Roaring Silence Case

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Submitted to;

VYP

Submitted by;

Roaring Silence


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31 March, 2012

Board of directorsV and Y Productions LtdUnited Kingdom

Sir,With due respect, we, a consultant group of four members, submit the report entitledBusiness Analysis: V and Y production Ltd. that you have assigned us. We haveanalyzed the current issues, prioritized them and discussed them. Based on thediscussion and analysis, we have provided some recommendations

We thank you, sir, for assigning us for the analysis of your production company.

Sincerely,Members of Roaring Silence


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Table of contents

1. Executive summary.3

2. What- so what analysis...4

3. SWOT analysis54. Strategic analysis.

i) PEST analysis...6

ii) Porters 5 forces analysis...7

iii) Porters generic Strategy analysis...9

iv) Ansoffs growth vector matrix10

v) Mendelows stakeholder analysis....11

vi) Critical success factors.12

5. Financial analysis13

6. Industry research14

7. Prioritisation of main issues...15

8. Issue types and approach19

i) Problems..14

ii) Proposal15

iii) Ethical issue....16

9. Recommendations..17


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Executive summary

This report has been prepared on the basis of our analysis on the case study andour knowledge about independent TV production companies and other issues of thecase. The independent TV production sector in UK is much talked-about nowadays.This sector can be said to be hugely demand driven, which ultimately makes thissector so lucrative. Therefore, the companies in this sector are expected to havestrong financial standing.The report starts with the company overview, and continues through the descriptionthe framework of overall business analysis. The business analysis includes fivemajor steps.

what- so what analysisSWOT analysisStrategic analysisFinancial analysis

Industry research

Business strategy analysis section also includes the PEST analysis, Porters fiveforce analysis, Porters generic strategy analysis, Ansoffs growth vector matrix,Mendelows stakeholders analysis matrix, and critical success factors. Inaccordance with the given information, financial analysis is done in this report. Incase of industry research we visited some TV production companies and interviewedsome directors, producers and TV production owners. We have prioritized the mainissues that the company is facing. This report includes the explanation of problemsand the potential solution of the problems. We tried to give some proposals, discussthe ethical issues. We also give some recommendation based on the problems and

proposals regarding this case study.


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What-so what analysis

What So what

BBC is exceeding the level ofcommissioning programmers by 2.5%

VYPs market for commissioning isincreasing

The market of independent TVproduction is very large-about 100

So the competition is very tough for VYP

Debt financing is increasing in thearea of TV Production Company.

As a result independent TV ProductionCompany is facing fund constrainproblem.

VYP has got so many talented andartistic employees.

This can be a very good side for VYP formaking unique programmes that can

help to gain competitive advantage.

only a small number of it is wellestablished

VYP taking this advantage can excelitself more conveniently and increase itsmarket share

Computer graphics interface hasattracted people and is influencing theprogramme quality and its cost

VYP must cope the new technologyusing computer graphics interface aswell as ensure its cost effectiveness

Higher initial cost lead to lower

margin in drama series

VYP need to be more careful in cost

controlling and forecasting accurately

Margin is getting lower in re-commissioned programmes.

There raise a need to be efficient in re-commissioning programmes and make acost effective budget

VYP cannot equip itself fully VYP needs to be more efficient inoutsourcing

The graphics technician of VYP iskeen to have a new software package

VYP should provide the employee with anew software package


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SWOT ANALYSIS

Strengths Weaknesses

Highly skilled, experience and

artistic employees One of top 20 companies in the

market Increasing market share Having regular freelance and

small companies workingexclusively for VYP

Management is committed andconfident

Having good customer in line Increasing sales both nationally

and internationally

Poor controlling

Inaccurate forecasting Fund constrains Difficulties in debt financing Technological scarcity

Opportunities Threats

Expansion of market Expanding with new

programmes Increasing international market

demand BBC is increasing its

commissioning programmes

So many competitors Reduction in programme

commissioning Distract from core business Unavailability of actors Unavailability of prepared script Reduction in operating profit

Vulnerable to reactive attack bymajor competitors


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Strategic analysis

Pest analysis

Political Economic

Intellectual property rights clause Govt. and legal authority Contract and labour act of UK

Fund constrain Increasing international demand Reduction in commissioning

revenueSocial Technological

Charity work Outsourcing ability Viewers attraction to computer

graphics interface Trends to re-commission drama

series

Creating potential through training Use of computer graphics

interface Not fully equipped IT based accounting process Video editing suits


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Porters five forces model

1. Threats of new entry:

Like VYPs emerging in these industries many more companies are coming in

this industry with a lot of talent, creativity and experiences. Reasons-

Better field to show creativity

Ever-growing market of TV media

2. Threats of substitutes:

Same programme just with a little innovation can succeed over another

programme of same kind.

