Marketing of Qatar Cinemas Company - Term Paper Example

?A. MARKET ANALYSIS The Arab region’s GDP had a decline of 10% in 2009, but bounced back to a growth of 10% in the following year; and maintains sameCAGR until 2012. The fall in 2009 was due to fall in oil prices. Qatar alone shows the strongest growth forecast between 2009 and 2013, at 17% CAGR. There is a positive progress made towards promoting the freedom in media and press in Qatar. Doha Media Freedom Centre was established in 2008 towards media freedom encouragement, this has led to a remarkable improvement. The Qatar Cinemas Company is classified under Entertainment and Media Industry. The company’s competitive theory statement is divided into five parts: vertical integration, strategic alliances, creative content, international agency and corporate diversifications. Conglomeration: Qatar Cinemas Company operates in two different fields, such as Consumer Products and studio entertainment. Horizontal integration: Qatar Cinemas Company owns many studio entertainment and consumer product franchise. This becomes horizontal integrated industry as all stake-holders act together in increasing efficiency since they act in the same business line. Globalization: Qatar Cinemas Company Services and Products are found in Arab Media and all over the world in different forms. Vertical integration:  Qatar Cinemas Company is made up of different sub-companies and business line, allowing the whole organization to produce, plan, distribute, and advertise all of its products on its own. Seller and Buyer Concentration: Qatar Cinemas Company is in an Oligopoly Seller Concentration, it is evident that there are few producers in the market and products can be either differentiated or homogenous. There are many buyers for the company’s products, ranging from different cultures, ages groups, sexuality, preferences and interests. Media synergy: Qatar Cinemas Company bought many film studios that allow making more advanced movies which are then distributed through renowned marketers. Barriers to Entry: Qatar Cinemas Company offers different barriers to entry for competitors in the market place. Qatar Cinemas Company enjoys privileges from trademarks, copyrights, and patents that prevent other entertainment companies from imitating their ideas and productions. For new companies it is difficult to compete with this established and well-known organization because of its long development period in winning known customers and protection legal barriers. Production Costs: Qatar Cinemas Company has high first copy (production) costs and low reproduction (subsequent) costs of most of its products. Product Differentiation: Qatar Cinemas Company has a wide variety of heterogeneous products; its shows, and movies for different tastes, ages and cultures. Its products are differentiated within the company and from products from its competitors. B. INDUSTRY ANALYSIS Qatar Cinemas Company has developed services and products for different audiences, teens, children and adults of all ages. Median age: 28 (70% between 17 and 34) Men: 90% | Single: 40% Literate: 90 % Employed Full Time: 90% Average HHI: QAR. 7,200. Qatar Cinemas’ Primary Competitors Qatar Cinemas Company competition consists of diversified players that capture media networks, TV content producers, and film producers. Competition is greatest at film production and network service; premium networks like Sonymax have an advantage over film halls because of their subscriptions fees. Presence of competition between services and brands creates an environment of price wars. Market Share Controlled by Qatar Cinemas Company Qatar Cinemas’ Total Revenue is approximately QAR 361 million (as for 2012). In order to obtain the market share, revenues from the three major competitors in the entertainment industry are considered. Total Industry Revenue: QAR. 262.9 Millions Qatar Cinemas’ Total Revenue: QAR. 36.1 Million Qatar Cinemas’ Market Share: 13.7% of Total Revenue Industry (inclusive of major competitors share) In the studio entertainment industry Qatar Cinemas’ market share is 40% in Qatar and 10% in the Arabic Box Office market (QAR. 7.9 Million) New Challenges for the Company The Qatar Cinemas Company has many threats that could lead to a negative impact business’ future. The company’s threats come from both national and global competitors. To summarize some negative challenges to the company might be: 1 Increasing trends of vertical integration of cable operators increases competitive pressures and consequently reduce the company’s revenues or increase costs. 