Company Analysis
Business Strategies
Cineplex is one of Canada’s leading entertainment companies that operates numerous businesses that include food service, amusement gaming, alternative programming, Cineplex Media, and online sale of home entertainment through their online store (Cineplex, 2016).Cineplex serves approximately 77 million guests per year (Cineplex, 2016). As of September 30, 2015, Cineplex owned, leased, or had a joint venture interest in 1,652 and 162 theaters (Cineplex, 2015). Cineplex circuit is concentrated in mid-sized markets and metropolitan areas (Cineplex, 2015). Cineplex business strategy for future growth includes the following:
Expanding and enhancing the existing infrastructure and service offering with a view of attracting new customers and increasing the revenue per customer (Cineplex, 2016). The new infrastructure and service offering will greatly improve the customer experience. This will include building kids play areas, snack bar for customers, and other entertainment spots.
Exploit their core media strength to provide sustained growth by building upon the extensive network (Cineplex, 2016).
Increase the penetration of amusement gaming and related leisure concepts, including The Rec Room, by expanding the current infrastructure and capabilities (Cineplex, 2016).
Explore additional avenues of providing entertainment to Canadians, at-home, in-theater, and on-the-go (Cineplex, 2016).
Make selective acquisitions and diversifications that will improve Cineplex core strengths (Cineplex, 2016).
Implications
The key elements of their strategy require Cineplex to go beyond movies to serve their customers in new ways and maximize the revenue earned per customer (Cineplex, 2015). Cineplex has already rolled out in-theater initiatives to enhance the entertainment experience, including increased premium offerings, enhanced in-theater services, alternative pricing strategies, improvement of the. SCENE loyalty program, optimizing product offerings, and improving service execution (Cineplex, 2015).
Cineplex efforts to diversify its revenue streams imply that Cineplex has to improve the revenue earned from pre-show, digital out of home advertising, and showtime sales through Cineplex Media as well as expand further digital signage installations, advertising sales and network support though Cineplex Digital Media (Cineplex, 2015).
SWOT Analysis
Strengths
Cineplex has the following strengths in their business:
Sood (2015) notes some of the Cineplex strengths to include the following:
Excellent service to its patrons, Cineplex prides itself in giving its customer a rich customer experience that will make new customers repeat customers and increase the revenue per customer.
Cineplex has more than 162 theaters and over 1,652 screens giving it a large audience and a massive network of earning revenue. Having such a big network gives an advantage to Cineplex commanding almost 70% market share.
Cineplex has the largest exhibition of 3D and IMAX projections giving Cineplex a competitive advantage over its competitors (Sood, 2015).
The seating arrangements in the theaters are comfortable and can be customized to fit the needs of various customers (Sood, 2015).
Weaknesses
Cineplex suffers the following weaknesses in their business:
High set up costs, setting up a theater is expensive and may constrain the ability of Cineplex to expand rapidly to capture emerging markets or new locations.
As much as Cineplex is trying to diversify its revenue sources, it is still highly dependent on revenue from film and film performance (Cineplex, 2015). Being highly dependent on the film revenue would make Cineplex earnings susceptible to the release in movies and blockbusters.
Low levels of customer loyalty, moviegoers are largely not brand conscious and choose a theater that is convenient based on location, showtime, and the theaters amenities (Cineplex, 2015). This means that Cineplex has to constantly keep innovating their value proposition to their customers.
Cineplex reliance on single suppliers for the supply of beverages and popcorns would leave Cineplex business at a loss in case the relationships with the suppliers would change adversely (Cineplex, 2015). Cineplex may need to explore the possibility of having other supplier just in case the supplier may experience failure. This would protect Cineplex business from being adversely disrupted due to failure in supplier performance.
Cineplex products are leisure products that have to compete for the customer’s leisure time and disposable income (Cineplex, 2015). In case of economic downturns, Cineplex would face a significant decline in demand.
Opportunities
Some of the opportunities Cineplex can exploit include:
Loyalty programs such as the SCENE can increase customer loyalty as well as the revenue per customer.
Changes in customer trends in favor of moving attendance indicate that the movie market is growing.
