Microenvironment of Pegasus & Taihe Entertainment International Co. Ltd
Pegasus & Taihe Entertainment International Co. Ltd is one of the most popular local film entertainment companies in China (Taihemedia, n.d), founded in 1993. This was among the first private company that has recorded success in TV programs such as Eastern Night of Tan, Films around the World, My Entertainment and Chun Hua Qiu Shi. Aside from T.V programs, the entertainment company is known for many interesting high-quality productions. Pegasus & Taihe has produced TV documentaries, 4-D films, corporate, city promotions, and digital video series. Internally, the company is able to plan and produce many shows of high quality. The private company is in charge of the Huabiao Awards Festival, the Beijing University Film Festival, and the Cheer for China Series. Movie productions such as Crossed Lines and Call for Love are credited to Pegasus & Taihe.
As a strategy for improvement of quality films, the company has updated its operations, and adopted more communication skills that help the company include marketing and brand promotion activities. The company is also integrating the aspect of public-private partnerships with the government of China whereby Pegasus & Taihe is doing a promotion of major cities, and enterprise brand expansion.
Pegasus & Taihe is a subsidiary of The Taihe Media Investment Co. Ltd. The corporate culture of Pegasus & Taihe begins with a look into the significance of the company logo. The name Taihe originates from an ancient Chinese script called ‘Book of Changes’. The first word ‘Tai’ means flowing and smooth and ‘He’ means flourishing. The company has a corporate prospect or goal of using film to spread the culture of the Chinese people. Moreover, through the ‘Made in China’ products of entertainment, the company aims to have an impact in the international film industry. The general corporate culture of working in a pleasurable environment while providing enjoyable products for the general public in China and internationally.
Macro business environment of China
The Unites States Commerce Service (2013) estimates that the Chinese economy is competing with the US economy for the position of an economic superpower. China is also home to 171 cities and a population of close to a million in every city while the US only has nine major cities. The high number of cities in China shows that the Chinese people are averagely a middle class population and hence has the purchasing power to be able to afford to watch movies and produced locally by Pegasus & Taihe. China’s GDP has grown slowly since 2012. The export market is booming in the country, with the US imports from China increasing by 468% since 2001. This high rate of exports outside of China is a good opportunity for the country to export film products to an even wider audience in the US and neighboring countries (U.S C.S, 2013).
The inbound foreign direct investment in China was at US$116 billion as of 2011. During the first three quarters of 2012, China’s inbound FDI was at US$83.4 billion. Its outbound direct investment totaled to US$52.5 billion in the first three quarters of 2012. Between 2011 and 2015, the Ministry of Commerce estimates that the outbound foreign direct investment (FDI) is bound to increase at a rate of 17% annually and soon, it will reach its superpower competitor, US at $150 billion. The rapid economic growth rate of China in the urban areas has contributed to an increased consumer market for high-end goods and services. By the year 2020, the country’s middle class population will have accounted for close to 50%, i.e. 700 million of the Chinese population. This is just the right market for the television and film market (Tang, 2014).
As of 2013, China’s film and television audience were over 1.3 billion, with an ever growing number coming from rural areas. The State Administration of Radio, Film and Television (SARFT) is the regulating body that controls the broadcast and film content consumed by the Chinese people. Changes in the macro environment show that younger generations are leaning towards the internet and mobile television instead of the traditional television. Audiences in many areas are open to Western culture, consume Western television content on television. China has the 12th Five-Year Plan in which the government wishes to promote the Chinese cultural industry through theater and films (ebscohost, 2014). A target has been set to increase the value of this industry by 5% GDP by 2015, through an annual growth rate of 15%. Such regulatory progress made in favor of the Chinese film industry is bound to contribute to the future advancements in sales of films that promote Chinese culture through Pegasus & Taihe.
Evaluation and critical understanding of entrepreneurship and innovation
Peter Drucker (2004) used to be an expert on matters entrepreneurship and innovation, until years later when more research, innovations and theories came up to give the two concepts a whole different meaning. William Lazonick (Morris, Kuratko & Covin, 2011) was one such scholar who came up with the idea of indigenous innovations after Drucker (2004). According to Lazonick, indigenous innovation is the improvement of group learning among members of an organization. According to Lazonick, the main strategy that is the key driver for the innovation is more advanced socially, rather than through processes. According to him, the pursuit of innovation needs more that the practical actions taken. Another way to look at innovation is disruptive innovation (Petti, & Ederer, 2012). Disruptive innovation is an innovation that improves products and services in such ways that the market does not expect. This can be achieved by lowering prices or designing products so that they appeal to a new kind of customer. These kinds of innovations can be looked at as being intimidating to the products’ current market while also being a source of competition to other market leaders. Drucker (2004) had a thesis involving a lot of research before coming up with an innovation.