Imitation by the competitors

Change of taste of the viewers


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3. Bargaining power of the buyer:

Broadcast company have employee whose duty is just to make decision

which programme to be commissioned at what price.

Their commissioning sensitivity is high

Their easy access to available information

4. Bargaining power of supplier:

The bargaining power of supplier that is the freelance people, small

companies affects the budget of the production house.

Availability of freelance and outsourcing company

5. Current rivalry:

Every independent TV Production Company tries to roll out its programme for

broadcasting.

Use of modern technology

Innovative programme making

Five Forces Analysis Outcome

Threat of the entry of new competitors Low

Intensity of competitive rivalry High

Threat of substitute products High

Bargaining power of buyers HighBargaining power of suppliers Low


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Porters generic strategy

Porters generic strategies

1. Cost leadership:

VYP mainly focuses on quality not the cost of programmes. It incurs initial cost inmaking drama series

Risks:

Other TV production company may be able to reduce their cost as technology

improves.

2. Differentiation:

VYP has established itself in the market and achieved goodwill by making

unique programme such as- documentary.

Low Cost Differentiation

Broad

Strategicscope

Narrow

Cost Leadership Differentiation

Cost Focus DifferentiationFocus


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Focusing on the quality

Making documentary from a different angle

Risks:

Imitation by the competitors and changes in the taste of viewers can hamper

achieving uniqueness in the programmes.

3. Focus strategy:

There are two scopes in focus strategy-narrow scope and broad scope. VYP is

making a number of programmes for the broadcasting company adopting broad

market scope strategy.

Focusing on new programmes

Focusing on new market

Risks:

Imitation by the competitors and changes in the segments of market can affect focus

strategy.

Ansoffs growth vector matrix

Product

Existingnew

Market

Existing

DocumentaryDrama series

Market penetration

Childrensprogramme

Productdevelopment

Ne

w

Sale of programmes in international market

Market development

Corporateadvertisingvideo

Differentiation


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Mendelows stakeholders analysis matrix:

Level of Interest

Power

Low High

Low Critics-evaluate VYPs

programmes

Competitors- interested in

winning contracts

Treatment- minimal effort

Outsourcing companies and free

lance people-perform VYPs most

of the tasks

Staffs- they actually make the

programme with the help of key

employees

Actors and presenters- they

present the programme in front of

viewers

Treatment- Keep informed

High Govt. and legal authority-

protect viewers and workers

right.

Viewers- make any programme

successful

Treatment- Keep satisfied

Broadcast companies-source of

VYPs revenue.

Shareholders and key employees-

greatly influence VYPs performance

and interested in earning profit.

Treatment- Key players


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Critical success factors:

1. One of the top 20 companies

2. 1.4% market share

3. Experienced, skilled and artistic employees

4. Good communication with broadcast companies5. Good programmes quality

Financial analysis:

Financial analysis (also referred to as financial statement analysis or accounting

analysis) refers to an assessment of the viability, stability and profitability of a

business, sub-business or project.

Profitability ratio: The sales profitability of VYP as follows:

2010- Profitability =

net profit after taxes

Net sales

1,483

20,620

=7.2%

2011- Profitability=

net profit after taxes

Net sales

2,085

28610
http://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Business


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=7.3%

Liquidity:

VYP works based on the cash inflow from broadcast companies. As VYP receives

commission revenue soon after the contract is signed, liquidity remains in VYP. VYP

meets its operating expense from commissioning revenue. Liquidity falls when

expense exceeds commissioning revenue. As no balance sheet information is

provided in the case we cannot estimate VYP in numerical terms.

