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Analyse of the Royal Theatre of Winchester

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Submitted By pernillev91
Words 3115
Pages 13
2 February 2013

1st March 2013
Mark Courtice
Chief Executive Officer
Theatre Royal Of Winchester
Jewry Street
Winchester
SO23 8SB

Dear Mr Courtice,

Re: Analysis of the Royal Theatre of Winchesters competitive market forces

Further to our recent meeting, I have undertaken an analysis of the macroeconomic market affecting the theatre of Winchester as well as the competitive environment of the market the theatre operates. Further an analyse of the theatre it self has been conducted, and assessed the theatres ability to deal with this changes. Below you will find an outline of the two most significant factors impacting the theatre.

An area for concern is the decrease in disposable income for the AB-socio economic group. This is where most of the customers to local theatres can be found and it have resulted in customers being more aware of its spending. Furthermore, customers might choose a competitive product such as a cinema ticket instead due a lower price. As a result of the increased unemployment in the UK, as well as the decreased disposable income consumers may defer trips to the theatre regarding the difficult economic climate. The reluctance to spend money on theatre tickets increases the risk posed by substitutes to the theatre of Winchester. Possible substitutes are: west end theatres, cinemas, TV shows, new technology and big events. Additional, there are several other theatres in UK, which can offer the same actors and plays as Theatre of Winchester, in a similar size and setting. Hence, the competition of attracting customers is high since the attendance is low because of decreased spending on performing arts. However, the theatre of Winchester has lower ticket prices compared to its competitors. Offering tickets for average £13 and some shows are even free, they are undercutting many competitors by as much as 20-30 pounds. Offering cheaper tickets to its consumer’s means that the theatre of Winchester will attract more customers, especially nowadays when consumers are being more aware of their spending. Since the theatre of Winchester is a local charity theatre, and by concentrating on its local aspects it attracts customers who don’t want to pay higher ticket prices and are unwilling to travel a long way to attend bigger theatres.

Initial analysis shows that the Royal Theatre of Winchesters external competition has a significant influence on the market. In the last few years it has been an increased number of cable and satellite TV, as well as other entertainment products appearing in UK households. Broadband access is available in 70% of UK households, and it is expected to rise during 2013. Online entertainment is creating a diminishing demand for the theatre industry. With the increased number in broadband connection, more consumers are using the Internet to download or stream movies, especially the younger age group. Consequently, this will directly reduce the demand for a younger target market to watch plays at the theatre, as well as it will affect the overall demand for the Theatre industry. The theatre of Winchester will face a significant loss in revenue, as the costumer aged 17 and younger contribute about a quarter of the entertainment industry revenue. A strong brand image is very important in the theatre industry. This can help to sell tickets, especially when it is a strong competition from substitutes. Theatres selling tickets on their brand image and reputation, rather than for a good show can gain revenue before having to incur costs. A strong brand image is extremely important to gain customers in a competitive market, and especially for the theatre of Winchester competing with local theatres and the west end theatres in London.

I hope you find my analysis of the theatre useful and that it will help to improve your business. If you would like any further information or discuss any off the topics brought up. Then please not hesitate to contact me.

Yours sincerely,

Political:
Government decisions regarding VAT rising from 17,5% to 20% will have a significant impact on the theatre industry (BBC, 2011). The increased VAT means that theatre of Winchester will have to charge more for its tickets without gaining any revenue. The theatre of Winchester is facing competition from West End theatres in London, and an increase to the price of their tickets may result in costumers attend rivals show due stronger brand image.

Economic:
Youth unemployment has risen to 974,000 in February (Parliament, 2013). The state of UK economy is a cause of concern among many consumers, who are worried about the rising unemployment level combined of high inflation and low growth in earnings, hence this is impacting consumers spending habits (Mintel, 2012). This will have a significant impact on the royal theatre of Winchester. Meaning there is less disposable income from this segment to purchase tickets. By 2015 the arts council of England will have its funding cut by a further £ 11.6m (BBC, 2012). Additionally, as a result of the downturn in UK economy sponsors will be less likely to invest in large venues with all the costs that comes with it (Mintel, 2012), consequently it will encourage the theatre to increase ticket prices.

