Enterprise Analysis: the Cineworld Group of inemas - Case Study Example

Enterprise Analysis [E-mail address] This paper will try to successfully highlight one area of leisure sector from the UK; the Cineworld Group of cinemas. This paper will attempt at highlighting the main goals and the strategies of the group and then follow with a detailed analysis in the light of such data. Our main purpose is to answer the following question: “What are the key challenges and opportunities for this company to succeed in meeting its goals in the next three years in the UK?” With the collected data we will analyze what problems may impede the application of the organization’s goals and what measures can be taken to overcome them. Cineworld Group is the United Kingdom’s largest chain of cinemas, with 78 outlets in the UK alone while another two in Ireland and Jersey (Hubbard, 2004). Rated as UK’s No.1 in 2010/2011, the chain is one of the most proffered movie-watching places because of its unmatched standard. The company has some of the most attractive offers for its customers – such as the unlimited movies membership for a set monthly price – that has invariably increased the customer flow at Cineworld outlets. The chain is also an economical choice since it offers comparatively lower ticket rates than what other cinemas offer. These, combined with several other characteristics of the Cineworld group offers the best experience to movie-goers and makes the entertainment time worth living. Organizational Structure The Cineworld group follows the ‘divisional’ structure for its organization since its spread out wide and even has an international presence. A board of eight members looks after the functioning and is the main hand behind the group’s success. Due to its several outlets across UK and even abroad, the board governs the lower rankings down across the hierarchy. The board oversees several committees, such as Nomination, Numeration and Audit. These committees are then further divided into directors, etc. This structure suits the Cineworld Group since it is widely spread out and other structures would not be able to handle such a network of outlets. This leads to increased motivation across the hierarchy as there are checks and balances that quantify every performance. It even increases sufficiency since divisions do not rely heavily on parent companies. However such a structure is not always perfect. Personal conflicts and likes often lead to differentiated decisions that in turn impact the whole group. At times, monotony takes over and the employees lose interest that affects the job performance. Policy Cineworld Group functions on the most simplest of strategy: to offer an unmatchable and exciting experience to movie lovers in complete privacy. Regardless of any discrimination, Cineworld offers services to people from all age groups and from every walk of life. These services offered to the customers throughout the chains are world-class and truly thrilling. This has been clearly reflected in the performance overview, where in 2011 alone Cineworld received over 48 million customers that sky-rocketed the chain’s total annual revenue to £348 million. According to its annual report of 2011 available on the company’s website, the Cineworld group plans to further increase its presence across the United Kingdom and add value to its shareholders by pursuing the following strategic measures; Impart even better services to the customers Increase the box office returns Raise the retail spending per customer Introduce more revenue earning means Expand the Cineworld network Bring in new technology for a better experience and flow of operations Goals Goals are the primary means for the survival and expansion of an organization and Cineworld Group is no exception. Since its advent in July 1996, Cineworld Group has seen a historic expansion and has become a foremost choice for movie watching. The comprehensive goals the corporate had set were a major reason for the breakthrough. Some of these goals had been handpicked from the company’s annual report; Strengthening relationships with film distributors for smooth operation flow Prioritizing customer’s interests and offering them improved services Offering competitive ticket rates to attract larger pool of audiences Converting every Cineworld cinema to digital for maximum screening flexibility Increasing customer memberships for maximum customer benefits Expanding online ticketing services for maximum customer facilitation Increasing seating capacity for larger accommodation Key Challenges Cineworld has an international presence in Ireland and Jersey. In such globalized markets, lie many opportunities and many problems. Undoubtedly, the Cineworld group makes higher profits with greater outlets; there are many problems that impede the structure. Adjusting policies according to foreign presences is no less than a challenge. Every now and then changing policies can mean hard times for the group. Nonetheless, the overall business seems profitable. This is mainly because the group has the advantage of monopoly across the country and is able to attract greater audiences. This has eventually led to a greater turnout at the cinemas abroad. However, due to the rapid globalization and dwindling economies across the globe, no segment of human life has remained untouched by their affects. Corporations have shut, employees fired, people left jobless, and above