Risk position:

Revenue for commissioning of programme decreases. As a result VYP can be in a

risk position.

Industry research:

For finding out the real scenario of this industry we went to different production

houses of Bangladesh such as creative media ltd., Circle media, Black & white, CG

world and . We met with directors, producers and actors to find out some real life

examples. Specially we met with ZahidHasan who is a producer, director and actor.

Our findings from the research is that in this industry people focus more on

differentiation, relationship with others and reputation rather than profit but they also

make profit.

Prioritization of main issues

Fee negotiation for new childrens programmeme is evidently the mostimportant issue in current scenario. VYP being a beginner in children programme,this first performance will be largely determinant of its future prospect. Moreover, theprojects crucial strategic importance is enhanced by the challenge whether VYP willbe able to establish its brand image by diversifying its expertise or confine itself into

the niche of selected genres. Whether to remain contented with the huge 6,300,000sacrificing merchandise rights or venture taking the merchandise rights at the cost of


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35% of certain revenue is another million dollar question to be addressed.Furthermore, the huge 6,300,000 is a large enough amount to have surpassednumerically all other issues. Thus, this fee negotiation of children programmeme isundoubtedly the most prioritized issue and so management must select the rightpath from the merchandise right dilemma.

Re-commissioned drama series, the seemingly easy-to-milk cash cow isprioritized over all the remaining ones for its underlying challenge of retaining VYPsreputation, strengthening market position and obtaining huge 5 m revenue. Fulfillingthe expectation raised due to the unusually well received previous programme andthus obtaining more than 5% operating margin are crucial for VYP. The only obstaclein this way is concern over availability of John Strong whose absence can severelyhamper the programmes appeal. Considering this strategic importance, colossalsum of revenue and urgency of this issue, management should take necessaryactions in this regard.

Banks friends or foe is the issue prioritized third for its large financial impactand more importantly for critical strategic issues regarding quality-budget dilemma.Firstly the 62000 impact on income statement numerically surpasses rest of theissues. Secondly and most importantly, the decision on this quality-budget dilemmais immensely significant since it will determine whether VYP will lean towards profitat the cost of quality, credibility and ethics or show allegiance to those invaluablestandards even incurring loss. For all these reasons, it must be ranked higher thanthe following issues. In this circumstance, management must prudently take theappropriate course of action in this crucial issue.

Proposal to expand into corporate advertising videos comes next to bankingin prioritization schedule. Despite the lucrative advertisement market, whether totake or not to take is really a grave concern for VYP considering some key issues.Firstly, VYP is quite a novice in the advertisement arena lacking any previousevidence of its expertise. Moreover, the medium-sized organizations capability todeal with so many sectors simultaneously is also a vital question to be addressed.However, the advertisement margin being low, there arises another strategic issue oftaking a test work with Zubinos Coffee shop. In the midst of such surroundingquandaries, the management should take appropriate course of action in this issue.

Accident at studio, although ranked last, is never a negligible issue. Notdischarging duty to the employees can be an abominable act severely hampering theorganizations reputation of years. In the mentioned case, poor planning that led theset builders to work in a hurry. More importantly, the comment made by a leadingVYP producer is utterly irresponsible and inhumane. Management must step aheadto stop such issues derogatory to VYPs fame and professionalism.


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Problems

Releasing Mr. Strong from his pre-existing contract

The drama series is about the ups and downs of rowers life. Last year the program

revolved group of four rowers. Mr. John Strong, an original rower, is one of them. But

Mr. Strong is already contracted with GGG for ten months. VYP shooting will start

within four months. A programme without a major character will lose acceptability of

the viewers. For example if Mr. Bean is shot without Rowan Atkinson it will never

be well accepted.So releasing Mr. Strong from his pre-existing contract is a problem

for VYP because without him the programmed will not succeed.

Solutions:

1. Releasing Mr. Strong by motivating Mr. Strong about VYP reputation and

offering him a more lucrative amount than GGG; this is legal in terms of

personal service contract. Secondly giving some extra amount will not affect

our margin in true sense. Finally this will let the shooting go smoothly.

2. Starting shooting without Mr. Strong and then making his part of shooting

when his contract with GGG is over. In this case VYP will not have to pay any

extra amount. Moreover will not hamper GGG trough this way.

