Competition and Strategy Analysis

Competition and Strategy Analysis

Introduction

Redbox is specialized in renting movies, in the form of DVDs and Blue-ray Discs in United States. It also offers rental video games through retail kiosks that is managed automatically. As reported by the parent company, Redbox operates with over 33,000 kiosks established across 27,800 locations by the end of June 2011 (Redbox, 2009). The design is as similar visible in the company's emblem. As part of the company strategy these kiosks are located across America at grocery stores, general pharmacies, retailers, convenience stores, and fast food restaurants. The expansion of Redbox family was announced in February 2012 with plans to deploy a couple of hundred kiosks in Canada. Redbox is the subsidiary company of Coinstar Incorporation, which recently reported that Redbox had captured 34.5 percent of the market share of discs rented. The main competition faced by Redbox is from Netflix, Blockbuster and Blockbuster express (Redbox, 2009).

Background

Considering the background of Redbox, initially its Automated Retail LLC was sponsored by McDonald's Corporation. During 2002, the corporation established four computerized convenience store kiosks, and 11 DVD letting kiosks. The initial purpose was to sell grocery items along with DVD's. All the kiosks were located in Washington's Metropolitan area. Redbox withdrew from grocery kiosk within a year and emphasized solely on DVD rental market (Verizon, 2012).

Decision Makers

Mitch Lowe joined Redbox family in the year 2003. He was formerly associated with Netflix as the co-founder. At Redbox initially, he started off as a consultant and then as VP of Purchasing & Operations. In year 2005 due to a remarkable performance by Redbox altogether, he was promoted as the Chief Operating Officer of Redbox. Mitch, after serving as the CEO for 4 years was named president of Redbox LLC in the year 2009. The decision makers are CEO of the company and Verizon Communications Inc. and Coinstar Inc., the owner and operator of DVD rental kiosks, Redbox (Redbox, 2009).

Problem Statement

The recent increase in the operating costs associated with Kiosk coupled with an increase in completion from multiple strong players, has put significant challenges and pressures on company to maintain its low cost and niche market strategy viable and financial growth for long-term to maintain IRR hurdle (Thompson, Strickland & Gamble, 2009).

Redbox require to assess its competitive strategy given the increasing operating costs and highly competitive players with strong financial muscle who can easily imitate the low cost strategy by finding other means of operations and also to expand their market from niche to mass. Considering the background of Redbox, low strategy have since long time work as winning formula to edge over the competitors. However, many researchers state that concentrating on low cost strategy and niche markets is effective when competition in the industry in low. Hence, they argued that this competitive strategy is not sustainable and viable for longer period of time and besides the IRR keep hurting the company in to achieve operating costs in low markets. Further, Redbox cannot maintain this strategy because their low cost does not give ...