Analysis the case - Assignment Example

The costs of changing the mentioned methods are cheap. Therefore, companies continually strive to implement new strategies to improve the quality and affordability their products in order to attract and maintain customers. Consequently, the competition is very high in the industry. New entrants – the entrance rate of new players in the industry is low due to the following facts: the existing companies have established, the capital requirement is very high, the cost of setting up an efficient distribution chain is high, the cost of promotion is high, and the high cost of building a solid relationship with the suppliers.

As a result, the mentioned high prices scare away the potential entrants. Substitute products – the technological advancements provide a platform for the development of substitute products that pose threats to the movie rental industry. There are several alternatives to movies-renting such as viewing of movies in theaters, watching movies on the television, internet based movie watching and others. Therefore, companies in the industry must carefully implement competitive pricing strategies in order to counter the threat.

Bargaining power of suppliers - the movie suppliers are many in the industry making the supply level of the movies high. Though suppliers have control of the quality of the products, their influence in the market concerning product prices is medium (supply is high). Bargaining power of customers – the high sensitive nature of the customers to the product prices increases their influence to the products prices. In addition, since there are more efficient methods of viewing movies (substitute products), and that the switching cost is insignificant, price variations cause a massive customer migration.

For instance, after Netflix separated the unlimited DVD and unlimited streaming, which saw the prices rise from $ 9.99 to $ 15.98 per month. Consequently, around 600,000 customers revoked their subscriptions. That indicates