Free Movie Theater Profitability Analysis Essay Sample

The level of competition that can be anticipated amongst industry rivals is substitution. Substitution refers to how easily people can shift from consumption of a given product because of its increased price. In economics, a threat of substitute prevails when demand of a product is influenced by the price change of a substitute product. Price elasticity of a commodity is influenced by substitute products, that is, as more substitutes prevail the demand becomes more elastic because consumers have more choices. Products that have close substitute restrict the ability of firms in an industry to increase prices.  Substitution is a threat in Cinemaplex industry. The immediate emergence of the home cinema industry such as big screen televisions, home theater sound systems, video on demand and broad band are threat to the industry. Cinemaplex is a movie theater that has passed through changes due to technology development.  The change has influenced the attendance at the theater negatively.

The Advantages and Disadvantages of Each of the Top Four Competitors' Situations and Strategic Approaches

Advantages of strategic approaches

Strategic approach permits a business to be more proactive than reactive in organizing its own future. The approach permits an organization to start and affect activities which in turn exert control over its future. The main advantage of strategic approach has been to assist organizations in formulation of better plans through the use of systematic, rational and logical approaches. Participation of workers in the strategy process not only assists an organization to develop a more responsive strategy, but also advances employees morale and commitment to the company. Organizations that support such participation are developing a more understandable workforce.  

The current participative approaches to strategy creation can also enable organizations to advance their focus on customer demand by enhancing the access of line workers to top management. Strategy approach can also assist organizations to remain flexible and responsive to changes in market situation. The amount of market information that managers receive enables them to come up with effective strategic direction.

Strategic enhancement may assist organizations to retain key workers because workers normally gain satisfaction by being able to direct and see the outcomes of their efforts. Maintaining these highly skilled and trained experts will become increasingly significant as knowledge has more and more to do with the organization's ability to make and maintain a competitive advantage. The approach may also allow managers to create better use of their time.

Disadvantages of strategic approaches

Strategic approaches are always time consuming. There could be therefore, a wish to condense the approach to half day or a daily activity. This however, may not provide participants enough time. Thorough understanding and knowledge of the field under investigation is absolutely important. Data and information from various sources have to be collected and interpreted which creates the approach even more time consuming.  Strategic approaches have to put a powerful emphasis on the choice of suitable participants or experts, and in practice it cannot be a simple task to accomplish.

Advantages of monopoly situation

There is no risk of over production

In a monopoly situation, capital for research is normally available.

The situation permits efficient use of resources.

In a monopoly situation, a firm is usually able to control the whole market.

As a sole producer of a particular product or service, a firm can easily set a price that is profitable to it.

Disadvantages of monopoly situation

Monopoly situation normally exploit consumers

It usually restricts the choice of consumers

Monopoly firms are usually inefficient because of absence of competition

In monopolistic situation, there is always exploitation of labor, that is, when price exceed marginal cost.

Advantages of perfect competitive situation

The resources are optimally located

Efficiency normally prevail because of competition

Consumers are normally charged lower price

Consumer wishes such as change in demand can be easily responded to.

Disadvantages of perfect competitive situation

The profits are usually inefficient

Product differentiation does not prevail

Absence of competition over commodity design and specification

Advantages of oligopoly situation

Oligopoly permits greater efficiency through economies of scale, standardization and in avoidance of monopoly. Oligopolies are characterized by a small number of suppliers. The suppliers tend to be very huge and can keep out new competitors, new products and competitive pricing.

Disadvantages of oligopoly

Oligopolies situation have many disadvantages. The firms in oligopoly situation have extensive amounts of strength and may even collude to set prices that are unlawful. For the consumers it means high prices accompanied by the likelihood of low quality commodity.

Advantage and disadvantage of monopolistic situation

A monopolistic firm has the ability to plan for long term as there are no market shocks. The firm can also invest more funds in a single direction as it does not have to worry about a competitor fighting it from different direction or technology. On the contrary, with a monopolistic situation, there is no force that pushes a monopolistic firm in making any investment, hold down fees or offering of goods and services.

The Financial Considerations That Affect the Profitability of Major Movie Theater Businesses

It is essential for cinema managers to concentrate on the financial statement of the industry. The management needs to ensure that managers understand the basics of a profit and loss statement. This will enable managers to focus on certain goals that targets both revenue and cost of the industry, thus they can easily determine the firm's profitability. Movie Theater businesses therefore should focus on profit margins, incentive bonus programs included, as this normal affects their profitability.

Strategic Options are Feasible Given the Situation Facing Industry Participants

One of the strategic options that are feasible given the situation facing industry participants is the creation of employment and income that result from construction and cleaning activities and from the advancement and establishment of new activities.  

Recommendations for Future Success

To improve on the industry future success, I recommend the industry to focus a lot on incentive bonus programs. These programs can be very successfully, depending on the territory at which they are implemented. Although the implementation of these incentives might appear more expensive, managers need to know that these programs normally enhance revenue far more than the expense that is incurred in profit enhancement. The side effects of these programs are improvement of workers morale and maintaining of key employees.  Therefore, if the cinema theater opts to adopt these programs it will easily increase its revenue and incur lower operating cost, thus increasing on its performance in the future.

 

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