Disney and PixarDisney owns Pixar outright, having acquired it in 2006 for $7.4 billion. In terms of business, Disney is a distributor of films, while Pixar is a production studio. That is to say, Pixar makes movies, and Disney markets and distributes them. Disney had an equity stake in Pixar, which came with a contract to produce three films. This has been the relationship between the two companies since the first Pixar movie, Toy Story. After that film, Pixar's head Steve Jobs insisted that Pixar, at the time an independent company, would have equal billing and equal profit sharing. During that period, the two companies were strategic partners. It was a natural move, then, for Disney to acquire Pixar. After the acquisition, Pixar's strategy shifted towards more growth. The cost of computer animation was declining, and Disney wanted to see more films, but maintaining Pixar's standards of excellence. This created some strain in the relationship with Disney. As Disney now had greater control over Pixar and was willing to invest in its expansion, it wanted more films, which stretched Pixar. But the power dynamic is different with Disney being owner, in that it can demand more content from Pixar and provide the resources to make it happen.

2. There are several external factors that are important for Pixar. The first is technology. Pixar was one of the most important companies in terms of developing computer animation, and for the longest time it lead the field. But as computer animation comes down in price, more people are entering into the field. It is becoming more difficult to be cutting edge. This leads to the second external factor -- more competition. The Lego Movie, distributed by Warner Brothers, marked the entrance of a new company into the field, and this represents a challenge for Pixar....

While Pixar still has an exceptional reputation, more competition is going to challenge its industry dominance, and could reduce demand for its films as they lose their uniqueness. A third external factor for Pixar is Disney, its owner. The change in ownership brought with it a change in direction for Pixar, and this ultimately has led to significant internal changes at Pixar.
3. There are several major challenges facing Pixar. The first is the aforementioned competition. Pixar for years was the dominant player, and now there are other studios capable of making high-end computer animation. The medium is no longer a novelty -- Pixar must respond by continuing to deliver great stories, as that is almost harder to do than to draw things on computers nowadays. The second challenge is to maintain the internal culture of creativity. This is one of the reasons why they have had such great stories and been able to maintain their status as an innovation leader. Pixar needs to keep the culture leaders in place, and resist Disney's attempts to scale up production more rapidly than the talent pool allows for. A third major challenge for Pixar is going to be do deal with adversity. They have never faced adversity, but the trajectory of greater competition and declining creativity at Pixar could easily lead this company to an interesting place where it is being legitimately challenged. It will be interesting to see how Pixar responds to that, given that they have never faced a situation where failure was actually a possibility before.

4.VRIO stands for value, rarity, imitability, and organization. If we consider Pixar's major assets, writing talent is now the rarest and therefore most valuable commodity at Pixar. This is difficult to imitate -- they rely on one person to lead the team and always…