This analysis examines the film industry, including photographic equipment, supplies, and motion picture production and distribution, which relates to the entertainment sector.
Opportunity: Growing demand for large-scale 2D/3D film viewing experiences. Evidence includes increasing order trends for 3D systems and pricing trends show consumers are willing to pay a premium price for these enhanced movie experiences. The strategic group this affects is the large format film group. Key success factors include supporting research and development for new advanced technology and having expertise to build and service the relevant equipment.
Threat: The threat of substitutes ...view middle of the document...
Resource: Technology protected by 46 patents and 7 pending patents in the U.S. This resource is valuable because it enables IMAX to exploit opportunities created by growing demand for large-scale 2D/3D viewing and lawfully neutralizes the threat of rivalry and imitation. It is rare because, by definition, no other firm have these patents. Competitors face a cost disadvantage because they have to purchase/lease IMAX’s protected technology. IMAX has and uses the complementary resources (partnerships, theatres) necessary to exploit this technology. This creates a sustained competitive advantage and is a sustained distinctive competency for IMAX.
Capability: Partnerships and lease agreements with rival theatre operators (Regal Cinemas, AMC, etc.). This resource is valuable because it enables IMAX to expand into emerging markets and neutralizes the threat of rivalry. It is rare because IMAX signed exclusive agreements with these firms. Competitors face a cost disadvantage because partnerships reduce IMAX’s capital requirements. IMAX’s co-CEO’s support such partnerships and views them long-term opportunities to expand, which creates a sustained competitive advantage and sustained distinctive competency for the firm.
Capability: Partnerships with rival film production and distribution studios (Disney/Pixar, Time-Warner, etc.). This resource is valuable because it allows IMAX to reach emerging markets and increase barriers to entry for the industry. Currently there are no other firms converting Hollywood movies into 2D/3D large-screen format. It is imitable should another firm gain IMAX’s film conversion technology once patents expire. These partnerships are supported by IMAX’s co-CEO’s, creating a temporary competitive advantage. (Please see Exhibit 2)
In 2004 and 2005 IMAX was a company on the rise. With an ROIC ratio of 0.0724 up from 0.0547 and a current ratio of 2.4781 in 2005, IMAX was more than able to meet their current liability commitments. Things changed in 2006 when the company failed to turn a profit, which is a result of decisions made in 2005. In 2005 IMAX employed a selling strategy that resulted in selling theater equipment to buyers with lower credit. This strategy incurred a high A/R in 2005, which had to be overturned in 2006.
In 2007 IMAX continued to struggle as a result of the 2005 selling strategy; the high write-off of A/R in 2006 caused higher debt levels compared to current assets. IMAX’s ability to pay off current liabilities fell to 0.8973 and its ability to pay off interest was -0.6656. These ratios show that IMAX is at risk of defaulting on its debt. In the past two years IMAX has not made enough profit to cover the interest on its debt which signals significant problems.
IMAX has a huge debt problem, but the future is potentially promising. At the end of 2007, IMAX signed a deal with AMC to supply 100 theaters with the IMAX system and they also signed a deal with Regal Cinemas for 38...