IMAX Corporation - Case Study Example

Running Head: IMAX CASE STUDY IMAX Case Study Submitted by: XXXXX Number: XXXXXX XXXXXXX of XXXXXXXX Submission: XX – XX – 2010 1. Executive Summary The IMAX motion picture and video tape production has been recognized and loved across the world. The company however is faced with high levels of competition in the current times. The company has a strong market position and based on the analysis it is clear that it has been able to keep up its image and also is on the verge of expanding. The company has expansion plans into Russia and hence the major recommendation for IMAX is to develop and sustain a strong brand image within the country and to use this to promote not only the motion picture and video tape production but also the motion picture and video distribution and photographic equipment and supplies. The main recommendation for the company is to use newer technology to improve their product and to start of small and expand into a bigger business. Table of Contents 1. Executive Summary 2 Table of Contents 3 2. Introduction 4 3. Analysis of business environment 4 3.1. Pestle 4 3.2. Porter’s Generic Strategy: 5 3.3. Industry life cycle 6 3.4. Industry survival and success factors 6 4. Analysis of IMAX 7 5. Critical Appraisal 7 6. Recommendation 9 7. Conclusion 10 Bibliography 11 2. Introduction IMAX is a well known format for motion pictures which mainly provided better sizes and formats with higher and clearer resolutions than the normal movie systems. This was developed by the Canadian IMAX Corporation and has indeed changed the image resolution to a great extent. The company has been known to improve the images by making them even ten times larger than the normal standard images. This report concentrates on the motion picture and video tape production. The paper includes a brief discussion of the business environment and provides a competitor’s analysis as well. Based on this a critical analysis of the company and its processes has been provided. 3. Analysis of business environment Considering the case of IMAX’s motion picture and video tape production, an analysis of the business has been conducted to gain an insight into the current situation of the company. 3.1. Pestle Considering the political factors that impact the company, it is clear that the work that has gone into the development of product requires a number of legal checks. Hence the impact of any political factor has a major impact on the working of the company and can create a lot of confusions and chaos in the overall processes of the company. In terms of the economic factors that impact the company, it is important to note, that the levels of investments that goes into IMAX is extremely high and hence the economics of the industry has a major impact on the business. The economic factors that also impact IMAX are the household income of the people as well as the cost of living within the country (Johnson, et.al, 2006). Social factors also play a very important role in the case of IMAX. It is clear that the main audience of IMAX includes people between the ages of 19 – 65 and a vast majority is from the colleges and universities. In terms of technological factors, it is clear that IMAX has a strong dependence on these factors. IMAX is based on the technologies and hence it is important that the company keeps itself up – to – date with the current changes and improvements in the markets and technology to be able to compete in the markets more effectively. The company does not have a major impact on the environmental factors. Also considering the legal factors, the company requires complying with a number of laws to build the systems and the video tape production. 3.2. Porter’s Generic Strategy: Considering the Porter’s generic strategy, it is clear that the company currently follows the ‘differentiation strategy’. This simply implies that the industry that IMAX is operating within is very wide and the product that the company provides is unique. Hence this makes the company currently pursues the differentiation strategy. The company has been one of the first to work on developing videos for the auditoriums and the zoos and this was their initial differentiation strategy. Currently IMAX differentiates itself with the 3D movies that it creates. An example of this is the recent news of Sea Rex 3D, a news article brought out the comment by Francois Mantello, Chairman and CEO of 3D Entertainment, which reads, “Thanks to the latest paleontological research and state-of-the-art computer generated images, Sea Rex 3D takes audiences on an extraordinary voyage two hundred million years back in time for an exhilarating encounter with the T-Rex of the seas on the worlds largest screens. This also marks a new step for our company, as it is the first time we have acquired the rights to a film produced primarily by a third party, thus reaffirming our commitment to becoming a prominent distributor in the IMAX theatre industry” (PR Newswire Association LLC, 2009). 3.3. Industry life cycle The industry has grown over the years and in the current period IMAX stands at a high level of maturity. The company has developed its business and has been able to reach the level of maturity. The company has been in the markets for a long period and has grown the sales volumes to a great extent. As seen in the image below the company is presently in a maturity level and can lead to move into the declining level in the possible future. 3.4. Industry survival and success factors IMAX was basically built with the intension of serving the industries relating the zoos and aquariums. This was the basic brand identity that the company has built, however with the shift from the basic brand identity; there is a high chance for the customers to be confused with what the company deals with. It has also been noted that IMAX audience generally comprise of people from households with an income higher than the national median value and earn as much as $70,000 (Nair, 2009). The industry has a number of successful companies and the success factors mainly depend on the effective manner that the company develops it brand image and brand recognition. 