SWOT and Pestel Analysis of IMAX Corporation - Case Study Example

IMAX Case Study Table of Contents Abstract 2 Introduction 4 Pestel Analysis 5 Porter’s 5 Force: 6 SWOT: 8 Industry Survival & Success Factors: 12 References 12 Bibliography 14 Abstract IMAX Corporation is among the world’s best entertainment companies which focuses on Immersive picture technologies. It provides a wonderful movie watching experience because of its strength in high end 3D and DMR technologies. It has 400 theatres operating in 48 countries. IMAX Corporation was the first to bring the concept of large format movies in 1970 which was premiered at Fuji Pavilion in Japan. It got listed in NASDAQ in 1994 and successfully achieved $196 million market capitalization in that year itself. The report tries to analyze the various Internal and External factors that affect IMAX. Large screen formats are a relatively new concept and it offers a wide range of exciting opportunities. There are very few players in this segment and it is primarily dominated by IMAX which is in this business for a long time now. PESTEL analysis is done to understand the current situation. It has been established from PESTEL Analysis that technology is the most crucial factor for large screen formats. US is a tech savvy nation and hence this was the first market which was targeted by this industry. IMAX has developed superior technology in due course of time which provides a competitive advantage to it. There is a threat from substitute like 3D televisions which is trying to deliver 3D technology at the audience’s living room. Hence there is a need for constant innovation. With the growing popularity of movies like Avatar and Alice In Wonderland new players are lining up to take advantage of the opportunity. Vertical Integration is a prime charecterstic of this industry and IMAX’s biggest buyers Regal and APC are coming up with their own large screen formats. Introduction The report is an attempt to understand the various factors which affect the business of IMAX. The report starts with an analysis of the industry and the market trends. It is followed by an analysis of the external environment. PESTEL Analysis is done and their implications for IMAX are established. It then tries to analyze the competitive forces that IMAX is subjected to. Michael Porter’s 5 Force model is used to analyze the various threats from competition that IMAX has. Next the report tries to identify the internal factors which affect IMAX. IMAX’s strength and weakness is established in this part. It is followed by understanding the opportunities and threats that IMAX has. Based on the above findings the market segment of IMAX is selected which is followed by targeting and positioning of IMAX in the consumer’s mind. Finally based on the target market segment the marketing mix of IMAX is developed so that it can stay ahead of competition. Pestel Analysis Political: The Federal Communications Commission has plans to implement a National Broadband Plan ensuring internet for all (Hanchard, 2010).This would mean that pay per views would increase which might affect box office sales. Economical: America has been through the worst financial crisis. However it is on a recovery path with things getting back to normal. The per capita income of US in 2009 was $39,138$ (Bureau of Business & Economic Research, n.d.). The price of a ticket at IMAX is $15 which is expected to rise to $17 with the success of films like Avatar and Alice in Wonderland. Social: Religious groups are strong in US and they can engage in lobbying and take actions against films showcasing excessive violence, sex etc. US has the highest number of movie audience per capita of population which stands at 5.3 films each year. Out of this if people who didn’t watch atleast a movie in one year, then the figure goes to 8.6 films. Moreover there is an increasing demand for 3D movies in America. 83% of the tickets sold of Avatar were from 3D screens (Schuker & Smith-a, 2010). Technological: US is one of the world’s most technologically advanced nations. People are highly tech savvy. Companies whose products are technology based first tries to enter US market. Environmental : Environmental issues like weather change are not applicable to this industry. Legal: Piracy is a major problem in US. Motion Picture Association of America estimated an annual loss of more than $3 billion because of piracy. The legal implications of piracy are very strong in US and it is liable to national criminal charges or public lawsuits. The FBI is very helpful an aggressive in fighting against piracy. Porter’s 5 Force: Michael Porter identified the following threats for any organization: Bargaining Power of Buyer: The biggest buyers of Imax are Regal Entertainment and APS. Hence Imax buyer’s are not directly the consumers. However there is a correlation between the direct buyers and the consumers which is reflected in the price of the tickets. The bargaining power of buyer’s is less since there are very few companies offering 3D large format movie experience. A person who is passionate about movies is ready to watch it in different formats. It is reflected in the fact that the price of tickets has gone up by 26% depending on the theatre (Schuker & Smith-b, 2010). Regal plans to set up 52 Regal Imax theatres by 2010.AMC has entered into an agreement with imax