Harvard Case - Amango Project: Taking Online DVD Rental to Germany
"Amango Project: Taking Online DVD Rental to Germany" Harvard business case study is written by Marc Sachon. It deals with the challenges in the field of Operations Management. The case study is 14 page(s) long and it was first published on : Nov 9, 2004
At Fern Fort University, we recommend Amango proceed with their expansion into the German market, leveraging their existing business model and adapting to the unique German market conditions. This recommendation is based on a thorough analysis of the German DVD rental market, Amango's strengths, and the potential challenges they may face. We propose a phased approach, starting with a pilot launch in a specific region, followed by a gradual expansion across Germany.
2. Background
Amango, a successful online DVD rental company in Austria, is considering expanding its operations to Germany. The German DVD rental market is dominated by established players like Maxdome and Netflix, but there is also a significant opportunity for a new entrant with a strong value proposition. Amango's success in Austria is based on its convenient, user-friendly platform, a wide selection of DVDs, and competitive pricing. However, the German market presents unique challenges, including a different cultural landscape, competitive landscape, and regulatory environment.
3. Analysis of the Case Study
Competitive Analysis: Amango faces stiff competition from established players like Maxdome and Netflix, who have a strong brand presence and loyal customer base. However, Amango can differentiate itself by offering a wider selection of DVDs, particularly niche and independent films, and by tailoring its marketing strategy to specific customer segments.
Market Analysis: The German DVD rental market is mature but still growing, with a significant demand for online services. The German population is tech-savvy and open to new digital services. However, the market is also price-sensitive, and consumers are likely to compare prices and services before making a decision.
SWOT Analysis:
Strengths:
- Strong brand recognition in Austria: Amango enjoys a positive reputation and customer loyalty in its home market.
- Proven business model: Amango's online platform is efficient and user-friendly, with a proven track record of success.
- Wide selection of DVDs: Amango offers a diverse selection of DVDs, including niche and independent films, which can attract a wider customer base.
Weaknesses:
- Limited brand awareness in Germany: Amango needs to build brand awareness and trust among German consumers.
- Competition from established players: Amango will face strong competition from established players with significant market share.
- Potential cultural differences: Amango needs to understand and adapt to the German market's cultural nuances and preferences.
Opportunities:
- Growing online DVD rental market: The German market offers significant potential for growth in online DVD rental services.
- Differentiation through niche offerings: Amango can target specific customer segments with niche offerings, such as independent films or foreign language movies.
- Strategic partnerships: Amango can leverage partnerships with local businesses to increase brand awareness and customer reach.
Threats:
- Economic downturn: A potential economic downturn could impact consumer spending and reduce demand for online DVD rentals.
- Increased competition: New entrants and existing players could intensify competition in the German market.
- Regulatory changes: Changes in regulations could impact Amango's operations in Germany.
Financial Analysis: Amango needs to conduct a detailed financial analysis to assess the feasibility of entering the German market. This analysis should consider factors such as initial investment costs, marketing expenses, operational costs, and projected revenue.
Operations Strategy: Amango needs to develop a comprehensive operations strategy for the German market, including:
- Supply chain management: Amango needs to establish a robust supply chain to ensure timely delivery of DVDs to German customers. This includes sourcing DVDs from German distributors, managing inventory levels, and optimizing delivery routes.
- Inventory control: Amango needs to implement an efficient inventory control system to minimize stockouts and optimize inventory levels. This may involve using forecasting methods, implementing a Kanban system, and leveraging data analytics to predict demand.
- Logistics management: Amango needs to develop a logistics strategy for efficient and cost-effective delivery of DVDs to customers. This includes optimizing delivery routes, partnering with logistics providers, and implementing tracking systems.
- Customer service: Amango needs to provide excellent customer service to build brand loyalty and retain customers. This includes offering multiple channels of communication, resolving customer issues promptly, and providing personalized support.
Marketing Strategy: Amango needs to develop a targeted marketing strategy to reach German consumers and build brand awareness. This includes:
- Digital marketing: Amango should leverage digital marketing channels, such as search engine optimization (SEO), social media marketing, and online advertising, to reach potential customers.
- Partnerships: Amango can partner with local businesses, such as bookstores or cafes, to offer promotional offers and increase brand visibility.
