The analysis of the Online Video Distribution Industry can be conducted in a better way with the help of the Porters Five Forces Model. It examines the challenges as well as the opportunities existing in the market place by looking at the five important forces or the factors that directly impact the Industry. The most important force is the degree of rivalry that is being existed in the Industry. An examination of the China’s Online Video market displays that there is the high degree of competition among the participants and it is problematic for the businesses to retain the loyal customers. In addition to that, the sale of the pirated and the illegal products and music have made the opposition even more worst. The customers can access the illegitimate material and other stuff at the lower price which has caused the corporations to vend their fair and legal products to them at the relatively higher price. The second important force of the Porter’s Five Forces Model is the bargaining power of the suppliers which encompasses the switching costs of the firms in the Industry as well as the influence of the inputs on the cost or differentiation. The thorough study of the market shows that it has the low switching cost which ultimately refers to the relatively lower bargaining power of the suppliers. They lack their concentration in the marketplace and cannot exploit the buyers in an undesirable way. Moreover, the third vital force is the bargaining power of the buyers which impact the price sensitivity directly. The Industry has a higher bargaining power of the patrons due to the presence of the extreme degree of rivalry among the competitors and the sale of the cheap and lower cost products.
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Furthermore, the fourth force of Porter’s Model is the threat of substitutes which refers to the lower switching costs of the patrons to the alternatives. The Industry has a relatively higher threat of substitutes as there exists a wide variety of alternatives in the marketplace and the customers can easily switch to the substitutes if they find it difficult to access the product easily or the price of the particular product do not match their expectations. The last force is the threat of new entrants. The barriers to the entry of new corporations are lower and this provides a threat to the existing businesses to improve their customer services in order to keep an edge over the competitors. It also requires the businesses to maintain the economies of scale. In addition to that, the inadequate barriers to the new entry are particularly due to the reason that this sort of Industries does not demand much investment or the acquisition of the capital in order to run the business in an effective way. This is also one of the major challenges facing PPS.tv that the entry of some of the great, well established online portals, have affected its position in the Industry in a negative way. These corporations often gain an advantage over the small scale companies for the reason that they have high levels of user traffic; conventional associations in the advertising industry, and profound pockets as well as they have an increased occasion of triumph in the online video business.
At the present times, the PPS.tv delivers its patrons with the professionally produced online video content which encompasses movies, games and other related items for free. PPS.tv has adopted many successful approaches in order to escape itself from the fierce Industry rivalry though much more needs to be done. The strategy of the corporation to avoid using the expensive and slow technology has supported them to keep an edge over its competitors as it enables them to reduce their costs and deliver the required products to the customers in the minimum time. . Its core competitive advantages include its comprehensive multimedia format support as well as the superb user experience.
In spite of having the core competencies, it confronted with certain critical issues. The first contest is increasing its user base. It requires the user base in order to defeat its rivals vending P2P video, as well as to counterbalance the operator bases of the porticoes with which it contested for publicizing and to permit targeted publicity to clutches that are still big enough to be eye-catching to advertisers. It has been comprehended that the PPS’ users anticipated to watch skillfully shaped, a comprehensive material and recompense nothing in return for that, and it is vital for the corporation to come up to the expectations of its users in order to earn the optimal profits.
The further study revealed that how the number of PPS.tv users increased with time with enhanced services and opportunities available on the site. However maintaining such a huge audience is very challenging. (Exhibit 1) In order to deal with this it is recommended to introduce other forms of entertainment as well in its video space. Although PPS.tv has already initiated different programs related to varying portals and search engines, further variety in this subject can also be added to boast the site users. In fact such an effective approach is also essential for surviving in an utmost competitive market. Moreover, it is already offering superior streaming technology; therefore it is important to add more innovative and appealing subjects in the PPS objective and motives list.
In addition another recommendation that I would make to the PPS management would be about the strategy regarding generating revenues. The thing to worry about is that Chinese law does not permit a company to acquire a loan unless it has three consecutive years of profitability in its working history. In case of PPS it would be crucial for the company to receive this loan as it still have to work for one more year in an enlightening manner gaining success and victories. Therefore it would be better to adopt a different approach based on commencing programs that would help the company in generating revenues instead of waiting one more year to get approved for an IPO. In that case it would become too risky as it would give other companies to advance and thrive. Furthermore, the China’s most efficacious online media providers implemented on a technically progressive platform, proficient of carrying advertisements through an extensive assortment of methods targeted to select users in a way that was triflingly invasive to the end user. And it will be advantageous for the PPS.tv to execute the similar strategy in order to gain more market share. Moreover, it has been deliberated that the Chinese shoppers have come to be used of getting online video and music related material for free of cost, therefore the PPS.tv should take the advantage of the market situation in an effective way and ought to consider the expansion of online advertising marketplace as an important source of proceeds. Accordingly, it is indispensable that PPS should comprehend the rudiments of the Chinese online advertising market in order to stimulate its transmission protocol and server software as the criterion for transportation and video serving by functioning with corporations in the video industry, involving the service delivers, content providers, hardware suppliers as well as the browser sources. It has been deliberated that the PPS.tv forms the precise associations and set the criterion of Industry, it could form a profitable corporate licensing of its expertise.
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Therefore it is vital for the company to afford the technology that serves the expectations of its users. PPS.tv does not only have to improve its user base but it is necessary for its fate to beat its competitive rivals in the market. Apart from all the above mentioned points, it is also recommended for PPS to develop an alternate yet effective revenues model in case the advertising and promoting its services do not serve the purpose entirely. However attracting advertisers is a better option as it forms only a small percent of their marketing budget. For this online marketing is more beneficial as compared to the other forms because it again utilizes minimum of the company’s budgets while establishing a large number of portals and search engine. (Exhibit 2) This advice is more consistent because it is associated with minimum financial risks. Advertising the company in international markets and intending to establish its roots globally is also one of the effective strategies used by PPS to resolve its complications and challenges. PPS could target those areas in particular that possess successful online advertising industries. Moreover such a market can also be selected for the same purpose wherein there are high chances to attract users that are ready to pay for the content they approve. In this way PPS can expand its company’s work into different countries around the world. Such an activity would enable PPS to join hands with thriving international advertisers which would probably lead to successful generation of revenues. A challenge associated with this establishment of company abroad is that the PPS staffs consist of Chinese staff for the most part. This leads to great complications and obstructions when communicating internationally. Therefore it would be much better to employ different cultured individuals in the company for better performance of the company in foreign matters. This would make business communication across the borders much easier and hence beneficial. However before selecting a state for expanding business, it is important to consider the economic, market and business condition of the state. PPS management should opt for that country that consists of maximum benefits for the company’s fate. Accessibility factors, investors and advertisers ratio, budget and audience review should also be given adequate attention. However, the underlying solution for the entire problem is also to further improve the PPS technology, its quality, speed and output. For instance the company can introduce better initialization of video and operating costs.
EXHIBIT 1: CHINA’S INTERNET USE GROWTH PROJECTION
EXHIBIT 2: ONLINE MARKETING IN CHINA
Anthony, Kevin, Wai Yan Wong and Aaron Rackoff. PPS.tv and China’s Online Video Distribution Market. 2008. 25 January 2013 <https://mitsloan.mit.edu/LearningEdge/CaseDocs/08-074%20pps%20tv%20lehrich.pdf>.
PPS.tv. About PPS.tv. 2013. 10 February 2013 <http://www.pps.tv/>.
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