Operations Management Principles Essay

Submitted By overforty
Words: 2595
Pages: 11

Abstract: This paper will present a white paper document for the XYZ Venture Capital Group advising where they might make a significant investment. The XYZ Venture Capital Group has no particular preference between a service and manufacturing profit group. ABC Consulting Group has decided to focus this white paper on the home movie – rental industry. The two companies highlighted in this industry are Knology Cable and Netflix.

Home Movie and Rental Industry
ABC Consulting Group will advise XYZ Venture Capital Group to invest in the Home Movie – Rental Industry. The Home Movie Rental industry first made its debut in the mid to late 80’s when the prices of VCR’S began to decline. Between the years of 1984 and 87 was the booming period. At this point stores of all kind started its on section solely dedicated to movie home movie rentals along with VCR sells. However by the 90’s as quickly as video renting business started to grow they started to decline.
Technology changes and progress every day because of this fact VHS has virtually become obsolete due to DVD’s. Movie rental stores are being pushed out of business because of VOD (Video on Demand) and pay per view rentals offered by cable companies and Netflix that offers DVD and Blu Ray rentals by mail order or streaming for small monthly fee with no late charges. VOD allows the consumer to rent digitally transmitted movies for 2 to 3 days, as well as to view training videos from the comfort of home through their cable network. Then you have movies rentals by mail order and streaming movies online with no late fees attached offered by Netflix.
Knology Cable Inc.:
Knology was recently purchased by WOW (WideOpenWest) for 1.5 billion for which now expands North West and not PRIMARILY in the South East where the home of Knology is located in West Point, GA based Overbuilder. Knology was first founded in 1995 and since been the leader in the services it provides to its customers (AVISTA 4/12). These two entities working together will now have a combined customer base of more than 800,000 and reaching close to 3 million homes between 13 states. This move has made Knology and WOW the 13th largest video and movie distributor among cable providers. WOW operates and provides movies on demand and 2 day rentals from the comfort of home in Michigan, Ohio, Indiana and Illinois while Knology service the South East.
WOW and Knology will operate together as one family welcoming the Knology staff into the WOW family (Farrell Jul 17 2012). Stealth is excited to have had the pleasure of working with Knology Residential cable provider for over four years. During this time Knology’s as a whole market shares has grown. Under the terms of the contractual documents, WOW has agreed to acquire the outstanding shares of Knology for $19.75 per share in cash, representing a premium of approximately 34% over Knology's average closing share price during the 3-month period prior to media reports on Knology’s sales process (Farrell Jul 17 2012).
Knology gross profits grown close to 132 million in 2011 by the second half of the year in profit, this is a growth of close to 17 percent from 2010. The take away profit increased to almost 14 and half million proving to be an 85% year-over-year growth (CED staff 8/11). Knology’s profits over the past five years estimations are as follows: gross margin toped at 70 percent and average 69 percent. Operations margin topped at 16 percent and average 11 percent. Take away margin topped off at almost 9.5 percent and averaged a minus 1.4%. According to the stats the margin averages surpass past averages and Knology appears to be successful and doing well (Jayson 6/12).
Netflix was founded in 1997 by Marc Randolph and Reed Hastings, with its headquarters in Los Gatos, California. The company is a web based business and was founded on the premise of no late fees and unlimited movie rentals based on a monthly