An Exploratory Study on the Innovative Business Model of Pre-Recorded DVD Industry in Taiwan

With superior competencies in mass production of disc replication, Taiwanese replicators have occupied a slice of the whole pie in the world DVD market. However, judging from the degree of value-added along the whole value chain, disc replication shares only a small portion of total industry revenue and the lowest margin among players in other segments. Furthermore, disc replicators had been suffering a decline of both their revenues and market shares during the past years, given the industry still had double digit growth gloablly. It becomes imperative for disc replicators to search for feasible ways of strategic changes in order to revitalize their businesses.
Motivated by this strategic challenge, the present thesis attempts to propose an innovated business model that for disc replicators. To achieve this goal, we will first explore the nature of competition and the industry structure of the pre-recorded DVD industry. Next, we will discuss the impact of emerging technologiese that may fundamentally change the industry landscape, such as next generation high definition blue laser disc and broadband digital downloading.
By applying profit pool analysis, our research clearly identifies that disc replication is sitting in the valley of the value chain and exhibits lowest profitability. As the industry has gone through its life cycle and has been approaching its mature phase, the industry consolidated and competition intensified. Current strategy based on scale production is no longer viable to sustain growth. We also found that Asia Pacific market is the engine of growth of DVD industry in the next coming few years.
Based on such an industry landscape, the study therefore proposed an innovative business model by vertically integrating the functions of replicators, distributors and physical distribution, and foscuing on the Asia Pacific region to provide local adaptation advantages to worldwide content providers. We further articulate and justify such business model from the five aspects of a business model; they are: value proposition, scope of operations, profit capture, strategic control, and exeuction. Implication of this business model and suggestions for future researches are also discussed.