THE IMPACT OF MERGERS AND ACQUISITIONS
ON ORGANIZATIONAL CULTURE
A Case Study of
Disney-Pixar Animation Studios
and Disney-Marvel Entertainment
Presented to Dr. Melanio Santella
Professor, Organizational Behavior
Graduate School of Business, Far Eastern University
In Partial Fulfilment
of the Requirements of
Organizational Behavior (MBA 203)
MARIA ARLENE (Bam) T. DISIMULACION
TABLE OF CONTENTS
BACKGROUND OF THE CASE STUDY ……………………………… 3 - 4
STATEMENT OF THE PROBLEM ……………………………………. 4
AREAS OF CONSIDERATION ………………………………………… 5 - 11
RELEVANT ORGANIZATIONAL BEHAVIOR PRINCIPLES
TO RESOLVE THE PROBLEM ………………………………………... 11 -14
FINAL RECOMMENDATIONS ………………………………………… 14 - 20
BIBLIOGRAPHY …………………………………………………………. 21
Disney-Pixar Management Strategies
BACKGROUND OF THE CASE STUDY
When news broke out that Disney bought Pixar Animation Studios for US$ 7.4
billion, some were excited, while the rest expressed apprehension.
With a giant like Disney, the anxiety was based on the legendary Disney’s
extreme control over business operations. Many, too, were worried that Disney might
kill the sparks of creativity that made Pixar extremely successful.
Then, Disney announced its purchase of Marvel Entertainment Inc. for US$ 4
billion. This time, the world, most especially the Marvel fanatics, were up in arms.
They could not imagine Mickey Mouse, wholesome and cute, walking alongside
the masked Spiderman. Even analysts could only imagine the collision that could erupt
at Disney theme parks, resorts and entertainment catering to young kids when combined
with the Marvel Universe of anti-heroes.
The Walt Disney Company, founded in 1923 by brothers Walt and Roy Disney, is
the world’s largest media and entertainment organization. Today, it owns eleven (11)
theme parks; two (2) water parks; one (1) television network, American Broadcasting
Company; (3) movie outfits, namely Buena Vista Distribution, Buena Vista Motion
Pictures Group and Walt Disney Studio Entertainment; plus Disney Consumer Products
Disney earned its reputation for successfully managing its empire thru a strong
corporate culture that includes extreme control over operations.
The case study will review topics and issues related to organizational culture with
reference to mergers and acquisitions, specifically in the cases of the Disney-Pixar
Animation Studios and the Disney-Marvel Entertainment.
However, it will exclude discussions on the other components of mergers and
acquisitions not related to organizational behavior such as due diligence for accounting
and finance; stock market prices; earnings per share and dividends distributed. Although
these are important areas for consideration, the case study is limiting its scope to
organizational behavior-related discussions.
STATEMENT OF THE PROBLEM
This paper will attempt to provide insights on the following questions:
1. What are the organizational cultures of creative giant Walt Disney
Company, innovative Pixar Animation Studios and maverick Marvel Entertainment?
2. What are the factors that will ensure the success of Disney’s merger and
acquisition of Pixar Animation Studios and Marvel Entertainment?
AREAS OF CONSIDERATION
This paper will review of the Disney corporate culture as well as the
organizational cultures of Pixar Animation Studios and Marvel Entertainment before they
were bought by the former. To provide a holistic view, it will include a brief history of
Further, the paper will discuss the rationale behind mergers and acquisitions. It
will also recommend specific action plans to ensure that mergers and acquisitions result
in a positive impact on corporate culture.
A. WALT DISNEY COMPANY
The Walt Disney Company (most commonly known as Disney) is the largest
media and entertainment empires in the world. Founded on October 16, 1923 by brothers
Walt and Roy Disney, it started as a small animation studio.
2. Corporate Culture
Disney has a strong foundation created by a strong heritage, established traditions,
quality standards, and shared values.
The Disney organization emphasizes happiness, not as an intangible, but
something that can be experienced through all contact with customers. Cast members, as
their employees are referred to, play a key role in ensuring that customers are happy,
treating them as invited guests.
To define “happiness” within the context of the multimedia entertainment empire,
the writer refers to the research conducted by Charlene Marmer Solomon.
In her article entitled “How Does Disney Do It,” she outlines the methodology the
corporation uses to instil the required behavior, norms and values.
According to Solomon, there are four (4) main ingredients to the happiness
culture. These are safety, courtesy, show and efficiency – called the “Disney Courtesy.”
Taught at the Disney University, the concept focuses on “employees who are part of the
fantasy and are present to create happiness.”
