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Competition in the Movie Rental Industry: Netflix and Blockbuster battle for Market Leadership - Research Paper Example

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This essay talks about Blockbuster Inc. which built an international franchise business around the video tape rental industry based primarily in VHS technologies in the early 1980’s, starting with a single store opened in Texas by founder David Cook and his wife Sandy. …
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Competition in the Movie Rental Industry: Netflix and Blockbuster battle for Market Leadership
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Download file to see previous pages As the report declares Netflix offered a low-cost video rental service that is widely regarded as changing the industry and undermining Blockbuster’s “bricks and mortar” strategy of operating thousands of retail stores with a large number of sales staff and other employees. Netflix’s innovation was to offer DVD rentals by mail, to allow flexible rental policies that did away with the “late fees” that Blockbuster customers had come to abhor, and utilized the growing internet and web technologies to streamline operations as well as make services available to a wide segment of the population. With Netflix, customers could rent video titles that they selected from an online catalog and receive them often within one day through the U.S. Postal Service.
This paper stresses that Netflix created a decentralized national network in the U.S. with over 50 distribution centers that provided unlimited video rentals for a flat monthly fee and used the government-subsidized costs of U.S. Post Office services for a competitive advantage over the “video store” model operated by Blockbuster. While Blockbuster was paying retail employees to staff physical store operations in major mall and min-mall locations across America and internationally, with rent, utility, staffing, training, and other overhead costs, Netflix was able to offer its services through warehouse shipping and delivery centers operating on the Amazon.com model at a reduced cost in comparison to Blockbuster. ...
How Netflix Outmaneuvered Blockbuster in DVD Rentals Netflix offered a low-cost video rental service that is widely regarded as changing the industry and undermining Blockbuster’s “bricks and mortar” strategy of operating thousands of retail stores with a large number of sales staff and other employees. Netflix’s innovation was to offer DVD rentals by mail, to allow flexible rental policies that did away with the “late fees” that Blockbuster customers had come to abhor, and utilized the growing internet and web technologies to streamline operations as well as make services available to a wide segment of the population. With Netflix, customers could rent video titles that they selected from an online catalog and receive them often within one day through the U.S. Postal Service. Netflix provided the users a postage-paid return envelope that could be used to return the DVDs at the customer’s leisure. In this manner, Netflix created a decentralized national network in the U.S. with over 50 distribution centers that provided unlimited video rentals for a flat monthly fee and used the government-subsidized costs of U.S. Post Office services for a competitive advantage over the “video store” model operated by Blockbuster. (Thompson, 2008) While Blockbuster was paying retail employees to staff physical store operations in major mall and min-mall locations across America and internationally, with rent, utility, staffing, training, and other overhead costs, Netflix was able to offer its services through warehouse shipping and delivery centers operating on the Amazon.com model at a reduced cost in comparison to Blockbuster. While ...Download file to see next pages Read More
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