Threat of new entrants: High Advanced technologies make it difficult for new competitors to enter the market because they have to develop those technologies before effectively competing. The requirement for advanced technologies positively affects PIXAR. The PIXAR has a high level technology development department, so the threat of new competitors is the technology. Threat of substitute products or services: Moderate I consider substitute products to be theater or other forms of entertainment.
Internet is also a substitute form of entertainment as the concept of instant messaging was very popular at this time. Also, we can see the beginning of the popular social network Facebook gain traction as it was launched in 2004. Rivalry among existing competitors: High Since there are only a few key players with similar percentage of market share (ranges from 14%-19%), the competition between them is strong. To be more competitive, the growing trend is to consolidate and acquire other studios.
For example, Vivendi acquired Universal in 2000, which was then acquired by GE in 2004 and Viacom acquired DreamWorks in 2006. Power of buyers: Moderate I assess this threat to be moderate as there are many potential consumers with limited financial impact on the industry. In addition, the industry is dominated by key players thus is able to limit the options for the buyers. On the contrary, even though there are only a few options, there are effectively zero switching costs for customers.
Hence, watching a film by one company does not make it more costly or difficult to then watch a film from a competitor. Power of suppliers: Moderate I assess this threat to be moderate since with technology, hand-drawn animation is being replaced by computer technology. In addition, the needs for these computer animation skills start to be outsourced from North America to Asia Pacific where there are significant lower costs coupled with high quality computer animation production.
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