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1. What key internal resources does Pixar have that might help it support its competitive
strategy?
Referencing Chapter 3: Analyzing the Internal Environment of the Firm
From Chapter 3, a firm’s value chain helps support its basis of competitive advantage. Pixar’s
value chain can be examined to ascertain the various activities that the firm carries out to
Pixar’s value chain is captured visually in the diagram below:
Value-chain activity How does Pixar create value for the customer?
Primary:
Inbound logistics Assumed adequate.
Operations Tremendous attention to every aspect of developing and
making films; software to make animation more lifelike;
Outbound logistics Assumed adequate.
Marketing and Sales Reliance on the Disney brand to attract family audiences;
Pixar name brand recognition fairly strong itself; reliance on
Service Assumed adequate.
Secondary:
Procurement Assumed adequate.
Technology development. Creation of new software helped in the production process.
Human resource
Recruitment and training of individuals who made a strong
General Administration Strong visionary leadership – Jobs, Catmull, and Lasseter –
kept the organization ahead of the curve; organizational
Primary Activities
In terms of primary activities, the key to Pixar’s differentiation resided in its operations and
marketing. Pixar placed a lot of attention on every aspect of developing and making its films.
In terms of marketing, Pixar relied on the Disney brand to pitch its films to family audiences.
Support Activities
With regards to support activities, differentiation is achieved by developing a strong general
administration that is built around visionary leadership and a culture that pushes for creativity.
Pixar relied on human resource functions to recruit and train individuals who could make a
Pixar’s value chain provided the basis for its competitive advantage, but to answer the question
of how to support a competitive strategy, it’s important to consider the concept of the resource-
Tangible Resources:
Financial – Thanks to Steve Jobs’ initial investment and Pixar’s ability to deliver, financial assets
Physical – Pixar’s physical facilities were certainly adequate. It had access to Disney’s facilities
Technological – Steve Jobs’ initial financial investment had allowed Pixar to acquire the
Intangible Resources:
Organizational – Pixar’s committee-run structure for decision making supported the creativity
Human – This was Pixar’s greatest strength – the quality of its human resources. John Lasseter
Innovation – Ed Catmull spearheaded the technological development that allowed Pixar to
Reputation – As a result of all the above resources, Pixar had the best reputation in the business.
Organizational Capabilities: The ability to harness technological innovation in support of
Determining whether the internal resources are valuable, rare, difficult to imitate, or difficult to
substitute (VRIN) can help a firm sustain a competitive advantage. See Chapter 3, Exhibit 3.6.
Applying the VRIN analysis to the above shows that Pixar had both valuable and rare resources,
NOTE – ADDITIONAL READING, VIEWING OF FILM CLIPS:
Pixar has used “shorts,” short animated films, to explore new technologies and train new
animators. These shorts are not released separately but run in the theatre as preludes to the full-
length feature films. The following is a review of some of Pixar’s shorts, explaining the
pioneering techniques that were incorporated:
http://www.pastemagazine.com/articles/2009/06/salute-your-shorts-pixar---part-2-the-other-
years.html
According to John Lasseter, it can take 17 hours to produce just one frame of film, with
sometimes 24 frames per second, so a lot of man-hours are involved even in a 5-minute short.
Given that these short films are not released separately, and therefore cannot be money-makers,
do you think it’s worthwhile for Pixar to spend the time and effort to produce these?
2. SECONDARY QUESTIONS: How does Pixar use strategic management? What is
Pixar’s competitive strategy, and what is the basis of Pixar’s competitive advantage?
NOTE: There are no PowerPoint slides to accompany this discussion.
Referencing Chapter 1: Strategic Management
Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter
1, Exhibit 01: Strategic management consists of the analyses, decisions, and actions an
organization undertakes in order to create and sustain competitive advantages:
●strategy directs the organization toward overall goals and objectives;
●includes multiple stakeholders in decision making;
Leaders face a large number of complex challenges. Leaders must be proactive, anticipate
change and continually refine changes to their strategies. This requires a certain level of
“ambidextrous behavior”, where leaders are alert to opportunities beyond the confines of their
See Chapter 1, Exhibit 06: The primary role of the organizational leader is to articulate vision,
mission and strategic objectives. Leaders must communicate their initial vision of the
organization’s purpose: what was the original goal that evokes a powerful and compelling mental
image of a shared future, one that would be massively inspiring, overarching, and long-term, that
represented a destination that is driven by and evokes passion?
