Strategic Management.

STRATEGIC MANAGEMENT

Assignment: Yash Raj Films

M. Khalil Ben Jemia

ID # 29693289

GDBA538 - Concordia University

Professor: S. Hudon

1. Issue

YRF was founded in 1970 by Yash Chopra as an independent production company following an experience with his brother BR Chopra, under BR films. Because of their different views, Yash decided to start his own company at the age of 40.  Success and rewards were quick to come as his first movies were already a hit. His son, Aditya, has taken over the company in 2012 after his death. Aditya has another vision for the company as he started to diversify the activities of company and transform into a “Hollywood-esque” multiservice studio including marketing, distribution, merchandizing, talent management, entertainment and VFX, as of 2016. However, revenues and market share have been declining following diversification strategy. Therefore, Aditya wants to elaborate a new strategy to keep diversifying the activities of the company in order to revive profitability.

1. External environment:

1. General:

1. Demographic 

India is home to the second largest population in the world with nearly 1,3 billion people according to the 2017 revision of the World Population Prospects. The Indian population is also very young, having more than 50% below the age of 25. Despite severe poverty in certain areas of the country, disposable income has been rising, making for extra money to spend on entertainment.

1. Economic

The Indian economy is one the largest economies in the world, partly due to its large population. Also, its young population predicts an even brighter future, saving on health and retirements costs. From another perspective, the film industry in India is one of the largest in the world, growing at 8-11% with gross revenues nearing $900 million in 2015 (page 2). However, its worldwide market share in terms of revenues is very small compared to Hollywood for example.

1. Political/Legal

In the year 2000 India recognized Bollywood as an industry allowing for domestic and foreign investments in the cinema industry. Ever since, big names such as Disney and Fox studios have come to India to take a chance in an emerging economy, growing the industry at unprecedented rate through new technologies and technical skills that already made their success in the western industry.

1. Sociocultural 

The young Indian society is an important driver for the economy as a whole and the film industry in particular for many reasons. First, literacy rates are rising across the country from 35% in the 1960’s to around 75% in 2011.  Also, increasing employment demand combined with a growth in the movie industry have sparked the interests of many young Indians to work in this industry. India became a hub of young and creative talents in the audiovisual sector. Also, penetration of electronic devices especially within the young segment increased the demand for entertainment which led to the emergence of VOD, among others. This represents both a threat and an opportunity to YRF.

1. Technological

Ever since the government recognized the industry and allowed investments, big advancements have occurred thanks to an access to large capitals. Studios now owns the best equipment and spend millions of dollars to fund their movies. Since entering into the digital world, the Indian movie industry has cut over distribution and production costs. However, piracy still pose a real threat to the growth of the industry.

1. Global

Throughout the years, a large English-speaking Indian community has formed especially in America, UK and middle east. With distribution offices all around the world, YRF has the ability to meet the needs of this large segment.  It also established its entertainment subsidiary in Los Angeles in 2011 to produce international movies and expand its target market, in view of the low market share of the Indian movie industry

1. Industry:

1. Threat of new entrants

As the article mentions, the Indian movie industry is very clustered and few “big studios” are dominating the market. One of the reasons is that movies in India are very stars-oriented as revealed by anthropologist and film scholar Tejaswini Ganti (page 4). Therefore, few studios have the financial and contractual capabilities to work with these superstars. Also, having evolved from a simple production company into a more diversified system not only allowed YRF to have a great control over all of its activities but also eliminate any need for intermediaries, increasing revenues and making available a large capital to fund future projects.

1. Bargaining power of suppliers

The movie industry in India is largely based on relationships. In this context, YRF has incredible assets as the most skilled Indian actors have always enjoyed working for the company. Moreover, YRF established in 2009, YRF Talents to scout the best talents in every sector (actors, technicians, producers…). Therefore, the bargaining power of suppliers is low as themselves, would prefer to work for YRF.

1. Bargaining power of buyers

Due to globalization and high penetration of internet in Indian houses, the consumer now has a larger choice when it comes to entertainment. Also, as noted above, piracy is presenting a real problem to companies in the movie sector. Indeed, users can easily find resources for free in the internet, hindering producer’s profitability and survival. Therefore, entertainers are compelled to meet the consumer needs because otherwise, they will turn to another alternatives.

1. Threat of substitute products

Nowadays, entertainment has evolved in many ways to include other forms and variations. In India for instance, cricket has gained in popularity to a point where the 2006 world cup was viewed by more than 600$ million persons in India. Also, other forms have seen the day including talk shows, tv shows (Indian soap opera) and web series.

1. Rivalry among competing firms

The rivalry among competition is rather cooperative according to the article due to the nature and history of the industry. Important players like Dharma and YRF have been in the industry since decades and they have acquired enough experience and capital to set their own strategic direction. As an example of competitive dynamics, some studios have decided to get into co-production to share fixed and sunk costs.