Redbox
Management Policy
November 19, 2012
Red Box
Red Box is the industry leader in DVD rental kiosks. It has established itself as an inexpensive and convenient method for customers to rent DVDs. Although Red Box is a cost leader in its segment, it is threatened by the slow but impending disappearance of the DVD format.
Threat of New Entrants RedBox has a cost performance advantage over possible new entrants since it is owned by a publicly traded company and already has an established distribution channel relationship. RedBox has an advantage over new entrants in that it already has a well-known brand image amongst movie viewers. People often say “why don’t you go just rent it from RedBox” during conversations. However, consumers can readily switch over to Blockbuster or cable pay-per-services.
Porter’s Five Forces I. Bargaining Power of Buyers
The bargaining power of buyers is high since it is extremely easy and inexpensive for the consumers switch viewing mediums. II. Threat of Substitutes
The thread of substitutes is high due to competitors such as Netflix, Blockbuster, cable and satellite T.V. companies. III. Bargaining Power of Suppliers
The bargaining power of suppliers is high since there are only a handful of movie studios that are able to supply the DVDs. Movie studios can limit the quantity, as well as increase the price and royalty payments of DVDs. Other wholesalers can also increase the price and limit the supply of DVDs. IV. Intensity of Rivalry among Existing Competitors
The intensity among existing competitors is fierce since Blockbuster has the ability to install more rental kiosks at existing stores and sign new contracts with existing retailers. Customers can buy new movies for $5 at retailers such as Walmart or get them shipped to their homes from retailers such as Amazon. V. The Threat of Substitutes
The threat of substitutes is high. A motion picture DVD is difficult to duplicate unless it is burned illegally. However,
November 19, 2012
Red Box
Red Box is the industry leader in DVD rental kiosks. It has established itself as an inexpensive and convenient method for customers to rent DVDs. Although Red Box is a cost leader in its segment, it is threatened by the slow but impending disappearance of the DVD format.
Threat of New Entrants RedBox has a cost performance advantage over possible new entrants since it is owned by a publicly traded company and already has an established distribution channel relationship. RedBox has an advantage over new entrants in that it already has a well-known brand image amongst movie viewers. People often say “why don’t you go just rent it from RedBox” during conversations. However, consumers can readily switch over to Blockbuster or cable pay-per-services.
Porter’s Five Forces I. Bargaining Power of Buyers
The bargaining power of buyers is high since it is extremely easy and inexpensive for the consumers switch viewing mediums. II. Threat of Substitutes
The thread of substitutes is high due to competitors such as Netflix, Blockbuster, cable and satellite T.V. companies. III. Bargaining Power of Suppliers
The bargaining power of suppliers is high since there are only a handful of movie studios that are able to supply the DVDs. Movie studios can limit the quantity, as well as increase the price and royalty payments of DVDs. Other wholesalers can also increase the price and limit the supply of DVDs. IV. Intensity of Rivalry among Existing Competitors
The intensity among existing competitors is fierce since Blockbuster has the ability to install more rental kiosks at existing stores and sign new contracts with existing retailers. Customers can buy new movies for $5 at retailers such as Walmart or get them shipped to their homes from retailers such as Amazon. V. The Threat of Substitutes
The threat of substitutes is high. A motion picture DVD is difficult to duplicate unless it is burned illegally. However,