The Red Box Case

Company’s Brief History

Red Box is a company that deals with the selling and renting movies. Red Box Company was started in 2003 and was later purchased by Coinstar Inc. in 2008. Since its inception and purchase by the company, Red Box has gone ahead to register enormous growth. The company owns and manages a chain of over 30000 outlets nationwide. These outlets are all colored red and hence the name Red Box. Red Box offers its large clientele a convenient way of accessing movies. This convenience results from the availability of a large number of outlets provided by the company. Practically every town and block has a Red Box movie outlet.

Driving Forces and Key Success Factors in this Industry

There are a number of important factors that lead to either success or failure in this industry. Some of these factors are noted in the following discourse. The key driving force is the capability of companies to access new releases once they have been released. Providing a variety of movies for different tastes of consumers is also an important factor. Cost is the key driving factor in the industry. People want to watch movies but they also want to buy or rent them at a reasonable price. Overpricing of movies is a sure way to turn away prospective clients. Also, customers want convenience in access to movies. They prefer to shop for movies at places where movie shops are conveniently located, for example, in supermarkets and near bus stations as well as in public places.

The Red Box Competitive Strategy- Chief Elements

Putting in mind that this is a highly competitive industry, Red Box, being one of the players in this industry, has employed a number of strategies that are aimed at keeping the company ahead in selling and renting movies industry. Stigler (1957) and Khan (2007) argue that in a perfectly competitive market, each player has to come up with its own unique strategies lest it gets phased out. Some of the strategies that Red Box Company utilizes to keep itself afloat are discussed below.

Conspicuous and Conveniently Located Stores

Red Box outlets are conveniently located in many areas of town and state. They have outlets in supermarkets, malls, public places, stations, and in populated areas. Also, all these outlets are painted in red, making it extremely hard for clients to miss them.

Relative Low Cost

Red box allows people to rent movies at a relatively lower price than most of its competitors. Clients can rent movies or even video games at $1 per night, which is one of the lowest costs of entertainment in the industry. Red box low prices discourage competition, while at the same time encouraging customers to rent many movies, which leads to the realization of profits.

Large Number of Outlets

Red Box owns quite a large number of outlets. As of 2011, the company claimed to own about 33000 outlets all over the world. This large number of outlets gives the company a massive market presence and, consequently, a competitive advantage.

Matching the Five Generic Competitive Strategies

Red Box Company is trying to fit into five generic competitive strategies in its conduct of business. The major strategy that the company is employing is the best – low-priced provider of products in the industry. The strategy of broad differentiation is also being endorsed by the company. Porter (1980) defines generic competitive strategies as those strategies that are aimed at giving particular business an edge over competitors in the market. Other generic competitive strategies include overall low-cost provider, focused low-cost strategy, and focused differentiation strategy. Red Box company utilizes practically all these strategies while conducting its business.

Competitive Advantage that Red Box is Trying to Use

Red Box is aiming at exploring online streaming and renting of videos. Clients can rent a movie and watch it online at the comfort of their homes. Also, customers are given the option of booking a movie online and picking it at the Red Box store. They can also return rented movies to any Red Box outlet in their vicinity. This saves customers time and at the same time increases their loyalty to the company. The company also plans to strike a deal with leading movie houses so that they could be receiving new releases sooner rather than later. The guarantee of being wholly supplied with all the latest movies and video games keeps clients returning to these outlets.

Appraisal of Red Box Financial Performance

Red Box is by far the largest revenue generating project for Coinstar 10k Inc. considering that the movie rental is a multibillionaire industry (estimated at around $8 billion). Red Box commands approximately 35% of the market share, and revenues of the company are in excess of $2.8 billion per annum. Red Box offers its movies and video games for rental at $1 a day, taking away late fees. Other close competitors, Blockbuster and Netflix, offer their service at a relatively higher price ($2-$3) leaving Red Box the lowest priced company and hence increasing its customer base. SWOT analysis of the Red Box case.

Red Box has a number of strengths over its immediate competitors. These are:

The opportunities available for Red Box company include:

• Internet rentals and streaming;
• Internet bookings of movies;
• Cable movies.

The threat for this company is:

• Direct competition from other large companies offering the same services and products.

Strategic Issues that Red Box Needs to Address

There are a number of issues that the company needs to address to keep itself afloat in the market. Some are management issues that result from running a company this big. The issues that need to be addressed in the company include the question of how to level down the increased expenses as well as how to ensure that quality problems do not arise in any of the stores owned and operated by Red Box company.

The ‘Worry List’ of Red Box Company

Red Box has a number of issues that are of great concern to them. Some of these worries include:

• How to keep the price of rentals down with the ever escalating wholesale costs of movies and expenses in the industry?
• How to make sure that the company receives new movies and video games way in advance of release in theatres or immediately afterwards?
• Which is the best strategy that the company should use to make sure that it leaves its mark in the international movie industry recommendations?

With regard to the issues and worries faced by Red Box company, a number of propositions can be considered. These may include:

• Partnerships with leading studios. This could wipe out the problem of receiving movies 28 days after they are released. Receiving movies this late makes profits and revenues of the company surge.
• Diversification. Diversifying into other avenues such as online rentals and cable streaming could be another way to make sure that the company retains its perpetuity.
• Research. The company should keep involving itself in research and development so as to keep itself ahead the latest developments in the movie world.