all survival has become a new challenge (Tynes, 1997). Since the global economic crisis, companies have either shrunken the size on purpose or have adopted alternate business models to help fight the financial crisis and remain afloat. Others who could not cope have shut down (Köksal & Özgül, 2007). Where real estate prices have plummeted, interest rates have risen, inflation has seen a steady rise, and commodity prices have shot up, the entertainment industry has its own saga to narrate. Media, press, film industries and those associated with such enterprises have experienced the blow of a degree. Investments have dropped, revenues have plunged and the number of cinema goers has reduced significantly (Hasting et al, 2011). In this melodramatic scenario, cinemas are bound to be struck since it is these very entertainment products they rely on for business. The global financial crisis does not appear to carry personal likes or dislikes of its own and thus has struck the category of cinemas as severely as it has had others. As people go jobless because of closing corporations and others have lesser to spend on entertainment because of the rising inflation, cinema has seen a decline in customers (Olorenshaw, 2011). Though on the whole, this decline might not seem a very significant one but it is neither as trivial that it could easily be ignored. Since the necessity of saving today is felt even more important than it was ever before, people have cut on their spending to save enough for any uncertain situations. This cut in expenses also includes those on entertainment, of which one happens to be movie watching in cinemas. There is no denying the fact that cinemas did see a decline in customers because of the deteriorating economy (Imre, 2012). The challenge arises here for the Cineworld Group; how in such circumstances should they remain in profitable business? Since people have cut on their expenses, this does not really mean they have extradicted and thrown out entertainment from their lives. No doubt there is lesser to spend but there is still something to be spent on leisure. The public undoubtedly wants to enjoy entertainment that is cheaper and yet exciting. Cheaper and exciting. The string for a productive business model has been detached from the reel of thread. One challenge for the Cineworld Group is the same; how to receive maximum benefit out of the little that people have to spend. The chain would undoubtedly have faced such a challenge where the multiplexes had seen a decline in customers. This can be safely concluded from the fact that movie tickets at Cineworld are comparatively cheaper than what most cinemas in UK sell their tickets for. This has in turn proven to be a positive strategy since Cineworld was recently labeled as UK’s No.1 cinema. The lower ticket rates kept the customer base strong and thus a constant flow of over 48 million customers was entertained in the year 2011 alone. Added to it, the Cineworld Group introduced its Unlimited Movies offer for a fixed price that bundled limitless movies and a reasonably low price for the movie freaks who found it harder to spend more on films. Nonetheless we still have no measure of record for how successful such steps had been for the Cineworld Group and will it even ensure prosperous business in the future as well? Cineworld Group in its annual report highlighted several means of income for its cinemas. Of the many a major source of income was cited as the revenue from retail sales in the form of food, especially popcorns and soft drinks. The two historical products highly associated with cinemas, are rather the main means for cinemas’ earnings and that is why you find them very expensive every time you go movie watching! This category is certain to be struck by the economic crisis since people are already considering saving their money and though movie watching might be a chance for them, movie popcorns are too expensive and budget unfriendly. A plunge in retail sale means another crisis. One of the goals of the Cineworld Group, as pointed earlier, is their aim of further expansion. Through its many years in business, Cineworld had seen a steady increase in its outlets that number up to 80 today. Though every corporate seeks expansion on ground, that is not always a feasible method of expanding profits. Seeding the existing network with ample resources to make it more profitable is a far better means of increasing profits than expanding an on ground network of feeble constituents. Although Cineworld has a stronger backbone it still can find it very hard to overcome the hindrances that stand in its way of expansion. There has been little retail and leisure development in the past few years that bleaks the opportunities the group wants to avail. Even if such a development comes into way, the time the new network takes to grow to fruition cannot be determined. Is Cineworld strong enough to bear the initial losses its new additions might bring? Having touched the challenges that directly related to the economy and were of the utmost concern for the group, we will now face some other issues that though do not carry great challenges but nonetheless are of significant importance in terms of finances. We will go through these challenges at a comprehensive pace. Hollywood is the prime food for cinemas across the United Kingdom – though foreign language content is also displayed, such as that from India’s Bollywood