Industry Survival and Success Factors of IMAX - Case Study Example

? IMAX Report Executive Summary IMAX is one of the largest film production companies in the world that stresses on the use of three dimensional technologies in regards to the production of movies and films. However the company is facing a number of challenges pertaining to the contents and the change in the level of consumer perceptions. This report thus focuses on the different challenges faced by the movie production company in the course of its operations and also the different type of strategies taken by the company to counter such problems. Introduction Imax Corporation earned a new spur of life on being taken over by Richard Gelfond and Bradley Wechsler during the period of 1994 at a price of around $80 million. These two people to help address the need for the business expansion of the company helped in making the company public so as to draw huge funds from outside. The two new owners to help address the need for market expansion of the company took resort to different strategies like changing the ambience of the IMAX theatres to be like that of the multiplexes and presenting films which would be different from the standardised ones. This strategy caught the attention of a niche crowd who were found visiting such theatres frequently. IMAX helped in developing the concept of showing cinemas in halls which would be in-built in buildings containing auditoriums, museums and other such public arenas. Herein the issue of dip in market capitalisation figures from $196 million during 1994 to $125 million during 2008 came out to be a matter of serious concern for the owners. The company apart from earning revenues from filming movies also created a revenue channel based on leasing of movie equipments and other distribution activities (IVEY, 2009, p.1-3). Analysis of the Environment The analysis of the external environment of IMAX is conducted based on strategic tools like PESTEL, Porter’s Five Forces Model and also the understanding of the life cycle of the film industry in United States. PESTEL Analysis The PESTEL Analysis would help reveal the external environment of IMAX based on the region of United States and would focus on political, economical, social, technological, environmental and legal aspects. Political Factors The film industry of United States depicts an internal political climate wherein several film producers like Walt Disney, Pixar, Warner Bros. and others are found to have created a lobby for them thus obstructing the entry of new firms. Further the Motion Picture Export Association (MPEA) in United States is found to render controlling measures upon the several factors pertaining to price levels and other distribution activities of the films produced by the industry to other foreign markets. This body also supports the lobbying activities of the film producing companies in United States (Wasko, 2003, p.180-181). Economic Factors The region of United States reflected a growing market for the growth of films. Thus during the period of 2007 around 603 films were found to be released which countered a huge revenue growth of around $9.6 billion. However the prices of the films demanded a standardisation to help attract larger number of viewers to the hall and thus took resort to large volumes of commercial advertising (IVEY, 2009, p.10-11). Social Factors Several social factors in the region of United States also impacted the type of cinemas which would be shown to the general public. It is found that the cinemas were considered in the American society as a medium for educating and entertaining children. Thus cinemas are increasingly being considered as the mediums for developing the American knowledge base. Further the existence of Latin American base is also found to largely impact the production of films in the region (IVEY, 2009, p.10; Sutherland and Feltey, 2009, p.102-103). Technological Factors Development of cinema technology in United States using high definition features in DVD recorders and the extensive use of internet and other camcorders to distribute the cinemas produced among larger number of viewers led to the growth of several options in regards to the viewing population of United States. This led to the fall in demand for cinemas shown or held by IMAX. Thus companies like IMAX needed to alter their value chain to help address the changing needs of the American population (IVEY, 2009, p.9). Environmental Factors In regards to the environmental factors the IMAX is again found to have become a media for the United States government to help promote the cause for safeguarding and protecting the natural environment. Thus enhanced tie ups were encouraged between IMAX and other natural museums and artefact centres to help in creating consciousness about safeguarding the natural beauty. IMAX also started producing several documentaries to increase environmental consciousness (Lord and Lord, 1999, p.163; Murray and Heumann, 2009, p.32). Legal Factors The legal climate of United States governs the several taxation and employment policies related to the operations of the film industry and also controls its international expansionary motives. Similarly the several operational elements of the companies in regards to the film industry like leasing activities conducted by IMAX Corporation are governed by the legal and administrative bodies in the region (Bloomberg Business Week, 2011; Daniels, Radebaugh and Sullivan, 2007, p.22-23). Porter’s Five Forces Model Consumerism in the region of United States in regards to the film industry is found to gain support of a large number of options owing to the emergence of internet and other video recording options. Thus companies like IMAX in order to attract crowds need to manage the fare rates in a reasonable manner (Jaffe, 2007, p.189). Moreover IMAX faced potential competition from existing players like Pixar and Disney which targeted the United States audience especially the children and family profiles for the production of animated movies. Similarly in the production for movie for halls Iwerks rendered potential competition to IMAX. With the availability of larger resources regarding space, technology and financial support the case of new entrants emerging in the movie theatre market has risen proving to be a threat to IMAX (Reuters, 2011). Industry life Cycle The film industry