Red Box Case Study

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REDBOX’S STRATEGY IN THE MOVIE RENTAL INDUSTRY [1] Currently, Redbox is one of the leaders in the movie rental industry. Its history was dated back in 2002 when it was just an experiment that McDonald’s restaurants had tried to expand. Acquired by Coinstar in late 2003, Redbox then began expanding by deploying vending machines kiosks that contained predominantly new release movie DVDs in high-traffic shopping locations. The idea behind Redbox is that customers could be easily enticed to rent a movie at a location where they shop regularly. Redbox pursues a low-cost provider strategy by striving to achieve lower overall costs than rivals on products that attract a broad spectrum of customers. It was able to achieve low cost by installing kiosks the cost of which is $15,000 with five years of useful life. The price competition among rivals is vigorous. There are many rivals who are selling similar products, but hardly anybody can offer the same price per DVD with no late fees. Moreover, the convenience of locations saves customers’ time, energy and money, taking into consideration that the rental fee of Redbox is “dirt cheap.” Through its successful strategy execution, in 2010 Redbox had 22,400 vending kiosks in the United States, Puerto Rico and United Kingdom. Redbox has rented over 1 billion DVDs. It processed 80 rental transactions per second and generated revenue of $773.5 million from rental sales, which is 16.8 percent of DVD rental market in the United States. To sum up, the success of Redbox strategy is centered on five main elements: 1. Low price: Its’ $1 per day rental price is considerably cheaper than the $4.5 rental fee charged by rental movie stores. Customers can rent a movie with no late fees and no membership fees and DVD could be returned at any location. Customers could also purchase new and used movie DVDs for a typical price for previously
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