- Public relations: Amango can leverage public relations activities to generate positive media coverage and build brand awareness.
4. Recommendations
- Pilot Launch in a Specific Region: Amango should start with a pilot launch in a specific region of Germany, such as Berlin or Munich. This allows Amango to test its business model and marketing strategy in a controlled environment before expanding to other regions.
- Targeted Marketing Strategy: Amango should develop a targeted marketing strategy that focuses on specific customer segments, such as movie enthusiasts, students, and families. This includes using digital marketing channels, partnerships, and public relations to reach the target audience.
- Partnership with Local Logistics Provider: Amango should partner with a local logistics provider to ensure efficient and cost-effective delivery of DVDs to customers. This partnership can leverage the provider's local expertise and infrastructure.
- Local Language Support: Amango should provide customer service and website support in German to cater to the local market.
- Continuous Monitoring and Adaptation: Amango should continuously monitor its operations and performance in Germany and adapt its strategy based on market feedback and data analysis. This includes tracking key performance indicators (KPIs) such as customer acquisition cost, customer lifetime value, and churn rate.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Amango's core competencies lie in its online platform, customer service, and diverse selection of DVDs. These strengths can be leveraged to succeed in the German market.
- External customers and internal clients: Amango needs to understand the needs and preferences of German consumers and tailor its offerings accordingly. This includes providing local language support and partnering with local businesses.
- Competitors: Amango needs to differentiate itself from established players by offering a unique value proposition, such as a wider selection of DVDs or competitive pricing.
- Attractiveness - quantitative measures: Amango needs to conduct a detailed financial analysis to assess the profitability of entering the German market. This analysis should consider factors such as initial investment costs, marketing expenses, operational costs, and projected revenue.
6. Conclusion
Amango has a strong foundation for success in the German market, with a proven business model and a strong value proposition. By carefully planning its expansion, adapting to the local market conditions, and leveraging its strengths, Amango can establish itself as a leading online DVD rental company in Germany.
7. Discussion
Alternatives not selected:
- Acquiring an existing German company: This would provide Amango with immediate market access and brand recognition, but it would also require significant investment and integration challenges.
- Focusing solely on digital streaming: This would eliminate the need for physical DVDs and logistics, but it would also limit Amango's offerings and potentially alienate customers who prefer physical media.
Risks and key assumptions:
- Economic downturn: A potential economic downturn could impact consumer spending and reduce demand for online DVD rentals.
- Increased competition: New entrants and existing players could intensify competition in the German market.
- Regulatory changes: Changes in regulations could impact Amango's operations in Germany.
Options Grid:
| Option | Advantages | Disadvantages | Risk |
|---|---|---|---|
| Pilot Launch | Controlled environment, minimal investment | Limited market reach, potential for slow growth | Economic downturn, competition |
| Acquisition | Immediate market access, established brand | High investment cost, integration challenges | Regulatory changes, cultural differences |
| Digital Streaming | Eliminates physical media and logistics | Limits offerings, potential for customer dissatisfaction | Technological disruptions, competition from streaming giants |
8. Next Steps
- Conduct a detailed financial analysis: Amango should conduct a comprehensive financial analysis to assess the feasibility and profitability of entering the German market.
- Develop a pilot launch plan: Amango should develop a detailed plan for its pilot launch in a specific region of Germany, including marketing strategy, logistics arrangements, and customer service plan.
- Secure funding: Amango should secure the necessary funding to support its expansion into Germany.
- Establish partnerships: Amango should establish partnerships with local logistics providers, marketing agencies, and other businesses to support its operations in Germany.
- Monitor and adapt: Amango should continuously monitor its operations and performance in Germany and adapt its strategy based on market feedback and data analysis.
By taking these steps, Amango can successfully enter the German market and achieve its growth objectives.
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Case Description
Describes an innovative approach to online DVD rental pioneered by Netflix in a sector hampered by short life-cycle products (movies). The industry has a supply chain that is prone to misaligned incentives between echelons, resulting in product shortages and poor customer satisfaction. Amango hopes to import to Germany this business concept pioneered by Netflix. To be able to do so, the company must copy Netflix's operating system and manage to solve its working capital problem.
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