This is quite expensive and therefore, the theatre needs extra grants of the different Councils. These Councils will not give grants to anybody and therefore, a new theatre must prove it is worth it. Also, when there are a couple of theatres in the same area, not everybody is enthusiastic of a new theatre.
Therefore, the threat of entry is not high.
Threat of substitutes
With substition, demand for a particular product can reduce when customers switch to an alternative product. The alternative can provide better advantages, like lower costs or less time needed.
There are different forms of substitution. Examples are product-for-product substitution, substitution of need or generic substitution.
The prices for a theatre production are high, especially for younger people, when you compare the prices of, for example, a cinema. A cinema can also be more excited. In Sheffield, there are two cinemas. The first is called Odeon. This cinema provides a discount on Tuesdays. The second is ‘The Showroom’.
A cinema is not the only substitute for a theatre. All the things that have something to do with leisure are substitutes. Especially, when the economy is not at its best, free or not expensive things become more and more popular. Examples are bars, pubs and clubs, sporting in the open air, or just parks where a band is playing or street theatre is performed.
The threat of substitutes is high when the economy is bad. And the younger the spectators, the higher the threat of substitutes are.
The power of buyers
If the following conditions prevail, buying power can be high:
- There is a concentration of buyers. This is often the case when the volume purchases of buyers are high.
- There are a large number of small operators in the supplying industry.
- There are substitutes of supply
- A part of the product, for example the costs or component, takes a high percentage of the total cost, since buyers want the best price and therefore ‘squeeze’ suppliers.
- The cost of switching a supplier is low or involves little risk.
- There is a threat of backward integration by the buyer when suppliers can not obtain quality or prices.
There are two types of buyers when taking a look at the case of Sheffield Theatres. The first one is the customers of Sheffield Theatre. They have a lot of power: when the spectators are not coming anymore to the theatre, because the prices are too high, the programme is bad or other substitutes offer better things, Sheffield theatre will lose income. When this happens, the theatre has to invest in a new campaign when possible, which causes new costs, or cut back on the prices and is further depended on the grants they get from the Councils, their sponsors and events. The theatre will not get much extra income of the restaurant and bars, because there are only a few spectators.
The second type of buyer is the Theatre itself. The Theatre buys productions from touring companies. When these productions do not attract enough spectators, the Theatre is also losing an income. Therefore, the Theatre will think twice a time about buying a new production of that touring company, especially when there are a lot of ‘suppliers’ (touring companies) of touring productions. The power of buyers is high in this case.
The theatre or more specific, Offstage Ltd. is also a buyer. This company buys food and drinks for restaurants and bars. Off course, Offstage Ltd. goes for the best price-quality arrangement. That means they want the best for the lowest possible price. A lot of suppliers can offer this, but Offstage Ltd. has probably to deal with contracts between them and the suppliers. Here, the power of buyers is still high, because when Offstage Ltd. has a complaint, they will not prolong or even break the contract.
The power of suppliers
The power of suppliers is high when:
- The number of suppliers is concentrated rather than a fragmented source of supply.
- The costs from switching to another supplier are high.
- The brand of the supplier is powerful
- There is the possibility of the supplier integrating forwards if it does not obtain prices and the margins it seeks.
- The supplier’s customers are fragmented.
The suppliers in the case of Sheffield Theatres are among the suppliers of food and drinks for the restaurants and bars. As already said by the power of buyers, there are a lot of suppliers for this. Therefore, the buyer of suppliers is not that high.
Another supplier is the supplier of touring companies. This power is high, because when the touring company suddenly is not coming to the theatre, the theatre quickly has to fill in an extra evening or postpone the production.
The theatre is also a supplier. It supplies its own productions to other theatres. Sheffield is known for its good productions and therefore the brand of the Sheffield Theatre is powerful. Again, the power of suppliers is high (see previous)
These two powers (buyer and supplier) are often linked together, because the relation with suppliers and buyers can have similar effects in constraining the strategic freedom of an organization and in influencing the margins of that organization.
Competitive rivalry
This means, that competitive rivals are organizations with equal services and product aimed at the same customer group.
In Sheffield town itself, there is no other theatre than the Sheffield Theatre.
In the neighbor towns, like Manchester and Leeds, there are a couple of theatres. Also in the capital of England, London, there are a couple of theatres.
Examples are Royal Exchange Theatre Company in Manchester and City Varieties Music Hall, Leeds Grand Theatre & Opera House and West Yorkshire Playhouse, all in Leeds. The one in Manchester looks like the Sheffield Theatres. It has one studio and one theatre. The prices are between ₤3.50 and ₤25. There can be 160 spectators.
The music hall originally only had musical productions, but is now mainly a variety theatre with family shows, live music, stand-up comedy, hypnotism, psychic shows and Christmas pantomime. Prices depend on the seat ring and production. The Grand Theatre of Leeds can house 1550 persons. It is the home to Opera North. There is a variety of live performance-staged events - opera, classical and modern ballet, plays, pantomime, star concerts and musicals. There are eight licensed bars and large catering facilities. Again, prices depend on seat ring. This also counts for West Yorkshire Playhouse in Leeds ()
In London there are about 100 theatres. There is something to find for everybody.
By car, and almost everybody has one nowadays, and public transport, the theatres in other cities can be reached easily. But all the theatres offer almost the same productions. Therefore, it is not necessary to go away for an evening in a theatre. The competitive rivalry is not high.