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Case Study Sample Paper on Strategy Case Analysis

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Case Study Sample Paper on Strategy Case Analysis

Introduction

    Wanda Cinema Line owns and operates a network of cinemas in China. The company operates 142 multiplexes in 73 towns in China. Wanda Corporation was incorporated in 2005, and the company is currently based in China. The firm also functions as a subsidiary of Dalian Wanda Group Co. Ltd. Today Wanda occupies 15 percent of box office in China and its studio number rank first in China (Johnson, 2014).

Analysis from Wanda’s acquisition of AMC

    In 2012, Wanda Cinema Line decided to buy AMC Entertainment Holdings Inc. AMC for 2.6 billion dollars including debt, expanding into the United States to build the world biggest cinema ever (Johnson, 2014). The buyout, which includes about 2 billion dollars in projected debt, offers Wanda, the second-largest operator in North America where movie enthusiasts spent 10.2 billion dollars in 2013 alone.  AMC is based in Missouri and is controlled by private-equity companies Apollo Global Management LLC (APO) and Bain Capital LLC, will benefit from extra $550 million investment from Wanda over time.

Insights from Yips globalization framework

    Yips (2003) model offers insight into the forces driving globalization. Yip(2003) contends that:

The market driver includes, but are not limited to:

    Analogous consumer needs and preferences

    The existence of international consumers

    Transferable marketing between different nations

Competitive drivers:

    Competitor’s global strategies

    Country interdependence

Cost drivers:

    Scale of economies and product development

    Favorable logistics

    Country-particular differences

Government drivers

    Trade policies

    Local content needs: regulation over technology transfer, intellectual property, etc.

From Yips model, we see that there, is lots of proof that globalization has been growing, progressively as the 20th and 21st century first started. Even the turmoil and difficulties of the 2008 credit crunch did not hinder the process.

Insights from CAGE framework

    CAGE framework was developed by Pankaj Ghemawatt to provide enterprises a manner in which to analyze countries in terms of the distance between them.  Here, distance is explained extensively to consist not just the physical geographic distance between nations but also cultural, administrative and economic benefits between them. For this case, Wanda purchase of AMC shows that the multinational was interested with a market with robust consumer purchasing power, and used U.S. per capita income as their first sorting criteria. In this sense, for the consumer segment, the distance is rather great, especially on the dimensions of culture, administration and economics (Ghemawatt, 2011).  Wanda chose a strategic merger with AMC who knowledge base and potential allows Wanda to better bridge the CAGE-model distances.

 

Wanda’s competitive advantages and disadvantages

    Growing efficiencies and economies of scale accomplished through the vertical incorporation, industrial focus, and diversification though global merger with AMC gives Wand a great advantage in the competitive U.S. market. The economies of scale will include but not limited to: increase bargaining power in handling suppliers of film, equipment, and popcorn. However these do not completely justify a peak market price in the cinema chain. Other key aspects include trans-nationalization of ownership, global spread of production and the freelance market for creative and craft labor.  The other competitive advantage for Wanda is the existing huge and wealthy home market that permits the industry to earn a considerable part of its investment in its own zone.  The growing significance of global markets for AMC international turnover; presently, between 40% and 60% of AMC’s theatrical grosses come from the global market.  Accordingly, Wanda has underpinned its appeal to foreign audiences via the importation of foreign talent and the ostensible “blockbusting” productions.  In relation to the above point, large marketing and distribution costs, both in local and foreign markets, and important market research so as to accomplish productive marketing campaigns is another competitive advantage for Wanda in the U.S. film industry.   Movie as a multiplatform product, focused on high perception aspects and with franchise capability.  An AMC movie is no longer just a film, but also commodity appropriate for sorts of commercial windows. In this view, the AMC/Wanda will essentially remain in the business of exploiting intellectual property rights.  However, uncertain trade operations and regulations by United States distributors in global distribution and exhibition agreements could give Wanda a competitive disadvantage. Other than abusive demands in sharing box office profits in cases such as blockbusters have limited exhibitors’ liberty by overlying in contracts regarding mechanism of liquidation, pricing, collection, amid other things (Hoskins & McFadyen, 2011).

 

Discussion

Wanda is experiencing the reality the restricted although still dominant appeal of its films and the increasing popularity of domestic films across the globe. However, as opposed to fighting against competition, Wanda has joined it, determined to engage in partnering with domestic productions.  At the distribution level, Wanda seeks to underpin its position in U.S. distribution markets via merger with the local distributor AMC, with a view to capitalizing revenues whist evading quotas and restrictions.  In essence the idea behind the presence of Wanda in U.S. is to spread culture and share happiness among the growing Chinese Diasporas. Wanda also moves to apply foreign talent when it can, drawing budding actors and directors from across the globe to work on its projects. AMC/Wanda presence in European production and distribution permits them to establish promising talents that they can integrate into Wanda Cinema Line system. It can as well be said Wanda seeks to produce some of its movies for economic (tax incentives and lower labor costs), creative (exotic locations) and even marketing concerns while considering the hypermobility of today’s film production (Balio, 2005).

Advancement toward the globalization of production and trade has been rapid in recent years. In spite of the volatility in economic expansion, the past two decades have seen huge increased in global grosses and in levels of global business in both commodities and services (Hartungi, 2006). By purchasing AMC, Wand Cinema Line only sees a development opportunity in film and a good return on investment with a Chinese growth kicker in the U.S. If there were competitive advantages to becoming a huge international player in the film industry, some corporations would have done it before. Size alone and international dimension does not provide visible strategic advantages in an enterprise whose movie-going consumers are purely domestic ones. The AMC acquisition may be the catalyst for Wanda to transfer a huge sum of monies from “soft” Chinese currency into hard American greenbacks. Theaters on the other hand are a cash enterprise, and Wanda could finally AMC community, which would be a shrewd way for the firm to shift a chunk of its assets base and increase it in the relatively safe haven of the United States.

 

 

 

 

 

 

References

Ghemawatt, P. (September 2011). “Distance Still Matters,” Harvard Business Review. Retrieved                 from:http://sabanet.unisabana.edu.co/postgrados/finanzas_negocios/Homologacion/negoc              iosint/Distance%20still%20matters.pdf.>  [Accessed 7 December 2015]

Hartungi, R. (2006). ‘‘could developing countries take the benefit of globalization?’’,        International Journal of Social Economics, Vol. 33 No. 11, pp. 728-43.

Hoskins, C. and McFadyen, S. (2011), ‘‘The US competitive advantage in the global television                market: is it sustainable in the new broadcasting environment?’’, Canadian Journal of               Communication, Vol. 16(2), pp. 207-24.

Hoskins, C. and Mirus, R. (2008), ‘‘Reasons for the US dominance of the international trade in                television programs’’, Media, Culture and Society, Vol. 10, pp. 499-515.

Aaker D.A. (2008). Developing Business Strategies. New York: John Wiley.

Balio, T. (2005). The American Film Industry.  Wisconsin: The University of Wisconsin Press.

Currah, A. (2007). “Hollywood, the Internet and the World: A Geography of Disruptive               Innovation”, Industry and Innovation, vol. 14 no. 4: 359-383.

Donahue, S .M. (2007). American film distribution: The changing marketplace. Ann Arbor:           University of Michigan press..

Barnes, B. (2011).  “Chinese Film Industry and Movie Business: Facts and Details,” American                             Journal of Management, 12(24), pp. 67-69.

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