Video Concepts The Video Rental Industry example essay topic

To: Ms. Sarah Hills From: Johnny Cobb Subject: Video Concepts The video rental industry today has reached a mature plateau level in the product life cycle. This makes the market hard to enter based on low profitability, high competition, and little opportunity to expand. Substitute products are being offered through Telecommunication companies using fiber optic technology offering in-home viewing of movies on a pay-per-view basis. With this type of long-term threat to the video rental industry, companies will have to enhance their strategic plans in order to sustain a competitive advantage. The opportunities in this industry are limited for a small start up company that has low funding and a high risk factor. Large companies like Blockbuster can afford to take risks and can survive the dry spells of the off peak season through financial funding from the corporation.

In order to take the opportunities that become available in this industry, the company must have the money to invest in the technology and marketing that will enable them to stay ahead or level with top competition. Blockbuster is the largest video retailer in the country and will continue to grow based on superior service that small competitors will not be able to finance. For example, Blockbuster is able to build larger stores with a greater video selection, obtain purchase power through buying in bulk at a low cost, and having an advertising budget that most small firms will not be able to compete with. The services offered by Blockbuster along with the convenient make up of the stores, allows them to be able to continue to crush competition and gain more and more of the market share nation wide.

There are many threats to the future of Video Concepts', but there are some strengths that they still possess. Video Concepts has incorporated in its strategic plan some services that differentiate the company from both the small and large competitors. The services include an individual reminder of a free rental, buy-one-get-one free night, movie reservations, and the most unique service is a home delivery option. Video Concepts also offers the lowest price in town on their one night rentals as opposed to Blockbuster's more expensive two night rentals making it seem less costly to the consumer. Weakness that Video Concepts possess will eventually drive them out of the industry. Starting with the marketing promotions that was used to try to stay competitive hurt the company financially instead.

While they maintained current revenue level, it resulted in a lower profitability. Before the arrival of Blockbuster, Video Concepts successfully beat out most of its local competition by its aggressive expansion and rising market share. With competition rising and larger companies expanding into the smaller towns, the pricing strategy, quality service, and good selection of new releases that Video Concepts has used in the past will not be enough to stay competitive in this industry. Video Concepts is not a wise company to buy knowing the aggressive competition, accelerated pace in technology, and the capitol that is required for start up. However, if you still want to pursue this challenge there are some opportunities that you will have to take advantage of. First, you must concentrate your efforts on driving out other small video retailers in the area.

Next, you must increase the price on new release videos and extend the amount of time the video can be checked out. This will effect your stock but you must buy more videos in order to rent more. Promotion spending will also have to be cut back, let Blockbuster advertise the new release movies that are coming and make sure you have them in stock. With these few changes, hopefully Video concepts will be able to stay profitable and differentiate enough to sustain a competitive advantage over its smaller competition..