This paper will analyze the five competitive forces in the movie theater industry and the level of competition that can be anticipated amongst the industry rivals. This paper will then describe the advantages and disadvantages of each of the top four competitors’ situations and strategic approaches. Next, this paper will describe the financial considerations that affect the profitability of major movie theater businesses. Then this paper will describe what strategic options are feasible given the situation facing industry participants. Finally, this paper will describe what recommendations will improve success in the market.
Keywords: Five Forces of Competition Model, competitors, strategic approach
Introduction The motion picture industry has been an outlet for many people, providing an escape from the daily hardships they endure. During the Great Depression in the United States (U.S.), “…nearly 60 percent of the nation attended at least one film a week” (Schultz, 2012, p. 392). Like during the Depression, today people look for ways to escape and bring enjoyment to their lives when experiencing difficult economic times. This is especially true for a family who cannot afford to take their children to an amusement park that may cost over one hundred dollars per ticket. Going to the movies offers entertainment at a low cost.
Another reason people enjoy going to the movies are all the lights and sounds that go with seeing a film on the big screen. Many people get lonely or bored at home and the movie theater offers creates a social setting that everyone can enjoy. Teenagers enjoy movie theaters because they can go in groups or take a date. No matter the time of year a movie theater is available for everyone to enjoy.
The movie theater business has had its ups and downs throughout the years. The number of large theaters is growing and small theaters are closing down. There are many speculations why this occurring when revenue is up in the movie industry. Next, we will look into the competition in the movie theater business and its impact on the industry.
Five Competitive Forces And The Level Of Competition Anticipated Amongst Industry Rivals Each of the five forces of competition help companies identify current and future competition, identify the strengths of these companies, and help determine if competitors might take away from the firm’s strategic advantage. The five forces of competition are the threats posed by new entrants, the power of suppliers and the power of buyers, product substitutes, and the intensity of rivalry among competitors.
The first of the five competitive forces is the threat of new entrants, which is the potential for new companies to enter an industry. Identifying new threats before they enter the market is difficult, and industry market leaders prevent new entrants by either creating entry barriers that, “…make it difficult for new firms to enter an industry and often place them at a competitive disadvantage even when do enter” or by retaliating against market newcomers (Hitt et al., 2011, p. 52). In the motion picture industry many single screen theaters are closing down making way for multiplexes or megaplexes that have the ability to show a wide variety of movies on numerous screens simultaneously. The threat of new entrants to the market is low, but current business owners must watch for signs of new companies replacing or renovating movie theaters, especially smaller theaters. Smaller movie theaters will face hardships when trying to compete with larger theaters that offer more choices and options to their patrons. The bargaining power of suppliers is the second of the five forces of competition. “Increasing prices and reducing the quality of their products are potential means suppliers use to exert power over firms competing within an industry” (Hitt et al., 2011, p. 55). When movie producers