The organizational mission also needs to be considered: a mission encompasses both the purpose
of the company as well as the basis for competition and competitive advantages. In writing a
Organizations must respond to multiple constituencies if they are to survive and prosper, and the
mission provides a means of communicating to diverse organizational stakeholders. Although
Anticipating that things might change, an organization’s leadership must then establish strategic
objectives to operationalize the mission statement. That is, objectives help to operationalize the
Pixar’s vision might have been best expressed by Steve Jobs: as he pointed out, a film works
only if its story can move the hearts and minds of families around the world. The mission of
Pixar is then to be known for the quality of its storytelling, to create “great stories and characters
See Chapter 1, Exhibit 1.3 for a depiction of the strategic management process. During strategic
analysis, the leader does “advance work” to anticipate unforeseen environmental developments,
identify unanticipated resource constraints, assess changes in his or her preferences for how to
manage. During strategy formulation, the organization addresses the issue of how to compete in
The basic question strategic management tries to answer is: How can we create competitive
advantages in the marketplace that are not only unique and valuable but also difficult for
competitors to copy or substitute?
Referencing Chapter 5: Business-Level Strategy
In order to achieve a sustainable competitive advantage, Pixar has to assess its ability to contend
with other movie studios, especially those that make animated films. The question of how to
compete in a given business to attain competitive advantage requires an assessment of the types
of competitive strategies, including the three generic strategies that are used to overcome the
five forces and achieve a competitive advantage:
●Overall cost leadership
oLow-cost-position relative to a firm’s peers
●Differentiation
oCreate products and/or services that are unique and valued
●Focus strategy
oNarrow product lines, buyer segments, or targeted geographic markets
Ask the students which strategy they think Pixar pursues. Their answers may include some of
the following points:
Pixar chose a strategy of differentiation – creating products that were unique and therefore
valued. The strategy of differentiation consists of creating differences in a firm’s product or
service offering by creating something that is perceived industry-wide as unique and valued by
aware of the Pixar magic, might choose a Pixar film over any other animated feature, and price
wouldn’t enter into the decision-making. Here the instructor can ask students to recall the
icebreaker exercise – why did they choose Pixar films as their favorites?
3. How has strategic leadership and the management of innovation helped Pixar sustain
its competitive edge?
Referencing Chapter 11: Strategic Leadership
The concept of leadership involves the process of transforming organizations from what they are
to what the leader would have them become. See Chapter 11, Exhibit 11.1. This involves:
●Setting a direction
Leaders need to set the direction for the organization by continually scanning the environment to
develop knowledge of all stakeholders, and knowledge of salient environmental trends and
Steve Jobs set the initial direction for Pixar when he saw the possibility in George Lucas’s
original computer group. Although Jobs was not a moviemaker, he understood the promise of
Leaders are responsible for designing the organization: a strategic leadership activity of building
Steve Jobs also understood and appreciated the talent of Ed Catmull and John Lasseter. Jobs
provided an initial structure where both these creative individuals could thrive. Catmull and
Lasseter in turn continued to build and sustain an organization that supported teamwork,
effective production processes, and systems that encouraged creative ideas, even after the
integration with Disney’s animation division. Evidence of this organizational design was
apparent by:
●Pixar’s campus-like environment
●Pixar University courses
●Steve Jobs remaining as both director and individual stockholder until his death
●Lasseter’s responsibility for creativity at both companies. He reported directly to Disney
Difficulties in implementing the leader’s vision and strategies include a lack of understanding of
responsibility and accountability among managers, reward systems that do not motivate
Pixar’s leaders understood the importance of culture – that employees had to be allowed to be
creative in their work environment. Employees were encouraged to:
●Transform office cubicles into tiki huts and circus tents
●Devote up to four hours a week to furthering their education
The leader also has the responsibility to create successful learning organizations by creating a
proactive, creative approach to the unknown, actively soliciting the involvement of employees at
Jobs, Catmull, and Lasseter created a learning organization: shared their passion by involving
NOTE – ADDITIONAL READING, PHOTOS OF PIXAR WORKSPACES:
Pixar is noted for its approach to human capital, and knowing how to combine talent to produce
innovative and profit-making products.
