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Executive Summary
The liberalization of the Chinese media industry and the emergence of the internet entertainment positioned it strategically as a lucrative industry. Remarkably, with the liberalization process, the industry showed an impressive growth rate of 30.3 percent between 2010 and 2014. As expected, this huge potential has attracted major investors, partnerships, and joint venture deals. Accordingly, Huayi benefited significantly out of these changes and strategically positioned itself as a market leader in the Chinese media industry. Nonetheless, the business trajectory into a market leader in the entertainment industry has been marked with failures and retrogressive partnerships. Noteworthy was the strained joint venture relationship between the company and Taihe Film Investment Company.
Basically, the revolution of the use of technology in media affected Huayi business environment in various ways. There was an emergence of major internet film consumers and the population in mainland China had increased their incomes and were now significant consumers of media products. Also, there were entrants of internet companies such as Alibaba and Baidu into this industry who increased competition in the gaming entertainment. These changes affected Huayi internal and external business environment.
The consolidation of small companies and the increased participation of foreign companies such as Columbia Pictures Corp. and Lions Gate threatened to cut the company’s bottom line. Notably, this affected the business external environment. As a result, Huayi issued an IPO in order to raise more capital which enabled it to expand its visual, live, and internet entertainment. Effectively, this made the company one of the leading media company in China. Nonetheless, the lack of enough competence on international media business made internationalization to be a major quagmire for the company.
On a positive note, the company has a simplified management structure which has no bureaucratic management systems. However, the company’s culture of issuing huge bonuses to employees’ means that it incurs a lot of costs when trying to retain key talent. Notably, this trend continues despite the company’s diversified portfolio which means there are slim chances of significant rivalry from the formation of companies that are owned by former employees.
Accordingly, the business should change the manner that it operates its business both locally and internationally. The company should stop issuing bonuses as an incentive to attract key talent. Generally, the business risks chasing away investors, partners, and shareholders since this will affect the business profitability. In light of this, the business may form a training department to ensure it has a constant supply of skilful actors. In addition, it should offer good salaries to its actors to increase its retention rate. Finally, the company’s endeavour to internalize its business should be driven by clear and realistic goals. Noteworthy, the company’s partnership with a foreign company does not guarantee its success in international film industry. Moreover, the film industry is facing huge competition from internet service film providers such as Netflix. In effect, this means that Huayi will be investing its money in a declining entertainment industry segment. Essentially, the company should invest its money in growing business such as the internet entertainment. Notably, the entertainment market segment has had a tremendous growth rate of late.