The Technological Advantage
To clarify, strategy is very important to organisations who wish to establish themselves in the industry, through pioneering a new format. However when the product becomes standardised, strategic choices become limited as competitive forces place a greater emphasis on price and service combinations. (Please refer to Appendix 7 for a discussion of Game theory in regards to this industry.)
The Internet has a large role to play in the rapid standardisation of technological developments. Previous to the Internet it was the case that the competitive advantage gained through technological innovation was much less easily replicated or obtained by competing organisations. Access to Internet and network technologies has made it easier for firms to both research technological advances and to monitor the acquisition of these advances by rival companies.
How will technology affect the future strategies of DVD rental organisations?
If consumer trends show a preference to rent by mail or to use VOD rental services, we could see the market to shift fully towards virtual companies, most likely resulting in the demise of physical organisations such as ChoicesUK as they struggle to adapt to serve a smaller, physical impulse market.
However, if the advent of HD-DVD and Blu-ray discs successfully replace DVDs and become the most popular formats, physical stores could remain constant, although they would still be in competition not only with rental by mail, but also by the virtual VOD services.
This future forecast raises some important questions; will consumers see Video on Demand services as a substitute to DVD/ HD-DVD rental? In addition, do consumers gain the same utility from watching a downloaded film on there PC, as they do from a rented DVD? The majority of DVD rentals are for the ‘night in’ scenario, relaxing on the sofa with a selection of snacks, which will be difficult to achieve when crowding around a PC screen. This seems to suggest that, in the short-term; only VOD services through TV services such as Sky Box office will have an impact on the rental industry, until integrated Internet and television technologies become more popular.
As the above argument shows, it is clear to see that there are many factors which will affect the future of the rental industry. A major strategic factor that organisations must consider is the direction in which the market is heading. One direction may see the Internet entirely engulf this industry; alternatively the industry could fragment to include several delivery mediums.
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