Business Strategy

Competitive Strategy

A competitive strategy is considered to be a long-term plan developed to help a company gain a competitive advantage over the competitors in their industry. Often, based on the competitive strategy, businesses build their advertising campaigns to highlight their strengths while simultaneously focus on their rivals services’ products’ weaknesses. Competitive strategies are crucial to companies in markets that are highly competitive with a vast variety of alternatives for their consumers (Businessdictionary.com, 2013).

There are more than 40,000 theaters in the USA, including over 1,000 in New Jersey alone. These theaters range from large corporate theaters such as AMC and Regal cinemas to small privately owned theaters such as Dunellen theater located in Dunellen and Big Cinemas Movie City located in Edison. Some of them focus solely on foreign films such as Big Cinemas, while others have a range of movies including American films as well as foreign films such as AMC and Regal. In order to compete with such a large amount of competition AMC must distinguish themselves from everyone else. AMC focuses on providing their customers the best possible service and a comfortable movie experience. 

AMC Theaters has a differentiation/Industry-wide competitive strategy. As they focus on creating the best environment for their customers they are also looking for ways to set their services apart from their competitors. AMC provides a very broad variety of movies to ensure that customers with different needs and likes are being satisfied with their products/services.

AMC distinguishes themselves by providing customers with a wide variety of options when it comes to experiencing a movie in their theater. Many AMC locations now include IMAX theaters which are larger than regular theaters as well as also providing 3-D movies. IMAX and 3-D movies are appealing to a larger customer base and can increase revenue.

Along with IMAX and 3-D movies, AMC over the past 5 years has been introducing a new concept of the AMC Dine-In theaters. This option provides movie goers with the ability to enjoy a movie and dinner at the same time. These theaters include a full service bar as well as recliner seating which enhances the movie experience. These theaters also have the option of Cinema Suites, which is for customers who are only 21+. This Cinema Suites option allows customers to avoid distractions that they would normally have to deal with in a regular theater.  

The Differentiation/Industry-wide competitive strategy best suits AMC because of the nature of their business and the fair amount of competition in its industry. While it is hard for others to enter the industry because of excessive demand of capital, there is already a fair share of competitors in this oligopoly. Another point that requires them to focus on differentiation/Industry-wide is the industry's set prices to their products. It is impossible to create a cost leadership competitive strategy in this environment. The differentiation comes in when providing services to customers by trying to create an a pleasant atmosphere that gives more satisfaction to their consumers in comparison to their competitors.

                                                   Porter's Five Forces Model

The Porter's Five Forces is a very important tool businesses utilize to determine where their strengths are as well as to identify their weaknesses in their industry. This tool enables businesses to determine which competitive strategy best suits their enterprise allowing them to obtain a successful outcome. The five competitive forces are; Bargaining power of buyers, Bargaining power of suppliers, Threat of new entrants, Threat of substitutes and Rivalry amongst existing competitors. These five forces can be extremely beneficial and can help shape the business.

 

Bargaining Power of Buyers:

Medium/High- Customers of AMC have a strong bargaining power. They are the revenue for the theaters. Med- Customers have the choice of which movie theater they would like to attend as far as movie times, prices and other amenities. On the other hand AMC has now launched the Dine-in Theater experience which sets them apart from other theaters. By doing so, AMC has used process reducing costs, not literally referring to money but it has enabled the convenience of being able to have dinner and watch a movie at the same location, avoiding perhaps issues related to traffic or waiting time at the restaurant.

Bargaining Power of Suppliers:

High: AMC has corporate designated suppliers (Insert supplier here.) This is unlikely to change unless authorized by corporate. Movies are also produced typically by the same few studios. This allows suppliers to have a high bargaining power. There is limited options regarding suppliers.  

Threat of New Entrants:

Low: New entrants are unlikely due to the demands of running a business connected to mainstream movies. This type of business needs a significant amount of starting capital as well as a massive infrastructure investment. A possibility of a new entrant could involve a local movie theater to which locals would prefer to go to for the convenience of the location.

Threat of Substitutes:

Medium: Threats of substitutes includes customers choosing to stream movies over the internet in the comfort of their home for a much lower cost than going to a theater. Another substitution could be the customers’ preference to wait for the film to be released onto DVD so that they could watch it in the privacy of their home. Other examples of direct substitutes would be Netflix, Redbox, and on-demand services from cable providers. The downside for all of these options is that they would not be able to watch the movie right away. After the movie is released in theaters it could take a few months until people have the opportunity to watch it on the above examples.

Rivalry (Market Competitors):

Medium/High: AMC top competitors include Carmike Cinemas, Regal Cinemas and Cinemark Century Theaters. Although industry competition is always a threat, AMC Theater’s has a very broad placement of their services in the Central and Northern New Jersey area. The reality is that rivalry among competitors is high because they all receive their product (movies) at the same time and is a matter of enhancing the service and creating different alternatives on how to provide the best experience to their customers in comparison to the competition.

Principles of Competitive Advantage

As previously mentioned above it is impossible for AMC as for all of their competitors to differentiate themselves from the competition by their products and because of this limitation they can only apply product implementation to their services. 

Product Implementation

• Hiring the best crew of servers, salespersons and customer care representative in order to provide the highest quality customer service to their customers.
• Offering different types of environments for their different types of consumers. Ex: families with small children are able to bring them along without having to worry about how much noise they make because there is a zone destined for children oriented activities.

System Implementations

• Opening dine-in locations that provide the convenience of "Dinner and A Movie" for their customers with the convenience of doing both activities in the same location. 
• Establishing an alliance with variety of entertainment companies to provide their customers with online purchases of tickets for their shows . Ex. Fandango.com