Industrial, SWOT, and Competitive Analysis - the US - Research Paper Example

Industrial, SWOT, and Competitive Analysis Industrial, SWOT, and Competitive Analysis Industry Overview In the US, the movie theatre industry has broadened and constantly evolved due to market demands and advancements in technology with the estimated theatres rising to 38,605. Since the year 2009, there has been progress and significant growth in movie box related offices though the attendance levels have reduced. In the year 1946, an average American would attend 28 films in a year and today the number has lowered to six. Meanwhile, consumers have been increasingly spending in diverse movie related technologies and utilizing the ‘on demand’ view of films. The growth data that was compiled by Datamonitor in 2010 approximated that in 2014, the US film market had a value of roughly $48.2 billion, which was an increase of around 0.3% since the year 2009 (Highbeam Business, 2009; Redwood Capital, 2014 ). The industry has also increased its economy of scale. For instance, after Marvel was bought by Disney in 2009, it expanded both in the animation as well as the movie sector. The revenue has also increased and in 2013 it was roughly $36 billion with North America having the largest share of $11.8 billion. It is projected that the global proceeds will continue to grow, reaching approximately $44 billion in the year 2017. There has also been an increase in online ticketing with major players such as Fandango whose tickets cover over 22,00 screens in diverse nations across the US as well as Europe. In 2005, there was purchase of 1.38 billion tickets and in 2006 the bought tickets were 1.68 billion in Canada and the US. The online film ticketing is projected to reach around $13.7 billion by the year 2017. From the figures, it is evident that the movie industry will continue to expand and generate increased revenue in the coming years (Redwood Capital, 2014). Regulation Review and Legal Concern Movie related theatres come in diverse sizes as well as shapes and developing one at the heart of Winston Salem in North Carolina is important since the region has only five theatres unlike other regions such as Charlotte that has 14. The region is perfect sine there will be an opportunity for a new experience and local competition will be low. The theatre will be developed in an old warehouse that is located in Winston Salem. In finding a suitable place, one of the main challenges will be to access its suitability. There will also be a need to ensure that the building meets reasonable legal standards of health as well as safety for all persons. Therefore, the management will need to come up with a safety guideline, covering issues such as fire, conservation of power, and toxic substances. The other challenge will be coming up with a license from the local authority as stated in the 2003 Licensing Act. Moreover, the license will only be issued to screen those films that are fully certified. For that reason, it will be a challenge to submit the movies separately in order to be certified. The owners will also need a theatrical license from a distributor and one covering the music that is played in the movie. Since food and drinks will also be offered, restaurant as well as liquor license will be required. Therefore, the business will face diverse challenges, mostly with regard to licensing. This means that a hefty amount of money will be required to secure all the licenses and ensure that the building conforms to the set regulations. Since the warehouse is located at the city centre, it will be easier for the authorities to locate it and in case legal regulations are not met on time, the owner will be forced to pay for any probable damages (Bernstein, 2000). Competitive Analysis In helping understand the competitive aspect, it is important to analyze Michael Porter’s six forces, which are suppliers as well as buyer’s bargaining power, the threat of new entrants, rivalry among competitors, threat of other services or products, and power of the stakeholders (Sekhar, 2009, p.49). The threat of new entrants in the film theatres industry is high. However, the financial outlay that is needed to produce a movie is quite high. For instance, producing of Disney Pirates is approximated to have hit as high as $300 million. On the same note, the supplier’s bargaining buyer is dependent on the type of suppliers. In the movie theater industry, it is relatively high since popular actors are likely to pull movie fanatics into attending theatres; thus, heightening sales through high endorsements. Buyers also have a high bargaining power, considering that there are increased substitutes. Consumers do have a vast selection of movies to choose from where they can easily access them remotely. Therefore, there is threat of other products or services and intense rivalry among the competitive companies such Walt Disney, AMC Entertainment Inc and News Corp, which creates and distributes entertainment across the globe and has a market share of more than 60%. News Corp is widely known for developing box office films such as Black Swan, RIO, and Avatar and will be a major competitor to the small theatre since it has continuously made 3D movies,. The other competitors are Time Warner, which produces movies through Warner Bros and has 17.9% market share. There are also other national competitors such as Cinemark Holdings Inc, which has 297 theatre outlets, Marcus Corporation, and the ITEC International. There is also the Regal Entertainment that has around 525 theatres in thirty-seven states and its stock price is $13.59. Locally, the theatre will face competition from Carmike 10, Carmike Wynnsong 12, Marketplace Cinemas, Stevens, and a/perture cinema (Vogel, 2010). The key strengths among these competitors are that they have the ability to expand internationally