The opening of the report consists of the Diagnosing Blockbuster’s Present Situation and Comparison of Blockbuster and Netflix. The SWOT analysis has been performed to find the internal and the external environmental situation of the company and present factors that are important for success. …
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The firm that is analyzed in the paper is Blockbuster. It was started in the year 1985 in Dallas as a single movie-renting store. With its aggressive growth strategy, the company managed to grow to nearly 7,265 stores in 24 nations around the world. Though the company remained as the world leader in movie rental during 1990s, problems emerged as new technologies developed in the area of entertainment distribution. New technologies that allowed online booking and online delivery of content developed as time passed, but the company management was adamant to give up its basic brick and mortar movie renting stores. As a result, while its competitors like Netflix effectively shifted to, and excelled in, methods like online booking, mail delivery and VOD, Blockbuster went on struggling with the already declining in-store movie renting systems and fell into debts. This resulted in a lot of issues in customer service that again made many existing customers leave the company. Firstly, the number of titles on offer declined dramatically, and secondly, popular items often went out-of-stock. Also, the delivery system was too slow as compared to that of its rivals. Thus, the company closed its year 2007 with a net loss of $ 85.1 million. This work looks into the various reasons behind the existing issues and tries to suggest ways for improvement in the future. A look into the performance of Blockbuster proves that once glamorous Blockbuster where everyone stopped to pick up a few movies has become a shadow of its past. There are a number of issues ranging from stiff competition, indifferent and doubtful management, lack of clear objectives, and finally, the continuously changing industry dynamics. Until the end of 1990s, Blockbuster was at the top of the rental business, and it never considered Netflix or any such other companies as consequential competitors. So the company paid little attention towards the emerging technologies and the changing customer preferences. Soon, the company found that its profits were going dramatically down. Thus, the stock price of the company fell from $29 to $2 per share. This was mainly the result of the emergence of other forms of entertainment delivery like rental by mail and video on demand. As these technologies emerged, a significant proportion of customers found them more convenient than in-store renting. It was at that juncture that the company made the most terrible mistake in its history. Instead of adapting itself to the emerging trend, the company decided to strengthen its in-store business. However, as the in-store business was destined to fail as technology allowed more convenient renting options, the effort proved futile. On the other hand, its rivals like Netflix who successfully adopted rental by mail and video on demand technologies found significant improvement in business and profit. As the company found itself in trouble, it started new strategies like kiosks, rental by mail and video on demand. However, each of the new strategies had its own defect too. For example, the rental by mail offered by Blockbuster was not as effective as that of Netflix. While Netflix managed to deliver the order in a single day, Blockbuster took one to three days. Also, while Netflix ensured successful delivery in more than 95% of the cases, many of the Blockbuster visitors found their favorite titles out-of-stock. Admittedly, the company has taken beneficial steps that will improve the position of the company in future. First of all, it has widened the product array in its brick and mortar stores by adding electronic appliances and video games. Secondly, it has started VOD though it has not been seriously explored. In fact, most of the problems faced by the company are associated with the lack of a specific objective. The management goes on changing its strategies in very short intervals, and hence, the customers get too puzzled to take a decision. Also, even the company representatives find it
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