See http://www.businessweek.com/managing/content/jul2008/ca20080710_173268.htm
And photos of the “tiki hut” workspaces inside of Pixar: http://www.google.com/search?
q=pixar+office+pictures&hl=en&client=firefox-a&hs=6vw&rls=org.mozilla:en-
US:official&prmd=ivns&tbm=isch&tbo=u&source=univ&sa=X&ei=yVk_TobHDsnq0gHd04z6
Aw&ved=0CBgQsAQ&biw=776&bih=565
Referencing Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship
Innovation involves using new knowledge to transform organizational processes or create
commercially viable products and services using the latest technology, experimentation, creative
There’s no doubt Pixar disrupted the existing technology at the time, innovating in a way that
Some of the challenges of innovation involve choosing when and how to continue to innovate,
the scope of future innovation and the pace, as well as whether or not to collaborate with
Before proceeding, firms must first define the scope of the innovation efforts, and must ensure
that their innovation efforts are not wasted on projects that are outside the firm’s domain of
interest. In defining the innovation scope, a firm should answer several questions:
●How much will the innovation initiative cost?
●How likely is it to actually become commercially viable?
●How much value will it add; that is, what will it be worth if it works?
●What will be learned if it does not pan out?
Pixar’s leaders, Jobs, Catmull, and Lasseter, were mostly concerned with creating value, with
utilizing the resources they had, with achieving the organization’s original vision and mission.
Organizations must have the entrepreneurial orientation necessary to succeed in a new venture.
Students should assess the vision, dedication and drive, and commitment to excellence
Autonomy – Experts, such as Pixar’s technologists, and Lasseter’s creative team, were allowed
Innovativeness – Edwin Catmull’s team made substantial breakthroughs in the development of
Proactiveness – Both Jobs and Catmull were proactive in identifying how computer technology
Competitive aggressiveness – With Pixar part of Disney, CEO Iger hoped to use the combined
Risk Taking – Steve Jobs’ original investment in Pixar was a risk – first $10 million, then an
The actions by Jobs, Catmull, and Lasseter instilled passion and energized effort toward making
great films: “everyone at Pixar remains committed to making films that are original in concept
What challenges remain?
●Increased temptation to make sequels
●Disney’s Iger pledged to keep Pixar culture protected – will that commitment hold if
●Both Catmull’s and Lasseter’s responsibility for both Disney and Pixar animation
●Integrating expanded staff – not everyone may have the same talent or desire to pool their
●Increasing the pace of production may encourage short cuts, compromising high
●Steve Jobs’ death may remove a source of inspiration and a sounding board for Lasseter
NOTE – ADDITIONAL READING, VIDEO CLIPS OF LASSETER’S WORK:
John Lasseter has been one of the major creative forces behind Pixar’s success. Here is a
retrospective of John Lasseter’s early animated creations, including the award-winning short film
Luxor, Jr., which was a turning point for Pixar:
http://www.pastemagazine.com/articles/2009/06/salute-your-shorts-pixar---part-1-the-early-
years.html
Although Lasseter is the more well-known face of Pixar, Edwin Catmull, president of Pixar and
Walt Disney Animation Studios, is its spiritual father. The following is what people say about
Catmull: “Ed believes that you should always hire people who are smarter than you. Ed believes
Similar to Steve Jobs’ visionary leadership at Apple, and at Pixar in his role on the board, it
appears Pixar has been successful because of the combined genius of Lasseter and Catmull. What
might happen if these two leave the company?