in 2007 to develop 100 imax theatres. Bargaining Power of Supplier: The supplier’s of Imax are the one’s who provide the hardware required for Imax technology. Imax is well equipped with the technological capabilities. It has entered into long term commitments with suppliers who provide the hardware. Threat of Substitutes: Americans have various ways of entertaining themselves. In a Media, Internet, Comminications and Entertainment (MICE) survey it was found that Americans perceive watching movie as a low value addition activity and hence its popularity was decreasing (Ronkonkoma, 2010). The threat from substitutes comes from high end DVD players, television, internet, sports, live shows, socializing, amuzement parks, etc. Direct To Home satellite televisions are also coming up with 3D channels like ESPN 3D, pay per view channels and movies on demand (Tech.spreadit.org, n.d.). Sony is planning to shift from high definition televisions to 3D TV. It plans to bring the 3D effect of theatres to the living room (Chen, 2010). Industry Rivalry: There are not many players involved in large screen formats. IMAX’S biggest direct competitor is IWERKS which focused on ride simulation products situated at theme parks. It also faces competition from Disney which primarily targets kids which is also the target segment of IMAX. New Entrants: Vertical Integration of AMC which has been a buyer of Imax is a major threat for IMAX. AMC is entering the giant screen with its “Enhanced Theatre Experience (ETE)”. Even Regal Entertainment Group has announced its plans of foraying into the giant screen segment. Regal plans to launch Regal Premium Experience (RPX) to complement its Imax screens (The Wall Street Journal,2010). SWOT: Strength: Brand Name: Imax is the pioneer of large scale formats of movies.It has created astrong brand name by developing itself in prestigious locations like Smithsonian Institution in Washington, Liberty Science Centre etc. Cost: Imax movies are usually based on nature,history, fiction etc which does not require Hollywood celebrities. Hence it saves cost of production.A 3D film at Imax costs $10 million which is equivalent to the charges of a Hollywood star like Tom Cruise. Moreover conversion of Imax into digital format would help it reduce costs considerably. Technology: Imax has developed superior technology over the years. The films of Imax movies are 10 times larger than 35mm movies. Digital re-mastering Technology (DMR) allows it to convert 35mm movies to large screen and even 3D formats. It has spent $12.6 million in last three years. Weakness: Financial Muscle: Most motion picture companies are now part of bigger diversified groups. For example, Sony has brought Columbioa Pictures, Warner Brothers has become a subsidiary of Time-Warner, Viacom has brought Paramount and Pixar merged with Disney. Imax is not a cash rich player like Sony, Time Warner or Disney. It lacks the financial muscles that these big corporations have. Limited Number of Movies: Imax had a total movie count of 226 films in 2007. Movies run for many years at theatres. Opportunities: The success of Avatar and Alice in Wonderland has opened tremendous opportunity to 3D movie formats. The phrase Imax Experience is gaining popularity. The future of the film industry is changing fast.3D gaming is becoming the new source of entertainment (3D Gaming Summit, 2010). Inspired by the success of Avatar James Cameron- Director of Avatar, is planning to come out with a sequel (Anonymous, 2010). There are 5.5 per capita movie viewers around the globe. Popularity of 3D is increasing at a rapid pace compared to 2D movies. Threats: The threats have been discussed above in details. Segmentation: The segment of IMAX viewers consist of the following segments of people Educational: 20% of IMAX viewers are school children in the age group 5-15 Entertainment: Youngsters mainly college and university students . Experience: About 70% of the viewers in the age group 19-65. Targeting & Positioning: Initially IMAX targeted only institutions such as theme parks, museums and amusement parks whereas now it has targeted the audience at malls and runs parallel with conventional movies. It has tied up with multiplexes to target retail consumers. It does not want to be everywhere. It targets a niche premium segment who wants great experience. IMAX wants to position itself as a brand which is unique and exclusive. It must be so unique that it must be difficult to replicate it at home. Imax theatres are designed to provide the most immersive experience in movie watching. High quality images backed with superior sound quality provides an experience that is highly rewarding. Marketing Mix: In case of service marketing the 4P’s are replaced by 4C’s. Commodity: IMAX mainly focused on 45 minutes documentaries which were based on educational backdrops. Later it took up conversion of regular 35 mm Hollywood movies to 70mm films. These were not enough to woo the audience. However with the success of Avatar and Alice in Wonderland, there has been an increasing demand for IMAX platforms. Cost: The cost to a customer for a ticket is higher than traditional formats. However it is justified because of the superior experience that IMAX provides. Communication: Imax needs to adopt an Integrated Marketing Communication delivering one unique message to the target market. It