Unformatted text preview: IMAX: LARGER THAN LIFE CASE ANALYSIS 2015 CORPORATE
STRATEGY IMAX: LARGER THAN LIFE CASE
ANALYSIS Individual Written Critique | Daniela Donado
1 IMAX: LARGER THAN LIFE CASE ANALYSIS 2015
INDIVIDUAL WRITTEN CRITIQUE
IMAX’s roots trace back to 1967, when four Canadians created a system for projecting
movies onto a giant curved screen that seemingly immerses viewers. During its first 25
years, IMAX focused on large-format educational films and installing its system in
museums, aquariums, zoos and other institutions. IMAX realized that its growth and
profitability were limited niche strategy so in response they decided to achieve faster
growth and higher margins by expanding to multiplexes and by launching Hollywood
films in IMAX format. The change in strategy was partially successful, but the risk of
losing their reputation only IMAX is still running.
This assignment is going to analyze IMAX`s external and industry environments and
identify the opportunities and challenges it faces through the PESTEL framework and
Porters five forces. Through this analysis we can determine if IMAX can thrive as a
niche player or if it should look to get acquired, and whether or not to exhibit too many
External Analysis: PESTEL Framework
1. Political: 1) Concerns about violence, sex and vulgar language in movies have
generated considerable efforts from influential politicians to organize and lobby
political action to regulate the entertainment industry.
2. Economic: 1) The film industry faced financial challenges in the late 90`s where
theater owners declared bankruptcy as a result of the over expansion within the
industry, in consequence IMAX had to engage in belt-tightening of its own as the
majority of its debtors defaulted. 2) This industry is highly dependent on its
consumer purchasing power which means that any fluctuation in ticket prices will
reflect on demand.
3. Socio-cultural: 1) Moviegoers preference for films varies by their age, gender,
lifestyle or even beliefs. IMAX should consider which target audience they wish to
attract and define which genre is preferred by frequent moviegoers before
considering releasing a film just because attendance and box office revenues are
directly related to it.
2) Trend of increased consumption of educational
4. Technological: 1) Constantly evolving film technology caused by large
investments in research and development has created newer and efficient
methods of film making. 2) Technological advance may be considered as a threat
for IMAX because new alternatives of film watching that cause people to stay at
home rather than going to the theater. 3) IMAX got funding in technological
development from the Ontario Technological Fund. 4) Technology is advancing
and companies have to constantly update their technology to become more 2 IMAX: LARGER THAN LIFE CASE ANALYSIS 2015
competitive in the industry. 5) Proliferation of cheaper digital film production and
3D equipment technology.
5. Environmental: There is no significant impact environmentally for the film
6. Legal: 1) Government regulation and policies on the industry which have allowed
IMAX to own patented rights for all their research and development encouraging
technological advances as well as government intervention against piracy
offering copyright protection. 3) Actor unions such as Screen Artist Guilds have
been formed in order to negotiate higher wages for their labor.
Industry Analysis: Porter Five Forces
1. Threat of New Entrants: Low
1)The threat of new entrants in the entertainment industry is low due to the high
capital investment and technical knowhow required to enter into the equipment
distribution, production and distribution industry. 2) In terms of distribution IMAX
has created a barrier to new entrants by establishing partnerships with cinemas
to showcase their films. 3) Piracy has also created a barrier to new entrants. 4)
Threat may be reduced by the proliferation of cheaper digital film production and
3D equipment technology.
2. Competitive Rivalry: High
1) IMAX faces direct competition from rival studios like Disney/Pixar and theatre
chain such as regal entertainment.. 2) Movie success rates from other production
studios make it more difficult for IMAX to turn a significant profit from their
movies. 3) Competition among movies within the same genre is so high that
studios schedule releases carefully to avoid direct competition.
3. Threat of Substitutes: High
There are many alternatives that exist for consumers, aside from the IMAX
experience such as DVD’s, pay-per-view, video on demand, theme parks,
sporting events etc. Consumers can now enjoy similar experiences in the comfort
of their own home.
4. Buyer Power: High
1)Moviegoers are increasingly sensitive to price changes. 2) IMAX’s major
customers are developing their own large format and 3D technology, which may
pose a significant threat to the future of IMAX if they decide to stop relying on its
technology. 3) The bargaining power could be increased if IMAX renegotiated the
existing contracts with buyers, however, for buyers it is easy to switch if one
studio doesn't offer the movie they want.
5. Supplier Power: Moderate 3 IMAX: LARGER THAN LIFE CASE ANALYSIS 2015
1)IMAX’s in house equipment manufacturing, long term relationship with
suppliers, use of firm owned technological resources, and number of patents,
significantly reduces the bargaining power of suppliers. 2) However, the film
industry has a limited number of suppliers, which consequently provides no
substitutes for studios such as IMAX.
Taking into consideration the previous analysis we can determine that high rivalry
coupled with high buyer power, increasing technology costs, and availability of
substitutes prevents companies within the industry from making a desired profit. As a
result, IMAX will have to change its strategy in the current industry to maintain a
I believe that an acquisition by a larger studio such as Sony, Disney or Time-Warner is
a good idea and developing trend for IMAX in the future because both external market
situation and internal company competencies are beneficial for IMAX to grow from a
niche player to a market leader. Through acquisition, large studio can not only address
IMAX’s financial problem and help IMAX to pay off its debt, but also can get more
economic returns and add more value through IMAX. Besides, IMAX can ensure its
survival and make more business opportunities in the future.
This acquisition could help IMAX to install more digital theatre systems, and invest more
money on marketing, to attract more audiences to watch its films and increase its box
office revenue. Furthermore, the company could convert the studio films into IMAX large
format films with lower costs or even create new films combined with both studio and
IMAX’s brand. This will expand their core audience, and create more economic value to
both the studio and IMAX.
Answering the question if IMAX should exhibit Hollywood movies, I believe that this
strategy is essential to increase the company`s box office revenue. IMAX can sustain its
competitive advantages such as their strong R&D team and their new technological
developments (DMR technology). They should take advantage of their achievement in
lower costs of conversion to launch more Hollywood films in the IMAX screens. In
conclusion, these changes will not make IMAX lose its differentiation; in contrast, it will
create more of IMAX’s brand effect. 4 ...
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This document was uploaded on 12/01/2015.
- Fall '15