Overview• Background, Industry• Central Issues• PEST Analysis• Porter’s 5 Forces• SWOT Analysis• VRIO Analysis• TOWS Framework• Our Evaluation• Questions?

Company Background

• Idea for IMAX originated in 1967

• First film premiere was in 1970 at the Fuji Pavilion in Osaka, Japan

• About 471 theatres in 45 different countries

• 50% located in museums, aquariums, zoos, and other institutions

• By the end of 2007 there were approximately 226 films

53%33%

15%

Total Revenue in 2007

System SalesFilmsTheater Operations

Film Industry

• Highly competitive industry• Very few/limited large format film companies• Theaters became very diluted in the 90’s• Ticket sales influenced by economy and

consumer wallets

Domestic Worldwide

10.6

29.2

2009 Box Office Revenue ($B)

Industry Facts

Source: National Association of Theater Owners (NATO), www.natoonline.org; Bureau of Economic Analysis, www.bea.gov; and Bureau of Labor Statistics, www.bls.gov.

45%55%

Theater Fees Studio Fees

Movie Theater Attendance:

1.47 Billion Average Ticket Price:

$7.50

Central Issues

• How does IMAX resolve its long-term debt issues from the 90’s theater industry crisis?

• Could IMAX thrive as a niche player that made large format films and systems?– High Competition, High Substitution, Piracy

• Would increasing the number of Hollywood movies released in IMAX format save the firm or dilute the IMAX brand?– Will IMAX lose its differentiation?

PEST Analysis

Political• Influential politicians and family promoted limiting violence, sex, and

vulgar language

Economic• Greatly affected by fluctuation of the economic status of consumers

Social• Age of consumers• Family

Technology• Vastly changing in industry• New film technologies (HD, 3D, Blu-ray, etc)

Bargaining Power of Suppliers • Unique expensive

equipment leads to low supplier power, IMAX is probably one of their few customers.

Threat of Potential Entrants • Low due to the high

overhead and startup costs.• Low due to expensive costs

of movie making, however documentary films much cheaper.

• IMAX keeps customers with solid technical support.

Porter’s 5 Forces Photographic Equipment and Supplies (SIC 3861) Motion Picture and Video Tape Production (SIC 7812)

Motion Picture and Video Distribution (SIC 7822)

Threat of Substitutes • Digital 3D and regular 2D

35mm are strong substitutes to IMAX movies and films.

• Many other much larger companies and studios producing movies and documentaries, often with Hollywood actors and much larger marketing budgets.

Bargaining Power of Buyers • Medium amount of buyer

power, many different cinema companies both franchise and private. However, no real alternative to IMAX.

• High buyer power, many other companies producing quality movies and films.

Porter’s 5 Forces Photographic Equipment and Supplies (SIC 3861) Motion Picture and Video Tape Production (SIC 7812)

Motion Picture and Video Distribution (SIC 7822)

Competitive Rivalry • Competition with Pixar/Dreamworks for animated, high

quality kid’s films.• Iwerks is the only rival for large format films, and they focus

on ride simulations. IMAX has a strong competitive advantage in technology with their patents.

• Entrants into the film industry value chain are rare.

Porter’s 5 Forces Photographic Equipment and Supplies (SIC 3861) Motion Picture and Video Tape Production (SIC 7812)

Motion Picture and Video Distribution (SIC 7822)

Strengths • Hardware, Digital Distribution,

and Support (46 Patents)• DMR Conversion Technology• Deals with Studios & Theaters• Strong Brand

Weaknesses • Expensive Production of

Movies/Hollywood Film Conversion Costs

• Limited Exposure/Facilities• Much Smaller than Hollywood

Production Studios• Long-Term Debt until 2009

Opportunities • Global Industry• Hollywood Films, 3D Movies• Growing popularity in

educational entertainment

Threats • Alternative entertainment

sources: Netflix/Internet, Home Video, 3D TV, Red/Blue Box

• Movie Piracy

SWOT Analysis

VRIO Framework

V

Yes

R

Yes

I

Yes

O

Yes

Core Competency: Technology & Patents

Sustained Competitive Advantage? Yes.

Strengths Weaknesses

Opportunities

Continue creating innovative educational entertainment, now with IMAX 3D. Distribute educational and Hollywood large-format films worldwide. Leverage 3D technology.

Hollywood film conversion to eliminate debt. Offer digital re-mastering technology and enter revenue-sharing agreements worldwide. More R&D to bring down conversion/hardware costs (tech gets cheaper).

Threats

Increase R&D investment to constantly improve the cinematic experience when profitable.

Form partnerships with Netflix, Red/Blue Box to distribute educational films.

More digital download outlets to combat piracy: iTunes, own store?

Partnerships with theaters, studios, and distributors. Make your company indispensable.

Always invest as much as possible in R&D.

TOWS Analysis

Our Evaluation

Why was IMAX changing its corporate and business strategies? Could IMAX thrive as a niche player that only made large format films and systems? • Digitally-remastered conversion for Hollywood films

• Revenue-sharing partnerships with theater chains

These strategic moves were made by IMAX to lower its long-term debt. IMAX has strong branding, film industry leverage, and a technological competitive advantage.

Our Evaluation

How would you evaluate the changes? Could increasing the number of Hollywood movies released in IMAX format dilute the IMAX brand?

IMAX made the right strategic business decisions to overcome its debt problem and return to profitability. Increasing the number of Hollywood movies should not dilute the IMAX brand. Today the IMAX brand is more associated with 3D technology and large screen film.1

1 The claim mentioned in the case that the brand’s trustworthiness is tied to institutional settings (educational entertainment) was done in 2000.

Questions?