Case Study Of The Blockbuster Model Cracks?

In 2011 Dish Network announced its acquisition of Blockbuster. This was a significant change in company strategy. The hope was with that highly recognized brand with more than fifteen hundred would help Dish to compete in video entertainment industry. Unfortunately these plans never materialized and Dish showed operational loss. In 2012 Dish started to close Blockbuster stores and had to lay off their employees focusing more on digital offering. But even this attempt was not successful and customers’ preferences stayed with Amazon and Netflix services instead. The reason of this failure was that it’s not enough to just implement changes. The process of transformation and vision of the goals are just as important.

If researched you find that the internal political struggles within the Blockbuster organization ultimately lead to its downfall. Power struggles that stemmed from the change in ownership as David Cook sold controlling his share of Blockbuster to Wayne Huizenga, John Melk, and

Blockbuster implemented a new strategy for customers to access their rentals in “five channels of distribution: in-store, by mail, through vending machines and kiosks, online, and at home (direct to the TV)” (DATAMONITOR, 2009). However, this strategy was a reactive approach to the problem produced ten years behind schedule. Wooldridge et al., (2007) stated that Blockbuster should select and adapt their strategy to respond to the fast changing market and maintain a competitive position. This was an obvious failure for Blockbuster. The changes in the market produced a decline in profit at a faster pace than the strategies that Blockbuster implemented to combat these losses.

Blockbuster’s restructuring of the company under its new owners shows how they were open to organizational change. The text describes organizational change as the movement of an organization from one state of affairs to another. Blockbuster completely changed their strategy and technology in order to compete with the new technology based companies that put them in this position in the first place. Simply put, no one visited the stores to rent movies when they could just turn on their television to order on-demand showings for the exact same price without leaving their home or grab a couple movies for a dollar apiece while grocery shopping. If they did not change they were sure to fail as a business and the company would disappear into the long list of companies that failed in the economic recession. The change was forced by other companies’ utilization of technology that caused a drastic change in the market conditions. This shift enabled the cheaper, more convenient home entertainment to steal a huge chunk of market share from Blockbuster’s traditionally structured company. Blockbuster enjoyed a long period on top of the movie rental/ home entertainment industry and this could possibly be what caused the success of these newer

Blockbuster was “the largest movie rental chain” in the Movies industry around the world (Biesada a). According to Rourke, Rothburd and Stansell (2006), Blockbuster mainly focused on “providing in-home rental, retail movie, and game entertainment”. It created 9,100 video stores and provided services to almost three million of customers in America and 24 other countries (p. 74). In 2010, the company filed for bankruptcy since it failed to adapt new technology in their strategies, and “was sold to satellite TV service provider DISH Network in 2011” (Biesada b).

Cook’s ideas broke the mold of traditional movie rental stores that set the stage for its rapid growth and popularity. All movies were displayed on shelves for customers to search for that title they wanted to watch and were open until midnight. It was considered a family friendly store and never had an adult section in any store across the nation. They broke the mold by integrating a system scanner database that allowed stores to inform customers when specific movie titles were in store and even put a hold on them until that customer arrived for pickup. Unfortunately, Blockbuster faces some financial difficulties and Cook was forced to sell the company to Huizenga instead of allowing it to go public (DealBook, 2011). This forced sale happened because an analyst publicly criticized Cook for his failure in the oil industry along with some shady accounting practices. The public image of a company has significant impact upon a company’s value on the public market. Huizenga’s leadership was more aggressive and Blockbuster acquired many of its competitors. Horcher teaches that acquisitions of other organizations expose an organization at risk, but that risk can be mitigated through proper management from the initial negotiation and after the transition is complete (2005). At their peak, Blockbuster sold for $8.4 billion dollars to Viacom after a short seven years after being

“Never be without a movie”, a slogan that used to be successful for many years. Blockbuster was the definition of “entertainment” itself at this time: Not only the company offered to rent or purchase movies but also it completed the customer experience with horizontal diversification: food, beverages, games etc. It followed the strategy of several business models: Brick and mortar shops, cross merchandising, and also rent rather than buy. Its value creation came from several partnerships with movie / video producers, and supplier of foods supplies. The initial strategy standard was to pay a minimum wage to employees, in order to reduce expenses, but also focus on advertising, promoting the company, developing the store locations etc. The main

It appeared that in Blockbuster’s hankering for growth, a strong and strategic organizational infrastructure was lacking. Blockbuster did not have a stable in structure of leadership and management to sustain itself. This is most likely the reason that there

Blockbuster was one of the main chains for DVD rentals as well as video game rentals. However, as the years went by new technological advances emerged and all of that seemed to begin to change. First and foremost, Blockbusters predominant position as the leading DVD rental business all began when it was established on October 19, 1985. Through the years their reign at being at the top slowly began to deteriorate and they officially shut down for good in January 2014. Their

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External environment is very important for managers to make decision about the company’s direction and strategy. In order to gain a deep understanding of Blockbuster’s industry and competitive environment, the following seven questions need to be answered. Q1: What are the industry’s dominant economic features?

The success of Netflix forced Blockbuster to see the growing popularity of rent-by-mail formats. In 2003 Blockbuster launched a rental subscription program, which would allow subscribers to rent an unlimited number of movies during the subscription period like Netflix, but with Blockbuster there was no waiting for movies to arrive. Blockbuster also fine-tuned its rental program and introduced a no-late-fee policy to compete against the growing number of subscribers to online rental companies. In 2004 Blockbuster

Blockbuster LLC first came into existence in 1985 as Blockbuster Video in Dallas, Texas. Its founder, David Cook was a computer programmer whose experience was helpful in inventory activities and in determining which genres of films were the most saleable and rentable. Soon shares in the firm were purchased by a firm called Waste Management, which then initiated the company’s expansion, believing in the on-product model of the firm which then had mass appeal (Hyatt, 2003). Waste Management then purchased the firm and its franchises. After an almost-merger with Viacom, as the company’s share prices fell, Blockbuster was then purchased by Viacom in 1994 (Sheridan, 1994). In 2004, after a number of acquisitions, Blockbuster then separated from Viacom, and continued with its sales of DVDs and other video products. Eventually in 2010, its external auditors, Price-Waterhouse Cooper provided an opinion that there were doubts about the firm’s being a going concern, with the firm’s inability to pay off all its bondholders. Blockbuster was then purchased by the Dish Network, which then went on to downsize the firm, closing a substantial number of stores around the world.

Option 3: This option could have been an interesting route for Blockbuster as it could have given them a fresh start to expand their assets beyond the traditional brick and mortar store and keep their company legacy alive by adapting to new mediums. One downside of this option is that it does seem like Blockbuster is simply imitating their competition rather than developing new distribution channels to maintain its industry leader status. Despite these hindrances, Blockbuster could still rely on these recent developments and identify areas to obtain an advantage over their competitors. For instance, Redbox originally inked a deal with select movie studios such as Disney or Universal for day-of movie releases for recent films, while other studios

• Blockbuster is a generally perceived name in the feature rental business sector, being the first move into the