Coinstar Case Notes - Coinstar: A Sleeping Giant Awakens...

Coinstar Case Notes
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Coinstar: A Sleeping Giant Awakens INTRODUCTION This case describes a unique entrepreneurial company, whose leaders have demonstrated a knack for identifying obscure market niches. The rapid success of its Redbox kiosk division has drawn attention to Coinstar’s business model and creates an interesting opportunity to explore the dynamics within a company attempting to diversify its revenue stream and to discover a long-term strategic identity. After describing Coinstar’s humble beginnings, the case delves into the company’s two primary business segments. The leadership team, competitive setting, customer qualities, marketing efforts, and supplier relationships for the Redbox and the Coinstar segments are presented. Financial records are also included, so that an assessment of the company’s performance and capital structure can be conducted. Review Coinstar’s two primary businesses, comparing and contrasting the divisions along strategic and performance dimensions. Define success determinants for each of the company’s two core business segments. What does an analysis of Coinstar’s financial results reveal about the company’s operations and the performance of the organization? What factors will contribute to the company’s decision to modify its capital structure? What role does diversification play in Coinstar’s business strategy? ANALYSIS Review Coinstar’s two primary businesses, comparing and contrasting the divisions along strategic and performance dimensions. Coinstar is currently committed to two core kiosk-type businesses: its Redbox DVD rental division and its coin-counting division. These two important business groups are compared along several strategic and performance dimensions below. REDBOX COINSTAR Business Origin Joint venture with McDonald’s Brainchild of company founder Market Profile THE local video store Popular, fun, fast, easy Low profile and brand awareness Competitive Advantage Affordability, convenience, simplicity, customer loyalty Patented coin-counting machine technology Scope 31,000 locations – US 18,900 locations – US, Canada, UK, Ireland 1 Coinstar
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Coinstar: A Sleeping Giant Awakens Locations Grocers, mass merchandise retailers, drugstores, restaurants, and convenience stores Supermarkets, other retail locations, and 400 (or 2%) located in bank lobbies Partner Benefits Receive percentage of sales Receive share of kiosk revenue Increased spending at their store cont. REDBOX COINSTAR 10 patents: security and inventory management 90 patents: machine networking, fraud prevention, and voucher authentication Revenue Pattern Revenue growth Seasonal variation Steady source of revenue Unexpected dip during recession Market Potential Physical DVD sales expected to drop $4 billion over the next 5 years due to technology advances (speed and storage) and portal variety; each kiosk generates ~$50,000/year Of $144 billion in annual coin flow, $7 billion is estimated to be idle; the average customer handles $600 in
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