The bargaining power of suppliers in the industry is high.
This industry relies heavily on the ability to reach agreements with suppliers in order to determine the stock on hand as well as the ability to get new movie titles as they are released. Some movie labels have agreements with certain video/DVD rental companies and do not distribute to other companies, which makes the bargaining power for the suppliers high within the video/DVD industry. Also, production studios control the price, and will set higher prices for blockbuster movies.
The current strategy of movie distributors is to first release movies to cinema theaters, then to retail and rental stores, and finally to television. Release dates of movie titles to rental stores are at the discretion of the movie distributors. Distributors have full control of release priorities based on their incentives. Bargaining power of suppliers is high as there are no substitutes for them.
Bargaining Power of Buyers
The bargaining power of buyers within this industry is low.
The buyers within the video/DVD rental industry consist solely of the individual consumers. There are few competitors in the industry and this is further emphasized with the uneven geographic spread of the stores. Blockbuster is the most prevalent competitor and Netflix can reach customers almost anywhere in the United States. Buyers who are specifically seeking DVD rentals are limited by geographic location in terms of store alternatives, therefore the bargaining power of buyers is low in that sense, but that doesn’t stop buyers to seek alternatives to DVD rentals, which is reflected in the threat of substitutes on the industry. [continues]
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