The philosophy driving its culture is a “comprehensive approach to employee
relations.” The company believes that management needs to treat its employees the way
they treat their customers. As one of its founders, Walt Disney once said, “You can
create, design and build the most wonderful place in the world, but it requires people to
make the dream a reality.”
To teach Cast Members (Disney employees) about expected norms in the
workplace, they undergo an eight-hour orientation program.
First half of the program focuses on Disney history, Walt Disney’s philosophy
and the standards of guest service. For new hires, they are advised on where they best fit
within the organization. To reinforce the lessons learned, they are repeated on internal
The second part includes a tour of the park “from a design and guest service
standpoint.” These are discussions on costumes and general office policies.
What makes the training more interesting is that these are taught by outstanding
employees in full costume.
Training does not end there, but continues – ahead of the curve – where
employees are trained before they even need it. “By the time a person moves through our
organization into middle management, they have a strong understanding of expectations
and have already gained the necessary skills.”
3. Disney Legends
True to its commitment of caring for its employees, Disney rewards and honors
individuals “whose imagination, talents and dreams have created the Disney magic.”
Established in 1987, the program has honoured animators, imagineers, song
writers, actors and business leaders.
B. PIXAR ANIMATION STUDIOS
Pixar Animation Studios was established in 1986 by Steve Jobs, CEO of Apple,
and Ed Catmull. Renowned for its cutting edge technical skill and artistic innovations,
Pixar became the leading pioneer in animation in just four (4) years after its birth.
Original and extremely innovative, Pixar has never bought a story or a character.
The storyline, concept and characters of blockbuster animated movies such as “Toy
Story,” “Monsters,” “A Bug’s Life,” “Ratatouille,” “Wall-E,” “Up” and “Finding Nemo.”
In 2006, Disney bought Pixar Animation Studios for US$7.4 billion.
2. Corporate Culture
Researchers and critics agree. There are three (3) keys to Pixar’s huge success.
According to Bob Irish in “Pixarology” – the distinct organizational culture driving
Pixar’s extra-ordinary success – are the following:
2.1 People and Talent: Pixar scouts for the best talents and provide
them with the environment to nurture their skills. Co-founder Ed
Catmull reiterates that “everyone must have the freedom to
communicate with everyone,” and that “it must be safe for
everyone to offer ideas.”
Furthermore, Pixar is not afraid to hire people who can even be
better than management. Ego must be set aside to allow each
employee to work creatively with the rest. The slogan which
reinforces this value is Pixar’s “All for one, One for All” belief.
2.2 The Fusion of Art and Technology: Pixar works hard to rid its
organization of the distinctions between “artists” and “scientists.”
The battle cry:“Technology inspires Art, and Art challenges the
2.3 Solid Financials: When Co-founder Steve Jobs bought the
computer division of George Lucas for US$ 10 million, he started
the legendary financial support Pixar gets from management. He
immediately invested US$ 5 million more in technology
C. MARVEL ENTERTAINMENT
Marvel Comics was founded by established magazine publisher Martin Goodman
in 1939. Its first publication was Marvel Comics #1, released in October 1939, featuring
the second appearance of Carl Burgos' android superhero, the Human Torch, and the first
appearance of Bill Everett's mutant anti-hero Namor the Sub-Mariner.
Marvel Entertainment is best known for its imaginative comic heroes drawn by
technically-skilled artisans. But it only began diversifying its portfolio in the 1990s thru
Its main properties include Spider-Man, the Fantastic Four, the Incredible Hulk,
Thor, Iron Man, Captain America, the X-Men, notably Wolverine. In addition, most of
Marvel's fictional characters operate in one single reality known as the Marvel Universe.
Marvel's comics were noted for focusing on characterization than most superhero
comics before them. This was especially true of Spider-Man, whose “young hero suffered
from self-doubt and mundane problems like any other teenager.”
Pop culture experts agree that Marvel superheroes are “often flawed, freaks, and
misfits, unlike the perfect, handsome, athletic heroes found in previous traditional comic
books. Some Marvel heroes even look like villains and monsters. In time, this non-
traditional approach would revolutionize comic books.”
2. Corporate Culture
Marvel’s history is replete with various changes in ownership and boom and bust
scenarios which may be the reasons for its relatively weak organizational culture as
compared with Disney and Pixar.
In the earlier years of Marvel, there was a single editor overseeing operations.
But as the company grew, individual titles were managed separately. With increasing
number of properties (or characters and comic titles), jobs were overlapping.
Aside from having chaotic work descriptions and titles, the 1990s were dominated
by gimmicks, such as swimsuit issues, to boost sales, which went against Marvel
Universe characters and storylines.
On another level, Marvel withdrew from the Comics Code Authority and
established its own Marvel Rating System for comics. This allowed Marvel to “reboot
heir major titles by deconstructing and updating their major superhero and villain
characters to introduce to a new generation.
