The internet formed a base to one of the most strategic transformations for Huayi led by two brothers, Dennis Wang and James Wang. Ideally, having a single medium where movies, games, and talent could be showcased got the brothers thinking on how best to tap revenue from the unfolding scenario. Noteworthy, this was necessitated by the paradigm shift from the conventional information and entertainment sources to the internet to serve their target audience.
Importantly, the external business environment was critical to conquering these hurdles. Firstly, the competition was rife within the existing market players. Noteworthy, China media had just been freed from excessive government regulations. Additionally, a huge number of investors were joining the industry to have a slice of the flourishing market. Actually, so good were the tidings that China’s box office boasted of roughly 10 percent of the global box offices revenues which accounted for about 94.6 percent of the entire market value. Furthermore, the threat of substitutes was real as there were mobile devices, print media, and television from which customers could choose. Ideally, this elevated the customers bargaining power.
Luckily, the internal environment was working to their favor. Essentially, the Huayi’s Internet Entertainment went on to account for 66.65 percent of revenue in the first quarter of 2015. Similarly, Huayi Entertainment offered new and rare services. Notably, they were the first to be involved in the mobile gaming business. Further, Huayi was determined to be exclusively inimitable as it embarked to gain controlling majority of its rival firms. For example, in 2013, they spent 670 Million Yuan to acquire a 50.88 per cent share in Yinhan Technologies. In fact, in just the first half of 2014, Yinhan had grossed over 800 Million Yuan surpassing the company’s chairman expectations. Most importantly, however, was the manner in which the Huayi’s structure was organized and functional. Specifically, when there was increased competition on the content side, Huayi cleverly diversified into three broad entertainment categories namely visual, live, and internet entertainment. Nonetheless, this move may have led to a lack of specialty in a single niche hence meager result in all investments.
Further, with increased competition in China and the need to globalize, Huayi embarked on finding a suitor to partner into the United States market. Consequently, a strategic decision was arrived allowing for a partnership with STK. Notably, in the new agreement Huayi was involved in all segments of film financing, production, and distribution. Importantly, Huayi gained the much needed US market penetration, brand recognition, and first priority distribution rights for all STK films in China. Unfortunately, this decision may potentially dilute Huayi’s influence in China since local consumers may not have the personal attachment to films created in a faraway land. Similarly, the decision to diverse the levels of entertainment may lead to underperformance due to lack of specialization.
All things considered, Huayi should consolidate its core competencies in film production and distribution. Further, a joint venture will enable the business to get brand recognition. Additionally, a continued acquisition of competitors is needed to promote Huayi market share. In spite of their efforts, Huayi faces the threat of being faced off by technology. Notably, movie streaming companies like Netflix offer similar services to those of Huayi in a much convenient manner
Lie, J., and Schean, J. Huayi Brothers: Strategic Transformation. London: Ivey Publishing, 2015. Print.