The Analysis of the Failure of Blockbuster Organizational - Research Paper Example

? Blockbuster Organizational Failure Introduction The global economy has undergone through substantial transformation in the last two decades. The advent of globalization paved a way for many businesses to operate their business beyond their national borders. As a result, the Multinational Organizations (MNCs) were largely eligible to avail the opportunities persisting in the international market place in terms of marketing and distribution of goods and services and improving their product quality to a large extent. At the same time, it also created numerous challenges in the market place regarding competitiveness, innovativeness as well as sustainability, which has greatly influenced company sustainability in many sectors. Focused on a similar notion, this paper will entail critical analyzes regarding the failure of Blockbuster LLC, which was formerly recognized as Blockbuster Inc. Overview of Blockbuster Organization Blockbuster is a global retail chain, which offers a vivid array of video games, home movie and rental services for DVDs and VCDs at reasonable price to its discriminating global customers. Besides, the organization is also dedicated to provide its customers with adequate product choices and unique purchasing experiences. Currently, Blockbuster is operating with more than 2,500 retail stores spread worldwide. Being an American MNC, the company owns its maximum number of retail stores in the US, apart from Europe, Asia and Australia. The primary objectives of the company over the years have been to provide a world class entertainment experience to the consumers with a vivid assortment of movie and game genres, serving to around 90 million people all around the world (Blockbuster, 2013). Irrespective of its success since its establishment, with the increasing pressure of competition in the global platform, the company had to witness a decline in its revenue structure. It was in the year 2010 that the organization filed for bankruptcy and was consequently acquired by Dish Network (Almeida, 2011). Analysis of the Organizational Failure Factors In order to analyze the reasons behind the failure of Blockbuster, the following subject areas will be taken into consideration, which shall be helpful to obtain an in-depth understanding of the role played by various external and internal business environment factors to secure the sustainability of a company in the long-run. Competitive Advantage According to Michael E. Porter (2008) competitive advantage is a strategy of gaining benefit over competitors by offering customers high value through reasonable price, good product quality, product variety, innovativeness as along with other value added services (Porter, 2008). In the current phenomenon, competitive advantages are not only necessary to assist a company in obtaining larger market share, greater profit and brand value, but it is also necessary to assure long-term leadership position of the company, in the modern era. However, when studying the incident of Blockbuster’s failure, it can be observed that the most significant aspect of competitive advantage is to guarantee the sustenance of a company, apart from the aforementioned benefits. It is in this context that apparently, due to its business model limitations, Blockbuster was in a competitively disadvantageous position. The industry context can be accounted as responsible in this regard, to a large extent. The current market structure of the entertainment industry tends to be highly volatile, where both the suppliers and the customers possess high degree of bargaining power, majorly due to the availability of close substitutes. Additionally, with frequent occurrences of forward and backward acquisition and mergers, Blockbuster also had to witness the threat of new entrants. Hence, given the limitations of the business model followed by the organization in terms of ill fit with external environmental changes, rigidness to adapt innovative ideas and cost as well as time intensive characteristic, the organization failed to preserve its competitive position for a long-term (Davis & Higgins, 2013). Another major limitation of the organization was its strategy to copy its major rivals in obtaining competitive advantages. For instance, Blockbuster intended to imitate the online rental services rendered by Netflix, one of its major rivals, but failed owing to lack of managerial efficiency. This further hindered the brand position of the company and resulted in its dramatic failure within few years (Coffie, 2010). Change Management As can be observed above, the business model followed by Blockbuster, lacked in adapting changes owing to its rigidity. It has been rightly observed that in the current competitive and highly dynamic business era only one thing remains stable i.e. the change. Contextually, it can be affirmed that change is a predominant factor for any organization to sustain its business profitably. It is worth mentioning in this regard that with the introduction of new technologies and rise of new players in the market, the preferences as well as the purchase behavior of the customers also tend to change considerably. A similar aspect can be observed in the performance of Blockbuster, wherein, only insignificant adoption of effective change management could be observed. Additionally, Blockbuster had been quite unsuccessful in framing its strategies towards implementing proper change management, being solely focused on increasing its market presence, with almost no concern or response towards customers’ choices and external market changes (Reuters, 2013). Diversity Management As a matter of fact, with the failure of the organization to imbibe effective change management strategies, it also failed to obtain the benefits of diversity. Fundamentally, the company lacked in developing an effective framework to respond to customers’ choices, needs and purchasing behavior. This in turn resulted in its weakening customer satisfaction level. As was noted by Davis & Higgins (2013), the company followed an ‘outdated business model’, which was rigid, was cost intensive and was also unresponsive towards external market changes. These aspects further led to the failure of the organization in managing diversity with aptness. A long-run continuation of such setbacks consequently resulted in its failure. Cross-Cultural Management Even though Blockbuster has been operating in various countries, it lacked in inculcating the features of various cultures. In the current phase of globalization, cross-culture management has undoubtedly become a critical aspect to secure sustainability. It is very necessary in today’s era that diverse cultures are respectfully imbibed and nurtured within an organizational workplace as well as throughout its value chain, so as to create a sustainable bonding with the stakeholders. However, a little incorporation of cross-cultural management strategies can be identified when assessing the performances of Blockbuster. In entertainment industry sector, cross-cultural influences tend to be quite strong. It is in this context that because Blockbuster lacked in practicing effective cross-culture management focusing on stakeholders’ engagement, it was overpowered by its competitors. To be illustrated, one of the major rivals of Blockbuster, Redbox, had been implementing continuous innovative strategies by rendering due significance towards the distinct preferences of its customers belonging to different cultures and following different lifestyles. The services provided by Redbox and Netflix and other competitors of Blockbuster, further rewarded the customers with price advantages and more convenient entertainment facilities with the aid f modern technology. However, as Blockbuster failed to incorporate such competitive strategies, it was affirmed that Redbox was taking the business away from Blockbuster (Reuters, 2013). Recruitment and Selection After a particular period of time, it was quite apparent that Blockbuster was failing to cope with the changing demands from its customers and its employees as well. To be precise, the business model followed by the company made the entire process of product delivery a costly venture. Additionally, the ignorance of the company to charge an extra “late fees” from its customers also had a negative impact on its revenue structure. It is worth mentioning in this regard that although the intention of the company was to attract greater numbers of customers as compared to its major rivals, this particular strategy apparently affected its financial position. Accordingly, it was unable to provide adequate remuneration to its employees which further led to high turnover rates within the organization. