Redbox's Strategy in the Movie Rental Industry - case study

Red Box Case Study

In: Business and Management

Submitted By kierahodge Words 1167 Pages 5

1. What are the chief elements of Redbox’s strategy? Which of the five generic competitive strategies discussed in Chapter 5 most closely fit the competitive approach that Redbox is taking? Defend your answer. The chief elements in Redbox’s strategy are:

a. Attracting customers with low prices and convenience. Charging customers $1 dollar per day as a rental fee is very attractive to users and the firm. It is attractive to customers because their nightly entertainment is very cheap in comparison to other alternatives. It is beneficial to Redbox because in the event that the customer forgets to return the movie, they are charged double the rental amount which doubles revenues instantly. b. Rapidly increase the number of shopping locations with a Redbox kiosk.

Most Redbox locations are between the cash registers and front entrance of the store much like Coinstar. They have recently added locations outside the stores to replicate soda machines and newspaper stands. This provides customers with convenient locations to rent and return their movies. c. Create a recognizable brand name. Redbox has created a recognizable brand name by using bright red and white colors for their kiosk. By using red, Redbox locations stand out and are easily recognizable to customers.

d. Make the machine easy to use. By making the machine easy to use, customers are able to browse through movies using touch screen technology quickly. They are also able to purchase movies and replaceable cases. Customers’ time at the kiosk is even quicker when there are two kiosk and/or the customers already knows what movie they want to watch. Which of the five generic competitive strategies discussed in Chapter 5 most closely fit the competitive approach that Redbox is taking?

Out of the five generic competitive strategies discussed in Chapter 5, Redbox is using a low-cost provider strategy. They have the lowest rental fee in the market. They contribute to revenue growth with late fees that are the same price of the rental fees. By having several locations they are also able to keep revenues high. Redbox has focused on a broad range of consumers located in a broad range of areas. Just by providing several locations, Redbox immediately has more access to potential customers than any other firm in the market. 2. What type of competitive advantage is Redbox trying to achieve? They are trying to achieve a competitive advantage that includes low prices, convenience, a recognizable brand, and a strategic replica of Coinstar.

3. What does a SWOT analysis of Redbox reveal about the overall attractiveness of its situation and future prospects? Give at least three responses to each. The strengths reveal how attractive this service is to customers. It also demonstrates the affordability and convenience of the kiosk. The attractiveness of the brand name attracts more customers and the ability to keep cost low is attractive to the firm’s bottom line. Customers are satisfied and the firm has also been able to maintain customer loyalty with percentage off promotions.

The weaknesses are the company’s inability to make the rented movies available to customers via the internet. This can be a problem when customers don’t want the hassle of having to wait in line, leave home to pick up a movie, or remember to return a movie. The opportunities are available to expand Redbox in various geographical regions around the world. Kiosks can be placed in neighborhoods and communities which will strengthen their market share. They also have an opportunity to expand to countries oversees to increase revenues. The threats are the liabilities that are associated with not being available on the Internet, remaining sustainable, maintaining customer loyalty, and increased interest in watching more recent movies at the theatre. Any of these threats have the potential to decrease their market power.

4. What strategic issues or problems does Redbox management need to address? Draw upon the discussion on p. 125 in Chapter 4 to develop your “worry list” and to state the issues/problems. a. Redbox should address the possibility of Internet delivery b. Competitive forces of VOD providers, Netflix, and other Internet providers

c. More locations that can potentially be profitable locations d. Additional kiosks in existing locations e. Underperforming kiosks f. Other competitive kiosks such as Blockbuster g. International expansion

5. What recommendations would you make to Redbox management? At a minimum, your recommendations should cover what to do about each of the strategic issues/problems identified in question 3. a. Redbox should address the possibility of Internet delivery I would recommend that Redbox created a way for users to rent movies through the Internet as well as the kiosks. They can offer customers the option of mailing the movie back or turning it in at one of the kiosks. This would set them apart for their competitors and allow them to compete with other Internet delivery providers.

b. Competitive forces of VOD providers, Netflix, and other Internet providers I would recommend that they monitor the amount of customers that prefer these services versus what Redbox has to offer. It is important to keep an eye on the traffic flow of customers that your competitors have obtained in order to prevent a takeover. This is especially crucial in this particular industry because of the strategic focus mainly being on convenience to the customers. Nothing is more convenient than not having to leave your home. c. More locations that can potentially be profitable locations

Increasing the amount of locations will increase the convenience of the rental return which in turn will increase the amount of rental that customers will make. The cost of providing another kiosk is low in comparison to the amount of potential revenue that is to be made. I would recommend they put a kiosk everywhere there is a soda machine or convenient store. d. Additional kiosks in existing locations I would recommend providing additional kiosks to existing locations with moderate to high traffic flow. Because one of the main strategies is to provide convenience, it is inconvenient when customers have to wait for another customer to pick out a movie. Or when customers are trying to return the movie on time and another customer is indecisive.

e. Underperforming kiosks I would recommend servicing kiosks often with routine test runs to identify any misuse of the kiosks. I would also remove any kiosks that weren’t turning a profit based on region not on a particular location. The reason for this is to pay attention to the interconnection of all the kiosks and identify the kiosks that were underperforming independently. f. Other competitive kiosks such as Blockbuster I would recommend that they monitor the strategic plans of Blockbuster and remain knowledgably about their moves in relation to kiosk locations.

g. International expansion I would recommend they expand internationally to impact the global community particularly in areas where the income is fairly low. In relation to location, I would recommend they use the model that Coke is using to reach millions of people around the world.