3. Telling Mr. Strong to complete his contract within 4 months and then join VYP.

This will not hamper both VYP and GGG.

Conflict between programme producer and director

Banks- friend or foe? A new documentary by VYP is forecast to make a loss. The

programme producer suggested taking no mare interviews and cutting back the user

of expensive CGI to achieve breakeven. The director is angry at these suggestions.

So there is a problem regarding conflict between director and producer. This problem

is actually choosing between cost leadership and differentiation strategy.

Solutions

1. Completing the interview taking no more interviews and cutting back usage ofCGI. This will help VYP reach breakeven. In business money is the main thing


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so what if VYP cannot express the truth properly and sustain reputation but

VYP can save money through this way.

2. Taking as many interviews as necessary for finding out the truth but

minimizing the use of CGI as far as possible. Doing so VYP can express the

truth thus sustain reputation and minimize its loss in a large extent. Moreover

for a documentary gaining viewers acceptance, broadcasters satisfaction and

award does not depend on the use of expensive CGI that much.3. Taking more interviews as necessary and using expensive CGI. This will

make the documentary attractive in spite of incurring huge amount of loss.

Accident at studio

Recently VYP made set builders work from 11 pm to 10 am (anti social work hour)

as VYP had little time to set up the studio due to poor planning. In this hurry a set

builder fell off and broke his arm. This accident must have a reputational impact on

VYP and relationship with stakeholders may be hampered.

Solutions

1. Taking responsibility of accident and making compensation for it. Doing so

VYP will be marked as empathetic and responsible to workers and be able to

develop relationship with stakeholders.

2. Stopping to work at anti social work hours but not taking the responsibility of

accident. The accident happened due to lack of concentration and tirednessof that worker. VYP do not need to take responsibility for this.

Proposals

Strategic proposals

Expand into corporate advertising video


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Background to the proposal: Steve Voddils old friend at Zubinous Coffee Shops has

requested to help him promote his chain of coffee shops by producing a corporate

advertising video which will be local independent TV.

Discussion of the proposal: It is a new market for VYP and VYP does not have any

experience regarding this market. Moreover if VYP accepts the proposal it will have

to bear loss at first. It will earn profit later on if the first video goes well. VYP may loss

its focus on TV programmemaking.On the other hand corporate advertising video is

a huge and potential market from which large amount of profit may be earned.

Taking ownership of merchandising right:

Background to the proposal: VYP is being contracted for a new childrens

programme Sammy Squirrel. VYP is confident about the successes the pilot

programme has received rave reviews. The contract contention is the ownership of

merchandising right. The broadcast company offered VYP 350,000 where the

merchandising right will remain with broadcaster. If VYP receives 40%

merchandising right, the revenue will drop by 35%.

Discussion of the proposal: Though merchandising is a new task for VYP, it will

outsource all the merchandising activities. If VYP takes the right it will reach

breakeven in the first year of first instance at sales level of 22,050,000(Appendix- ).

Earning so much revenue at the first year first instance may not be possible for

aoutsourceing company.

Operational proposal:

Re-commissioning of drama series

Background : Following the success of a drama series last year a proposal of re-

commissioning of drama series from BBC.


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Discussion: The re-commissioning of the drama series will give 5 million revenue

and more than 5% margin after cost savings. Though one of the major actors is

unavailable, it is possible to make him available through some techniques.

Giving Sara Mills share in the profits of the company

Background: Sara Mills, head of programme commissioning, has recently

approached Voddil and Young to ask whether she can participate in the companys

success as she does not consider that her skills are being fully recognized and

rewarded.

Discussion: Sara Mill, a key employee of VYP having high power and interest, will

contribute more loyally in VYPs success. As a result positive atmosphere will prevail

in VYP. Otherwise VYP have to look for her alternative.

Ethical Issues

Objectivity

Portraying the truest possible picture of an incident is the responsibility of the maker

of a documentary. In the issue of Banks friends or foe, it has been recommended

that Sarah Runner, the program director be allowed to have as many interview as

she requires to bring out the truth. Regardless of business consequences, VYP

establishes its ethical stance of objectivity in this instance.