Sociological:
With almost eight in ten 16-34s own a smartphone (Mintel, 2013) and an increased use of social media (Mintel, 2011) mean customers are able to communicate faster and pick up information more quickly. A social media platform can be used to increase revenue encouraging with a younger audience (Mintel, 2012). Using social media is attractive as a marketing tool, helps to gain positive experience in the business sector because of the positive experience by the younger generation (Webb and Burgoyne, 2009)

Technological:
Living in a wireless world, 21 million households in UK had Internet access in 2012 (ONS, 2012). Operating with a strong online presence, it has never been more convenient to purchase tickets for customers living a busy lifestyle. Social network sites, such as Facebook are also helping the theatre to connect with customers. The increased use of contactless payment makes the purchase transaction of tickets easier for its customers, and the same amount of staff are able to serve more customers (Mintel, 2011).

Environmental:
The climate change act, introduced in 2008, commits the UK to reduce greenhouse gas by 80% by 2050 (BBC, 2009). The increased awareness of using a greener approach will benefit theatres regarding ticket sales. Several theatres have completed an environmental project in collaboration with Ecovenue and the environmental program has helped to improve environmental performance and sustainability (Theatre Trust, 2013).

Legal:
The majority of injuries in the theatre industry are related to work at heights. The government Health and Safety website provides advices for people working at theatres, on the legal hierarchy for selected equipment for work at heights, to avoid injuries (HSE, 2013).

Reference list:

Bbc (2012). Art council England faces more cuts of £11.6 m. Available at: http://www.bbc.co.uk/news/entertainment-arts-20664137 (Accessed 23 February 2013)

Bbc (2009). Climate change. Available at: http://www.bbc.co.uk/climate/policies/uk_policy.shtml (Accessed: 20 February 2013)

Bbc (2011) VAT rate rise from 17,5% to 20%. Available at: http://www.bbc.co.uk/news/business-12099638 (Accesses: 22 February 2012)

HSE (2013). Theatre. Available at: http://www.hse.gov.uk/entertainment/theatre-tv/theatre.htm (Accessed: 25 February 2013)

Mintel – Financial Services: Consumer and New Technology – UK – August 2012 [Online]. Available at: http://academic.mintel.com/display/590911/?highlight=true#hit1 (Accessed: 27 February 2013)

Mintel – Leisure Review – UK – December 2012. [Online]. Available at: http://academic.mintel.com/display/649148/ (Accessed February 16th 2013).

Mintel – Mobile Phones – UK – February 2013 [Online]. Available at: http://academic.mintel.com/display/655022/?highlight=true#hit1 (Accessed 22 February 2013).

Mintel – Online Spending Habits – UK – February 2011. [Online]. Available at: http://academic.mintel.com/display/566827/?highlight=true#hit1 (Accessed February 16th 2013)

Office for national statistics (2012) Internet Access – Households and Individuals, 2012 part 2. Available at: http://www.ons.gov.uk/ons/rel/rdit2/internet-access---households-and-individuals/2012-part-2/stb-ia-2012part2.html (Accessed 19 February 2013)

Parliament (2013). Unemployment. Available at: http://www.parliament.uk/topics/unemployment.htm (Accessed: 22 February 2013).

Theatre Trust (2013). Ecovenue. Available at: http://www.theatrestrust.org.uk/resources/ecovenue (Accessed: 29 February 2013)

Webb, J and Burgoyne, B (2009) You´ve got a friend: Measuring the value of brand friending on social networks´ Market Research Society: Annual Conference, 2009.

Strengths:
With a 36-year heritage, the Royal Theatre of Winchester is a permanent institution within the local community (Theatre Trust, 2013). With a committed audience, mostly local, the theatre has built a strong customer base with the older generation from its inception in 1977 (Theatre Trust, 2013). With customers returning to the theatre, the local community of Winchester provides a vital strength, supplying volunteers and regular costumers (Theatre trust, 2013). Winchester theatre benefits of being a charity theatre and works closely with its major funders, Winchester City Council and Hampshire County Council (The charity commission, 2011). This will benefit the theatre of Winchester with an already good established financial performance, which in return can help with further product development and following marketing campaigns. Furthermore, Winchester offers venue hire to dramatic societies, ticket agency services and room hire for corporate use, which help to feeding into the long-term intentions (Theatre royal Winchester, 2013).

