IMAX Corporation Background - Case Study Example

? Management IMAX of the of the Contents Background 3 Case Facts 3 Internal and External Constraints 4 ment ofCriteria (Objectives) 7 Situation Analysis 7 Environmental Scanning 7 SWOT Analysis 7 PESTLE 9 Porters 5 Forces 11 Marketing Mix 13 Conclusion and Recommendations 14 References 17 Background IMAX Corporation a Canadian company is an organization participating in producing large format films in theaters. The large formatted films of IMAX are basically a set of cinema protrusion standards, where the films are of bigger in resolutions than the traditional filming formats. Figure 1: Big IMAX Screen Resolutions (Source: Brown, 2002) Since the inception of first movie theaters, movies have always parked many audiences all across the world and have contributed large sources of finances to the theater owners. IMAX originated in the market since 1967, was popular among all the business organizations. IMAX was the first company in the world getting involved in producing all characteristics of large format films (MPAA, 2009 Case Facts In 1994 Wechsler and Gelfond had purchased the long established business of IMAX Corporation from its traditional owners. The company was purchased for 80 million by the new owners. However, observing the growing competition in the market of movie theaters, the new owners launched the shares for the company to the public in 1994, in order to raise more capital for further business growth of IMAX. The investors who invested in the company started to face high volatility in their profits due to uneven business conditions of IMAX. At this juncture it became a primary matter of problem for all the investors and analysts to forecast sure economic surplus for the company in future in the presence of such growing uncertainties. At the time of the purchase the stock valuation of IMAX in NASDAQ was $196 million while in December 2008 its worth came down to $125 million. Despite of the large number of IMAX theaters in more than 40 countries in the world, the business of the company is decrementing over time (Chakravarty, 2002). Internal and External Constraints The commerce of IMAX is facing several internal and external limitations that have made the analysts worry about the long term success of its business. Internal Constraints The theaters of IMAX may lose its popularity and brand worth because its strategic managers only concentrate in non educational entertainment Hollywood movies. Further, the CEO’s of the company are in a dilemma to sell IMAX to some large media partners like Sony, Time Warner or Disney. The officials are also in a dilemma to release the Hollywood movies in both regular and large formats in IMAX. It is also a matter of internal constraint for the firm managers to analyze the requirement for further rise in Hollywood movie releases in IMAX theaters (Olijnyk, 2002). External Constraints Figure 2: Growing Substitutes of Movies (Source: IVEY, 2009) The number of movie viewers is higher than any other entertainments, as the ticket prices for movies are comparatively low. But it should be analyzed that the growing numbers of substitutes in the market of entertainment have lowered the aggregate movie viewers. Figure 3: Rising number of DVD Consumption in U.S. (Source: IVEY, 2009) The above schedule shows that the total DVD use in U.S. increasing with time, greater use of DVD has lowered visitors in movie theaters. Figure 4: Increasing Movie Ticket Prices (Source: IVEY, 2009) The falling Gross Domestic Product and increasing prices of movie tickets have lowered the total number of theater audiences, although the theater owners virtually find their revenues increasing. Statement of Criteria (Objectives) The objectives of business that IMAX should exhibit for its economic prosperity in future are: To become a niche player in the competitive market of movie theaters. To diversify its operations. To augment the brand loyalty and tap more potential clients. Situation Analysis The context of situation analysis will help the readers analyze the business problems of IMAX in an implicit prototype. Environmental Scanning In the context of environmental scanning, the paper explains the various internal and external business facets of IMAX. SWOT Analysis The SWOT analysis will analyze the various strengths, opportunities, weaknesses and threats involved in the business of IMAX. Strengths The products (film resolutions) launched by IMAX are inscriptions of uniqueness and innovation. The giant resolution movies set by IMAX provide the ultimate movie watching experience to all the viewers. The company operates in more than 40 countries in the world and thus provides entertainment to many individuals in both domestic and foreign markets. It is a leader in the industry for large format films. The company shares high brand worth and popularity. The 3D movies shown in the halls of IMAX are the best in the world. IMAX DMR (the technology of digital re-mastering) adds feather to its cap of brand worth. The customer services offered by the company are also exclusive; it has helped it to park many customers all across the globe. The in-theater tickets pick up kiosks and the facility of online ticket booking by IMAX has served great conveniences to all the potential movie lovers and augmented its brand worth over years (Emmons, 2000). Weaknesses The recessionary traces in the global market have lowered the real income levels of individuals across the world. People in the contemporary world are facing lower purchasing powers due to lower real income levels. At this juncture the increased prices of the movie tickets of IMAX have reduced some of its demand in the market. The company’s growing cost is responsible for the high prices of the tickets. The total number of movie releases of the company is less