Introduction
This essay analyzes a well-known American movie theater chain, AMC Entertainment Holdings, Inc. The paper is organized as follows: First, the firm’s tangible and intangible resources, including those that are diverse and immobile, will be identified and examined using the resource-based view of the company. Second, three chosen resources will be subjected to a VRIO framework study.
The firm’s internal strengths and weaknesses, as well as external opportunities and threats, will be assessed using a SWOT analysis in the third step. To maintain the company’s long-term survival and competitiveness, the study emphasizes the significance of utilizing its strengths, fixing its weaknesses, capitalizing on opportunities, and managing threats.
Resource Analysis
It is necessary to indicate what capabilities and resources the company has. The internal resources and capabilities of a business that can give it a long-lasting competitive edge are the emphasis of the resource-based view of the firm (Barney, 1995). AMC Entertainment’s physical assets, such as its movie theaters, equipment, and real estate, are some of its tangible resources. AMC also has intangible assets, including collaborations with film studios, brand reputation, and loyal customers.
AMC has a solid reputation for offering customers an exceptional movie experience, which has developed over time. This resource is heterogeneous because it is exclusive to AMC and difficult for competitors to imitate. Furthermore, it cannot be sold to a competitor’s business or moved to another one, making it immobile (Barney, 1995). AMC owns and rents a sizable quantity of real estate, including several enviable locations in large American cities (AMC Theatres, n.d.).
By offering access to central locations and drawing more consumers to its theaters, owning and leasing property in advantageous locations may give AMC a competitive market edge. AMC’s affiliations with well-known film companies like Disney, Warner Bros., and Universal are another beneficial asset (AMC Theatres, n.d.). AMC can access unique advertising materials and programming its rivals cannot get through these alliances.
The VRIO Framework
Three of the resources listed above will be analyzed using the VRIO framework. These are:
Real Estate – Valuable, Rare, Inimitable, and Organized (VRIO)
AMC’s real estate holdings are significant because it offers an excellent position for its movie theaters. Because it is unique to AMC and challenging for rivals to copy, it is uncommon. It is unique since it is challenging for others to get such desirable places.
Brand Reputation – Valuable, Rare, Inimitable (VRI)
AMC has developed a solid reputation for offering customers high-quality movie experiences, leading to customer loyalty and effective word-of-mouth advertising(AMC Theatres, n.d.). Brand reputation is crucial in luring and keeping customers because it fosters a feeling of dependability and trust in consumers’ thoughts. Other businesses will find it challenging to match AMC’s level of brand recognition without making significant time and resource commitments. AMC has developed a strong position in the market.
Partnerships with Movie Studios – Valuable, Rare, Inimitable, and Organized (VRIO)
Strong connections with big film studios need time and effort to develop, and AMC has fostered these relationships throughout the years (AMC Theatres, n.d.). AMC distinguishes itself from other theaters and gives consumers a better moviegoing experience by procuring unique design and marketing materials.
Movie studios are careful about the theater chains they want to collaborate with, and they might prefer to work only with AMC or other reputable theater chains. This makes it difficult for new competitors to imitate AMC’s relationships and establish a presence in the industry. The business has the tools and expertise needed to manage its partnerships properly.
SWOT Analysis
A company’s internal and external elements that affect its operations and decision-making are identified and analyzed using the strategic tool known as a SWOT analysis. The following analysis is based on the Appendix A SWOT table:
Table 1. SWOT Analysis.
Strengths
AMC’s brand name has been developed over the years by consistently giving customers a high-quality viewing experience. As a result, the organization now has a devoted client base that gives them a competitive edge. Due to its established relationships with well-known film studios like Disney, Warner Bros., and Universal, AMC can access exclusive content and marketing tools that improve the patron experience (AMC Theatres, n.d.). AMC has a broad reach with over 1,000 theaters and 10,000 screens, making it simple for customers to access their services (AMC Theatres, n.d.). The company has invested in cutting-edge technology to improve the movie-going experience, including IMAX and Dolby Cinema.
Weaknesses
The unpredictable and fluctuating box office earnings are a significant source of income for AMC. The firm has a larger debt-to-equity ratio than the industry standard, which denotes a higher level of financial risk. AMC primarily serves the US market, making it susceptible to changes in its laws and economy (AMC Theatres, n.d.). The consumer experience might be impacted because many of AMC’s outdated theaters need reconstruction.
Opportunities
AMC has the chance to grow internationally, which might open new revenue sources and lessen its reliance on the US market. The business may expand its offerings by, for example, providing online streaming services or collaborating with eateries to provide a whole movie and eating experience. AMC may look at collaborations with streaming firms to provide unique programming and promotions, given the rising popularity of these services. AMC might benefit from the rising demand for high-end cinematic experiences by increasing the availability of its advanced technology.
Threats
Netflix and Amazon Prime Video are two streaming services that threaten AMC’s conventional movie theater business. AMC’s income could drop if consumer behavior shifts, such as a preference for remaining in rather than going out. The current ratio assesses a company’s capacity to meet its immediate liabilities. AMC’s current ratio as of 2022 was 1.03, less than the 1.07 industry average (Stock Analysis, n.d.). This suggests that AMC would struggle to pay its short-term financial obligations compared to its competitors.
Recommendations
The business needs to increase profitability while lowering its debt-to-equity ratio. The company should concentrate on revenue from various sources, including agreements with streaming services, online rentals, and advertising. The business may improve its cost structure by lowering operational costs and looking into new revenue opportunities. The business should adopt new technology and adjust to the shifting market conditions. The business can invest in virtual reality technology to draw clients and provide engaging movie experiences.
Additionally, the business might collaborate with streaming platforms to provide exclusive content and grow its customer base. Moreover, the business needs to concentrate on becoming global to access a larger market and profit from unexplored areas. The business must create a strategic plan that builds on its advantages, compensates for shortcomings, seizes opportunities, and reduces risks. These suggestions can help AMC Entertainment Holdings, Inc. succeed in the dynamic entertainment market and maintain its competitiveness.
Conclusion
In conclusion, AMC Entertainment is a well-known chain of cinemas with a considerable theater network, solid brand recognition, and beneficial connections with major film studios. In addition to modern technology, it has a solid financial standing, which has helped it succeed in the market. To be competitive and prosper in the market, AMC Entertainment must continue to adjust to shifting market conditions and customer behavior while maximizing its advantages.
References
AMC Theatres. (n.d.). Corporate Profile. Web.
Barney, J. (1995). Looking inside for competitive advantage. Academy of Management Executive, 9(4), 49–61.
Stock Analysis. (n.d.). AMC entertainment holdings, inc. (AMC) stock price, quote & news – stock analysis. Web.