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CASE16_Cinemaplex - A Horror Show at the Cinemaplex...

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A Horror Show at the Cinemaplex? INTRODUCTION This case is an industry study, highlighting the threatening conditions which are negatively impacting potential for theater owner profitability. A strategic assessment of the motion picture industry should be initiated by analyzing the general environment and industry conditions affecting all competitors and then completed by formulating answers to the following questions. 1. Through a comprehensive analysis of the five competitive forces, what level of competition can be anticipated amongst industry rivals? 2. What are the advantages and disadvantages of each of the top 4 competitors' situations and strategic approaches? 3. What financial considerations affect the profitability of major movie theater businesses? 4. Given the situation facing industry participants, what strategic options are feasible? 5. What recommendations can be made to improve their likelihood of future success? ANALYSIS General Environment A variety of forces in the general environment influence the growth and performance of companies competing in the film industry. Segment conditions present both opportunities and threats. In the economic segment, attendance is negatively related to domestic conditions. During the current economic downturn, theater receipts can be expected to rise, creating an opportunity to increase ticket sales. Americans spend over a third of their time on entertainment, and movie viewing is a popular form of entertainment in the U.S. This sociocultural condition is not expected to change. Demographic trends have longer-term implications for cinemas. Over the next 15 years, movie theaters can expect to benefit from a growing population. Despite the fact that its core age group is growing more slowly than the overall U.S. population, 4 million more core market members are anticipated by the year 2025, providing the potential for attendance to increase by 700 viewers per theater (or 100 viewers per screen). Cinemaplex - 1
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A Horror Show at the Cinemaplex? In the technological segment, digital advancements open up possibilities for theater owners to upgrade their projection operations and for the costs associated with film print to be removed from the value chain. On the other hand, increased availability and affordability of electronic equipment is having a transformational effect on the home theater experience and reducing the novelty of the theater setting. Industry Environment Today's cinema industry is characterized by flat attendance rates, slow to no growth prospects, and screen overcapacity. A complete look at the competitive forces at play in the movie theater industry will suggest the level of competition that can be anticipated amongst industry rivals. The strengths of the industry's five competitive forces are assessed and estimated below.
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