2 Volatility in terms of advertising revenues due to varying events that depending on number of viewers. 3 Changes in consumer and general public tastes and preferences for products and entertainment could reduce the demand for the some productions. 4 The success of Qatar Cinemas Company businesses is highly dependent on the maintenance and existence of intellectual property rights within the entertainment industry; if copyrights are dishonored, revenues would reduce, and this affects its producers. C. COMPANY ANALYSIS Financial Evaluation Revenues and Profits: Revenues: Revenues for 2012: 41.813 (Million QAR) Revenues for 2011: 40.062 (Million QAR) Revenues for 2010: 38.063 (Million QAR) Revenues for 2009: 36.149 (Million QAR) Revenues for 2008: 37.843 (Million QAR) Revenues for 2007: 35.510 (Million QAR) Revenue Growth from 2007 to 2008: Increased by 6.57% Revenue Growth from 2010 to 2011: Increased by 6.57% Revenue Growth from 2008 to 2009: - 4.47% (Dropped) Revenue Growth from 2011 to 2012: Increased by 5.25% Revenue Growth from 2009 to 2010: Increased by 5.29% As seen from the past information, Qatar Cinemas Company’s revenues have been rising through the years. In 2012, revenue changed by 5.25% from the previous year. There was a decrease in revenue between year 2008 and 2009 of 4.47%; the total change from 2008 to 2012 is 0.60% increase in revenues. Incomes: Net Income for 2012: 4.84 (Million QAR) Net Income for 2011: 4.51(Million QAR) Net Income for 2010: 3.90 (Million QAR) Net Income for 2009: 3.30 (Million QAR) Net Income for 2008: 4.42 (Million QAR) Net Income for 2007: 4.67 (Million QAR) Income Growth from 2007 to 2008: - 5.28% (dropped) Income Growth from 2010 to 2011: 15.64% Income Growth from 2008 to 2009: - 25.29% (Dropped) Income Growth from 2011 to 2012: 7.32% Income Growth from 2009 to 2010: 19.83% From the information above, net incomes at Qatar Cinemas Company have changed its trend in the last 6 years. First decreasing in net income, and then, increasing it again, but not surpassing the ones from 2008; as seen in revenues. The change from 2008 to 2009 was due to decrease in income by 0.112 (million QAR) or a change decrease of 25.28 %. For year 2009 to 2010, there was an increase with 0.656 (million QAR) or 19.83% increase in company’s income. From the past information, revenues dropped between 2008 and 2009, but it recovered back as from 2010 to 2012; gaining 0.60% more than in 2008. On the other hand, the trend with net profits is the same. Profit decreased in 2009, but greatest in 2008. This is due to great net incomes in 2010. There was a decrease of 21.78 % from 2008 to 2009; and also profit decrease of 11.01% from 2008 to 2010.   2010 2009 2008 Selected Financial Data (QAR in millions) Net income attributable to The Qatar Cinemas Company 3.963 3.307 4.47 Revenues 38.063 36.149 37.843 Net Profit Margin (%), [Comparison to Industry] Qatar Cinemas Company. 10.41 9.15 11.70 Consumer Services, Industry – 4.34 28.7 The net profit margin shows how much of every Riyal of sales the company has in earnings. The 2010 profit margin, of 10.41%, means that the Qatar Cinemas Company has a net income of 0.014 for each Rial it sells. From the information above, profitability of an industry can be determined. It can be seen net profits decreasing from 2008; then recovered from 2009 to 2010. This growth is not at the same level as of 2008. Revenues are higher than that of 2008 in 2009, but the profits are low due to low net incomes and low earnings, and cash flow through the industry. As a result of these changes, Qatar Cinemas