IMAX’s business level strategy Essay

1. Discuss IMAXs vexation level system to date and proposed changes. (10 points) masterducts divergentiationThe vast stage movie system gives customers unique ocular and audio movie soak uping give that backsidenot be found in conventional movie theaters. IMAX is also narrowd by its library of films and locations. IMAX located itself in institutional environment and mercantile multiplexes to target wider hearings let in family, students, and tourists at different time during the day by check its own movies and new(prenominal) studios movies. Speaking of the technologies, IMAX films printed on larger films, which require special designed camera, projector, and screen to display the IMAX features.Cost leadership.The beau monde heavily invests monetary and human resources in their R&D, because the technologies developed would lower the costs of producing and distributing films significantly. The newer service agreements and partnership with theater owners seize IMAX l ower its capital requirements when new IMAX screens were opened in the traditional multiplexes. IMAX not more(prenominal) than thanover saves money on films making because they dont crap to deport a lots of money to the major stars as the Hollywood does, but also save money on the marketing. IMAX increased the number of Hollywood movies in commit to ride on the coat- tails of marketing campaigns launched by the studios.The proposed expanding strategies will bring more audience to IMAX, and save more production and distribution costs. By opening new IMAX screen in commercial-grade multiplexes will give customers easy access to IMAX movie, and in allow IMAX gain more market sh ar, and increase concussion ticket tax income. Although the initial system installation and movie converting costs are macro, over long landmark IMAX can achieve economies of scale by utilizing the IMAX system installed in traditional theaters.2. Conduct an external analysis. (25 points)a). PESTEL good examplePolitical factorsConcerns about violence, sex, and vulgar language in movies had generated considerable efforts to organize and lobby political movement to regulate the industry. There are some limit in terms on selection of movies. ratified factorsCopyright law protects this industry suffering from piracy. Violations of copyright act were considered felonies and were subject to federal criminal charges and civic lawsuits. Patent law also protects the technologies heavily used in this industry.Economic factorsThe economy is fairly durable except the crisis that hit the industry in the late 1990s because of the overbuilding during that decade, the 911 crisis in the early 2000s and the economic inlet in 2008. The economic crisis in 2001 and 2008 would reduce batchs disposable income therefrom reduce the receipts of the industry.Socio-culturalIMAX is trendy. It does not matter that if people have seen movies in the traditional theater before, some of them would like t o watch on IMAX screen again. Parents looking for activities combine education and entertainment would go to IMAX. More highly amend parents and overscheduled kids would like to go to places equipped with IMAX system. The college and university education are popularized which increases the absolute majority of IMAX audiences.Technology factorNew motion-picture photography technology development are encouraged and supported by funds, associations and Oscar Award. But the development of high-definition DVD recording, big screen TVs and cheaper projection and sound system technology offers potential IMAX viewers alternative sources of entertainment. The internet, live play, TV programs and cables are also substituting technologies.b). Porters Five ForcesIMAX operating in three industries photographic equipment and supplies industry, motion and picture and video production and distribution industry. Barriers to entryThis industry requires upfront investments to develop technologies, birth with producer and access to the distribution channels. IMAX held 46 patents and has seven patents pending in the United States, in order to enter this industry, potential enemys must develop their substitute technologies, or take the risks of copying IMAXs patent technologies, andboth are very costly.IMAX is achieving economies of scale, the more movies released in IMAX format, the more the IMAX system installed are utilized. IMAX is also update their technologies and making improvement to lower the costs of operations, therefore the learning curve cost advantages act as a barrier to entry. The barrier to enter this industry is high.Threats of substitutesLive plays, sport events, TV programs (big screen TV, cable, and satellite), the internet, DVD, nursing home theater projection and sound system are all alternatives of IMAX movie for consumers to entertain themselves in a different way. These substitutes also prevent IMAX from raising the ticket price. The threats of subst itutes are high.SuppliersThe suppliers are vendors who provide the critical elements relate in IMAXs projectors and camera systems, film making talents (actors, post-production workers), other studios (Hollywood, Disney, SKG DreamWorks etc.), and movie distributers (theater chain). The suppliers power is low because by relinquish movies in IMAX format and opening more IMAX screens will increase the box office revenue for all the parties involved. IMAX does not pay top stars to make movies. They pay the actors whose median salary is $17 per hour. IMAX has virtually its post-production work done by its wholly-owned subsidiary. IMAX purchases its equipment components from vendors with whom it maintained long-term relationships.BuyersBuyers are people who are willing to pay for the IMAX movie tickets, and theater chain has IMAX systems installed in their theaters. IMAX doesnt rely on certain type of vendees. The buyer range is very wide, and from different demographic. They are not likely to be price sensitive because the majority IMAX audience with average household income of more than $70000. The product offered by IMAX is much differentiated, and buyers cannot get the same honoring experience anywhere else. Overall, the buyers power is low.RivalryThe rivalry is low because IMAX was founded as the only company in the world that was involved in all aspects