SWOT & Financial Ratio

docx

School

Houston Baptist University *

*We aren’t endorsed by this school

Course

2301

Subject

Business

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by caleb1324

SWOT According to Investopedia, SWOT is a strengths, weaknesses, opportunities, and threat analysis that is a framework used to evaluate a company’s competitive position to develop strategic planning. Strengths One of Cinemark's greatest strengths has been its ability to establish a global presence. Cinemark has multiple locations in various countries which increases its audience reach. Another strength for Cinemark has been its ability to offer viewers premium viewing experiences like IMAX, XD, and luxury seating choices which target customers seeking enhanced viewing

experiences. They also offer customers the ability to earn from repeated returns to the cinemas through its member loyalty programs that gifts free movies and exclusive offers for members and the ability to earn points for every dollar spent that can be later exchanged for movie tickets. Weaknesses Although Cinemark has managed to establish itself, there are weaknesses that Cinemark must be aware of. One of which is dependence on box-office reviews. The number of tickets that Cinemark is able to sell largely depends on customer sentiment towards certain movies. Since ratings and perceptions fluctuate, Cinemark’s revenues also fluctuate. In addition, competition from streaming services like Hulu and Netflix can easily affect Cinemark's revenue because a large number of people will rather stream than go to a theater. According to a survey by The Harris Poll, “77% of respondents to the survey either strongly (38%) or somewhat (39%) agreed with the statement “In general, I prefer watching movies at home over watching in the theater.” Just 6% strongly disagreed.” (Lupis, 2023). Furthermore, Cinemark faces high maintenance costs. Cinemark offers viewers the highest quality streaming experience, it needs to be able to keep their theaters up to date with new and innovative technology which can be costly to both acquire and maintain. Opportunities Cinemark Holdings, Inc., presents many opportunities for development and growth. First off, Cinemark has the ability to expand its products beyond standard movie screenings as the entertainment sector develops more. Included in this are chances to improve the consumer experience by offering upscale amenities like deluxe seating, dine-in cinemas, and improved refreshments. Additionally, the business might use its current infrastructure to enter new industries, such as digital sports competitions or alternative content screenings, to draw in a

larger clientele. In emerging nations where there is a growing need for entertainment options, Cinemark's global footprint also offers growth opportunities. From a financial standpoint, Cinemark's revenue streams have shown themselves to be resilient and steady. The corporation continuously produced substantial earnings from movie theaters and sales through concessions prior to the COVID-19 epidemic. Although the pandemic caused disruption in the industry, Cinemark was able to navigate the catastrophe thanks to its solid financial position and cost-control strategies. Additionally, the business's digital activities and loyalty program offer chances for data-driven marketing and elevated client interaction. In the competitive entertainment sector, Cinemark Holdings has possibilities to innovate and adjust to shifting consumer preferences while preserving financial health. Threats Based on research, some threats include an increased use of technology and its advancement and competing streaming services to name a few. People enjoyed (and some still do) going to the movie theaters, purchasing a ticket, heading to the concession stand to buy buttery popcorn, candies, drinks, nachos, and slushies before carrying it all to the theater, finding their seat, and enjoying the previews before the movie begins. People enjoyed the experience! However, over time with the advancement of technology came new competition, streaming services. People can now microwave their own popcorn, buy candy from the store, pick any drink they want from their own fridge and choose any movie or show to watch from the comfort of their own home for the price of $15 a month instead of $15 a ticket. This is a threat many movie theaters face and some have already been taken out of business because of it.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Porter Five Forces According to Investopedia, Porter’s Five Forces is a model that identifies and analyzes five competitive forces that shape every industry. Threats of new entrants The threat of new entrants in the movie exhibition industry poses a notable concern for Cinemark Holdings from a financial perspective. While Cinemark has an established presence and a strong network of theaters, potential new competitors may still find entry opportunities. The primary financial challenge stems from the significant upfront capital required to establish and operate theaters, including real estate, construction costs, and technology infrastructure. If new entrants can secure the necessary funding, they could potentially target underserved or growing markets, eroding Cinemark's market share and revenue potential. Additionally, the rivalry for viewers' attention has gotten more intense with the growth of streaming platforms and on-demand material. The conventional dominance that movie theaters historically held over the distribution of films has diminished because of this digital disruption, which has made it simpler for new entrants to investigate alternative entertainment possibilities. To stay competitive, Cinemark, like other industry participants, must consistently make investments in improving the movie-going experience, such as by providing upscale facilities. Lastly, pricing power is another component of this financial dilemma. The pricing methods of new entrants may be more aggressive in an effort to capture market share, which might put pressure on ticket prices and profit margins for established businesses like Cinemark. To lessen this threat, Cinemark must continuously innovate, adjust to changing consumer preferences, and invest in technology in order to offer a compelling and diverse in-theater experience and maintain its financial stability in the face of prospective new competitors.

