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Porter's Five Forces Model And The Movie Rental Business

916 words - 4 pages

In today’s world, advances in technology have led to the development of materials, tools, techniques, and other means that make life easier, more efficient, and more productive. Businesses in the private sector as well as the governmental organization use those models, devices, and technologies for marketing purposes to help with marketing analysis, market entrance, data tracking for decision making, productivity, ability to serve their members or partners better by supplying quality products and virtual service to promote brand lifting, customer feedback, great customer experience, and offering the right product to the targeted market. Porter's Five Forces Model is one of the frameworks that help businesses develop their market strategy and analysis. This paper will focus on the Porter Model to evaluate a prospective market entrance for a potential movie rental business. Therefore, the five criteria for the model--Buyer Power, Supplier Power, Threat of Substitution, Competitive Rivalry, Threat of New Entry, and the movie rental industry will be scrutinize.
According to the history of movie rental, home video, and gaming, Netflix was the first company to introduce the movie rental service back in April of 1998 and offered more than 900 titles (Lardener, 2010). Ever since, the industry has become larger with new technology such as online streaming and next day delivery. Also, more competitors are now available and provide the same services, such as Amazon, Wal-Mart, blockbuster, and Redbox kiosks.
Buyer power is very low in this market because one customer’s decision to use the service or not to use it will not affect the overall market. Likewise, one customer’s dissatisfaction will not influence a significant number of other customers. The source of dissatisfaction would have to be a legitimately inferior product or service to motivate such a prevalent response. Many substitutes are available from the local kiosk store, but these could be weak movie rentals substitutes. In general, individual customers do not hold bargaining power over the price of products or services in this market (Mattingly, 2012).
Supplier Power is driven by the number of suppliers of each key input, for example the uniqueness of their product or service, their strength and control over customers, the cost of switching from one supplier to another, etc. The fewer supplier choices one has and the more help from suppliers one might need, the more powerful the suppliers can be. The major studios have marginal supplier power in the online movie download market because they are the exclusive source of popular movies that customers want. Those highly popular movies basically have no substitutes in the rental market. However, buyer concentration in this new market is high, so suppliers tend to want to sell their products to all of the companies in the market to maximize their revenue, increase client retention, and keep marginal profit. The suppliers to the movie...

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