of large format films. IMAX doesnt havedirect competitor in this industry. Even though some of the moviegoer may choose the traditional theater sooner of watching IMAX, to the highest degree the IMAX audience are willing to pay extra $3 to $5 to experience the unique IMAX features and some of them already watched the same movie in the traditional theater before. Additionally, only IMAX movies have long lifespans in the theater circuit. In conclusion, I think this industry is take inive.c). Key opportunities and threatsOpportunities Large format film industry is emerging industry, and this industry is d riven by technological innovations, changes in demand, and customer needs. IMAX can utilize the introductory-movers advantages. IMAX has the technological leadership, and also obtains the patent protections that enhance their performance. IMAX has the opportunities to tie up the strategically valuable resources, which are the relationships with independent filmmakers, and distribution channel such as theater chains, so that it can success in this industry Threats IMAX is a relatively small firm compared to a rival studio, so they might be bought, and operates a part of another company. IMAX is not able to maintain their brand check if so many a(prenominal) Hollywood movies released in IMAX format.3. VRIO (25 points)ValuableRareInimitableOrganized warring implicationsTechnological leadershipYesYesYesYessustainable competitive advantageLocationsYesYesNoYesTemporary competitive advantageRelationships with other studios and theatersYesNoNoYesCompetitive parityBrand imageYesYesYesYes Sustainable competitive advantageCash flowNoNoNoYesCompetitive disadvantageThe technologies allow IMAX display the large format film features on whale screen to attract customers. Because of the patent protection, it is rare and hard to copy. IMAX invested in their R&D, and received grants and award from trey parties, so it is organized. By locating itself in institutional environment, IMAX creates a unique brand and attract different group of audience, so it is valuable. It is rare because not so many entertaining facilities opened in this environment. This system is not hard to imitate. It is organized because some of the IMAX films were educational and entertaining, and involved documentaries of natural and scientific wonders, so it valid to have IMAX in these locations. Convert other studios movies into IMAX format increase the IMAX ticket revenue, so it is valuable. The alliance with other filmmakers also saving IMAXs marketing expenditure. It is not rare because the Hollywo od movies also released on DVD, pay-per-viewformat. sight can also watch movies on TV and internet. It is not costly to imitate. It is organized because not all the Hollywood movies are released in IMAX format, it must be carefully chosen. The brand image is valuable because the large films features and unique watching experience are only associated with this brand name. It is rare because this product can only be provided by IMAX. It is hard to copy because this brand image is developed over long time, and IMAX has the first mover advantage. The company R&D and new services are supporting this brand image in terms of innovation and cost saving, so it is organized. The cash flow is not valuable because this company has negative net income for 2006 and 2007. The fact that IMAXs debt has been downgraded is an indication that the companys liquidity is questionable. It is organized because IMAX is hard to solve this problem by sign new service agreement, which would lower its operatio nal capital requirements and assist it pay off its debt.More box office revenue is expected by converting more commercial movies into IMAX format. 4. Based on your analysis, would you recommend proceeding with and expanding the strategy to exhibit Hollywood movies? Should the firm retrench? (20 points) Pro Hollywood movies are the most popular movies in the world, by releasing more Hollywood movies in IMAX format, more audience will be attracted by the combination of the movie and unique watching experience. This is the quick way to make revenue in order to improve the companys financial situation. This strategy also allows IMAX to take advantage of marketing campaigns launched by the studios therefore to save the marketing expenses. Because Hollywood movies has the most market shares, and this high demand will stimulate the theater owners to open more IMAX screens. It gives IMAX the opportunity to attract more viewers and expand the core audience. IMAX can make more revenue by si gning more service agreements with traditional theaters, and make profits by maintaining the system and sharing ticket revenue.If IMAX is releasing more Hollywood movies, share price is likely to go up, and create more value for shareholders. The more confident the stakeholders are, the easier for IMAX to raise capital to focus on technology R&D and further differentiate its products. The digital re-mastering technology reduced converting costs. Converting other studios movie is now making more profits and cost less. Con Screening re-formatted movie is not as profitable as screening IMAX own movies, and makes IMAX takethe risk of diluting its brand image. Releasing more Hollywood movies may let people question IMAXs educational function. The violence and sex contents in Hollywood movie may drive parents and their children away. Screening more Hollywood movies will benefit IMAX. It increases the revenue and the number of audience therefore I recommend proceeding with and expanding th e strategy to exhibit Hollywood movies.In long term, because IMAX has all these expectant technologies, and more stable financial supports, they should focus on developing its own movies. IMAX also should launch more marketing campaigns to promote its movies in order to maintain the brand image, and place more emphasis on its educational and entertaining functions. IMAX may develop some sub brands for example like, Smart Imax Kids, or learnedness with Imax which only located at institutional environments and integrate with the ride simulation packages to target specific demographics. This action at law will strengthen IMAX brand image and make the young generations and potential Hollywood moviegoers like these brands and become real IMAX fans when they grow up.