Procurement and Contract Management

Posted: October 17th, 2013

Procurement and Contract Management

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Procurement and Contract Management

            Redbox is a business, which has a specialty of renting movies and video games. It is based in America and it uses automated kiosks in making sales. It has more than thirty- three kiosks in more than twenty seven thousand locations. The kiosks are in red color since it is the company color. This color makes them conspicuous in their location. Redbox began as kiosks, which sold many types of products. It sold groceries like eggs and sandwiches as well as milk. Only eleven kiosks specialized in selling DVDs. The grocery kiosks were withdrawn but the management realized movie rental kiosks were doing well and Redbox official started in 2004 (Redbox, 2012).

Redbox has used uniqueness and creativity to achieve its success. The kiosk is designed in a unique way to facilitate convenience. Initially, Redbox used re-branded kiosks but it designed another one. The kiosk is self-service with a touch screen. Its disk array is robotic system and it contains stacks of DVDs. The kiosks are available indoors as well as outdoors. These kiosks contain over six hundred DVDs and the titles are updated every week. The titles can range from seventy to two hundred in number and communication is electronic and web-linked (Ferrell & Hartline, 2010).

The management has strategically placed these kiosks. They are in areas, which have high sales volume. It is possible to connect one machine to another for wider variety of movies. Customers pay the purchases through debit or credit card. A customer has custody is one day after which charges start accruing. After twenty-five days, the customer owns the DVD but it lacks the original case. Rental rates range between one and two dollars. These kiosks have become successful because they are situated in many popular places (Redbox, 2012).

Redbox is using the internet to do business and reach out to a wider customer base. It has a website where customers can check the nearest kiosk if they need to purchase a DVD. Those with smartphones can download the Redbox app and use it to get information about their DVDs. Customers are allowed to reserve DVD via online. This is possible because there is a real time update on the website. Customers wishing to buy used DVDs can do it from the kiosks. The unsold used movies are returned to the suppliers. One to three percent of the company’s earnings are from selling used discs (Redbox, 2012).

Redbox Company has been collaborating with other businesses. This is one of the major contributing factors leading to its success. Initially, it was financed by McDonald at this time it sold groceries and DVDs. It later discovered the DVDs were more profitable and they specialized on selling movies. Coinstar bought forty-seven percent of the company in 2005. They bought it at thirty two million and wanted to increase ownership up to fifty one percent. By 2008, Coinstar bought the rest of the shares from McDonald and owned the company fully (Hitt et al, 2012).

These kiosks are situated in other businesses for more people to access them. Redbox has collaborated with businesses like pharmacies, grocery stores, fast food restaurant and convenience stores. Currently, Redbox is intending to venture in Canadian and Mexican market. Redbox has chosen Family Dollar stores to have its kiosks. The stores have signed a multi year contract on partnership with Coinstar. In Canada, Redbox kiosks will be situated in Wal-Mart and Alimentation Couche. Canada is among the biggest DVD rental countries. Therefore, it has potential market for Redbox movies and video games.

Redbox has collaborated with Blu ray Association to sell their discs in Redbox kiosks. Blu ray discs have better quality than normal compact discs and DVDs. The discs are sold in all the kiosks in different locations. Collaborating with Blu-ray was a strategic decision since Blu-ray discs are popular. Both companies benefit from the high sales volume of the discs (Ferrell & Hartline, 2010). This has greatly contributed to their success. Currently, Blu-ray has started selling movies through Redbox kiosks. These movies are available in all Redbox kiosks nationwide. Soon, they will be available in all the countries with Redbox kiosks.

Redbox and Verizon signed a contract to collaborate in offering online movies. Customers will be able to stream videos from the internet. These services will be competing directly with companies like Netflix. This is a good strategy for making investments and it is expected to give good returns. Coinstar is utilizing the value of Redbox kiosks and being creative on the new kiosk technologies. Redbox will attract new customers in various geographical locations. This partnership will continue to expand the movie business done by Redbox (Redbox, 2012).