since they have the necessary resources and have been in the market longer. However, they also face piracy challenges and the rate of attendance has reduced; leading to low sales and increased competition. It is also to be noted that with online presence, families can enjoy films at the comfort of their homes and this has reduced the popularity of the theatres (IBIS World, 2015). The theatres tend to compete with one another on the basis of ticket prices, film as well as concession offerings, and the quality of the auditorium (IBIS World, 2015). Since first run and successful theatres are in better position to secure licensing for films and have increased market share, the new theatre will get shares from them by reducing prices on their first released films; hence, help in boosting its admissions. It is likely that the competitors as well as the indirect rivals such as online streaming players, satellite TV, and cables will try to stop it by reducing their prices, creating loyalty programs that provide concessions, and offering prospects services or products such as discounted popcorn and drinks as part of the film experience. It will also face indirect and external competition from other avenues such as home theater, DVD players, and video games among others. The penetration of equipment such as a projector screen will affect and compete with the new theatre. SWOT Analysis Strengths The theatre will have comfortable seating arrangement, relaxed recliners, and quality acting. It is also spacious, meaning that it is available to people who need to hold parties or relax. It will have a strong management that will oversee the operations of the business and ensure that the needs of the consumers are met on time in order to guarantee a competitive edge. Moreover, considering that it is a new business, it will draw curious enthusiasts who will come to compare it with other local theatres in the region. Therefore, there will be more room for improvement, consumer feedback, and introduction of unique services. The entertainment industry is also expanding rapidly; therefore, the business is in a better position to come up with latest innovative strategies that will draw more customers (Redwood Capital, 2014). In order to maximize on the strengths, all the stakeholders must be on board in order to develop sound strategies that will ensure long-term success. Weaknesses One of the major weaknesses will be the heightened prices of coming up with the theatre and setting the ticket prices. It will be also at a disadvantage, considering that it will be entering a saturated and mature market with numerous competitors. Since it has a small market capital, the new theatre will be more volatile in its stock as well as operations. It is also obvious that given its large size competitors, the business might not always have the financing, equity, and restructuring capability. In order to mitigate the weaknesses, the management will develop a plan in which they detail some of the unique services that other theatres are not offering. This will help in attracting more consumers. Opportunities With technological advancements, there have been improvements in preventing piracy through reintroduction of encrypting methods, which minimize DVD copying. There is also growing number of theatre enthusiast and based on the fact that it is located in a well known region, it will be at a competitive advantage. The business also has an opportunity to develop 3D capabilities as well as luxury cinemas since it has already been introduced in the market. Since there are increased entertainment and dining establishments, this will help in drawing more customers (Bertalmio, 2014, pp. 193-194). In order to increase the opportunities, the managers will keep up to date with the recent trends and market dynamics to ensure that consumes are getting effective services. Threats Although the film industry has allowed various innovative as well as creative processes, the new theatre will suffer from immense saturation. There will be competition from locals such as the amusement park and Carmike Seven. With the economic downturn and increase in ticket prices, movie goers have and will continue to realize that going to a theatre to see a movie is no longer cheap. Therefore, there will be decrease in consumer demand and continuous low sales. Moreover, growing online content will be a major threat to the theatre. For example, since the year 2009, broadband connections have increased at a yearly rate of 19.8%. As consumers continue streaming and downloading films on their smartphones, iPods, computers and iPads, demand for theatres will continue to fall (IBIS World, 2015). In order to minimize the threats, there will be a platform in which appealing services will be introduced such as low sales, free entries, and combination of other forms of entertainment to appeal to a wider audience. References Bernstein, M. (2000). Controlling Hollywood: Censorship and Regulation in the Studio Era, London, UK: Bloomsbury. Bertalmio, M. (2014). Image Processing for Cinema. Boca Roton, FL: CRC Press. Highbeam Business. (2009). United States-Movies & Entertainment. (Industry Overview). Retrieved from http://business.highbeam.com/437189/article-1G1-201556519/united-states-movies-entertainment IBIS World. (2015). Movie Theatres in the US. Retrieved from https://www.ibisworld.com/reports/reportdownload.aspx?cid=1&rtid=10 Redwood Capital. (2014). Cinema Operator Industry. Retrieved from http://www.redcapgroup.com/media/1035a448-73ff-4295-b83d-46d24aee8a73/Sector%20Reports/2014-05-07_Cinema%20Operator%20Industry%20Report%20May%202014_pdf. Sekhar, S. (2009). Business Policy and Strategic Management. New York, NY: I.K. International Pvt Ltd. Vogel, H. (2010). Entertainment Industry Economics: a Guide for Financial Analysis. London, UK: Cambridge University Press. Read More