since the success of NASCAR and The Polar Express. Moreover, the theaters of the company are only located in the major cities, the company fails to park customers living in the suburb areas. The number of screens in each theater in the company are also very few in IMAX (Lowry, 2002). Opportunities The growing population in the global market has largely helped most of the modern business organizations enjoy a wider customer base. The company should open new branches in the smaller towns to tap more customers. Making advances in technological knowhow would always help the company reduce its total cost of production and help the firm reduce its ticket prices. If the company introduces 4D technology in its theaters, then it would surely help it enjoy a larger pool of potential customers (Federal Reserve, 2013). Threats Modern individuals often avoid watching 3D movies for eye problems. The IMAX theaters always face a strong competition with the other traditional theaters in the market. The rapid growths of online piracy of movies have made individuals download the newly released movies and not visit the theaters more frequently. Individuals often desire to enjoy theater movie watching experiences by watching movies in the modern home theater systems other than the public theatre like IMAX. Many movie lovers have started to shift their preferences in other forms of entertainments like sports and live theaters. The recent crisis conditions and fluctuating exchange rates have also disturbed the business operations of IMAX. PESTLE The PESTLE analysis will concentrate in the political, economic, social, technological, legal and environmental aspects of the business of IMAX. Political The government regulations are always strict when it comes to the segments of entertainment. The governments of most of the developing and developed economies impose high taxes on luxury transactions on both producers and consumers. Higher taxes increase the price of the tickets and often cause loss of revenue for companies like IMAX. Economic The business of IMAX is often influenced by the turmoil’s in the global economy. The company sells expensive high quality movie tickets, so if the people lack the purchasing power to afford such tickets, the business of the company would collapse. If someone looks into the schedules given under the section of background, it would be clear that the revenue of IMAX has fallen over the last few years, due to excessive rise in recessionary trails in the market. Social The company operates in more than 40 countries in the world; it generates employment opportunities for a large number of individuals worldwide. Further, IMAX Corporation employs skilled, semi skilled and unskilled laborers. The superior movie qualities displayed in the IMAX theaters are good sources of entertainment for all the movie lovers. Technological The 15000 watt powered bubs in the projectors of the IMAX theaters makes the movies images much brighter and sharper than the projectors of the traditional theaters. The company annually spends almost 5.5 % in research and development purposes. Superior technology and efficient projected movie pictures are the most unique characteristics of the IMAX theaters. Legal The governments of many economies often impose a lot of restrictions on the types of the movies that would be displayed in the IMAX theaters (USINFO, n.d.). Environmental IMAX uses a lot of electricity in their movie theaters. The company should try to convert its services in the digital formats. Projector screen of the IMAX theaters also requires a lot of water for cleaning itself, thus such requirements of IMAX theaters consume a lot of environmental resources and must be changed over time to preserve environmental energy. Porters 5 Forces Threat of new entrants: High With rapid development of loan facilities it has become very easy to build a movie theater cost effectively in the modern world. This has increased the threat of new entrants in the movie industry where IMAX operates. Other firms in the industry may upgrade their state of technology like IMAX and overtake its market powers. With rapid developments in technologies IMAX may soon face a new potential rival in the market that can provide enhanced movie viewing experience in the market. Threat of substitutes: Moderate The customers can often choose other theaters to watch their movies instead of IMAX theaters. The prices of the movie tickets of IMAX are way more than the other movie theaters in the market. Higher prices increase the power of substitution in the business of IMAX. Rather at present many individuals prefer DVD movies than watching movies in theaters. Bargaining power of the suppliers: Low Much empirical news has commented that IMAX dominates its suppliers in the market. The film producers often change the dates of their movie releases when IMAX is about to launch a new film in its theaters. The business organization of IMAX dominates the film producer’s business decisions (DOL, 2013). Bargaining power of the buyers: Low The unique movie experiences that are visualized in the movies of IMAX theaters make the business firm charge high prices for its movie tickers. Such special services reduce the bargaining powers of the customers in IMAX business. Rather the individuals often get ready to pay higher prices for the movie tickets of IMAX. However, it should be considered that the recent economic downturns have lowered the disposable income levels of the individuals. At this juncture many buyers might prefer to purchase cheaper traditional movie tickets than the movie tickets of the expensive IMAX theaters. This would surely increase the bargaining powers of the customers in IMAX business. Potential rivals in the industry: High The existing rivalry in the industry of movies and theaters is extremely