RELEVANT ORGANIZATIONAL BEHAVIOR PRINCIPLES
TO RESOLVE THE PROBLEMS
1. Organizational Culture
Edgar H. Schein, author of “The Corporate Culture Survival Guide: Sense and
Nonsense about Cultural Change,” said that the increasing importance of organizational
culture is due to globalization, mergers and acquisitions, partnerships, among other
Tom Peters, in his seminal book “In Search of Excellence” agreed with Schein
stating that corporate culture plays an important role – “particularly if its values hinge on
customer service, innovation and proactivity, flexibility, action orientation and human
resource development – forging so-called excellent, and therefore successful,
The relationship between culture strength and performance reliability depends on
how strong-culture firms learn from and respond to both their own experiences and
changes in their environment. Adjustments can be when employees “ have an agreed
upon framework for interpreting environmental feedback and a common set of routines
for responding to different signals from the environment.”
2. Strong versus Weak Culture
Studies reveal that a strong culture was conceptualized as a coherent set of beliefs,
values and norms embraced by most members of the organization. It emphasized its
degree of consistency across the organization as well as its acceptance.
Many early proponents of organizational culture tended to assume that a strong,
pervasive culture was beneficial to all organizations because it fostered motivation,
commitment, identity, solidarity and the sense of belonging.
However, strong cultures can dampen the rise of subcultures that can lead to
organization dysfunction. A strong culture could also be a means of manipulation and
co-optation (Perrow 1979). It could further contribute to a displacement of goals or
subgoal formation, meaning that behavioral norms and ways of doing things become so
important that they begin to overshadow the original purpose of the organization (Merton
1957; March and Simon 1958).
3. Mergers and Acquisitions (M&A)
These are strategies used in business to achieve the following:
3.1 Synergy: The gains to be made by combining resources of
companies lead to increased efficiency and decreased costs.
Among the most common type of synergies are the following
Cost synergies: Savings generally may come from internal
economies of scale or through purchasing.
Marketing and Sales synergies: This leads to a wider reach
of target markets through a larger sales force or expanded
customer base, cross selling one product to buyers of
Technology synergies: This happens when companies gain
access to cutting-edge equipment, processes, systems
and expertise that can enhance their capabilities
3.2 Diversification/Sharpening Business Focus:. Companies which
decide to sharpen focus, often merge with companies that have
deeper market penetration in a key area of operation.
3.3 Growth for All Firms Involved: Mergers can provide the
acquiring company an opportunity to increase the market share
without making any additional investment because they buy a
competitor’s business for a price.
3.4 Increase Supply-Chain Pricing Power: By buying out one of its
suppliers or one of the distributors, a business can eliminate at least
one level of costs.
The Disney-Pixar and Disney-Marvel mergers and acquisitions initiative will
always be considered as an exemplary success story in the annals of organizational
Defying the odds that mergers and acquisitions will wreck havoc on corporate
cultures, productivity, profits and employee morale, the Disney example sets a new trail
for companies interested in taking the same path.
Most likely, Disney will soon include lessons learned from their actual
experiences in the Disney Institute.
As written in their brochures, Disney has created a method that brings together
organizational culture with personal and corporate success.
Some may see these as an oxymoron, but “Disney has a foundation created by a
strong heritage, established traditions, quality standards, and shared values. At each and
every Disney destination around the world, these are the assets that create the road map -
the corporate culture that defines our people management processes and the philosophy
that leads to every business decision. Upon this foundation we have built unique traits
and behaviors, and introduced language, symbols, processes, and styles that distinguish
us in the marketplace. By protecting and nurturing these differences, we remain
committed, focused, and ready to achieve new business goals.”
To ensure the success of mergers and acquisitions as well a enable these to positively
affect corporate culture, follows are the recommendations:
Recommendation # 1:
Conduct a Bicultural Audit of the Companies Involved in Mergers & Acquisitions
To reduce, if not totally eliminate cultural differences between companies that are
merging or are being bought by another organization, it is recommended that a bicultural
audit be conducted.
A bicultural audit “diagnoses cultural relations between companies and
determines the extent to which cultural clashes will likely occur.”
In his book, “The Corporate Culture Survival Guide: Sense and Nonsense about
Cultural Change,” author Edgar H. Schein presents a guideline for doing bicultural
First, a task force must be created with membership coming from organizations
involved in the merger and/or acquisition.