Weaknesses:
Having a strong brand is very important in the theatre industry. Theatres are able to sell tickets on the theatre brand, rather than on the plays offered (Courtice, 2013). However, the royal theatre of Winchester does not have a very strong brand identity. The competition from cinemas, offering tickets at £9 (Everyman cinemas, 2013), whilst the theatre offer tickets to £13 increases the competition (Theatre royal Winchester, 2013). Thus, the prices remain a problem, especially in current times when consumers are more aware of their spending and possibly seek to find other opportunities offering a lower price. If the theatre does not apply more special offers, consumers might look elsewhere to find less expensive performances and plays which ultimately is an excellent opportunity for the theatre´s largest competitor Mayflower Theatre Southampton and the local cinema (Courtice, 2013). The royal theatre of Winchester is in need for a promotional discount in order to uphold its desired volume sales (Mintel, 2012).

Opportunities:
An opportunity tells the company in which way they can improve and aims to reduce the external threats the company is facing (Brassington and Pettitt, 2007). To successfully target a younger customer base it is recommended to engage with stakeholders from local communities. Such as Compton primary School and the Westgate school to help to diversify the audience and volunteers, as well as increasing the longevity of the theatre. To successfully promote a younger customer base, it is recommended to offer markdowns such as price promotion, as this offers a limited risk for the theatre (Mintel, 2012). Another opportunity could be to evaluate the use of space within the building to improve its functionality (The charity commission, 2011). Increased number in seats might help to amplify its sales. Nevertheless, the performing arts market is estimated to expand due the weak euro has attracted more foreign tourists, which will benefit Winchester if they increase the number of seats (Mintel, 2012). In addition, the amount of followers and likes of their twitter and Facebook pages (Twitter, 2013, Facebook 2013) provides a prospect for sponsors and customers to assist in decision making, helping to make more loyal to the theatre.

Threats:
The threats in a SWOT identify problems facing the company from the external environment (Blythe, 2005). The main threat to the theatre of Winchester is the increasing competition from local theatres such as Mayflower theatre Southampton and west-end theatres located in London. The market is saturated with theatres and many featuring the same plays and with London theatres featuring celebrity actors (Mintel, 2012) there is a high risk that customers will switch from their local theatre for the benefit of bigger theatres. The concern for governmental issues regarding funding´s and donations is also occupying the theatre. Within the past few year the spending costs towards arts has decreased with 10% (Courtice, 2013). This will affect the quality of products provided by the theatre, and if these demands do not meet the consumers’ expectations the theatre might face the possibility of losing customers. This will have impact on the revenue, loss of market share, development of new plays and bad publicity.

Reference list:

Blythe, J. (2005). Essentials of marketing. 3rd ed. Essex: Pearson Education

Brassington, F and Pettitt, S. (2007). Principles of marketing. 2nd ed. Essex: Pearson education.

Courtice, M. (2013, February 19). Talk at Oxford Brookes University.

Everyman Cinemas (2013). Film Listings. Available at: http://www.everymancinema.com/session-listing (Accessed: 22 February 2013)

Facebook (2013) Facebook (Online) Retrieved from: http://www.facebook.com/TRWinchester (Accessed: 25 February 2013)

Mintel – Performing Arts – UK – July 2012. [Online] Available at: http://academic.mintel.com/display/590394/?highlight=true (Accessed February 14th 2013)

Theatre Trust(2013). Theatre royal (Winchester). Available at: http://www.theatrestrust.org.uk/resources/theatres/show/796-theatre-royal-winchester (Accessed 27 February 2013)

The Charity Comission (2011) Summary Information Return, The Live Theatre Winchester Trust (Online) retrieved from: http://www.charity-commission.gov.uk/SIR/ENDS39/0001077139_SIR_20110331_E.PDF [Accessed 15th February 2013]

Theatre Royal Winchester (2013). Venue Hire. Available at: http://www.theatreroyalwinchester.co.uk/venue/ (Accessed: 26 February 2013)

Theatre Royal Winchester (2013). What’s on. Available at: http://www.theatre-royal-winchester.co.uk/whats_on/when/asc/20/1/ (Accessed: 24 February 2013)

Twitter (2013) Twitter (Online) Retrieved from: https://twitter.com/TRWinchester (Accessed: 25 February 2013)

Threat of new entrants:
Initial analysis shows that the threat of new entrants is low to high. The smaller local theatres are not enjoying the same economic of scale, as the bigger theatres do therefore the threat is high, in addition the licensing agreements are less strict for smaller theatres (Shellard, 2004). The capital requirements for purchasing operating equipment’s are high, thus the threat of new entrants is low for the major players due the costs of establishing a large theatre is extremely high. Theatres with a strong brand do well, and well-established theatres dominate the market (Mintel, 2012). The strong brand image and the high set up costs increase the barrier to entry the market.