in United States depicts a stage of considerable growth owing to large amount of changes in the movie production scenarios in the region. Technological and commercial improvements in the film industry are continually changing the pattern of film production prompting areas for high opportunity and growth for such (Weil et al., 2007, p.4-5; Crane and Meyer, 2010, p.16-17). Thus the film industry in United States is positioned in the growth section of the industry life cycle curve. Maturity Film Industry of United States Growth Industry Survival and Success Factors of IMAX The focus of IMAX on production of entertainment packages linked with the education sector helped in gaining a larger market. Moreover the IMAX theatres ventured to tie up increasingly with the different multiplexes thus giving the people a new entertainment venue which was previously centred to auditoriums and museums. Again the enhanced use of three dimensional technologies helped to create much more thrill among the viewers in regards to the different films both science fiction and others. The marketing and promotional events taken by IMAX on a large scale helped to increase the brand awareness among large number of viewers in the mass market (Johnson, Scholes and Whittington, 2008, p.247-249). Analysis of the IMAX Strategy SCP Model The structure of the United States film industry reflects an oligopolistic market governed by selective movie companies like Warner Bros., Fox Entertainment and others catering for a larger viewer base. In terms of conduct the United States movie industry attempts to address the growing needs of the viewers by rendering large scale innovation to the sound and featuring paradigm of the movies. Recent performance parameters reflect on the inclusion of sound and special effects to the movies thus focusing on the creation of science fiction films (Albarran, 2009, p.32-33). The film industry in United States owing to the development of the technological interface has led to the growth of potential competition in regards to both consumers and companies. However IMAX is found to effectively govern the supplying population containing of distributors who often delay the issue of films in the light of potential news from IMAX of any new releases (Marich, 2005, p.198-199). Moreover the changes in viewer tastes with also the rise in the availability of spaces has led to the rise of new companies in the film industry. IMAX Corporation to enhance its profitability and productivity position resorted to the differentiation strategy of moving over from the position of producing movies pertaining to education and entertainment genre which were produced in large formats to special science fiction films. Further the association of the company to the institutions like museums and national parks were transferred to large number of multiplexes. Again the enhancement of technological pursuits also helped the company to enhance the profitability and productivity position than other movie companies (IVEY, 2009, p. 11-12; Seeking Alpha, 2007). Value Chain Analysis In regards to film companies like IMAX the value chain activities centre around developing a newer technological framework for the launch of new movies, management and development of productive resource base pertaining to the dimension of people and technology to help produce quality movies and thereby formulating and strategising its distribution base to gain newer areas and developed margins. It is found that IMAX worked to develop the technology used for producing films to upgrade the production of movies. Further value additions were rendered through audits conducted by company management in the different film studious where such developed audio-visual instruments are being used. (Mrak, 2010, p.46). Moreover value additions were also generated in the pattern of movie generation pertaining to various genres ranging from horror to action and romantic comedies and other documentary events. Value Additions in regards to marketing and distribution activities helped IMAX gain high amount of revenues by featuring films in the multiplexes. In citing an example it is seen that a movie named ‘Polar Express’ distributed to the multiplexes in the form of three dimensional movies helped the firm earn large amount of revenues in comparison to its competitors in United States (Silver and McDonnell, n.d., p.15). Moreover other changes in the value dimension was also generated through the development of people who would take care of rendering special effects and other editing activities to the movie before the final presentation. Thus the value chain analysis of IMAX shows that how the firm developed itself in regards to the technological paradigm by generation of movies based on three dimensional technology, development of human resources to gain relevant competencies and also the work on its distribution paradigm and operational processes to effectively market the movies produced to large group of multiplexes and to the distributor base. This enhancement in the value paradigm of IMAX Corporation helped the company gain potential amount of revenues from the different multiplexes and other institutions where its movies were marketed or distributed. The theatre and the multiplex owners also gained huge flow of viewers who felt encouraged to see the three dimensional IMAX movies (Mrak, 2010, p.46). Product and Service Differentiation Strategies  Product or service companies in the manner of differentiating the different offerings help to eke out a specific position in the total market and thereby focus on the enhancement of its brand identity. Differentiation rendered in the product or services helps the companies in gaining the advantage of the niche market segments (Johnson, Scholes and Whittington, 2009, p.249-251). IMAX Corporation is incorporating productive technology like 3Net to enhance the level of product offerings to the ultimate consumers in the United States market. Through the use of three dimensional technologies where IMAX was aptly offering the best quality videos and movies for viewers at multiplexes and theatres the use of 3Net enabled the company to reach to the home based viewers in a much more enhanced manner. The company in addition to the production of movies also diversified further to enter into the realm of distribution where it acted like a potential distributor