Rivalry among competing firms Cinemark faces fierce competition in the movie-entertainment industry. Some of its biggest rivals include AMC Cinema, Regal Cinema, Cineplex, and Marcus theaters. AMC is one of the largest movie theater chains in the world, with a significant presence in the United States and globally. Although now part of Cineworld Group, Regal theaters continue to compete with Cinemark in the United States. Cineplex is a major Canadian movie theater chain and represents competition for Cinemark in the Canadian market. Marcus Theatres operates a chain of movie theaters primarily in the Midwest region of the United States. Another major rival, as discussed in the Weaknesses, is streaming Services. Although they are not traditional rivals, streaming platforms offer an alternative to traditional movie theater viewing and compete for consumer entertainment choices. Bargaining power of suppliers Operating in the Movie entertainment industry means Cinemark's main suppliers are the Film studios as well as technology companies they purchase their equipment from. When it comes to negotiating revenue-sharing terms with theater chains, movie studios wield significant weight. However, many movie studios compete for distribution in theaters, which helps to reduce studio dominance. Providers of projection and audio equipment have some negotiating power, however, because there are numerous suppliers, their bargaining power is relatively low because Cinemark can find other suppliers easily. Threat of substitute products For Cinemark, the threat of substitutes remains high seeing as there is a growing demand for better streaming services. Instead of purchasing expensive movie tickets, many individuals may see greater benefit in waiting 3-5 months for the movie to come out on their $10 to $12 per

month streaming platform. Furthermore, the multiple choices of theaters scattered across different cities means consumers could easily find alternatives to watch movies. Bargaining power of buyers Customers have various alternatives, including streaming services and competing theater chains. This gives customers some bargaining power. In addition, because of the different options when it comes to theaters, customers can easily find another theater to watch their preferred movie. This ability to choose gives customers moderate to high bargaining power since they can compare ticket prices and choose to go somewhere else. Cinemark Holdings Financial Analysis Cinemark’s financial statements for the five years being analyzed—2018-2022—show that the company is experiencing financial difficulties. It has been losing money, and a significant decrease in profitability is projected in 2020. The corporation did not pay dividends in 2020, 2021, or 2022 likely because of financial concerns related to the COVID-19 pandemic and decreased viewership. Profitability Analysis 2018 2019 2020 2021 2022 Profitability Ratios: Return on Equity (ROE) 14.68% 13.21% -77.20% -126.41% -226.95% Return on Assets (ROA) 4.77% 3.28% -11.09% -8.08% -5.63% Dividend Payout (% of Net Income) 69.91% 83.23% -6.86% 0.00% 0.00% Gross Profit Margin -70.65% -66.96% -3.95% -47.25% -57.89% Operating Profit Margin 12.05% 10.31% -110.00% -16.72% -3.66%

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Net income Margin 6.64% 5.83% -89.88% -27.99% -11.05% Cinemark achieved a great Return on Equity (ROE) of 14.68% in 2018, indicating that shareholders' equity was employed efficiently to generate value. However, the ROE began to decrease in 2020 and eventually reached -226.95% in 2022, showing severe financial distress and large losses that exceeded shareholders' equity, needing quick actions to restore profitability and financial stability. This was a result of COVID restrictions which impeded movement for months. Return on Assets (ROA) experienced a similar pattern to ROE. The trend in Return on Assets (ROA) over the years shows a considerable fall in the company's asset efficiency. In 2018, the ROA was 4.77%, suggesting that the company earned 4.77 cents for every dollar invested in assets. By 2022, the ROA had dropped to a negative -5.63%, suggesting that the firm was no longer efficiently converting its assets into earnings. The negative ROA implies that the company's asset base was generating losses that surpassed potential earnings, showing inefficiencies in the company's core operations. The company experienced a severe decline in profitability, with a negative Gross Profit Margin, Operating Profit Margin, and Net Income Margin in 2020 and subsequent years. These negative trends signify significant financial distress and a loss of efficiency in both core operations and asset utilization. With that in mind, Cinemark will have to invest more capital in Research and development (R&D) to discover how to recapture that core audience or expand past the limitation of physical locations. Shareholder Returns Analysis

2018 2019 2020 2021 2022 Shareholder Returns: Price/Earnings Ratio 20.81 20.81 n/a n/a n/a Dividend Payout Ratio 1.43 1.20 n/a n/a n/a Dividend Yield 3.36% 4.01% 2.07% n/a n/a Earnings per Share [Provided] $ 1.83 $1.63 -$5.25 -$3.55 -$2.26 For the first two years of 2018 and 2019, the P/E Ratio is the same until the year 2020 when it began showing n/a up till the year 2020. The reason behind this is due to the pandemic that hit earlier in 2019, closing most businesses and causing a rise in TV streaming services that allowed the experience of a movie theater to people in the comfort of their own homes. This results in negative earnings per share for most theaters and even putting some out of business as you can see in the bottom row. Liquidity Analysis 2018 2019 2020 2021 2022 Liquidity Ratios: Working Capital $ 84,341 $ -73,810 $ 286,306 $105,328 $ 155,100 Working Capital Ratio 1.1 8 0.90 1.47 1.14 1.22 Acid Test--Quick Ratio 1.14 0.87 1.45 1.12 1.19 Although Cinemark's liquidity analysis shows the company drastic decrease from 2018 to 2019 cash, until 2020 when the company began to gradually increase working capital and

