MAGINET.COM: COMPETITION IN E-ENTERTAINMENT SERVICES

By Park, Seungwook; Modarres, Mohsen et al. | Journal of the International Academy for Case Studies, May 1, 2008 | Go to article overview

MAGINET.COM: COMPETITION IN E-ENTERTAINMENT SERVICES


Park, Seungwook, Modarres, Mohsen, Lee, Kookchul, Journal of the International Academy for Case Studies


CASE DESCRIPTION

The focus of this case is on the selection of appropriate international strategy by e-entertainment company, MagiNet. The products provided by the MagiNet Company included Information System, Movie-on-Demand, and Internet-TV services for luxury segment of the hotel industry. Secondary issues in the case are globalization vs. multi-domestic strategies; R&D costs for new products; cross-industry application of the services by MagiNet Company; The levels of difficulty in this case are4 - senior capstone classes and 5-first year of graduate classes. The case is designed to be taught in 1.5 hours of class time, and 3 hours of outside preparations by students.

CASE SYNOPSIS

MagiNet was launched in 1995 as an entrepreneurial subsidiary of Pacific Pay Video Company. The mission of MagiNet was to provide e-entertainment services in the Asia Pacific market. Soon after its establishment the company realized rapid growth and became a leading service provider of movie-on-demand, Internet TV, and information services to luxury hotels in Asia Pacific region. By 2002 Maginet became leader in e-entertainment service and expandedboth domestically and internationally. MagiNet's market share increased to 78%, and annual sales reached $6.62 million dollars. However, the strategic audit for the year ending 2003 indicated a gradual decline in total sales and a simultaneous increase in operating costs. The decline in the company's performance created a dilemma for Lee the CEO of the company. After much thought and consulting views, Lee decided that the implementation of drastic reorganization and changes in the strategic orientation of the company may be the only viable alternatives to improve the financial performance and long term survival of the company.

COMPANY OVERVIEW AND MISSION STATEMENT

Pacific Pay Video was founded in 1991 in the United States. PPV s mission was to provide e-entertainment to luxury segment of the hotels industry. During the early years of its operations Pacific Pay Video (PPV) realized a rapid growth rate. In 1995 PPV s top management decided to expand internationally by establishing a subsidiary company in South Korea. Environmental scanning indicated that national culture, favorable competitive environment among e-entertainment providers, and telecommunication infrastructure would make South Korean market a strategic opportunity for the initial stage of international expansion. The mission for the new subsidiary was to provide high quality e-entertainment services to luxury hotels in Pacific-Asian countries. The cultural differences pressured the new international subsidiary to be cognizant of customer preferences and customize its products and services for the Korean market. However, the customization required greater financial resources for successful operations. To secure required financial resources, Lee, the CEO of MagiNet Company, decided to initiate public offering to NASDQ which turned to be unsuccessful. PPVs cash flow problems eventually pressured top managers to implement an extensive reorganization and eliminate non-value added activities and processes. Two years after the restructuring strategy about 90% of five-star hotels in Seoul had contracted with MagiNet for the interactive movie-on-demand services. The success in international expansion strategies encouraged the company to provide new services for a pre-installed laptop or desktop computer, on-demand, Internet-TV and PC services as a bundle to the hotels in the AsiaPacific region. To maintain the competitive position in international market product differentiation and understanding of cultural differences were strategically important. To sustain its competitive position in Asia-Pacific MagiNet established an effective network that enabled the company to offer services in luxury segment of hotel industry. Moreover, the marketing strategy focused differentiating services in Information System, Movie-on-Demand, and Internet-TV services to major cities in more than 12 countries. …

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