Diploma in Engineering Technology

Center for Industrial Technology and Enterprise

Purok II, San Jose, Cebu City

A Case Analysis of
Video Concepts, Inc.

Submitted by:

Andrino, Lupe John

Cañones, Jomarie
Dayday, Adonis
Laug-laug, Alfe P.
Miñoza, Niño Rey Christopher A.
Tampus, Raven Paul B.

Submitted to:

Dr. Bonifacio N. Mercado, Jr.

Case Facts

In 1987, after his graduation, Mr. Chad Rowan, a business graduate and
expertise started his own business on Video Rental. After the profitable period of his
business, in the span of six years, he has been trapped in a dilemma of what should he
do given the current adverse business environment.

He started his own business in one retail store with 200 square feet and 500 tape
rental library in Lexington and was named Video Concepts. In implementation of his
marketing strategies such as home delivery, a free rent offers after ten rentals, on
demand a total of $64000 revenue in the first year of the business is achieved.

Due to high demand and successful year, he expand his business and opened
another small retail store in small shopping center in a neighboring area by borrowing
$80000 from his banker on a seven year note.

He opened his third video rental in Lexington’s busiest shopping district in the year
1990 with $200,000 loan. This new store had a capacity of 12000 tapes on display.
Through the new technologies this store was being operated in more efficient manner.
In one year this new retail store became the main biggest and most profitable store of
VCI. With predatory pricing strategy, high quality service and good selection of new
releases were the driver force for phenomenal growth of company that eliminate many
smaller competitors from the market. In 1991 out of 17 competitors only 6 remained in
the market.

In 1991, Blockbuster Entertainment Inc. built a new store almost across the street
from the main VCI store. Before Video Concepts, Blockbuster is the largest video rental
chain store in US with total revenues over $1.2 Billion in 1992.

VCI still managed to maintain current revenue level and market share in 1992 –
1993 despite the slow growth rate in customer spending on video rentals in US and stiff
competition from bigger competitor. VCI spend too much on promotions that reduced
the profits and expected ROI is not achieved. Also, VCI is not good position to repay
even its current liabilities. Pay-Per view services is also emerging as the substitute
creates threat to the video rental business

But on the good side, after the arrival of blockbuster in Lexington it was found out that
market has grown from $600000 to $1300000.This indicates that this market still has
potential.
Statement of the problem

1. The company is lack of management in terms of liquidation and expenditure;

2. The company is lack of strong marketing program and strategy in place to
compete; Failure to examine and create awareness of macro environment the
company is operating in.
3. The company is lack of strategic leadership, Chad has failed to implement a
strategy making process for the company in the long run.

Objectives of Case Study

1. In current adverse business environment, where is the Video Concepts Inc. in

terms of market share;
2. Where do Video Concepts want to be;
3. And how do Video Concepts get there

Analysis of Video Concepts Strategic Management Strategies

Operations and Marketing

He did develop a strategic vision of “expanding Video Concepts into several similar-
sized towns within a couple of hours driving distance”, this is where his strategic
management process ended.

Chad had the ability and resources including the advance software program that
efficiently run the business. He used the opportunity to maintain customers’ loyalty to
the business by supporting local events in schools. He also implemented a marketing
strategies like free delivery, free rent offer every 10 th rental.

However, Chad failed to develop any strategic or financial objectives that were
quantified, measurable, and had a deadline for achievement. Expected ROI was not
achieved due to its liabilities that are not properly liquidated. There is also no
management team beside chad to help monitor and control the business. In addition,
Blockbuster’s strength contribute to Video Concepts market share stability.

This results in no way to propel the business in an orderly fashion, or any way to
measure success.
Recommendations

1. Continue customer service and enforce leadership requirements.

2. Acquiring rival films at bargain prices.
3. Blocking avenues open to challengers
4. Chad should formulate tactics for competing and marketing his company besides having
low prices.
5. Create customer / business relationship.
6. VCI should move deeper into the video game industry, by buying and selling used
games.
7. Get the store online where they can both rent and sell movies/games directly to the
customers.
8. Closing shop in the 2 previous stores and leasing the premises.
9. Possible future partnership with local businesses, which can lead to more innovative and
financially friendly marketing and sales promotions.
10. Examine macro-environment issues to specify requirements for the management.

Overall, Chad needs to examine all aspects including the Macro environment that Video
Concepts are in.

We believe that our strategies and recommendations can help chad towards future development
through this adverse business environment.