high. Compared to the turnovers in the other industries, even in this recessionary times the retail business in the film industry has been good. This is only possible with constant innovation and improvements in the movie quality in theaters. Thus, though the quality of movies shown in the theaters of IMAX is excellent, the company still faces relatively elastic demand due to the high competition prevailing in the market. Marketing Mix The marketing mix analysis will try to analyze the business of IMAX by emphasizing its products, prices, operational places and promotional strategies. Product The IMAX theaters have both 3D and regular screens, the seats of the IMAX halls are comfortable and customer services offered is also excellent. Thus, watching a movie via the services rendered by IMAX not only provides an extra ordinary movie watching experiences to the individuals, but also satisfies the utility of the consumers by providing them with excellent customer services. Price The company applies varied pricing strategies on the basis of its market segmentation norms. The price of tickets varies for 2D and 3D theaters, at the same time it also differs in terms of the age of the customers. The company chargers higher for adults compared to the children. Further IMAX offers special discounts to the school students and the tourists. The company also offers special price concessions in several occasions annually. Like special concessions in the price of the IMAX tickets at the time of Christmas helps the company park more customers. Place The IMAX theaters are mainly located in the busy locations of different cities. The locations of the IMAX theaters are in the popular tourist spots in some of the cities, such strategic places of the theaters help to attract a large number of buyers. Moreover, the peak busy locations of the IMAX theaters in front of playgrounds, museums and market places helps to tap more economically affluent customers in its theaters of IMAX (Slack & Nigel, 2005). Promotion The company has a long established business, thus it has a lot of economic surpluses to use in sales and marketing promotional activities. IMAX have advertized its brand through various means of media like televisions, magazines and journals. The company also sent direct mails to the different schools and tourists inbound groups about the quality and nature of their services. The official website of the company is attractive and provides a detailed idea about the type of the theater services rendered by the company (IMF, 2011). Conclusion and Recommendations There is no doubt about this fact that the quality and technology used by the IMAX theaters to display movie is unique and exclusive, but still the company needs to adopt some changes in order to augment its business performance and lead in the market (Arnold, 2008). Considering the above analysis, a number of recommendations may be provided regarding the business of IMAX:- Along with entertainment Hollywood movies, the company should try to launch a few educational movies in its theaters. Considering the recent crisis situations in the market, the company should try to lower the costs of its movie tickets. The services rendered by the company should be of varied price ranges, so that it can be affordable for individuals of all income groups. The company should try to open up new branches of its business in the emerging economies of the world like China and Russia. Only focusing on the quality of the products is not enough for the company. The company would only be able to capture more clients if it manages to lower its ticket prices. The company should try to launch both regular and large format films. Constant technological innovation would surely help the company lower its cost of services; this would in turn help the company lower its movie ticket prices. The company should try to incorporate 4D movies in its theaters. It should also try to open more theaters under its name in even the suburb areas of the developed economies. IMAX should actively participate in anti piracy programs so that individuals are not able download the pirated versions of movies online (Simon, 2003). It is expected that with such improvements the company would surely be able to enhance its performances in future. References Arnold, R. A. (2008). Macroeconomics. Connecticut: Cengage Learning. Brown, J. (2002). A case study for business. Retrieved from http://www.imax.com.au/content/resources/Big%20Screen%20Business%20-%20Part%203%20Marketing.pdf . Chakravarty, S. N. (2002). A really big show. Institutional Investor, 35(10). pp. 1-20. DOL. (2013). Encouraging Future Innovation: Youth Entrepreneurship Education. Retrieved from http://www.dol.gov/odep/pubs/fact/entrepreneurship.htm . Emmons, N. (2000). IMAX may turn towards mainstream. Amusement Business, 112(49). pp. 20-21. Federal Reserve. (2013). Board of Governors of the Federal Reserve System. Retrieved from http://www.federalreserve.gov/releases/h15/20130805/ . IMF. (2011). Key Risks and Challenges for Sustaining Financial Stability. Retrieved from http://www.imf.org/external/pubs/ft/gfsr/2011/01/pdf/chap1.pdf . IVEY. (2009). IMAX: larger than life. Retrieved from http://www.worldwideboxoffice.com/. Lowry, T. (2002). Now: playing at IMAX hit movies. Business Week, pp. 0-46. MPAA. (2009). International theatrical snapshot. Retrieved from http://www.mpaa.org/International%20Theatrical%20Snapshot.pdf . Olijnyk, Z. (2002). One giant leap. Canadian Business, 75(17). pp. 46-48. Simon, Z. (2003). The double-edged sword: the technological sublime in American novels between 1900 and 1940. Budapest: Akademiai Kiado. Slack, N. & Nigel, S. (2005). Operations strategy. New Jersey: Pearson Education. USINFO. (n.d.) Principles of Entrepreneurship. Retrieved from http://usinfo.org/zhcn/DOCS/enterp.pdf . Read More