they were allowed to form relationships with other companies? Why?
Q2. Assuming that Pixar and Disney are more valuable in an exclusive relationship, can that value be realized through a new contract? Or is common ownership required?
Strategic Alliance
Reasons:
1. Bring together Disney’s and Pixar’s complementary skills and assets
2. Share fixed costs and associated risks
3. Vehicle for firm growth
Pitfalls:
1. Potential conflict over profits
2. Potential opportunism
Acquisition
Reasons:
1. Increased market power on animation market
2. Overcoming entry barriers due to integration of two big companies
3. Learning and developing new capabilities
4. Reshaping firm’s competitive advantage
Pitfalls:
1. Integration Difficulties -> Over cultural differences/ Over integrating management activities
2. Possibility of inability to achieve synergy
3. Over-focus on acquisitions4. Bureaucratic costs
4. Conclusion
Lesson Learnt
- a variety of factors have to be considered
- not necessarily money needed -> exchange of stocks
To Acquire or Not to Acquire?
Better to acquire.
THANK YOU!
The Value of Pixar and Disney in an exclusive relationship has the greatest value.

1) Bring complementary skills and assets together
2) Huge synergy
3) Develop new capabilities
4) Increase market power
5) Lower risks with an exclusive relationship
Cultural Differences
Early years
-small, work personally with everyone
By 1950’s: began nametags
2005: 133,000 employees (CNN report)
Reports that “Walt often felt stymied by the bureaucracy.”
Profitability, not quality, rules the day.
-Executives are the ones making decisions
-Tight schedule
Connection Culture
Corporate Culture
Collaboration Culture
Three basic principles
First. Everyone must have the freedom to communicate with anyone.
Second. It must be safe for everyone to offer ideas.
Third. Stay close to innovations happening in the academic community.
DISNEY
PIXAR
October 16, 1923
1928
1937
1955
DISNEY
PIXAR
1984
1994
2005
1979
1995
1986
Fair Agreement?
CNN Jan.25 2006
1999
Cultural differences
Financial risks
Extra Discussion
Result of Acquisition
Net Income of Walt Disney
Pretend that you were the CEO of Disney
For acquiring
Against acquiring
Stock Exchange
Full transcript