Executive Summary
AMC Theatres is a renowned movie theater chain that dominates its market with innovative strategies. Its business activities have been tailored to perfection throughout the years, as it follows customer trends closely in each of its 1000 locations (AMC Theatres, no date). However, AMC’s business operations require a drastic revision due to the recent market fluctuations, new competitors and auxiliary industries, and destabilized partnerships with movie studios.
Quality and capacity management strategies and concepts deal with two essential parts of business operations by allowing firms to align their activities with customers’ expectations. In the entertainment industry, these approaches focus on either creating the most attractive forms of experience or sufficing an optimal number of visitors per period. The importance of quality and capacity management is especially apparent in the case of AMC, as it has to find innovative means of client retention in order to compete with such companies as Netflix and HBO.
As a result of recent market fluctuations, it is highly suggested that AMC’s managers focus their attention on customer trends and redirect the capacity development efforts toward online services. It is challenging to win against the SVOD platforms, as the benefits they provide to customers are overwhelming. There is also a necessity to ensure further stability of partnerships with movie studios, which can be improved through investments in their products. In conclusion, AMC has to adapt to the changes in its industry to survive the ongoing shift in customer trends by using quality and capacity management.
Introduction
American Multi-Cinema (AMC) Entertainment Holdings, Inc. is the largest theater chain in the United States. Its AMC Theatres network covers over 1000 locations and hosts 11,000 screens through the multiplex format the company invented decades ago (AMC Theatres, no date). The firm is known for its past successes, yet it struggles to keep its momentum in the digital era. Despite the efforts put into establishing a competitive advantage that suits modern customer trends, AMC has to deal with increasing pressure from multiple sources at once, including its partner relationships, disruptive technological innovations, and the changing tastes of its viewers.
Business operations describe a variety of activities performed by organizations to create revenue. However, depending on the market, firms may prefer to focus on different aspects of operations management in order to achieve a better position among other companies. For example, competition in the entertainment industry relies heavily on providing a unique experience to the most extensive customer base. Throughout the years, AMC has perfected many of its operations, yet it remains essential for it to keep its services updated to modern standards.
In addition to this factor, the appearance of a convenient alternative – streaming video-on-demand (SVOD) services – threatens AMC’s success, as it now has to compete with a rapidly developing industry (Arteaga, Coronado, and Flores, 2019). Survival in such a difficult position requires a firm to optimize all its aspects through the near-perfect allocation of resources. Therefore, this paper will explore the elements of AMC’s quality and capacity management.
Quality Management
The concepts of quality management in business operations prioritize meeting and exceeding customers’ wishes. A firm must outline what exact characteristics are essential for its success in the market and link its activities with clients’ expectations, which is possible through tools such as statistical process control (SPC) (Slack and Brandon-Jones, 2018).
In the entertainment industry, SPC may require a degree of generalization of public views on a particular experience, as there is a multitude of opinions regarding comfort, excitement, and other subjective parameters. Due to this factor, quality management has to take complex steps to ensure that any trend in customer feedback is followed adequately while keeping an eye on the overall picture created by reports.
Hedonic and conjoint analyses also play a crucial role in quality management. The concept of domains of quality, which is different for customers and businesses, reveals that the expectations of experiences may vary significantly, prompting companies to align their vision with their clients continuously (Slack and Brandon-Jones, 2018). These assessments enable firms to establish the norms within their industry on regional and local levels, creating an acceptable ratio between the quality and the prices of a service or a product.
The entertainment market may be more challenging to predict than the one dealing with durable goods, yet it is possible to comprehend its variations. The hedonic analysis assesses interactions between visitors and entertainers through the service attributes that are comparable within the industry, while the conjoint analysis links the perspectives on these parameters between the two groups (Arteaga, Coronado, and Flores, 2019). These concepts can boost the efficiency of business operations and push a firm toward a higher position among its competitors.
As the largest movie theater chain, AMC has to cater to a wide variety of personal preferences, which puts severe limitations on the usability and generalizability of customer feedback. Scale-related and technological constraints that are quickly resolved by SVOD platforms through function delegation to users are more challenging for movie theaters (Rosas, Cortez, and Arslan, 2022).
