Chinese Economy

Five Competitive Forces Low cost of entry means increasing competition Consumers can have multiple relationships with sellers Main competitors are online subscription services, internet movie and TV content providers, DVD rental outlets, kiosk services and entertainment video retailers Big competitors like Blockbuster Rival Sellers Suppliers are likely to increase costs as the industries profits increase, but the volume of movies sold can offset the increase Suppliers tend to want to sell their product to all of the companies in the market to maximize their revenue. This reduces competition for supply and therefore prevents supplier power from being very high Suppliers will make new content more expensive or may initially limit licensing agreements to avoid "cannibalizing" their own product, which can make new content harder to acquire. In this industry vendors have the potential to achieve a significant advantage by forming strategic alliances with movie studios, distributors and parent companies. Suppliers Because movies and TV episodes are commodities, no matter who sells them they will be the same. However pirating files of movies and other content from internet sources via the use of illegal file sharing software can be regarded as a substitute threat as the substitute product is a less expensive or free copy of the media file Substitute Products Lower entry costs mean that more competitors can enter the movie rental markets However there are dominating players in the market already (Blockbuster, Netflix). The strength and market share that these competitors already have make it difficult for new entrants to succeed. Potential New Entrants Buyers have the power to choose the best priced/best quality vendor as movies and TV episodes are commodities. Buyers can have more than one relationship with a vendor Companies have to compete on price and quality in order to attract customers Switching costs are low or non-existent There is a large customer base Buyers Driving Forces Continuous advancements in technologies, primarily the internet, mean that movie rental companies have moved towards an online format (e.g. Netflix, BlockBuster Online) Other technologies like computers, smart phones and internet connected TV's mean that you can watch movies anywhere and anytime. Technology It's more convenient to log on to a home computer (or an alternative compatible device) and stream or download a movie then it is to visit a bricks and mortar video store. Therefore increasing the popularity of web-based interfaces like Netflix. Convenience The cost of streaming/downloading a movie or TV episode is generally much cheaper than renting a physical copy. Subscription packages offer good value for money ($8.99 for unlimited streaming and one DVD out compared to DVD rental from traditional video store ranging between $3-$4) Netflix has no late fees Cost Position In Market Large and updated selection of movie titles Strong advertising and market coverage Customer convenience Fast and easy to use software Overall low cost Efficient and widely accessible methods of delivery and distribution Key Success Factors The current strategy of Netflix: Achieve a consistent growth of subscribers through generating positive word of mouth and investing in effective marketing strategies Consistent growth of revenue Offering a wide ranging and constantly updated title selection Achieving high levels of customer satisfaction Giving subscribers a choice of either streaming content or quickly delivered DVD's by post Making their service convenient and easy to use through advanced and unique software. Current strategy Offer a range of subscription packages ranging from $4.99 a month to $47.99 a month Deliver a quality service; extensive library, available on lots of devices, "cinematch"