Redbox's Strategy in the Movie Rental Industry Case Study

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Case Study: Redbox’s strategy in the Movie Rental Industry

1) Which of the five generic competitive strategies discussed Chapter 5 most closely fit the competitive approach that Redbox is taking? Why did you select the strategy you selected?
The two main strategies Redbox focuses on are a combination of low price and convenience as well as increasing kiosk locations with high traffic. Compared to its competitors, Redbox’s offers a rental fee as low as $1.20 per day, which is $3 cheaper on average. Redbox is also extremely convenient. All kiosks are placed in high traffic locations such as supermarkets, drugstores, and McDonald’s. Since mid-2009, the number of Redbox locations has increased from nearly 20,000 to 34,600. With its 34,600 locations across the country, anyone could easily locate a Redbox kiosk near them. The competitive strategy most closely fit Redbox’s approach is the low-cost provider strategy. Redbox’s kiosk strategy is very unique and cost efficient. Among the many movie rental companies, Redbox is the only one that uses kiosks rather than an actual store. This not only reduces the initial investment, but also the operating cost. Redbox locations also generally use the low-cost strategy; therefore, Redbox is effectively taking advantage of pre-existing price-conscious buyers. These locations also communicate convenience. Instead of making a trip to a movie rental store, customers can pick up movies while going to the store. Therefore, for a buyer to switch to Redbox, he/she actually saves money and time.

2) What does a SWOT analysis of Redbox reveal about the overall attractiveness of its situation and future prospects?

Strengths
- Extremely low rental price
- No monthly obligation
- Convenient locations
- Online reservation
- Number of locations
- Smartphone app
- Can be returned to any kiosk
- Takes ½ to a minute to checkout or return
- Constant addition
- Open 24 hours
- Good movie selection – newly released/popular

Opportunities
- General expansion – more kiosks
- Video game industry expansion
- Offer online video streaming
- Offer purchasable online movie downloading
- Sell music albums
Weaknesses
- Limited titles – usually only newer movies
- Limited machine capabilities
- High acquisition cost to purchase newly released movies from retailers - High cost of content acquisition and license agreements
- Must employ field staff to move copies to different machines to ensure availability

Threats
- Blockbuster’s increased online services
- Online movie streaming – Netflix/Hulu

Based on this SWOT analysis of Redbox, the company is in a quite unique position. With the low rental price, the convenience, and the unique product delivery method, Redbox almost stands alone in the movie rental industry. All of Redbox’s strengths listed above are the company’s competitive advantage. No competition even comes close to what Redbox has to offer. Redbox is very adaptive and has tried to counter some weaknesses through technology. The smartphone app and online reservation allow customers to check the availability of a specific movie at a specific location and gives them the ability to reserve a movie. However, some of Redbox’s weaknesses need special attention. Redbox has successfully signed licensing agreements with six major movie studios. However, the acquisition cost is very expensive and several studios have terminated early. Another major issue Redbox faces is limited availability. To somewhat counter that, Redbox hires field staff to move movie titles to kiosks with a low inventory. Despite Redbox’s weaknesses, the company has plenty of room to expand, both nationally and internationally. To expand the product line, PC games or music albums can be added. Redbox has many great opportunities and open market for expansion. As more people, nowadays, choose to stream movies online, Netflix and Hulu have become Redbox’s major threats. Redbox is...
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