Resolving such challenges is impossible when going against large SVOD companies, such as Netflix. In turn, AMC tries the diversification approach and now has its own on-demand video platform, although it lacks many features that make other platforms attractive to the moviegoing audience (Stream On Demand | AMC, no date). The company’s attempt to replicate this formula indicates that AMC comprehends the trajectory of moviegoers’ hedonic trends.
Furthermore, the expected quality of experience in the entertainment industry has been shifting toward immediate access to a wide variety of content. As a leader in this market, AMC has to align its quality management strategies to customer trends via relevant analyses. The hedonic analysis reveals that service attributes that are most sought after in the movie theater industry include factors that are replicable by users at their homes, such as comfortable seating (Arteaga, Coronado, and Flores, 2019).
However, there are features that are unique to specialized locations, such as 3D projections, environmental effects, surround sound technologies, and similar additions. In the actual example of AMC’s activities, these types of analyses are perceivable through the installation of new and trendy features in the major locations owned by the company. For example, AMC creates different kinds of showrooms depending on the demand for a particular element within an area, increasing the attendance rates through more significant attraction.
Capacity Management
The main theories of capacity management in business incorporate demand-supply responses and customers’ requirements. This part of operations involves strategies that deal with physical constraints that affect its revenue through such notions as planned output and resource allocation (Slack and Brandon-Jones, 2019). The concepts of capacity management deal with optimization strategies that maximize a company’s profits. Acquiring information on demand per movie and per weekday allow firms to generate incentives for visitors that fill capacity expectations that fit into planned output (Kim and Nora, 2020).
The assistance of big data is especially critical for such purposes, as it enables companies to tailor their services to customers’ expectations, adapting to any changes instead of losing a portion of their profits for a short time (Weinberg et al., 2020). The discrete choice framework can grant organizations the predictive power to maximize efficiency. This approach in capacity management focuses on capturing the productivity of each seat at a projected demand rate (Kim and Nora, 2020). The concept of working capital can stabilize this projection further through smart investments in new locations, although underutilization may remain an issue.
In the entertainment industry, one might think that demand shifts nearly unpredictably, although it is not so. There is an average number of expected visitors per day, the need for a particular type of activity, and other highly variable factors. However, AMC possesses the capability to adapt to such circumstances through a multitude of options it provides.
Underutilization for AMC is a significant issue that can be resolved through demand management, as forecasts are possible per movie, while free showrooms can be allocated for other purposes, such as reruns or other showings (Slack and Brandon-Jones, 2019). The qualitative approach is required to predict such information, which makes this type of management rely on one’s judgments. For example, AMC can assess a film’s budget, marketing expenditures, and similar parameters to determine how many screens should be used for it and for how long a movie should run in theaters.
AMC Theatres are now competing with the capacity of online platforms, being at an apparent disadvantage in many factors, such as variance and accessibility. In addition to these struggles, the COVID-19 lockdown has brought the public’s attention to the convenience of SVOD services, making large movie chains lose visitors at a rapid pace, which leaves many seats without the need (Hallinan and Reynolds, 2019).
First, the digital capacity now also has to be taken into account by movie theater chains. Without the need to use up physical space for this type of service, SVOD platforms excel at capacity management. As has been said, AMC has its own online on-demand video website, yet its capacity is not fully realized. AMC struggles to utilize this part of its business, as it sacrifices the number of available movies by limiting the release of new titles for big screens (Stream OnDemand | AMC, no date). However, this feature does add variability to the services provided by the company, positively affecting its overall performance.
Due to the restrictions placed on the entertainment industry, firms operating in this sector have had to manage their capacity with utmost care for the past three years. Unlike in online streaming services, any fluctuations in attendance rates of movie theaters produce an immediate response (Rosas, Cortez, and Arslan, 2022).
