Issue Essay – Movies Galore




Without any analysis, the owner decided and claimed that there are two available options for reversing the decline in profits that are either raise the rental prices or reduce the operating expenses. These suggestions or methods for improving the profitability were not based on any cost profit analysis. According to owner, they cannot avail the option for raising the rental prices of movies for their movies rental store chain as they are reputed for offering great movies at lower prices. However, they can remain as competitive are they are if they base their claim on a survey to investigate the prices that their competitors demand and customer can pay. Then they can increase their rental prices by justifying their prices with the quality of the movies and services provided in comparison to their competitors.
Even if the choice of raising rental prices is not opted for, and owner select the other alternative shrinking the operating expenses then first of all, it must be questioned whether inducing a reduction in the operating expenses at all the ten Movies Galore store is the only option for augmenting the profits of video rental store chain. Owner claimed that to reverse the decline in profits, they must reduce operating expenses at all the ten stores. However, for video rental stores, there can be other alternative methods to boost their profit levels. They can provide better deals to their customers like renting out five movies will give one extra movie on rent. The store can come up with special deals and discounts on the festive occasions. They can initiate advertising campaigns to make more people informed about your products availability and its variety.
Even if the operating expenses are reduced, would it be profitable to close the store at 6:00 PM rather than 9:00 PM. Most of the people watch movies at evening or at night when they got free from their work and want to relax with family and friends. If they would close the store at 6:00 PM, or would remove the five year older movies from their stock, then their customers would definitely move to their competitors for their required movies. It might be possible that some people want to watch the movies that were released five years ago. These actions might reduce the operating expenses of the store but they could lead to the decline in the sales and customer base, which in no other way will ameliorate the profit situation of the Movies Galore stores.
As one of the store in Downtown has reduced the operating expenses by closing stores at 6 PM instead of 9:00 PM, and by removing the older stocks from its collection, it is not guaranteed that it will also work for all the other rental stores of Movies Galore. We don’t know the location of the stores. By implementing these measures in Downtown store, we cannot be certain that it will work for other stores too due to the differences in locations.

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Review #1

Excellent work!

Answers Reviewed By: Pacans [1044 Orange Star Level]

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