A Horror Show at the Cinemaplex - Essay Example

? Case Study Discuss what level of competition can be anticipated amongst industry rivals At the present time, the four major industry rivals –Regal, AMC, Cinemark and Carmike are not competing very fiercely with each other in terms of the nature of services that they offer. Rather, each of these rivals is catering to certain geographical areas and targeting segments of the public on the basis of the density of the population in their areas. For instance, Regal and AMC focus on the larger markets, i.e, megaplexes and mid size plexes in large cities while the other two target their activity in smaller towns and cities. In terms of competition in the future, it may be noted that people living in larger cities are likely to gain access more quickly to film DVDs and sophisticated movie watching equipment which would pull them away from the theatres, while the smaller regional areas are likely to continue with their theatre activity for a much longer period. This leads to the inference that Regal and AMC may decide to shift their focus and compete for the smaller regional markets, to capture the higher numbers of the theatre going public. The other two exhibitors may opt to offer digital film viewing to enhance viewer experience. It must be noted however, that there is likely to be a decline in the business activity of all the four industry rivals and more and more movie goers tend to turn away from watching movies on big screens in favour of watching them at home on sophisticated TV and DVD systems with superior audio equipment. The other side of the coin is that competition among industry rivals could heat up more, as they compete fiercely for customers. Cinemark and Carmike could decide to consolidate their position and thereby offer stiffer competition to the two larger rivals; hence in a lean market, these industry players are likely to consider various business-savvy moves such as mergers and acquisitions in order to aggregate and consolidate the existing markets as they rapidly diminish and to improve their negotiation ability with studios. 2. Describe the advantages and disadvantages of each of the top four competitors' situations and strategic approaches. 2. The advantages of Regal’s strategy is focus on mid size markets using multi and mega plexes – this would ensure full occupancy and profit maximization. It is also the largest exhibitor in the United States, with 6335 screens and about 12 screens average per theatre, hence it has maximum access to film material to draw viewers in. The disadvantage is the high price, because at $7.43, it’s the highest among the leaders and consumers would be able to view the films for a lower price using other exhibitors. This factor would be especially relevant in recessionary times such as we have presently, because it could pull away many potential viewers to theatres operated by other exhibitors. Another disadvantage is that it has the highest costs per screen. AMC: This exhibitor operates 4585 screens but shows an average of 14 screens per theatre. This is the most significant advantage offered by this exhibitor because it provides consumers with maximum levels of variety in their film viewing. Another advantage this exhibitor has is the ability to pull in the crowds, because the theatres are located in densely populated, urban areas. They are not as expensive as Regal and for the major chunk of the viewing audience, i.e, the younger teen audiences, the greater variety and lower prices offer better options for a date or night out. AMC can also easily offer digital viewing, which would be yet another huge draw. The disadvantage is that because its audiences are mostly in urban areas, they are more likely to use alternative movie watching modes such as new audio equipment and DVDs which would reduce theatre going altogether. Another disadvantage is the high cost per screen Cinemark: One of its advantages is that it serves specifically targeted smaller markets Sole theatre chain for those markets Lowest average ticket price compared to other exhibitors, i.e., $5.11 Disadvantages are high concession prices for the smaller markets which could put off movie goers. Carmike: Advantages are low ticket price of $5.89 and it also has the lowest cost per screen. It targets specific markets, i.e, those populations of less than 100,000 where movies are one of the few viable entertainment options. The disadvantage is the high concession price in comparison to ticket price, i.e, $3.50. 3. Describe the financial considerations that affect the profitability of major movie theater businesses. 3. Firstly, the recessionary trends coupled with inflation have made movie watching at the theatres generally expensive for consumers. Secondly, the margin of profit is very low from the actual movies because most of the revenue is ploughed back to the studios. Rather it is from concessions and advertisements that most of the exhibitors’ revenue is attained, but the high cost of the concessions is increasingly making it un-viable because customers are not keen to come to the theatres. Running advertisements are lucrative for the exhibitors but the audiences despise them and maintaining the balance between the revenue from advertisements and not antagonizing the consumer is a difficult exercise. Lastly, but most important, increasingly sophisticated movie watching equipment for private home viewing is now available, which is moving audiences away from theatres and the disturbances from cell phone users or rude and bored employees. 4. Describe what strategic options are feasible given the situation facing industry participants. 4. One of the best strategic options appears to be greater levels of consolidation among the exhibitors, in order to maximize profits. For example if AMC and Carmike were to merge, the urban areas would get lower priced tickets while the rural areas would get better quality sound and picture and revenues from both market segments could be increased because competitive advertising would be reduced. Secondly, the multiplexes need to focus upon improving the quality of the movie watching experience they offer by introducing digital technology and superior audio equipment, so that the theatre experience is still superior to the home viewing experience and gives consumers the incentive to leave their homes and venture into the theatres. 5.Describe what recommendations you would make to improve their likelihood of future success. 5. Recommendations for improving likelihood of future success: (a) Prohibit use of cell phones in theatres, introduce a mandatory requirement that all cell phones must be switched off before entering the theatre. This would improve the quality of the movie viewing experience. (b) Improve the decor , appearance and ambience of the theatres, including playing soft music in the foyer and requiring attendants and employees to be dressed in suits and white gloves as they used to be before, so that customers feel their experience is special. (c) Use digital equipment to enhance movie visuals and use sophisticated audio equipment with effective soundproofing between theatres to improve the movie viewing experience. (d) Allowing sales of gadgets, T shirts and toys with special movie advertisements, for example Woody (from the movie Toy Story) T shirts and guns in the foyer before and after the movie (e) Allowing customers to pre-order drinks from concessions and find them waiting at specific spots when they come out during the intervals. (f) Providing effective training in good customer service to attendants , ushers and other employees so that customers enjoy their movie going experience. Reference: *Gove, Steve and Matherne, Brett, P. “Case 16: A horror show at the Cineplex?” Read More