Instructions for Analysis of Case 6

Instructions for Analysis of Case 6 - Instructions for...

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Instructions for Analysis of Case 6 1. How strong are the competitive forces in the movie rental marketplace? Do a five forces analysis to support your answer. Below is an analysis of five forces model of competition in the movie rental industry: Rivalry among companies competing in movie rentals Rivalry is centered on such factors as Price of movie rentals (rented either individually or via a subscription plan); variety of subscription plans to choose from. Convenience in renting movies (including returning rented DVDs). Breadth of selection (size and diversity of movie rental library). Availability of the DVD Of course, DVD availability is not a factor when the rented movie is being streamed over the Internet by video-on-demand providers. Ease of browsing through all the selections to determine which movies to rent. Policies and fees (if any) regarding how long the renter can keep the DVD (or view the movie if it is downloaded or rented online). Advertising and promotion—Much of the advertising is being done online in the case of both Blockbuster and Netflix; however, Blockbuster utilizes in-store promotions on a regular basis. But the DVD rental business is not one that is a heavy user of TV, radio, and newspaper advertising on a regular basis. Image and reputation. Most movie rental competitors pursue some version of a differentiation strategy to try to set themselves apart on the basis of one or more competitive factors. Several factors were working to intensify rivalry among movie rental industry participants: All rivals are actively and busily launching fresh promotional initiatives (the free trials and unlimited streaming at Netflix, for example) and engaging in new marketing tactics and market maneuvers (Redbox’s rush to deploy more of its distinctive red kiosks and Blockbuster’s initiatives to reinvent itself) to spur their movie rental revenues and build a loyal customer base. The large number of fresh strategic initiatives on the part of various movie rental rivals heightens rivalry. Low switching costs on the part of buyers—it is pretty easy for people wanting to rent a DVD to (a) go to one store location or another to rent a DVD or (b) switch their subscription from Netflix to Blockbuster or some other subscription service or (c) order the movie through their cable provider or some other video-on-demand provider. Some rivals have utilized rock-bottom subscription rates (and free trials) and low rental fees as a means of attracting new customers— Rivalry increases Rivalry is likely to increase significantly as “wave of the future” video-on-demand Rivalry increases as the product offerings of rivals become more standardized.
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Threat of entry— The costs of developing a Web site. Developing order fulfillment capability to equal the short delivery times offered by Netflix and Blockbuster.
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This note was uploaded on 12/28/2011 for the course MGMNT 425 taught by Professor Dr.pham during the Winter '11 term at CSU Long Beach.

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Instructions for Analysis of Case 6 - Instructions for...

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