achieved its highest in the past five years. It is more than capable of using its current assets to pay its short-term debts no less than two and a half times. Debt Management Analysis 2018 2019 2020 2021 2022 Debt Management: Debt-to-Equity Ratio 2.1 3.1 6.0 15.2 42.6 Times Interest Earned 3.5 3.4 N/A N/A N/A Data from 2018 to 2022 shows a significant and dangerous trend in Cinemark’s debt management. The debt-to-equity ratio increased from 2.1 in 2018 to 42.6 in 2022, indicating a considerable reliance on borrowed funds in comparison to equity. At the same time, no Times Interest Earned data for the years 2020 to 2022 shows that the company may have struggled to generate enough earnings to cover its interest expenditures. These developments underline the crucial importance of a comprehensive financial examination and a strategic plan to address excessive debt levels and financial risk, all while taking into account the broader economic and industry context. The economy during those times went through the pandemic and the recovery era. Efficiency Analysis 2018 2019 2020 2021 2022 Accounts Receivable Turnover - Days 10.8 9.9 29.0 11.4 10.3 Inventory Turnover - Days 3.7 3.8 9.5 5.0 4.6

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Asset Turnover (times) 0.72 0.64 0.12 0.28 0.49 Fixed Asset Turnover (times) 1.76 0.20 0.05 0.09 0.16 The data from 2018 to 2022 show a mixed picture of Cinemark's operating efficiency. Notably, accounts receivable turnover has improved in recent years, with the time it takes to recover outstanding debts decreasing. However, accounts receivable turnover days increased significantly in 2020, indicating possible credit control or client payment issues. Meanwhile, inventory turnover efficiency varied, with 2020 showing a substantial lag in inventory management but progressive improvement in subsequent years. Asset utilization showed a positive trend in asset turnover, indicating a more efficient use of total assets to generate income over time. The fixed asset turnover ratio, on the other hand, dropped considerably, meaning that the firm became less effective at producing sales from its fixed assets. Overall, this data emphasizes the significance of understanding the factors influencing these patterns, with a focus on resolving issues related to accounts receivable and fixed asset turnover while keeping the positive features demonstrated by asset turnover. Conclusion Cinemark's financial statements show the company is in a challenging period. The findings indicate significant financial issues, mostly because of the COVID-19 outbreak, which resulted in a loss of profitability and a decrease in shareholder returns. Financial ratios for the company declined substantially, with negative profitability indicators, a lack of dividend payments, and a concerning deterioration in asset efficiency and fixed asset turnover. Recommendations

Other than traditional movie screenings, Cinemark should prioritize revenue streams. One example is providing upscale amenities such as plush seats, dine-in cinemas, and premium drinks. By providing a differentiated and better movie experience, Cinemark may attract a broader range of customers and reduce its dependency on box office reviews. Diversifying revenue streams will help mitigate the consequences of shifting movie ratings and streaming service rivalry. Cinemark should also consider strategic alliances or agreements with prominent streaming platforms to offset the threat of streaming services. These arrangements might include exclusive movie premieres, co-promotions, and even special in-theater events related to streaming content. Given the company's high maintenance costs and financial troubles, Cinemark should prioritize cost reduction and operational efficiency. Cost-cutting technical updates, enhanced processes, and energy-saving initiatives are examples of this. By refining its cost structure, Cinemark can maintain financial stability and commit resources to areas that improve the consumer experience without straining the budget.

References Kenton, W. (n.d.). SWOT analysis: How to with table and example . Investopedia. https://www.investopedia.com/terms/s/swot.asp Team, T. I. (n.d.). Porter’s 5 forces explained and how to use the model . Investopedia. https://www.investopedia.com/terms/p/porter.asp Lupis, J. (2023, February 7). People generally prefer watching movies at home than in the Theater . Marketing Charts. https://www.marketingcharts.com/industries/media-and-

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

entertainment-228652#:~:text=Indeed%2C%2077%25%20of%20respondents%20to, %E2%80%9D%20Just%206%25%20strongly%20disagreed . UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-K . Inline XBRL Viewer. (2022, December 31). https://www.sec.gov/ix?doc=%2FArchives%2Fedgar %2Fdata%2F885975%2F000095017023004235%2Fcnk-20221231.htm Cinemark USA Mission, Vision & Values | comparably. (n.d.). https://www.comparably.com/companies/cinemark-usa/mission

SWOT & Financial Ratio

Related Documents