Introduction
RKO Warner Video Inc. is a company that specializes in distributing video and audio products to consumers in most parts of the world (Orsina 16). This company was established by Michael Landes after gaining enough experience working in the production and supply houses that sold cassettes, tapes and other visual and audio products to consumers (Bongcore 12).
This company is managed by Steve Berns and Ken Molnar as the president and vice president of operations respectively. This essay is an analysis of a case study of RKO Warner Video Company and the effectiveness of its incentive compensation plan.
It had adopted a quarterly incentive package for consumers and employees to ensure it boosts its sales and promotes its image in both local and international markets (Rejda 70).
It expanded its operations between 1979 and 1989 by opening additional outlets and recruiting workers to manage the high clientele during peak seasons like December and Easter Holidays. Most of these stores were located in New York City and supplied PVCs (prerecorded videocassettes).
The first and largest retail outlet store is the Broadway Store located in Manhattan and depicts the image of other outlets. This is the largest retail outlet in the world that supplies (selling and renting) prerecorded videocassettes (Markson 44).
This company managed to achieve its targets and expand its operations by developing incentives that ensured its operations remained relevant to the investor, workers and consumers. The following are some of the approaches used to develop these incentives.
Chain’s Strategy
Molnar and Berns had excellent knowledge regarding various issues that are necessary in transforming the image of this company. Their experience, skills and unity played significant roles in ensuring that their plans yielded fruits (Cichelli 22).
This made them happy with the results of all financial calendars and thus motivated them to develop additional plans that will ensure this company continues to make profits and at the same time satisfy employees and consumers.
It is important to explain that these two brilliant managers did not focus their attention to the objectives of the company only but also the satisfaction of employees and clients on the company’s environment and products respectively (Shimmer 2). This means that Berns and Molnar took a broad view in developing their plans to ensure that all stakeholders are happy with their roles in ensuring the company achieves its targets.
First, they ensured that the stores had a huge inventory of prerecorded videocassettes that would satisfy the interests of all consumers (Shernoff 19). This means that they were never to run out of stock since these managers ensured there were enough stocks in all stores.
Most stores fail to satisfy the demand of their consumers since these products are usually seasonal and their demand is determined by trends and fashions. This means that a videocassette can be on demand for a whole week, month or years and fail to maintain its hold the following period (Brummell 12).
In addition, this demand is usually overwhelming and requires stores to stock these products to ensure all clients get what they need. This is a major incentive that ensures customers are confident they will get what they want from the stores and thus develop a strong attachment with the stores.
Secondly, they ensured the stores had a variety of prerecorded videocassettes to offer clients chances to sample their choices (Shimmer 4). It is necessary to explain that the success of this industry is sometimes determined by impulse buying.
Therefore, when a store has a variety of these products this may increase its sales since customers will be motivated by curiosity or greed to buy several products at the same time. This ensures the stores maximizes on these weaknesses exhibited by consumers.
In addition, the products were displayed in an attractive and cautiously designed manner to ensure they are visible by clients from a distant (Arahood 22). This made it easy for customers to appreciate the organization and neatness exhibited by the staff and thus they were encouraged to buy or rent regularly the products from these stores.
Moreover, the managers introduced computerized systems to ensure orders were processed within short time; therefore, the company was able to serve many customers within a short period. Delays and long queues were eliminated and this gave the stores a head start in attracting huge markets.
Lastly, they introduced bar coding and labeling to ensure clients were able to identify the products they wanted (Reed 31). All cassettes were arranged in alphabetical orders and thus this made it easy for clients and store workers to identify the products their clients wanted.
Management Incentives
This was the most complex strategy that was established by this company to ensure the volume of sales increases and customers and employees are contended with the products and compensations respectively.
The establishment of the ALMI Group by Michael Landes and Albert Schwartz to ensure the litigation and production rights of this company were protected as provided in the constitution (Sinha 41). This enabled the company to buy or acquire other smaller companies and theatres that were renovated to the desired standards of Landes.
This company bought all assets and production, distribution and marketing rights that belonged to the United Artist Theatres, Century Theatres, RKO Stanley and Warner Theatres (Shimmer 2). These companies were combined to form the RKO Century Warner Theatres Chain and this became an effective strategy for building its brand name recognition and a reputation for good quality.
The strategy involved a lot of renovations and selling all assets that were perceived to be obsolete (Shimmer 5). ALMI became very active in video and film production and distribution that were later joined with other investment activities like real estates, shirt manufacturing, ice cream stores, oil production ventures and video games.
In 1986, the videocassette retailing industry experienced a major shift in its operations that eliminated the traditional ownership of production and distribution rights that were reserved for studios and registered distributers only (Maria 7). The First Sale Doctrine of 1986 provided that a video store could sale or rent PRCs without repaying the distributor and this meant that they did not share their profits with them.
This led to reduced release prices of new hits from $ 79.95 to less than $ 30 to encourage consumers to buy the films instead of renting them from the unscrupulous traders (Shimmer 6). Therefore, most non video traders started stocking these products and offered cheap selling or renting prices.
Even though, this became a serious threat to the operations of RKO it was managed and downplayed to ensure it did not affect the company. This company had neatly displayed and coded its products to ensure customers were not confused or did not waste a lot of time before deciding what they wanted. These were major advantages that made most customers to prefer the services of this company to those of others.
Video shacks were developed to suit the needs of consumers and ensure they spend very minimal time in these stores (Jones 51). For instance, Arthur Morowitz used the jewelry style display to furnish his store that was located in the upper middle class suburbs.
This was an effective strategy of catching their attention that led him to get a lot of profits and opened another store on Long Island which became an immediate success after he employed Steve Berns as the store’s manager.
Post Acquisition Strategies
The management of this company had strong convictions that its success would depend on its appearance, quality and diversity of its inventories. Therefore, it ensured that the workers were well dressed and cautious and the stores had a variety of PRCs that were perceived to be on high demand.
The stores had an average of 15 clerks and three managers that were aged 18 years and above. In addition, new clerks were paid $ 5 per hour and the stores were opened for 70-80 hours weekly (Shimmer 8). The compensation plan adopted for workers ensured that they were paid according to their performance in addition to the basis salary they earned every month.
This means that they were supposed to push their clerks and attendants to ensure they make huge sales so that they can get commissions. However, this move was not very successful since the managers discovered that store managers were not motivated by these commissions to increase their sales (Emerson 56). In addition, it was not wise to grant some stores bonuses even though they failed to reach the 95 % of their rental targets.
Conclusion
This company had a centralized system of management that ensured decisions were made and issued from senior offices. Junior workers were not involved in decision making and this led to regular failures in implementing various policies. Even though, the compensation incentive for store managers did not achieve its targets it offered a good lesson to Berns and Molnar.
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