Posted on by Judy

One hotly contested and highly competitive industry is the movie rental business. You can rent videos from local video rental stores, you can order pay-per-view from the comfort of your own home, and you can rent videos from the Web at such sites as Netflix. Using Porter’s Five Forces Model, evaluate the relative attractiveness of entering the movie rental business. Is buyer power low or high? Is supplier power low or high? Which substitute products and services are perceived as threats? Can new entrants easily enter the market? What are the barriers to entry? What is the level of rivalry among existing competitors? What is your overall view of the movie rental business? Is it a good or bad industry to enter? Why?

ANALYSIS OF PORTERS FIVE FORCES OF MOVIE RENTAL BUSINESS
Threats of New Entry – In the movie rental business there is negligible or no threats to the new entires in the market, as there is no sort of licensing or franchising required to enter into the business, one just have to have a shop or an online portal which is required for customer interaction for renting and purchasing the movies. There is no type of specialized knowledge required, an individual just have to be aware of all sort of movies available in all genre, moreover the time and cost required to the movie rental business is very low and can be recovered in short period of time.
Suppliers Powers –The number of supplier of movies in this business is pretty huge, many stores are available who rent movies to the customers on very large scale, the nature of supplier is homogenous as they del in similar products, while the exit or entry of a new supplier will leave the market unaffected as they are in perfect competition. The uniqueness of the services being rendered by the supplier depends on how strong the consumer base of the supplier is.
Threats of substitution – The ability to substitute affects the business most as the customers substitute the buyers which decreases the consumer base of the business. The performance of the substituted suppliers makes the buyer to stick to them by offering attractive offers and discounts on every purchase they make as to bring them back to the store as frequent as possible.
Buyers power –The number of buyer, the people who rent movies are huge in number, which implies that a single buyer can influence the business as addition of a buyer of reduction of a buyer leaves market still without affecting it because they are in perfect competition. The buyers are price sensitive in nature means the loyalty of the buyer depends price, the buyer will shift itself towards those suppliers who will deliver the services at cheaper cost.
Competitive Rivalry –Since the number of suppliers are in huge number the stiffness of the competition increases, which enhances the quality of services rendered by the suppliers, The rivalry is intense so the competitors attracts the customers with aggressive price cuts and with high impact marketing techniques.
 
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