However, a different author looks at an antithesis of Drucker’s concept, whereby he focuses on accidents happening that lead to an innovation. This he called systematic innovation. Bessant and Tidd (2008) explain that for innovations to occur, they do not always have to have a plan. The authors agree that sometimes, innovations are because of accidental occurrences. Some of the innovations that have come about this way include penicillin, nylon, Teflon and cornflakes. Away from the different critics and views on innovations, an entrepreneur has been described as having the ability to move economic resources from low to high levels of productivity. In the US Szirmai (2011), explains that an entrepreneur is someone who begins his own small business from the scratch. Drucker (2004) disagrees with the above definition by saying that not all the small business that is beginning on an entrepreneurial perspective. Secondly, not all small businesses have an innovative idea behind them. For Drucker (2004), entrepreneurs see ‘change’ as a standard. For entrepreneurs, change is welcome and important only if it benefits the people working in a corporation or the small business. The role of entrepreneurs is to look for areas that require change and explore how they can implement change. However, accomplishing this change has never been easy for many organizations. Millions of companies suffer from inflexibility of the rigid corporate structures, making many employees without enough agility to cope with or even introduce the change.
Innovation and entrepreneurship in the 21st Century
In the twenty first century, it was amazing to see that many different strides that companies are making towards achieving innovation and entrepreneurship (Shah, GAO & Mittal, 2014). It was during this time that innovation became an important aspect of every business globally, regardless of its market scope. Businesses have now realized that in order to compete in today’s commercial world, it is imperative that innovative skills are identified and nurture early. This is bound to give the company a competitive advantage and more benefits. Think tanks, research and development (R&D) departments are used in many companies to come up with the innovative strategies. In reference to a study conducted by a group of senior managers in companies based in Chicago (Szirmai, 2011) showed that entrepreneurship and innovations still have a number of challenges to meet before achieving success.
The results of the research showed that enterprises that referred to them as being highly innovative already worked using innovative processes. Even though, the innovative processes had their challenges and strengths, the mere fact that the process was innovative, communicated something to the customers about the whole company. When one compares the ideas and concerns of entrepreneurs of the 21st century with those of the 1980s, many differences are evident. Eve during times of economic recessions, entrepreneurial ideas, and innovations are still required. Zhao (2008) recommends the application of networked innovations as a strategy to assist corporations and businesses to carry out innovations in this Age of Information. The next section of the following essay gives a critical look at the sociological theories of entrepreneurship (Bula, 2012).
Entrepreneurial ventures can be closely linked to social entities from their beginning. The involvement more people as a business grows brings about a lot of changes and lasting consequences to the business. Bula (2012) adds that many enterprises are formed because of the coming together of teams. In order choose the right team, one has to consider the purpose of the choice, homophile, and other constrained choices concerning context or the opportunity structure. The author defines homophile as the ability of people that find themselves similar to other people to connect. This may be the reason for choosing others on the basis of ethnicity and gender. A give and take transactional relationship between team members plays a big role in entrepreneurship activities, whereby people come together to establish a small business. These people must be present from the beginning to the time when the business is up, running and bringing in profits.
A lot of literature has been done based on the assumption that working in a team is a considered choice of the founders or business leaders. Bula (2012) quotes the work of another author, stressing that there are a number of psychological benefits originating from relationships between the team members. A solo business leader or entrepreneur bears the burden of making all the decisions for the business and bearing the consequences that come about. Working in a team tends to spread the responsibility among all the business members. The opportunity to defend business decisions among other members allows team members to gain more confidence in their decisions. From another perspective, Bula (2012) explains that team involvement works better if all the people involved are friends and can keep the team spirit going during difficult times.
Entrepreneurship and innovation in the film industry
The film industry is the number one creative industry that the youth are encouraged to join and develop their skills (Liao, 2011). Over the last years, documentaries and other film productions have enjoyed a complete reinaissance. However, the film industry in general is yet to enthusiastically approach innovations in business practices (Zhang & Stough, 2013). Vladica (2008) explains that these innovations can help in the exploration of opportunities such as interactive media, content digitization, use of broadband or re-production of the value chains. Application of innovations is integral to the development of feasible business models for film and documentary producers. The media environment is grappling with the creation of business models that bring about revenue to film producers for a long time (Bernice, 2006). To solve this problem, innovative, and entrepreneurial business models that are offered rewarding opportunities for film producers are coming up. This might be the opportunity that young filmmakers have looked for in the creative industry. Using the theory of socialization (Bula, 2011), different teams of young people can come together and develop films that can be educative and adopt a strategic business model that will bring revenue to them (Bernice, 2006).