industry (Ciecko, 2001). Risks pertaining to film hire terms from Hollywood studios had always hung in the air. Over the next three years if such studios ever plan to negotiate their terms and the new draft does not turns out to be in favor of the Cineworld Group, serious challenges may impede. Films being doled out to Cineworld might decrease and as a result earnings might drop by a significant degree. In such a case the group might face serious financial troubles and hard-to-recover-from challenges. With the increase in the use of sideline medium such as television, DVDs, internet, etc., attracting audiences towards cinemas has risen as another challenge (Harper, 2005). With huge widescreen and ultra high definition television sets now within peoples approach, cinema’s existence is to face another rising threat. To cope with the new arising threat, cinemas shifted to 3D viewing so as to make movie watching at a cinema, an altogether different experience (Alley, 2006). Once again this barrier had been broken by the invention of 3D television sets that offer a 3D viewing experience to audiences within their homes (Harman, 2000). This can be one of the many challenges for the Cineworld Group. Are they prepared to draft another strategy that would help in attracting maximum audiences? Piracy has been a long existing problem for the several media elements that function today. Film piracy is one of the most prominent amongst them. Piracy is termed illegal since it does not allow a film to do maximum business. A film loses a considerable amount of audience to cheaper copies of the film that are leaked into the market shortly after their releases. Thus cinemas are also the one affected by such measures as they observe a fall in their audience group. With the further advancement in technology, piracy has seen a boon and quality of pirated films has further improved. This again affects the cinema business as they do not observe a complete audience. This lead to lower rents being given out to film distributors as the film does not seem to attract larger audiences. As a result film studios might consider investing in sideline mediums than investing in cinematography. Has the Cineworld group drafted an efficient policy for the next three years that will reduce piracy acts at cinema halls? Falling investments are another potential risks to cinemas. Stakeholders are increasingly concerned about investors’ trust since investors are ever more conscious to put in anything in view of the financial crisis. A further trust deficit between the investor and the stakeholder has barred the relationships since each is more focused on getting the maximum benefit out of the opportunities. The group wants money while the investor is afraid to do so. In that case both need to balance the power and interest by using the power and interest theory. A Cineworld will need to settle on mediocre rules somewhere between direct speech and consultation. Consultation with own advantages in draft will lead to maximum benefits. Taken the Cineworld Group’s vision of expansion, this lack of investor confidence can bar the group’s goal for establishing new multiplexes. In that case the Cineworld group will have to seek off loans or rather develops such terms that offer maximum benefits to the investors. In a nutshell, like every other industry in today’s world has problems and challenges that need to be dealt with effectively, Cineworld Group of cinemas is also in a need for effective business strategies and models. Though on the whole Cineworld sounds a very profitable name, the very foundations of it cannot escape the international crisis. There is no denying the fact that companies across the globe has seen hard times in recent years – with the exception of a few – and many more have shut down due to increased losses. Cineworld Group needs to re-go through its policy and strategies and design a possible model that helps it fight against the odds of the business. Over-seeing their next ‘three year’ vision can help the group in attaining a suitable position. References: Top of Form Top of Form Alley, T. (2006). Exploring 3D modeling with Cinema 4D R9. Clifton Park, NY: Delmar Learning.191 Ciecko, A. (2001). Superhit hunk heroes for sale: Globalization and Bollywoods gender politics. Asian Journal of Communication, 11(2), 121-143. Top of Form Harman, P. (2000). Home based 3D entertainment-an overview. In Image Processing, 2000. Proceedings. 2000 International Conference on (Vol. 1, pp. 1-4). IEEE. Harper, G. (2005). 5. DVD AND THE NEW CINEMA OF COMPLEXITY. New Punk Cinema, 89. Hastings, G., Angus, K., Bryant, C. A., Sage Publications, inc., & Sage eReference (Online service). (2011). The Sage handbook of social marketing. Thousand Oaks, Calif: Sage.Bottom of Form Hubbard, P. (2004). Going Out (of Town): New Geographies of Cinema-Going in the UK. Scope: An Online Journal of Film Studies. Imre, A. (2012). A companion to Eastern European cinemas. Malden: Wiley-Blackwell. Köksal, M. H., & Özgül, E. (2007). The relationship between marketing strategies and performance in an economic crisis. Marketing Intelligence & Planning, 25(4), 326-342. Olorenshaw, R. (2011). Luxury and the recent economic crisis. Vie & sciences de lentreprise, (2), 72-90. Tynes, S. R. (1997). The Walking Wounded: Employees’ Perspectives on Mergers and Acquisitions*. Sociological inquiry, 67(3), 299-319. Bottom of Form 1. Bottom of Form Read More