Redbox outsourced its call centers in 2010 due to the global economic crisis. It helped to cut down operation costs of the company. Using outsourcing services was considered as the best decision for the company. This action had a negative impact to the community because two hundred employees lost their jobs. The community was frustrated by moving those jobs to another state and country (Ferrell & Hartline, 2010). The closed call centers were in Illinois and about eight percent of the company’s workforce was down sized. The call centers were outsourced to Canada and Texas.

Redbox procure the movies from Hollywood after they are ready for renting. Initially, Redbox would get movie supplies immediately they are released. The current policy states a movie has to wait for 30 days before it supplied to the retailers. Redbox procures products from NCR, as a part of an agreement after purchasing Blockbuster Express in February 2012. It also procures other commodities requires for operations. The company has formulated policies on sustainable procurement. It is keen on how the commodities are produced. The suppliers must use ethics. Redbox is a reseller of goods so it ensures it deals with authentic suppliers. Redbox has started a program of educating employees and suppliers on sustainable procurement strategies (Ferrell & Hartline, 2010).

The role of contracts in a business is enabling expansion and growth of business (Hitt et al, 2012). Redbox has managed to get a large customer base by having contracts with other businesses. For example, it has signed contracts with all the businesses holding the rental kiosks. Redbox has signed contracts with other companies to do business together and venture in new markets. For instance, the contract with Verizon aims at targeting at a new customer segment. Contracts with Family Stores and Wal-Mart continue to popularize Redbox business in other countries.

Coinstar, Redbox’s owner, has taken risks with the movie rental business. When Redbox started, it dealt with renting DVDs and selling groceries. It took a risk of specializing in DVD renting only. Normally, a business has better financial security when it specializes in diverse products (Hitt et al, 2012). After taking the risk, the business has become successful and it continues to expand. The idea of collaborating with Verizon to sell streamed movies was a risk. The management wanted to sell the same product via different means. By countering this risk, the company has made strategies to subdue any threats.

Despite the success of Redbox, it is has some weaknesses. The company is experiencing problems because of selling movies at a low price of up to one dollar. Hollywood was concerned about this issue and addressed to Redbox management. Hollywood wanted Redbox to sell at the standard rental price of four dollars. Hollywood felt Redbox is devaluing the industry by selling movies at such a low price. Redbox did not consider Hollywood’s plea. This made Hollywood cease its supply to Redbox. Redbox’s CEO buys the DVDs from other retailers immediately the movies are ready (Redbox, 2012).

Redbox has been having lawsuits about its operations. Universal studio, Warner Bros and 20^th Century Fox refused to sell movies to Redbox. Redbox bought the movies immediately they were released. Hollywood did not like it so they implemented a policy for retailers to wait thirty days. Redbox sued these studios for several counts (Ferrell & Hartline, 2010). These lawsuits have affected Redbox’s operations because they are not supplied with movies any longer. This has led them to buy their movies from other retailers. However, the management is formulating strategies to counter such weaknesses.

Redbox has strengths, which have enabled it to succeed. The most conspicuous one is their prices. Any businesses intending to succeed must offer affordable prices to customers (Hitt et al, 2010). Redbox sells movies at a rate of one to two dollars. Other retailers sell the same movies at a rate of four dollars, as stipulated by Hollywood. These prices have made the kiosks popular and they attract a wide range of customers. The low prices have brought conflict with Hollywood because they fear the industry will be devalued. This concern is unfounded and Redbox does not consider it.

The kiosks use high technology and they are attractive. The company color makes them appealing and easy to spot. They are also located in many places, which are popular and have many people. For example, there is a kiosk in Empire state, New York. They are also found in Chicago and many other states. The kiosks offer a wide range of movies for customers to select. Lately, the company has introduced streaming movies online. Busy customers can just stream the movies and they do not have to look for Redbox kiosks. Another important strength is the company’s ability to adapt to changes. They make technology updates in according to the changes (Ferrell & Hartline, 2010).

References:

Ferrell, O.C. & Hartline, M. (2010). Marketing Strategy. California, CA: Routledge.

Hitt, M. A., Ireland, D. R., Hoskisson, R. E. (2012) Strategic Management Cases: Competitiveness and Globalization. New York, NY: Cengage Learning.

Redbox. (2012). Home. Retrieved from http://www.theredboxcompany.com