Dropping numbers of visitors cause theaters to lose a significant portion of the projected revenue, while the unpreparedness for their influx causes theaters to miss the opportunity to earn more than expected. AMC is famous for its multiplex approach, which is now a staple within its market, although this strategy puts a strain on a facility’s expenditures. Moreover, capacity management in the form of efficient seat use can be employed through a discrete choice framework. In the movie theater industry,
AMC’s Challenges
AMC managers have to focus on the market’s vulnerability to disruptive events, the competitive advantage against SVOD services, and the relationships with filmmaking studios in order to retain the firm’s high visitor count. These points present an immediate danger to the company’s success, as its competitors can increase their share of the market further, making it difficult for AMC to come back from the recent downturn.
Therefore, two proposals that a new manager can suggest in their annual meeting with the marketing manager are improvements in partnerships with filmmakers and the diversification into the SVOD industry. The firm’s decision to turn to drastic measures in terms of its structure and format shows that the operations management of AMC seeks new paths to claim its audience back (Whitten, 2021). However, the company has to comprehend the impact of its actions on its long-term sustainability.
Current trends in the entertainment industry work against AMC, as the firm loses its ground against a superior alternative for its audience. As an outcome, filmmaking companies also follow this trajectory and favor contracts with major streaming platforms, while lessening their dependency on movie theaters, which is apparent in the case of Universal Studios and AMC (Paxson, 2022). The solution is two-fold since the company has to optimize its locations through service diversification, focusing on both convenience issues and capacity underutilization.
First, the need for diversity has pushed AMC to explore the possibility of creating an online platform similar to Netflix. On-demand access to videos can not solve the issue alone, as AMC has to connect its online visitors with offline locations to captivate them better within its network (Hallinan and Reynolds, 2019). Second, different applications for AMC’s multiplex locations need to be developed. The firm can add more types of sessions available, such as binge-watching TV series, and create a new marketing campaign focused on this development.
The initial steps toward this strategy are already being taken. Picking up new locations that are currently underused and transforming them into places for people to enjoy any media on big screens can prove to be highly efficient (Whitten, 2021). However, the genuine transformation of AMC’s facilities into multi-purpose big-screen showrooms is yet to occur. Through a marketing campaign that reveals the benefits of renting such locations, AMC can gain a greater share of the market.
The operations strategy of AMC has to incorporate further disruptions stemming from exclusive contracts between filmmakers and SVOD companies. The volatility of this market is unpredictable, as can be seen in the example of COVID-19 (Paxson, 2022). In such periods, movie studios are forced to seek all possible ways to show their product to audiences, causing a downward spiral of conflicts between their partners. Currently, the limited theatrical windows allow AMC and its competitors to benefit significantly from such relationships, although many of them realize that this grace period is going to be reduced (Paxson, 2022).
Encroaching SVOD platforms may provide better deals for studios, gaining exclusive rights themselves. Therefore, AMC has to adapt to this future by securing movie rights for itself during production periods or even earlier. Contacting producers and investing in their works may benefit AMC in the long term, although it will divert a portion of its revenue to such projects. However, through proper marketing, it is possible for AMC to gain the attention of streaming platform users and promote its brand, further improving the performance of all its departments, including on-demand videos and theaters.
Conclusion
In conclusion, AMC Theatres is in a challenging position due to its current market situation, although the firm possesses sufficient knowledge and resources to turn to innovation and come up with new, efficient strategies. Quality and capacity management concepts and theories can provide a stable background for AMC to build upon through its vast network of locations, although it must comprehend the necessity of innovative approaches. The challenging situation in the entertainment industry prompts AMC to delve outside the boundaries of service that have worked for the company for the past decades.
The firm’s survival depends on its managers’ ability to resolve the current crisis caused by a multitude of factors affecting the industry simultaneously. Deals with moviemakers can alleviate a portion of such challenges via exclusive deals, which are now popular among SVOD platforms and have proven to be highly efficient as a means of earning a competitive advantage. Moreover, with the rising popularity of streaming services, AMC now has to compete with the quality of television provided by major platforms, such as Netflix and HBO. This development prompts AMC to simultaneously join the SVOD market and create an experience of leisure time that exceeds the benefits of accessibility and comfort of watching shows and movies from home.
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