Pegasus & Taihe Entertainment International Company has already set its mark as a top film company in China, bringing local Chinese culture to the people of China. From the business environment analysis, it is evident that the company already has in place a wide variety of products. Taking advantage of the millions of people in the over 120 cities of China, the film industry run by the entertainment company has a ready audience to feed its products. However, Pegasus & Taihe is facing competition from the Western film industry of Hollywood because many of the youth are watching a lot of Western drama through the internet and mobile devices.
This brings us to the key weakness that the company has. Pegasus & Taihe has not entirely embraced the presence of the internet sites such as YouTube and digitization of its products in order to reach a wider audience. A good look at the website the company is hosted, there are no social media links where products can be shared, people who love the Chinese culture are not able to subscribe and get premium membership for first-hand access to films that the company has addressed. From the above environmental analysis that Pegasus & Taihe is operating in, it is evident that the film, just like tourism is a product that the company can export and reach an even wider audience. The Chinese Tourism Strategic Plan (Chipchase, 2012) has set diversification of tourism products as one of the strategies for future tourism development. The key question of the ministry in charge is why the film has not been included as one of the products earmarked for diversification. Since the main aim of Pegasus & Taihe is to bring the Chinese Culture to the world, film tourism can be a great way to spread the message of the Chinese culture through events such as the film festivals promoted by Pegasus & Taihe.
The next section studies ways that Pegasus & Taihe can use to adopt an innovative business model that it can use to digitize film for the consumption of a wider market. Sparacino (2008) and Wall Communications (2002) explain that the commercial models that are in use in the marketplace to publicize film products include content licensing, usage fees, content licensing, and advertising. Sponsorships and a few online sales also apply to business models for the distribution and sale of film products. Use of such commercial models gives film producers an opportunity to reach a wider audience. Hodder (2006) adds that television episodes sold on iTunes bring a return of $1.44 of the $1.99 retail price to the rights holder.
Audiences may not necessarily embrace such models in such a way that commercial satisfaction is achieved. An example of this is seen in December 2007 when Hewlett Packard stopped its famed video download services. The result of this is that Wal-Mart also stopped its movie download services, retaining one for music (Hight, 2008). Aside from the mentioned downfalls of video downloading, one particular idea that may work for Pegasus & Taihe is seen in Telcos. The company can position itself in media distribution and increase its shares of content revenue by offering on-demand videos through their networks of partners and sponsors. This can be done banking on the fact that there is a widespread use of mobile phones that have video features. Similarly, the use of online sites such as YouTube can bring about revenue due to the presence of user generated content (Bernice, 2006).
There are two specific innovative business models that can be recommended for application in Pegasus & Taihe. First, the YouTube model can be developed to sell film products depending on the use of open distribution platforms and user-generated content. Such platforms and content can serve to increase the company products popularity by attracting more viewers to its YouTube videos. Pegasus & Taihe, is a private company that can be classified as an independent producer of its film content. This explains why the company is using customary outlets for its products such as Huabiao Awards Festival, the Beijing University Film Festival, and the Cheer for China Series. Other traditional outlets for its film products include community cinemas, archives, and film circuits. It is also evident that the film company has worked with universities to make university circuits. For an entrepreneurial film company, innovation does to mean entirely that traditional film distribution outlets should be abandoned. Innovative models encourage the creation of new entrepreneurial business practices in every one of the distribution channels used by Pegasus & Taihe so that more specific consumer markets can be reached (Zsombori, et al., 2008).
One such innovative business strategy is the use of interactive and digital media. Multiplatform communication technologies that allow re-industrialization of the value chains is also an interactive media approach (Irwin, 2004; Cook & Wang, 2004). Pegasus and Taihe can also produce digital movies and deliver them using broadband, through the company website and on Video on Demand (VOD). Technology has made such transformation more effective with the introduction of digital file compression, encryption, streaming media and the broadband Internet connection (Currah, 2003). The technology allows digitization, storage, and transmission of the company’s film content through broadband and digital networks. In order to action the above strategies, the company will have to adopt even more innovative distribution strategies over the internet so that more VOD can be used for more clients (Vickery and Hawkins, 2007). At the beginning of this section, western movies and drama from Hollywood was seen as the main competition for China’s Pegasus & Taihe, competing for an international audience. The competition can be dealt with the use of VOD technology. This kind of technology is a major threat to Hollywood’s business model that is theater based. The theatre-based model has audiences as passive consumers. However, VOD had audiences in control as they can watch the movies at home, or any other place of choice (Husak, 2004).