Threat of substitutes:
Substitutes are products which can perform the same function in the industry (Boddy, 2011). It is products that can offer the same experience, as a customer would get when he or she attended a theatre. In 2012 the Olympics was a substitute, since domestic customers not visiting the game stayed away and this absence did not compensate tourists visiting the game (Mintel, 2012)(London theatre direct, 2012). However, considering long-term threats this is considered with low power. Online entertainment is a big threat. Because of the easy access, many consumers living a hectic lifestyle are looking for more convenient options to entertainment, and will find it more easy to stream a movie online instead of go to the theatre.
Entertainment substitutes to theatres such as Festivals can affect attendance as they offer a different range of entertainment. Especially the younger generation might be more interested in attending a festival (Mintel, 2012).

Power of buyers:
Initially the power of buyers is weak, due to many customers purchase in small volumes (Mintel, 2012), this means that it will be difficult for them to push down prices as they can not control a high enough percentage of their sales to reduce ticket prices. In addition, the switching costs are low. The availability of at least 400 theatres around in the UK means that buyers have high power dependant on their preferences (Theatres online, n.d.). Overall, the power of buyer is high in terms of the availability of competing theatres. However, because of the strong theatres brand, especially the west end theatres, the power is reduced.

Power of suppliers:
The power of suppliers is high, in particular the supply of labour – the actors. Headline actors are rare, and they have high power in the theatre industry. They have the ability to charge high prices for performances, and they have also the opportunity to supply several plays in one year. Actors who are not so famous do not have the same power. They cannot charge the same prices, secondly they are not hard to find and they do not attract customers in the same way as headline actors. Therefore the power is low. Other suppliers such as volunteers and sponsors have high power – as the theatre relies on their support to survive. Hence, relations with suppliers rely heavily on theatre business since they help to increase the possibility of competitive advantage (The theatre commission, 2011).

Degree of competitive rivalry:
It is a large degree of rivalry in an industry when it is difficult and expensive to leave, and several firms competing (Boddy, 2011). In the UK industry it can be found over 400 other rivals of theatres, however some of them have stronger brand name than other (Theatres online, n.d). On a regional level, the degree of rivalry is particularly high around the London area, due London audiences have a bigger additional visitor spend than outside London (Shellard, 2004). However, according to Mintel (2012) visitors to theatre are only attending a play every six month, therefore it increases the competitiveness between the theatres. Hence, loyalty and relationship with its customers is important in competitive rivalry.

Reference list:

Boddy. D, 2011, Management: An Introduction, 5th edition. Essex: Pearson Education Limited. P. 262.
London theatre direct (2012). Theatres closing for the London Olympics. Available at: http://www.londontheatredirect.com/post/403/THEATRES-CLOSING-FOR-THE-LONDON-OLYMPICS.aspx (Retrieved: 23 February 2013)

Mintel – Leisure Review – UK – December 2012. [Online]. Available at: http://academic.mintel.com/display/649148/ (Accessed February 16th 2013).

Mintel – Financial Services: Consumer and New Technology – UK – August 2012 [Online]. Available at: http://academic.mintel.com/display/590911/?highlight=true#hit1 (Accessed: 27 February 2013)

Mintel – Performing Arts – UK – July 2012. [Online] Available at: http://academic.mintel.com/display/590394/?highlight=true (Accessed February 14th 2013)

Shellard, D. (2004). Economic impact study of UK theatre. Arts Council England. [Online] Available at: http://www.artscouncil.org.uk/publication_archive/economic-impact-study-of-uk-theatre/ (Accessed: 25. Febraury 2013).

Theatres Online (n.d.) Find a theatre. Available at: http://www.theatresonline.com/find-a-theatre.html (Accessed: 26 february 2013)

The Charity Comission (2011) Summary Information Return, The Live Theatre Winchester Trust (Online) retrieved from: http://www.charity-commission.gov.uk/SIR/ENDS39/0001077139_SIR_20110331_E.PDF [Accessed 15th February 2013]

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