Company is making more revenues; other expenses make profits much lesser. If revenues continue to grow at the given margin, profits will be as high as before. Profitability of an industry determines the EBIT (Less interests and income taxes) and operating income (amortization and depreciation.) Depreciation is recently higher than 2008s’ (from 15.82 to 17.13 (in Million QAR), and it is also evident that the operating income is lesser as compared to 2008s’ (from 8.986 to 8.439). Using the above and other information, it is possible to determine how Qatar Cinemas Company has been performing or calculate expected future performances. For example, Deloitte & Touche expect that for this year (2013) the total revenues will be of 39 (Millions QAR). Current Liabilities and Long term Debt from the last 5 Years: Current Liabilities: Liabilities for 2012: 11.470 (Million QAR) Liabilities for 2011: 11.195 (Million QAR) Liabilities for 2010: 11.000 (Million QAR) Liabilities for 2009: 8.934 (Million QAR) Liabilities for 2008: 11.591 (Million QAR) Long Term Debt: 2012: 1.0119 (Million QAR) 2011: 1.0120 (Million QAR) 2010: 1.0130 (Million QAR) 2009: 1.1495 (Million QAR) 2008: 1.1351 (Million QAR) Liabilities for the year 2008 are highest for the last 5 years; this might be why Qatar Cinemas’ total revenues were higher. Liabilities smoothly decreased in between 2008 and 2009; with a decrease of 2.657 (million QAR) or 22.92% decrease. It is evident that changes between 2009 and 2010 were an increase of 2.066 (million QAR) or 23.13% growth. The long term debt increased from 2008 to 2009 by 1.26% or 14.4 (million QAR). And from 2009 to 2012 were decreases. From the above data, both long term debt and current liabilities are lower today (by 2012) than before. Long Term Debt to Capitalization Analysis: Total Capital for 2010: 47.4 (Million QAR) Long term debts 2012: 11.351 (Million QAR) Total Capital for 2011: 48.0 (Million QAR) Long term debt 2012: 11.495 (Million QAR) Total Capital for 2012: 51.1 (Million QAR) Long term debt 2012: 10.130 (Million QAR) Percentage Debt to Capitalization 2010: 48.33% Percentage Debt to Capitalization 2011: 42.35% Percentage Debt to Capitalization 2012: 40.67 % Qatar Cinemas’ total capital has been increasing in past three years, but debt to capitalization rate as at decreasing rate as a result of decreased long-term debt. Qatar Cinemas’ Ratio of Total debt to capitalization is: Percentage Long Term Debt to Capitalization 2010: 24.1 % Percentage Long Term Debt to Capitalization 2011: 24.0 % Percentage Long Term Debt to Capitalization 2012: 19.7 % The above data gives the same trend current liabilities sum up; the debt to capitalization is at decreasing rate. Cash Flow Margin Qatar Cinemas has produced 3.675 Million Free Cash Flow as compared to its net income of QAR 3.646 Million in 2012. This implies that Qatar Cinemas Company turned approximately 9.8% of its revenues into Free Cash Flow (FCF). Cash Flow Margin = Cash Flow / Net Revenue. Cash Flow in 2012: 5.676 (Million QAR) Cash Flow in 2011: 4.938 (Million QAR) Cash Flow in 2010: 6.009 (Million QAR) Cash flow margin between these years are: Cash Flow Margin 2012: 15.00 % Cash Flow Margin 2011: 13.70 % Cash Flow Margin 2010: 15.90 % The Cash flow margin shows how Qatar Cinemas needs to generate cash for expenses and purchase assets payment. Qatar Cinemas’ cash flow margin was reduced from 2010 to 2011 and rose again in 2012; but a lower level as compared to 2010. This shows that Qatar Cinemas needs to overturn in order generate more cash. From the above data, cash flow per share produces an exact pattern. In 2009 it was at QAR 3.09, then decreased to QAR 2.63 in 2011, and finally increased to QAR 2.91 in 2012. Returns on Investment Returns on equity 2012 2011 2010 Selected Financial Data (QAR in Millions) Net income attributable to Qatar Cinemas Company 3.963 3.307 4.427 Total Qatar Cinemas Shareholder’s equity 37.519 33.734 32.323 ROE (%) Qatar Cinemas 10.56 9.80 13.70 Qatar Cinemas’ returns on equity deteriorated from 2010 to 2011, but then slightly improved from 2011 to 