Video Rental Chain
Video Rental Chain
Industry
Video rental industry has experienced a swift decline in past few years as technology has slowly been replacing the in-store rentals through online downloads as well as purchases. Also, competition experienced from subtitles like cable television together with internet rentals continue to affect video rental chain operators adversely as they try to maintain their relevancy in the transforming market. Therefore, to remain relevant in the industry, there is a need for video rental chains to start offering other services linked to the industry. Market share concentration has declined considerably over the six years with many players in the industry running bankrupt.
The industry products include video game rental, prerecorded video retail, media retail sales, and other merchandise sales. Competition in this field has lessened as many firms have pulled out of video rental retail industry. Profits increased to a point where operators earned satisfactory returns on the invested capital through product sale. However, with the rise of DVD in the market, video rentals, as well as VCR machines, came to a halt (Wilson & Keers, 2012).
Competence
Many firms in the industry focus on their core competencies. An example of such a firm is Redbox. Video rental chain will require having an appearance that is low priced and strong strategic partnerships that will assist in driving high rental volumes to succeed in the video rental market. There is an existing threat from firms already in the market, and mainly stiff competition is from those companies in the online streaming industry for instance Netflix and Hulu (Augustine, Austin, Carson & Long, 2016). The industry is trending away from physical media at a faster rate towards content streaming. Therefore, the firm is going to enjoy growth if it adjusts to the decline of physical media as time passes.
Market segment
The major market segment for this industry are households but mainly those who are aged 55 years and below. This is because of necessity to buy DVDs or Blu-ray compatible equipment. Other problems encountered are connecting as well as operating these systems. Some have multiple controls which many old people shy from. As a result, to higher rates of household penetration, with many units of video cassette players and functional DVD players, and the increase of need for Blu-ray compatible equipment, many households provide a market for video rental services. Thus, video rental stores have become attractive to younger people and families including young adults and teenagers.
Vertical
Vertical contracts can amplify efficiency improvements in the video rental industry. This is possible through revenue sharing under a feasible contractual plan between both downstream and upstream firms. The vertical contracts entered between a downstream retailer, and an upstream manufacturer will offer more flexibility when it comes to coordination of supply decisions than in simple linear pricing. Moreover, the linear pricing contracts are going to remain available to video rental retailers even after the introduction of contracts that foster resource sharing (MORTIMER, 2008). The retailers also will choose their preferred contract every time a new title is availed in the market.
Geographical
All rental stores compete on rental prices. Some firms started by offering improved customer services as well as product diversity to retain and attract more customers. These initiatives have also been promoted via advertisements, holding customer competitions, and offering some striking deals to loyal clients. However, large video rental franchises have attempted not only to compete on price alone but also to select competitive geographical locations that provide ample space for bigger stores and which are easily accessible by customers.
References
Augustine, C., Austin, C., Carson, B., & Long, J. (2016). Redbox: Strategy in the Sunset of Physical Media. Thunderbird.edu. Retrieved 8 April 2016, from http://www.thunderbird.edu/blog/faculty/washburn/2011/12/18/redbox
MORTIMER, J. (2008). Vertical Contracts in the Video Rental Industry. Review of Economic Studies, 75(1), 165-199. http://dx.doi.org/10.1111/j.1467-937x.2007.00462.x
Wilson, C., & Keers, B. (2012). Financial management. Sydney: Prentice Hall.