Duty of Care

To ensure safety of its employees and to design a social work hour for them are

obligatory responsibilities of an ethical organization. Concerned by the accident at

studio, VYP has been recommended not to let a single more occurrence of this type

take place. Moreover, the producer making irresponsible comment should be

despised. In fine, the mentality towards employee should be changed holistically and

it should be ensured that all the employees are treated humanely, compassionately,

and above all, with care.


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1. Conflicts of interest

Recommendations

Problems

1. Releasing Mr. Strong from his pre-existing contract: in this problem VYP

should follow the first solution that is offering Strong lucrative amount. If it is

not possible VYP should start shooting without Strong and then taking his part

of shooting after his pre- existing agreement.

2. In case of the conflict between the producer and director VYP should use as

many interviews as possible but minimize the use of CGI.

3. VYP should take responsibility for the accident at the studio and makecompensation for the loss of the set builder.

Proposal:

1. Ownership of 40% merchandising right should not be received by VYP asindicates a total sale of 22050000 which is not feasible in the first at first

instance rather it should take the 3500000 revenue offer as it brings huge

amount of cash without any risk.

2. The proposal of re-commissioned drama series must be accepted by VYP as it

brings profit. In this case the releasing Mr. Strong is legally possible.

3. Proposal of making Sara Mills a shareholder should be accepted and VYP

should give him handsome amount of share after negotiation. It can be 5% of the

total share.


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Appendix

Breakeven point of merchandise sale:

Revenue from commissioning without merchandise right= (350,000*54/60)*20

= 6,300,000

Revenue from commissioning with 40% merchandising right= (227,500*54/60)*20

= 4,095,000

So we need more 2,205,000 revenue from merchandising sale which is actually the profit

received from outsourcing companies after providing 60% royalty to broadcaster. The sales

level must be 22,050,000

Here, total sales=2,205,000 by outsourcing

25% profit from outsourcing companies

5,512,500 60% royalty

2,205,000 3,307,500

Our profit 40%


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[The questionnaire is based on aninterview of a leading production house of

Bangladesh. Mr. ZahidHasan, the subjectof our interview, has provided us with

information on the management of his

production house under the following

format.]

1. How many production houses do you own?

1

2

More than 2

Answer: 2

2. What are the names of these houses?

Questionnaire


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Answer:

Pushpita Visuals

Black and White

3. Do you hire directors for your programs?

Yes

No

Answer: No

4. Do you play the roles of producer and director at the same

time?

Yes

No

Answer: Yes

5. What kinds of programs do you make?

Drama

Advertisements

Childrens program

Documentary

Answer: Drama

6. What is commissioning system of your production house?


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Answer: It is mainly based on the deed of agreement with the broadcast

company.

7. Do you think it is beneficial for a production house to grab 3\4

items

of programs at a time?

Yes

No

Answer: No

8. Suppose you want an actor to play an important role in your

next

program. Now he has already entered into a contract with some

other production house . Do you think you can validly convince him to

work for you instead of that production house?

Yes No

Answer: Yes

9. How would you do that?

Answer: I would convince him by ensuring that if he works for me hell

be benefited financially and will also become a popular character.


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Ordinarily, this works.

10. Have you ever faced any legal complications in doing so?

Answer: No. Ive never faced anything like that. Moreover, in

Bangladesh perspective, generally there is no legal bar in

doing so.

11. Have you ever made any late delivery to broadcast

companies?

Yes

No

Answer: Yes

12. What were the legal consequences of late delivery?

Answer: I did not have to face any legal consequences for such late

deliveries. Most of the broadcast companies are good friends of mine.

As such whenever there is a late delivery I let them know

earlier so that

they can make some alternative arrangements. However the number of

such late deliveries had been very few.


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13. Do you want to share any problem that you have undergone

in dealing

with any broadcast company?

Answer: Yes. I had a deal with a renowned broadcast company (do not

want to mention name) to submit a drama series consisting of 26

episodes. Lateron, seeing the progress and quality of the series, the

company asked me to prepare 52 episodes of the said series. So, I

started

to invest more on that series. But a few days later the broadcast

company

informed me that they want only 13 episodes of that drama series. I was

very disappointed. Therefore I decided to cancel my deal with them.

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