2012. Higher ROE through the years indicate of improvements in the economy. Returns on Assets Qatar Cinemas Company returns in assets also deteriorated from 2010 to 2011, and improved from 2011 to 2012. ROA should be higher through the years as it shows that means the company is gets more income per investment. Current Ratio/Liquidity or Risk Assessment This ratio gives an idea of the Qatar Cinemas’ ability to pay back its short term liabilities using its short term assets. Higher the ratio, shows capability for the company to pay its obligation Operating Profit Margin   2012 2011 2010 Selected Financial Data (QAR in Millions) Operating income 6.456 5.205 7.404 Revenues 38.063 36.149 37.843 Operating Profit Margin (%) Qatar Cinemas 16.96 14.40 19.57 Qatar Cinemas’ Profit Margin deteriorated from 2010 to 2011 and slightly improved from 2011 to 2012. Solvency or Capital Structure Leverage Ratio: It is calculated by the formula: total debt/ total assets (Million QAR) 2012 2011 2010 Total Debt 21.130 20.429 22.942 Total Assets 69.206 63.117 62.497 Leverage Ratio 30.53 % 32.37% 36.71% The leverage ratio smoothly lowers in in three years hence a good indicator for the company. This means that Qatar Cinemas’ debt is going down. Debt to Equity Ratio: (Million QAR) 2012 2010 2009 Total Debt 21.1 20.4 22.9 Total Equity 37.5 33.7 32.3 Debt to Equity Ratio 56.42 % 60.66% 70.88% As seen from the table above the debt to equity ratio has been lowering over the years; good indicator for the capital and company business structure. Income statement The company’s net income fell by 11.78% in between year 2011 to 2012, which is from 13.37 million to 11.80 million. Revenues grew by 36.60 % in the same period; that is 17.3 million to 23.6 million. Growth rates Dividends per share have been increasing by 33.33% while company’s earnings per share by 11.78% year by year. This positive trend in dividend payments is vital since very few entertainment companies pay a dividend; five year earnings per share growth of Qatar Cinemas ranks highest in motion industry. Cash flow in QAR In 2012, Qatar Cinemas’ cash reserves fell by 3.50 million. However, it earned 14.83million from operations with Cash Flow Margin of 62.80%. The company also used 2.60 million on investment activities and paid 15.80 million in the cash flows financing. Balance sheet in QAR Qatar Cinemas has a Debt to Total Capital ratio of about 12.69% Conclusion After collecting of Qatar Cinemas data, carrying out in-depth analysis from outside perspective to the company, Qatar Cinemas Company is a global pace maker in the industry of entertainment; Qatar Cinemas Company continuously grows. This company demonstrates its highly organized and centralized managerial decisions. Its studio production department is vital for the company to act as a leader for its business products and services. Between the Positive remarks on investment are: Qatar Cinemas Company is a diversified entertainment company surpassing most competitors in its diverse operations. Reviewing the Qatar Cinemas’ overall balance sheet, it portrays a strong and solid cash balance. Qatar Cinemas is characterized with strong management team that has led to development of entertainment franchises for both domestic and international distribution. (Vause) References Asian economy. n.d. 24 December 24 . Bailey, Roy. The Economics of Financial Markets . Cambridge: Cambridge University Press, 2005. Cleff, Thomas. Exploratory Data Analysis in Business and Economics. New York: Springer, 2012. Cohen, Muhammad. Asian Economy. 23 December 2013. 24 December 2013 . Levinson, Marc. Guide to Financial Markets (The Economist). New York: Bloomberg Press, 2009. Ogata, H. Statistical Inference for Financial Engineering. New York: Springer, 2011. Touche, Deloitte. "Financial Statements." 30 June 2013. Qatar Cinema and Film Distrubution Company (Q.S.C). 24 December 2013 . Vause, Bob. Guide to Analysing Companies (The Economist). London: Oxford University Press, 2010. Zakarya, Musab. "Arab Media Outlook 2009-2013." 2013. Dubai Press Club. 24 December 2013 . Read More