4. Analysis of IMAX Considering the company and its competition, it is essential to highlight the company’s strengths when compared to others in the industry. IMAX faces a medium level of threat considering the barriers of entry. The industry is very large and requires a high level of investment hence the risk is very low. In terms of buyer power the company faces a high risk. The numbers of competitors in the industry are high and the company faces main competition from Pixar animation studio Inc, DreamWorks studio, The Walt Disney studios, Icon production LLC, and Namco Bandai holdings. This gives the buyers a choice and thereby increases the risks. Similarly the risk of substitutes is also quite high, considering the competition that is present in the markets. The supplier power however is not very high as the company is not completely dependent on a single supplier. In terms of rivalry the company is faced with a high level of risk as the competition is high. 5. Critical Appraisal In earlier researches it has been clearly seen that IMAX has mainly faced the losses due to the high costs that are incurred in the development of the high quality and big films. The technology used by the company although is very effective and meets the need of providing the customers with an excellent experience of watching movies with higher focus on detail, the company is being hit due to the high amounts of expenditure that is involved in making the films (The Free Library, 2010). The slowness of the processes of the company and the need for higher levels of quality tends to take up higher levels of time and resources which thereby leads to higher expenses. It is considered to be more effective if the company was to stick to the aquariums, zoos and other fields similar to these rather than to focus on the commercial and Hollywood movies. IMAX is a relatively smaller company and hence large investments like these tend to bite into the profits of the company as well as the overall revenues (Mead, 2008). IMAX is a solution to provide incredible clarity and impeccable pictures worldwide with the six – channel sound system which provides an extraordinary movie experience for the viewers. IMAX provides the customers with excellent images and improved overall experience of cinema. The market capitalization of the company in 1994 was accounted to be $196 million however in 2008; this has reduced to $125 million (Nair, 2009). Secondly, the basic use of the IMAX system is mainly in museums, aquariums, zoos, and other educational institutes needing the 3D technology. Considering the competition of the company it is clear that companies like The Walt Disney and Dream Works studios the company faces a high level of competition which in turn also impacts the demand for the IMAX products. It is clear that the company is not very involved or can afford to participate in the Hollywood movies (Free Library, 2010). This is clear that companies like Sony Pictures, Warner Bros, etc, tend to take up a major part of the Hollywood market thereby leaving IMAX in a situation where the company does not cater to high profile movies which in turn reduces the overall income of the company. A report by Nash Information Systems has also highlighted that IMAX does not have a major role in the US movie markets from 1995 until 2010 (Nash Information Services, LLC, 2010). Also considering the financials of the company and from the graph below, it is clear that IMAX has been retained an optimal level of gearing ratio. Balance Sheet Information (Financial Times, 2010) It has also been noted that IMAX has a higher level of debt when compared to the equity. The company however has been able to achieve a strong gearing ratio which accounts for almost 52% (Financial Times, 2010). Based on these a set of recommendations can be drawn out, these have been discussed in the next section. 6. Recommendation The motion picture and video tape production contributes to a major part of the company and hence IMAX needs to concentrate on the development of better and improved processes. IMAX requires concentrating on this aspect of the business and needs to work towards building a steady brand image for itself. Also in terms of the prices and the expenses the company has already taken their steps towards reducing the prices, which can help in the overall profits of the company as well (Telephone IP News, 2010). IMAX has also been noted to face high levels of competition from major companies like Disney, or Pixar which have been recognized to be a major attraction among children. It has also been noted in a report that with IMAX going small, there are some higher risks (Booth, Cole, & Pascual, 1998). With the extensive expansions that the company plans to undertake, an attempt should be taken to work towards building processes with better technology and improved overall performance. 7. Conclusion IMAX needs to realize that branding is the course of establishing an association or relation between a perception, object, symbol, emotion and a company, product with the ambition of encouraging loyalty and building differentiation. When information on a brand is favorable and consistent, it will positively affect perceptions of quality and value, and subjects willingness to buy. For IMAX to be able to produce brand equity, loyal customers must be present which makes customer equity a fundamental quality of brand equity (Johnson, Scholes, & Whittington, 2006). The company needs to work on improving the product and also towards the technology used. This will help IMAX be able to meet the competition as well as will permit an overall improvement of the company as well. Thus this forms a very important aspect and a number of different elements need to be considered like the Brand Aura and Positioning. IMAX should also note that the consumer selection strategies include best value, price seeking, and price aversion at times when information on product quality is not always perfect (Johnson, Scholes, & Whittington, 2006). Bibliography Financial Times. (2010, April 19). IMAX Corp. Retrieved April 19, 2010, from Financial Times: http://markets.ft.com/tearsheets/financialsSummary.asp?s=IMA%3AFRA Free Library. (2010). NAB Show Brings Attendees Down the 3D Rabbit Hole with an Eye-Popping "Alice in Wonderland" Afternoon. Retrieved April 17, 2010, from The Free Library: http://www.thefreelibrary.com/NAB+Show+Brings+Attendees+Down+the+3D+Rabbit+Hole+with+an+Eye-Popping...-a0221345495 Johnson, G., Scholes, K., & Whittington, R. (2006). Exploring Corporate Strategy. Essex: Prentice Hall. Mead, B. (2008). IMAX DIGITAL. Film Journal International , p22-22. Nair, A. (2009). IMAX: Larger than Life. Ivey Management Services , 1 - 18. Nash Information Services, LLC. (2010). US Movie Market Summary 1995 to 2010. Retrieved April 17, 2010, from http://www.the-numbers.com/market/ PR Newswire Association LLC. (2009). 3D Entertainment and N3D LAND Productions Join Forces on the Production and Distribution of Sea Rex 3D. Retrieved April 15, 2010, from Farlex Free Library: http://www.thefreelibrary.com/3D+Entertainment+and+N3D+LAND+Productions+Join+Forces+on+the...-a0207098532 Telephone IP News. (2010, January 30). IMAX ANNOUNCES DIGITAL 3D MOTION PICTURE CAMERA INITATIVE. Retrieved April 19, 2010, from The Free Library: http://www.thefreelibrary.com/IMAX+ANNOUNCES+DIGITAL+3D+MOTION+PICTURE+CAMERA+INITATIVE.-a0217616580 The Free Library. (2010, January 30). IMAX ANNOUNCES DIGITAL 3D MOTION PICTURE CAMERA INITATIVE. 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