distributing the films to the different theatres and multiplexes and thereby earning returns on such basis. Further diversification strategies taken by the company helped it to increase its focus on international markets such as the emerging economies of Asia and China. This diversification of the company to international zones helped the concern to gain large amount of business profits. IMAX also diversified to gain revenue through the rendering of enhanced focus on activities like leasing of film products to third parties (Lieberman, 2010). These differentiations enabled both in regards to the product and service framework helped IMAX to gain access to potential markets and incur large revenues (Johnson, Scholes and Whittington, 2008, p.247-249; Slack and Parent, 2005, p.119). Appraisal of sustainability of strategy  In terms of strategic resources IMAX Corporation was able to develop both technical and human resource skills to help in the production of high quality movies based on third dimensional technology. Moreover the movie halls were customized to help address the sophisticated needs of the viewer base. Further the research and development functions and potential relationship with the suppliers also acted as a strategic resource base for the concern (IVEY, 2009, p.3). The above strategies taken would be potentially sustainable in regards to the fact that it tends to address the changing needs of the consumer bases and the society in general. Development of the human and technological resources to help produce quality movies based on three dimension technology earns sustainability owing to the fact that the company acting on such moves gains a large consumer base. Uniqueness of the strategy can be observed from the collaboration of the operational activity with the 3Net technology that helped in developing the quality model of the movies produced (Discovery, 2011, Child, 2011). Speaking on the basis of the VIRUS Strategy it can be mentioned that the development of the different software and hardware elements like producing films based on three dimensional technologies made the IMAX experience both valuable and inimitable in nature. Further development of the films focused on enhancing the educational methodology of the region by effectively diffusing with the social and cultural parameters make the experience quite rare. The marketing and promotional exercises of IMAX to enhance the brand awareness for the services rendered helps to enhance the dimension of consumer loyalty to a great extent thereby ceasing switchovers of people to other substitute brands. His comments: Very briefly. See attached   Environmental analysis and five forces – too focused on IMAX and not on broader industry. No industry survival and success factors   Analysis of strategy – should pass muster, although the value chain analysis is done in a fashion, and using terminology, that I do not recognise. I shall be checking Turnitin carefully.  Could usefully be better linked to the environmental analysis – why (or to what extent) do these strategies make sense in this environment?   Appraisal of sustainability strategy. Very simplistic. Could be improved by the identification and evaluation of strategic resources. References Albarran, A. (2009). The Media Economy. Taylor & Francis. Ivey. (2009). IMAX:Larger than Life. [Pdf]. Available At: http://www.w.fh-giessen.de/downloads/Mit_ID/532/Imax%20Case.pdf. [Accessed on July 29, 2011]. Wasko, J. (2003). How Hollywood works. SAGE. Lord, G., and Lord, B. (1999). The manual of museum planning. Rowman & Littlefield. Murray, R., and Heumann, J. (2009). Ecology and popular film: cinema on the edge. SUNY Press. Bloomberg Business Week. (2011). IMAX Corporation. [Online]. Available At: http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=29780. [Accessed on July 29, 2011]. Daniels, Radebaugh and Sullivan. (2007). International Business,11/e (new Edition). Pearson Education India. Jaffe, J. (2007). Join the conversation: how to engage marketing-weary consumers with the power of community, dialogue, and partnership. John Wiley and Sons. Marich, R. (2005). Marketing to moviegoers: a handbook of strategies used by major studios and independents. Focal Press. Reuters. (2011). IMAX Generates Approximately $3 Million Global Gross Box Office for Disney Pixar's...[Online]. Available At: http://www.reuters.com/article/2011/06/27/idUS222491+27-Jun-2011+GNW20110627. [Accessed on July 29, 2011]. Crane, F., and Meyer, M. (2010). Entrepreneurship: An Innovator's Guide to Startups and Corporate Ventures. SAGE. Seeking Alpha. (2007). New Contracts Bolster Business for IMAX. [Online]. Available At: http://seekingalpha.com/article/24438-new-contracts-bolster-business-for-imax. [Accessed on July 29, 2011]. Mrak, M. (2010). High-Quality Visual Experience: Creation, Processing and Interactivity of High-Resolution and High-Dimensional Video Signals. Springer. Johnson, G., Scholes, K., and Whittington, R. (2008). Exploring Corporate Strategy: Text & Cases, 7/E. Pearson Education India. Slack, T., and Prent, M. (2005). Understanding sport organizations: the application of organization theory. Human Kinetics. Sutherland, J. And Feltey, K. (2009). Cinematic Sociology: Social Life in Film. Pine Forge Press. Lieberman, D. (2010). Discovery, Sony and Imax see TV through 3D glasses. [online]. Available At: http://bx.businessweek.com/value-chain/view?url=http%3A%2F%2Fc.moreover.com%2Fclick%2Fhere.pl%3Fr2447335161%26f%3D9791. [Accessed on July 29, 2011]. Discovery. (2011). Introducing 3net – The 3d Joint Venture Of Sony, Discovery Communications And Imax Officially Announces Network Brand. [online]. Available At: http://press.discovery.com/us/3n/press-releases/2011/introducing-3net-3d-joint-venture-sony-discov-1139/. [Accessed on July 29, 2011]. Child, B. (2011). US film industry set for four years of strong growth, predicts report. [online]. Available At: http://www.guardian.co.uk/film/2011/jun/14/us-film-industry-growth-forecast. [Accessed on July 29, 2011]. Weil, R. et al., (2007). Litigation Services Handbook: The Role of the Financial Expert. John Wiley and Sons. Silver, J., and McDonnell, J. (No date). Are Movie Theaters Doomed? Do Exhibitors See The Big Picture As Theaters Lose Their Competitive Advantage?. [Pdf]. Available At: http://eprints.qut.edu.au/12880/1/12880.pdf. [Accessed on July 30, 2011]. Appendix Read More