ROARING SILENCE

CONSULTANCY GROUP

Submitted to; VYP Submitted by; Roaring Silence

ROARING SILENCE
CONSULTANCY GROUP

31 March, 2012 Board of directors V and Y Productions Ltd United Kingdom Sir, With due respect, we, a consultant group of four members, submit the report entitled Business Analysis: V and Y production Ltd. that you have assigned us. We have analyzed the current issues, prioritized them and discussed them. Based on the discussion 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. 2. 3. 4. Executive summary.3 What- so what analysis...4 SWOT analysis5 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. 6. 7. 8. Financial analysis13 Industry research14 Prioritisation of main issues...15 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 and our knowledge about independent TV production companies and other issues of the case. 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 this sector so lucrative. Therefore, the companies in this sector are expected to have strong financial standing. The report starts with the company overview, and continues through the description the framework of overall business analysis. The business analysis includes five major steps. what- so what analysis SWOT analysis Strategic analysis Financial analysis Industry research Business strategy analysis section also includes the PEST analysis, Porters five force analysis, Porters generic strategy analysis, Ansoffs growth vector matrix, Mendelows stakeholders analysis matrix, and critical success factors. In accordance with the given information, financial analysis is done in this report. In case of industry research we visited some TV production companies and interviewed some directors, producers and TV production owners. We have prioritized the main issues that the company is facing. This report includes the explanation of problems and the potential solution of the problems. We tried to give some proposals, discuss the 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 BBC is exceeding the level of commissioning programmers by 2.5% The market of independent TV production is very large-about 100 Debt financing is increasing in the area of TV Production Company. So what VYPs market for commissioning is increasing So the competition is very tough for VYP

As a result independent TV Production Company is facing fund constrain problem. This can be a very good side for VYP for making unique programmes that can help to gain competitive advantage. VYP taking this advantage can excel itself more conveniently and increase its market share

VYP has got so many talented and artistic employees.

only a small number of it is well established

Computer graphics interface has VYP must cope the new technology attracted people and is influencing the using computer graphics interface as programme quality and its cost well as ensure its cost effectiveness Higher initial cost lead to lower margin in drama series Margin is getting lower in recommissioned programmes. VYP cannot equip itself fully VYP need to be more careful in cost controlling and forecasting accurately There raise a need to be efficient in recommissioning programmes and make a cost effective budget VYP needs to be more efficient in outsourcing VYP should provide the employee with a new software package

The graphics technician of VYP is keen to have a new software package

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SWOT ANALYSIS
Strengths Highly skilled, experience and artistic employees One of top 20 companies in the market Increasing market share Having regular freelance and small companies working exclusively for VYP Management is committed and confident Having good customer in line Increasing sales both nationally and internationally Opportunities Expansion of market Expanding with new programmes Increasing international market demand BBC is increasing its commissioning programmes Weaknesses Poor controlling Inaccurate forecasting Fund constrains Difficulties in debt financing Technological scarcity

Threats 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 by major competitors

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Strategic analysis
Pest analysis
Political Intellectual property rights clause Govt. and legal authority Contract and labour act of UK Social Charity work Outsourcing ability Viewers attraction to computer graphics interface Trends to re-commission drama series Economic Fund constrain Increasing international demand Reduction in commissioning revenue Technological 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 Threat of the entry of new competitors Intensity of competitive rivalry Threat of substitute products Bargaining power of buyers Bargaining power of suppliers

Analysis Outcome Low High High High Low

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Porters generic strategy

Low Cost Broad

Differentiation Cost Leadership Differentiation

Strategic scope

Cost Focus

Differentiation Focus

Narrow

Porters generic strategies 1. Cost leadership: VYP mainly focuses on quality not the cost of programmes. It incurs initial cost in making 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.

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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 Existing new Documentary Drama series Existing Market Market penetration Product development Corporate advertising video Differentiation Childrens programme

Sale of programmes in international market New Market development

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Mendelows stakeholders analysis matrix:

Level of Interest

Low Low Critics- evaluate VYPs programmes Competitors- interested in winning contracts

High 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

Treatment- minimal effort

present the programme in front of viewers

Power

Treatment- Keep informed High Govt. and legal authorityprotect viewers and workers right. Viewers- make any programme successful Broadcast companies-source of VYPs revenue. Shareholders and key employeesgreatly influence VYPs performance and interested in earning profit.

Treatment- Key players Treatment- Keep satisfied

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Critical success factors:

1. 2. 3. 4. 5. One of the top 20 companies 1.4% market share Experienced, skilled and artistic employees Good communication with broadcast companies 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

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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 most important issue in current scenario. VYP being a beginner in children programme, this first performance will be largely determinant of its future prospect. Moreover, the projects crucial strategic importance is enhanced by the challenge whether VYP will be 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 6,300,000 sacrificing 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 surpassed numerically all other issues. Thus, this fee negotiation of children programmeme is undoubtedly the most prioritized issue and so management must select the right path from the merchandise right dilemma. Re-commissioned drama series, the seemingly easy-to-milk cash cow is prioritized over all the remaining ones for its underlying challenge of retaining VYPs reputation, strengthening market position and obtaining huge 5 m revenue. Fulfilling the expectation raised due to the unusually well received previous programme and thus obtaining more than 5% operating margin are crucial for VYP. The only obstacle in this way is concern over availability of John Strong whose absence can severely hamper the programmes appeal. Considering this strategic importance, colossal sum of revenue and urgency of this issue, management should take necessary actions in this regard. Banks friends or foe is the issue prioritized third for its large financial impact and more importantly for critical strategic issues regarding quality-budget dilemma. Firstly the 62000 impact on income statement numerically surpasses rest of the issues. Secondly and most importantly, the decision on this quality-budget dilemma is immensely significant since it will determine whether VYP will lean towards profit at the cost of quality, credibility and ethics or show allegiance to those invaluable standards even incurring loss. For all these reasons, it must be ranked higher than the following issues. In this circumstance, management must prudently take the appropriate course of action in this crucial issue. Proposal to expand into corporate advertising videos comes next to banking in prioritization schedule. Despite the lucrative advertisement market, whether to take 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 previous evidence of its expertise. Moreover, the medium-sized organizations capability to deal with so many sectors simultaneously is also a vital question to be addressed. However, the advertisement margin being low, there arises another strategic issue of taking a test work with Zubinos Coffee shop. In the midst of such surrounding quandaries, the management should take appropriate course of action in this issue. Accident at studio, although ranked last, is never a negligible issue. Not discharging duty to the employees can be an abominable act severely hampering the organizations reputation of years. In the mentioned case, poor planning that led the set builders to work in a hurry. More importantly, the comment made by a leading VYP producer is utterly irresponsible and inhumane. Management must step ahead to 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 of CGI. 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 tiredness of 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 recommissioning 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 make compensation for the loss of the set builder.

Proposal:
1. Ownership of 40% merchandising right should not be received by VYP as indicates 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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Questionnaire

[The questionnaire is based on an

interview of a leading production house of Bangladesh. Mr. ZahidHasan, the subject of 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?

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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? Answer: Drama 6. What is commissioning system of your production house? Drama Advertisements Childrens program Documentary

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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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