Business Strategy

Porter's Five Forces Model

AMC Theaters is a leader in the exhibition business that gives guests the ultimate AMC- Amazing experience when it comes to their movie going choices. AMC Theaters offers unique services to suit all needs, making it difficult for competition to arrive. Using the Five Forces Model, created by Michael Porter, the company is able to assess the structures and main characteristics within their industry. Porter’s Five Forces model include: Bargaining Power of Customers, Threat of Substitutions, Bargaining Power of Suppliers, Threat of New Entrants and Rivalry.

Bargaining Power of Customers 

AMC Theaters bargaining power is set to be mostly high, however it can vary depending on the location. People in different geographical locations can choose which theaters/ venues to go to depending on the budget available. Each venue is set up in different ways, the times offering for each movie varies across, the prices of tickets range depending on the commodities and services available at each theater. For instance, customers now have the option to attend a Dine-In Theater where they’re able to watch a movie and enjoy a delicious dinner at the same time. The people are the ones that bring revenue to the theaters; therefore AMC continues to grow to set them apart from other theaters.

           

Bargaining Power of Suppliers

The bargaining power of suppliers is set to high because the studios hold the rights of the films that are played as well as all the details in the production of the movie. Most movies are typically produced by the same movie studio, which makes AMC limited options to suppliers.  The supplier of the movie has a very high amount of leverage with making negotiations.

Now In terms of the company bargaining power of suppliers, when it comes to their food-based products, the bargaining power would be low as AMC have different suppliers depending on the theater. For example, Dine- In Theaters offers restaurant based services rather than a traditional theater, which is more basic.

Threat of New Entrants

The threat of new entrants for AMC theaters is low because it costs billions of dollars to open up one single location. The demands involved in a business such as this one includes a variety of costs including, equipment, and projectors, operating expenses, Information Technology costs such as the information systems involved to keep the theater running day to day. Not only that but adhering the rights from the studios to play a film is difficult and costly which involves a significant amount of starting capital to be able to enter the movie industry

Threat of Substitutes

The threat of substitutes for AMC theaters is medium moving up to high since now a day people can watch movies instantly over the Internet. There are many services such as Netflix, Redbox and many on-demand services that cables offer that will make one stay home and stream a movie over the Internet rather than go out and spend more money. Also, there are other forms of entertainment available such as playing video games, going for a show on Broadway, and leisurely activity such as going to amusements parks, playing sports, going to the beach and much more. However, the only way to watch a movie that is released is by going to the theater, if not there is a wait time until the movie becomes available.

Rivalry

AMC Theaters have high market competition including their top competitors Regal Cinemas, Carmike Cinemas, Bow-Tie Cinemas and individually owned movie theaters. This rivalry is due to the fact that all theaters receive the movie at the same time and cannot compete on speed, but instead have to focus on giving the customers the best movie experience by offering them the best deals and promotions and giving them incentives compared to the other competitors. 

Competitive Strategy

Along with Porter’s Five Forces to assess the business, he developed four competitive strategies to better respond to the structure of the industry.

The competitive strategy that AMC Follows is industry -wide along with differentiation as they have the largest market share in the industry aside from Regal Cinemas. In addition, AMC offers more concepts and ideas than other companies across the United States. AMC Theaters focus on creating a brand image that customer’s value, which unfortunately as a result some competitors have taken some of their services such as reserved seating and an enhanced menu of food items.