How Blockbuster Ruined The World

Analyze Blockbuster's current position (based on its brick-and-mortar business model) using Porter's 5-forces model. What are the conclusions of your analysis?

The movie rental industry is a living industry; there are constant changes with advances in technology, rights management, and the slow, but steady, move away from physical Media. Companies such as Netflix, Hulu, RedBox, and Blockbuster are being forced to look at new business models and try to keep up with these changes.

Numerous failures in planning and monitoring market changes negatively affected profits and decreased customer loyalty. Blockbuster sought utilization of section 11 bankruptcy to significantly decrease the businesses debt. The bankruptcy and acquisition by Dish network provided the opportunity to invigorate a better business solution for moving forward. Blockbuster’s

The first failure of Blockbuster’s strategies, which lead it to bankruptcy, was the negative relationship with their consumers. While Netflix’s chief executive, Reed Hastings, recognized the technology had been grown rapidly and would change the transmission of movie rental industry, Blockbuster’s CEO, James Keyes, believed that consumers would still prefer to the brick-and-mortar rental structure. Thus, Keyes planned to focus on expanding Blockbuster’s stores into various departments

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

It appears that Netflix has control over the vast majority of the movie rental business. Consumers are renting less than they used to and the convenience that Netflix incorporates into its service, such as online streaming and mail orders eliminates other competitors from considering entering the movie rental business.

What role has Netflix played in the development of Blockbuster’s strategic planning? How important is Netflix to Blockbuster’s future strategic plans?

Entering and transforming the video rental industry was a large undertaking for the start-up company. The first marketing objective the company undertook was the process of building a brand. Netflix’s identity was crucial to future growth and success. Without a strong brand, competitors with deep pockets could have easily duplicated the company’s business model. Secondly, leveraging technology was critical to establishing the business and infrastructure growth. The consumer base was the final objective Netflix sought to achieve. Retaining and growing subscribers were fundamental to revenue and marketing goals.

Blockbuster is the largest movie rental retailer. With its opening in 1985, Blockbuster has pursued an ambiguous program of growth and expansion. Currently, Blockbuster owns and operates over 9,000 stores both domestically and internationally. In addition, Blockbuster franchises about a quarter of its stores. It is important to note that Blockbuster is undergoing a managerial struggle at the present time. The current CEO, John Antioco, and a major shareholder, Carl Icahn, are disputing Blockbuster’s strategy. Mr. Antioco has threatened to resign if Mr. Icahn succeeds at attaining a position on the Board of Directors1. Mr. Antioco believes that Blockbuster needs to develop new strategy to respond to the current market

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 too confident in their brand and their reach that failed to see the threat from the online rental business, meanwhile Netflix took advantage of their slow entrance to build a market and leverage on growing technology (DVD) that took off really quickly.

The presence of Netflix and Blockbuster in the movie rental industry has assisted me in developing this analysis of each corporation’s strength, weaknesses, opportunities, and threats as followed:

Netflix‘s business model and strategy compare closely to its key rivals. Although, Netflix won a patent that covered much of its business model and could be used to help stifle competition in the future (Thompson C-33) . Netflix has a team of executives that manage only the on-line DVD rental enterprise. They are well established and use a very sophisticated software program thereby making movie selection easy and fun. In my analysis, Blockbuster has many retail stores to contend with and many other facets of a business enterprise, thereby not having a unique team of individuals solely dedicated to the on-line DVD rental business. Wal-Mart would be Netflix’s greatest fear due to the enormous capital available and expertise that could be employed, yet Wal-Mart continues to lag behind Netflix. Wal-Mart’s online software needs a lot of debugging, whereas Netflix had already spent several years debugging its software (Thompson C-37).

At the beginning the company was considered leader of its industry due to its capacity to customize a store to its neighborhood,

Netflix was founded by Reed Hastings and Marc Randolph in 1997 and was originally based out of Scotts Valley California. The business model that they were working towards was to create a company that would offer online movie rental service made available by streaming media as well as DVD’s that could be ordered online and delivered to the customers’ homes. (Wheelen, Case 12). Netflix had a strategic plan to undercut the competition in an effort to stress the market and force weaker competition out of the field. This was a very successful plan and over a period of years it was able to force the closings of most of its competing market to include the mega giant Blockbuster video. Using a business