Unit VI Assignment Part 1: Using the provided table that outlined ✓ Solved

Using the provided table that outlined the various characteristics of each market structure type and the information provided by Manager Tracy from Ruby Red Movie Theater, define the market structure (perfectly competitive, monopolistically competitive, oligopoly, or monopoly) movie theater market of this town. Discuss each market structure characteristic as it either relates or does not relate to the movie theater market for this town. Make sure you address all four market structures and each market structure characteristic in your discussion.

Given the market structure you have identified for the movie theater industry in this town, what marketing ideas would you recommend for Ruby Red Movie Theater?

Grayson's Guild Movie Theater has made an offer to purchase Ryne's Reel 2 Reel Movie Theater. The merger would result in both theaters operating under the same business ownership. What problems would this merger cause for Ruby Red Movie Theater? Could the government have issues with this merger?

Paper For Above Instructions

Market structures play an essential role in determining competitive behavior among firms in an industry. The movie theater market in the town described possesses characteristics consistent with an oligopoly. An oligopoly is defined as a market structure where a few firms dominate the market, and their pricing and output decisions are interdependent (Tirole, 1988). In this examination, we will review the market structure attributes, identify the implications for Ruby Red Movie Theater, suggest marketing strategies, and discuss the potential consequences of a merger in this industry.

Market Structure Characteristics

In an oligopolistic market such as the movie theater industry in this town, several characteristics stand out:

  • Number of Firms: There are only four firms competing within this market, which is a defining feature of an oligopoly. Each firm closely monitors its rivals' actions, particularly in pricing and service offerings (Baye, 2010).

  • Product Differentiation: While all firms are engaged in the movie business, they differentiate their products through various marketing strategies, such as varying movie schedules and ticket prices. This offers consumers a range of options that contribute to each theater's unique identity (Kotler & Keller, 2016).

  • Barriers to Entry: High barriers to entry exist as the city has regulations prohibiting new competitors from entering the market. These barriers reinforce the stability of the existing firms and ensure they can maintain profitability (Porter, 2008).

  • Price Setting: The firms in this market act as price makers, allowing them to establish pricing strategies that can influence consumer demand. Given limited competition, they can secure higher profit margins than in more competitive markets (Stigler, 1964).

This analysis identifies the movie theater market as oligopolistic, distinguishing it from other structures such as perfect competition, monopolistic competition, and monopoly. In perfect competition, numerous small firms exist, each being price takers, while monopolistic competition poses many firms with slightly differentiated products. A monopoly, conversely, comprises a single firm controlling the market, which is not the case here.

Marketing Strategies for Ruby Red Movie Theater

In light of its oligopolistic market position, Ruby Red Movie Theater must develop strategic marketing initiatives to elevate its competitive stance:

  • Brand Enhancement: Building a compelling brand identity is crucial. Associating with characteristics like “the funnest movie experience” will resonate with family-oriented and younger audiences who seek enjoyment (Aaker, 2014).

  • Warranties and Guarantees: Introducing warranties that assure satisfaction or refunding tickets when performance expectations are not met can instill consumer confidence and encourage ticket purchases (Kotler & Keller, 2016).

  • Targeted Advertising: Employing social media campaigns targeting young demographics will expand market reach. This includes leveraging platforms such as Instagram and TikTok for promotions and special events (Chaffey, 2019).

  • Pricing Strategy: Considering current positioning as the fourth-largest theater, Ruby Red could implement competitive pricing strategies or special discounts, particularly during off-peak hours, to stimulate demand and increase market share (Nagle, Hogan, & Zale, 2016).

These marketing strategies will enhance Ruby Red's visibility and attract additional customers away from competing theaters in an oligopoly.

Impacts of the Grayson’s Guild and Ryne’s Reel Merger

The proposed merger between Grayson’s Guild Movie Theater and Ryne’s Reel 2 Reel Movie Theater raises several competitive issues for Ruby Red Movie Theater:

  • Market Power: The combined entity would have increased market power due to a larger customer base and potentially lower pricing strategies. This could lead Ruby Red to lose patrons and market share (Carlton & Perloff, 2005).

  • Increased Competition: A strengthened competitor might leverage price reductions to undercut Ruby Red’s ticket prices, resulting in decreased revenue for the already struggling theater (Scherer & Ross, 1990).

  • Resource Consolidation: The merger would allow for resource pooling, including human resources and marketing budget enhancements, giving the new entity an edge in executing effective marketing strategies (Tirole, 1988).

From a regulatory viewpoint, government agencies such as the Federal Trade Commission (FTC) may scrutinize the merger. Concerns regarding potential monopolistic behavior, restrictions on competition, and customer fairness may arise, leading to investigations and regulatory hearings that could impede or halt the merger (Carlton & Perloff, 2005).

Conclusion

The characteristics of the movie theater market define it as an oligopolistic structure. The competitive landscape requires Ruby Red Movie Theater to adopt dynamic marketing strategies to retain its audience amidst growing competition. The proposed merger poses significant challenges that could reshape the competitive dynamics, prompting potential government intervention to uphold market fairness.

References

  • Aaker, D. A. (2014). Building Strong Brands. Free Press.

  • Baye, M. R. (2010). Managerial Economics and Business Strategy. McGraw-Hill/Irwin.

  • Chaffey, D. (2019). Digital Marketing: Strategy, Implementation and Practice. Pearson Education.

  • Carlton, D. W., & Perloff, J. M. (2005). Modern Industrial Organization. Pearson/Addison-Wesley.

  • Kotler, P., & Keller, K. L. (2016). Marketing Management. Pearson Education.

  • Nagle, T. T., Hogan, J. E., & Zale, J. (2016). The Strategy and Tactics of Pricing. Pearson.

  • Porter, M. E. (2008). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press.

  • Scherer, F. M., & Ross, D. (1990). Industrial Market Structure and Economic Performance. Houghton Mifflin.

  • Stigler, G. J. (1964). A Theory of Oligopoly. Journal of Political Economy, 72(1), 44–61.

  • Tirole, J. (1988). The Theory of Industrial Organization. MIT Press.