IMGT2400 Ch1 Exc1 Dusty Knox by nMYFuu3

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Dusty L. Knox

IMGT 2400

Ms. Kayser

2012 January 26



    Chapter 1: Exercise 1 – Using Porter to Evaluate the Move Rental Industry

                                         Threat of New
                                           Entrants



             Bargaining Power              Rivalry among             Bargaining Power
               of Suppliers             Existing Competitors            of Buyers


                                                                                          Michael
                                                                                        Porter’s Five
                                       Threat of Substitute                             Forces Model
                                       Products or Services




       Entering into the movie rental business is risky. New technology and increased internet

speeds have introduced a competitive new market leaving many movie rental stores out of

business. Buying power is low and so is supplier power. An individual or organization wishing

to enter this market should do careful research and determine a product line and strategy that will

attract customers.

       There has been a shift from consumers going down to their local video store to

downloading on-line a movie rental. Increased internet speeds and satellite services make it fast

and convenient to get most any movie you want with the touch of a button without ever having to

leave your house for less than what it would cost in fuel to drive to a video store. We have

witnessed several video stores in our own community going out of business. A new business

would need to invest in technology that would make it possible to supply to a culture that has
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shifted to a demand of instant gratification and zero tolerance. Any problems in your system or

supply and your customers will simply go to the next best competitor who is just a click away.

       As a new business looking to enter the movie rental business you will find that both

buying power and supplier power are low. Competition is high giving consumers many options

as they rapidly make the change to on-line rentals. According to a December 2011 market report

by IBIS World (http://www.ibisworld.com/industry/default.aspx?indid=1370, 25 Jan 2012) many

of these competitors have exclusive agreements with industry suppliers for movie distribution

making it difficult for a new business to enter the market. With so many options out there, such

as Amazon, Blockbuster, Hulu, iTunes, Netflix, Redbox, DishNet, DirectTV and Best Buy’s

CinemaNow.com to name a few, suppliers have a wide variety of existing options for movie

rentals that they can watch on their televisions, computers, tablets, game boxes or even their

phones. Many of these existing businesses already have an existing infrastructure and resources

that enable them to take advantage of changing technology to be on the leading edge of supply as

they compete with each other to stay at the top of the market. Most of them also have a loyalty

program of some sort to retain supplier power.

       Entering into this business could be risky. A startup business would need to develop

relationships with suppliers and build a strategy that would be inviting to consumers to increase

their supplier power. The positive side is that the cost of technology is rapidly decreasing and

with no physical inventory or shipping costs your product costs could also be low. A startup

business could take advantage of consumers who are frustrated by the required memberships and

monthly fees of competition by offering a commitment free service that is simple and easy to

use. Advertising on the internet reaches so many people that you could acquire a market share of

business and be profitable. With the right strategy and investment an individual or organization

could be successful, but they will need to do the proper research first.

								
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