Next, the members will be involved in discussions and dialogues on the following
External Survival Issues
Mission, strategy, goals
Means: Structure, system, processes
Measurement: Error-detection and correction systems
Internal Integration Issues
Common language and concepts
Group boundaries and identity
The nature of authority and relationships
Allocation of rewards and relationships
Deeper Underlying Assumptions
Human relationships to nature
The nature of reality and truth
The nature of human nature
The nature of human relationships
The nature of time and space
Third, both groups should explore major areas of how the other organization
Finally, both groups will be required to use dialogues as their major medium of
By slowing down the conversation, we learn to hear the deeper layers of our own
discourse and realize how much our perceptions, thoughts and feelings are based on
learned assumptions. We begin to experience our own culture, that is, to the degree to
which our own group identifications and backgrounds color our thought processes. As
we discover this in ourselves, we are readier to hear it and accept it in others. (Schein,
Recommendation # 2:
Use Success Factors to Ensure a Successful Merger of Corporations and their
Companies involved in merges and acquisitions must be given the opportunity to
understand the reasons for the corporate change, thus, minimizing the resistance of their
It is highly recommended that employees see the reasons for the merger and
acquisition. They must understand its long-term, positive impact and be made to realize
that its effects can be beneficial to both.
Instead of looking at the negative view, that is, the elimination of competition,
employees of these firms must look at the following potential positive and lucrative
results of a merger and acquisition strategy as presented in the previous section.
In the case of Disney-Pixar, separation was the best fit to allow the corporate
cultures to continue to flourish with the resulting synergies enhancing and expanding
their market reach as well as their revenues.
On the other hand, in the case of a company like Marvel with a relatively weak
culture being acquired by a dominant culture like Disney, I recommend the integration
strategy. This way, the acquired company gets access to equipment, marketing and sales
capabilities and reach of Disney as it strengthens by aligning itself with Disney.
Recommendation # 3:
Use the Separation Strategy for Mergers & Acquisitions of Companies With Strong
Corporate Cultures such as the Disney-Pixar Model
There are four (4) distinct strategies to merge organizational cultures, i.e.
Assimilation, Deculturation, Integration and Separation.
For organizations with strong corporate cultures with the willingness and
understanding in what can be gained from a merger and acquisition activity, I recommend
the use of the separation strategy.
Although, “Organizational Behavior” authors Steven McShane and Mary Ann
Von Glinow stated that “this strategy is most appropriate when the two merging
companies are in unrelated industries or operate to different countries,” the Disney-Pixar
and Disney-Marvel merger and acquisition has successfully used and implemented this
Attached is a copy of the Management Policies between Disney and Pixar,
articulating the latter’s freedom to continue its corporate legacy without interference from
Recommendation # 4:
Use the Integration Strategy for Mergers & Acquisitions of Companies, One with A
Strong Organizational Culture and the other with a Weak Organizational Culture
such as the Disney-Marvel Model
As far as the Disney-Marvel scenario, both companies instinctively knew that the
realization of their common goals could be achieved by integrating the culture of Marvel
Marvel's long history of several changes in ownership is reminiscent of orphans in
temporary foster homes which can lead to reduced capability to maximize their core
With an integration strategy, Marvel can gain from the strength of Disney’s
organizational culture and use it to its advantage.
Recommendation # 5
Companies Must Share a New Strategic Vision
To further increase the rate of success of mergers and acquisitions, without
negatively affecting the corporate cultures of the organizations involved, the leaders and
employees must share the same vision.
It is recommended that to reduce uncertainties, stabilize employee morale and
enhance productivity, goals and objectives must be clearly articulated, including the role
each one will play.
Edgar H. Schein “The Corporate Culture Survival Guide: Sense and Nonsense about
Cultural Change” Jossey-Bass, a Wiley Company, John Wiley & Sons, 1999
Judy Shimmin Levy “Pixar: A Case Study in Information Technology and the Creative
Mike Werstuik “What Disney and Pixar Can Teach Us About Mergers” Callahan &
Associates, July 9,2008
R. Muthukumar, editor “Case Studies on Mergers, Acquisitions and Alliances – Vol. II”
Icfai Books, Icfai Business School Case Development Centre
“How Pixar Fosters Creativity”
“Will Disney's Latest Acquisition Prove As Marvellous As It Appears?”
The Economist, September, 3rd edition 2009
James M. Haley and Mohammed H. Sidky “Making Disney Pixar Into A Learning
Sadri, G., Lees, B. (2001) "Developing Corporate Culture as a Competitive Advantage”
Journal of Management Development, Vol. 20 No.10, pp.853
Kathryn A Baker “Organizational Culture”
Mike Werstui “What Disney and Pixar Can Teach Us About Mergers” Callahan &
Associates, June 9, 2008
“The Walt Disney Company Makes A Hero-Sized Investment in a Brand Built by
“What the Marvel/Disney Merger Really Means”