should use advertisements, direct marketing, print media, radio, television to woo its target segment. It should use appropriate Out of Home media especially in malls where its target segment gathers. Social networking sites have become the most important promotional tool. The segment in tweeter is usually the technology savvy youth. Twitter is used to predict the success of a movie. Tweet torrents are analyzed to determine success of a movie (Fildes, 2010). Word of mouth publicity helps in building audience. Channel: In line with its strategy of targeting a niche segment, it wants to locate itself at few select places. IMAX theatres are mostly located at multiplexes and theme parks. Industry Life Cycle: The 2D film industry lifecycle is in the matured stage and it is fast losing its importance as a source of entertainment. It is being replaced by substitutes like computers, high definition televisions, cam coders, home entertainment systems and high end DVD’s. However giant screen formats are at an introduction stage of the product life cycle. Giant screen formats and 3D’s are relatively new technologies with very few players in this segment. Imax is the leader in this segment with new players fast catching up. Among the new players are Regal and AMC. The 3D movie industry has a long way to go from here. Industry Survival & Success Factors: Giant screen formats require huge investment in technology. The industries survival and success depends on how fast companies are able to innovate and implement new technologies to make movie watching a rewarding experience. Moreover the number of movies released in 3D format is very less. A 3D movie runs for several years at IMAX which can be boring for the viewers. Hence an integrated effort from production houses and theatre owners is required to produce more films in 3D format so that repetition is avoided. However, the huge costs involved in making such movies acts as a deterrent for production of such movies (Goldberg, 2010). References Hanchard, D. March 23, 2010. National Broadband Plan will drive media mayhem. ZDNet Government, David Gewirtz. [Online] Available at: http://government.zdnet.com/?p=8188 [Accessed On April 11, 2010]. Bureau of Business & Economic Research. NoDate. Per Capita Personal Income by State, 1990 to 2009. Per Capita Personal Income by State. [Online]. Available at: http://bber.unm.edu/econ/us-pci.htm [Accessed On April 11, 2010]. Schuker, L.A.E & Smith, E-a. March 25, 2010. Higher Prices Make Box-Office Debut. The Wall Street Journal. [Online]. Available at: http://online.wsj.com/article/SB20001424052748703312504575142143922186532.html [Accessed On April 11, 2010]. Schuker, L.A.E & Smith, E-b. March 25, 2010. Higher Prices Make Box-Office Debut. The Wall Street Journal. [Online]. Available at: http://online.wsj.com/article/SB20001424052748703312504575142143922186532.html [Accessed On April 11, 2010]. Ronkonkoma. April 8, 2010. The True Value of Time and Money: Innovative Methodology Gauges American Attitudes Regarding Consumer and Lifestyle Choices. PRWeb. [Online] Available at: http://www.prweb.com/releases/2010/04/prweb3846094.htm [Accessed On April 11, 2010]. Tech.spreadit.org. No Date. DirecTV 3D. [Online] Available at: http://tech.spreadit.org/directv-3d/ [Accessed on April 11, 2010]. Chen, J. April 9, 2010. Yet Another Dimension of Television. The News. [Online] Available at: http://thenews.choate.edu/index.php?option=com_content&view=article&id=158:yet-another-dimension-of-television&catid=15:frontpage [Accessed on April 11, 2010]. Annonymous. April 8, 2010. UPDATE: Regal's Large-Format Theater To "Complement" Imax. The Wallstreet Journal.[Online]. Available at: http://online.wsj.com/article/BT-CO-20100408-710727.html?mod=WSJ_World_MIDDLEHeadlinesAmericas [Accessed on April 11, 2010]. 3D Gaming Summit. Apr 6, 2010. Avatar Producer Jon Landau to Be Keynote Interview at First Ever 3D Gaming Summit(TM). EarthTimes. [Online]. Available at: http://www.earthtimes.org/articles/show/avatar-producer-jon-landau-to,1236059.shtml [Accessed on April 11, 2010]. Anonymous. April 10, 2010. Avatar 2 Movie: James Cameron Confirms Sequel. [Online]. Available at: http://movies.spreadit.org/avatar-2-movie-james-cameron/2010/03/25/ [Accessed on April 11, 2010]. Fildes, J. April 9, 2010. Twitter used to predict box office hits.BBC NEWS. [Online]. Available at: http://news.bbc.co.uk/2/hi/technology/8612292.stm [Accessed on April 11, 2010]. Goldberg, A. Apr 9,2010. The 3D rage in Hollywood. Sun2Suf. [Online] Available at: http://www.thesundaily.com/article.cfm?id=45340 [Accessed on April 11, 2010]. Bibliography Analoui. F, Karami .A, 2003, Strategic management in small and medium enterprises, Cengage Learning EMEA David. F.R., 2006, Strategic management: concepts and cases, / tenth edition, Pearson Education Inc Williams, T & Green, A. 1997. The business approach to training. Gower Publishing, Ltd. Bohm, A. 2009. The SWOT Analysis. GRIN Verlag. Dibb, S. & Simkin, L. 1994. The marketing casebook: cases and concepts. Routledge. Yudelson, J. 2006. Marketing green buildings: guide for engineering, construction and architecture. The Fairmont Press, Inc. Kurtz, D.L. MacKenzie, H.F. & Snow, K. 2009. Contemporary Marketing. Cengage Learning. Stahl, M.J. Grigsby, D.W. 1997. Strategic management: total quality and global competition. Wiley-Blackwell. Read More