Increasing disposable income indicates that there will be an increase in the demand of movies.
Threats
The main threats facing Cineplex are as follows:
Too much competition, Cineplex is facing cut throat competition from other alternative medium such as DVDs, VCDs, internet channels such as YouTube and Netflix.
Cineplex success is tied to the availability of high quality and appealing films, in case there is a decline in the quality of the films released, Cineplex could incur significant losses. In 2014, seven of the major film distributors contributed 93% of Cineplex box office revenue.
Implications
Cineplex enjoys considerable strengths that give it a competitive advantage in the marketplace. A key weakness that raises concern is that Cineplex is highly dependent on film revenue. There is a need for Cineplex to urgently address this particular weakness by identifying and growing other revenue sources. There are opportunities that Cineplex should exploit to increase revenue and profitability. Noteworthy is the SCENE loyalty program that has improved attendance and purchase incidence (Cineplex, 2015). Cineplex will need to explore new ways of serving customers in order to neutralize the threats posed by alternative medium. However, Cineplex is not in a position to dilute the threat of lack of high quality films, as they are not in control of the quality and the timings of movie releases.
Value Chain analysis
Film industry players can participate in four different activities in the value chain, i.e. production, distribution, exhibition, and consumption (Eliashberg &Elberse, 2005). In the value chain, Cineplex is involved in exhibiting and consumption of the films through its theaters and shops where it sells DVDs to consumers.
Primary activities
Operations - Cineplex carries on its business by providing high quality entertainment in over 162 theaters and 1,652 screens. Cineplex has three main revenue streams namely: Box office, Food service and Media revenue. Box office revenue accounts for approximately 56% of the total revenue.
Marketing and sales – Cineplex markets its products and services primarily through advertising through its network and through the use of film distributors. Cineplex also sells advertising through third party networks (Cineplex, 2015). Cineplex airs movie trailers that elicit interest among movie fans to buy tickets and attend the shows.
Service – Cineplex aim of providing excellent customer service by hiring friendly staff, providing various amenities at the movie theaters, and offering their customers high quality entertainment. Cineplex monitors customer satisfaction through customer surveys, focus groups, and mystery shoppers (Cineplex, 2015). The employees also undergo a rigorous training and are expected to adhere to the company’s code of conduct in discharge of their duties.
Outbound logistics – Cineplex relies on third parties to ship the hard products customers purchase from their Cineplex store of Blu-ray discs and DVDs (Cineplex, 2015).
Supporting activities
Procurement – Cineplex procures its movies from the film distributors who undertake the development and financing of the movies (Eliashberg &Elberse, 2005). For food and beverages, Cineplex has entered into arrangements with suppliers.
Human resource management – Cineplex employs approximately 11,000 people to support its business activities (Cineplex, 2015). Cineplex provides long-term incentives in order to motivate and retain its employees (Cineplex, 2015).
Technological development – Cineplex is continually upgrading its information systems to satisfy the business needs.
Infrastructure – Cineplex has a theater circuit that is concentrated in the mid-sized markets and major metropolitan areas the theater provides Cineplex with a critical advantage over its competitors covering approximately 70% of the market share (Cineplex, 2015).
Reference list
Cineplex Inc. 2015 Third Quarter Report. Retrieved March 7, 2016, from
http://irfiles.cineplex.com/reportsandfilings/annuallyquarterlyreports/2015/Q3-2015-Report.pdf
Cineplex. (2016). Investors | Corporate Strategy. Retrieved March 07, 2016, from
http://ir.cineplex.com/aboutus/CorporateStrategy
Cineplex. (2016). Investors | About Us. Retrieved March 07, 2016, from
http://ir.cineplex.com/aboutus
Eliashberg, J., & Elberse, A. (2005). T he motion picture industry: critical issue s in practice,
current research & new research direction. Harvard Business Review. Retrieved March 7, 2016, from http://www.hbs.edu/faculty/publication files/05-059.pdf
Sood, R. (2015, May 25). Case study on the Cineplex Entertainment. Retrieved March 07, 2016,
