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Porter's Five Forces Model

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Porter's Five Forces Model

The movie rental business is indeed a hotly contested and highly competitive industry. In the 80's movies the movie rental business was established as VCRs made their way into homes. This gave viewers more control over when they could see a movie as opposed to waiting until it was available on television. Initially this was limited to local video rental stores. Today the movie rental business is a highly competitive business and has evolved. Porter's Five Forces Model has been used to research the relative attractiveness of entering the movie rental business and the industry's competitive pressures.

Is buyer power low or high?

Buyer power is high because consumers have a lot to choose from in regards to the availability of movies. Blockbuster still has a fading edge on the renting of business from the traditional business, brick and mortar. Cable or satellite providers like Timewarner Cable and DirecTV provide the option to rent movies from the comfort of their own home via remote. Netflix introduced the option for people to rent movies online. They had first-mover advantage in which they had a significant impact on gaining market share in the movie rental business by being the first company to offer the convenience of online movie rentals. Redbox provides the option to rent movies from a kiosk. Blockbuster is now offering similar offerings such as online movie rentals and kiosks. With all of the many choices that buyers have in renting movies, the buyer power is high.

Is supplier power low or high?

As opposed to buyer power, the supplier power is low in the movie rental business. This supplier power is low because there are many for the buyer to choose from. Supplier power may be high in the area of rentals via kiosks because of cost and convenience to the buyer. However, with the emergence of Blockbuster and Amazon in this market of online rentals, the supplier power is lowered.

Which substitute products and services are perceived as threats?

Redbox and Netflix provides a service in the movie rental industry that can be perceived as a threat when they initially had the first mover advantage. Redbox was perceived as a threat due to the convenience of $1 kiosk rentals per day and Netflix due to the ability to vie movies instantly without having to wait for it to arrive via mail.

Can new entrants easily enter the market?

New entrants cannot easily enter the market because it is already heavily flooded. Especially with Redbox having an advantage on location and price in regards to kiosk rentals. New entrants must consider cost, location(online, brick & mortar, kiosk) and the availability of product.

What are the barriers to entry?

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