Walt Disney & Pixar Incorporation Harvard Case Solution & Analysis

Solution 1:

Vertical Integration

An Organization expands its business in two ways that is to acquire their supplier/distributor and acquirethe same production system as the competitors, to gain a competitive advantage in the market. Vertical integration is the name given to the purchasing ofthe supplier / distributor. Vertical integration can help companies cut the cost and increase efficiency by reducing carriage expense and decreased turnaround time.


The companymanufacturing the shoes decided to deliver the shoes to enduser, so they acquire its retailers.

Relationship Specific Investment

Relationship Specific Investment hasa simple meaning that the investment which returns, depends on relationship with something else. In this type of specific investment, they acquire the efficiency of the relation.


Gas has a relationship with its pipeline because there is a specific relation upon which the investment is dependent. On the other hand, petroleum things also consider in these type of relationships.

Downstream free-riding

Free Riding means that’s someone is consuming more resourcesandpaying less charges of consumption. This casebecomes a downstream in the economy of the countryandis illegal.


One of the most common Example is that purchasing shares through a syndicate with paying less than the actual price.

Solution 2:

By analyzing their financial statement which is shown in the Appendix A and B that Pixar has more worth than Disney in term of the returns. Pixar has greater value in its proprietary computer animation technology, whichis its edge on Disney. Both of them have creative people who innovate the stories andembarkthe company`s goodwill. Pixar reason for achievement is Steve jobs who spend histime delicately to give a high edge note to the company. On the other hand, Disney is lackingthese type of things, but stillDisney has a good market reputation. Pixar started a flat & flexible business that gave extra self-rule to the firm’s performers. Walt Disney was the leader of animated kids’ movies. They employed the best story writers in the Company and owned the most advanced creation. These are the main things which give them an edge according to their capabilities and competence. Now, as per analysis and their internal control, Pixar has a favor over Disney which is showing its potentiality.

Solution 3

The Concurrent contract is more feasible as to sharing the common share equity because there are certain things in the contract which are beneficial for the organization. In the current contract, there are also cost cutting advantages with respect to distribution.It's also having revenue advantages which are in the ratio of 50:50. On the other hand, amending the new contract there should be a rights sharing term which can also benefit Pixar. Moreover, there should be a change in the free distribution to attain more customers. The contract length should have a 5 year term rather than having a10 year term, so that it will beeasier for both the firms to maintain the terms of the agreements. These changes would be a recommendation for the organization of “Pixar”. Another thing that can be is re-engineering of the whole enterprise system, but it can be costly for the organizations.

Solution 4

The value of the both entities goesin favor of the common ownership decision, because there are many things on which amend and entities of the contractwill resist. Walt Disney need Pixar because of to rebuild its idea with help of computer animation and Pixar is very good at it. Now the company has two streams for the analysis which are discounted cash flow approach and Price earnings ratio. In this case discounted cash flow approach is used because with this approach, there is a better chance in improving their cash flow. For using Cash flow approach, it evaluates the present value of future cash flow of the enterprise. In the Appendix C with respect to current scenario, there is a positive potentiality in the expected cash flow in term of their present value. These analysesare done with few assumptions which are given below

  • This analysis has been done with respect to acquisition of Pixar incorporation
  • Assumed Revenue is increased by 20% in every year
  • Cost and expense are reduced by 20%
  • Project cost taken as an average of 6.5 billion and 7.4 billion
  • The rate is taken average, which is given in the case that varies from 11% to13%
  • Assumed there is no amortization cost

These assumptions are taken with case scenario and the practical approach of Walt Disney and Pixar valuation method.

Solution 5

There are some challenges which will be facedbyBob Iger and his team with regardto the combing the entity, are as follows:

  • Financing source to purchase the Pixar common share holdings
  • Distributing the share of profits with respect to investments
  • Running the organization with the collaboration of different team members
  • Effectiveness and Efficiency on the quality matters aspect

Risk factors of Market Capitalization........................

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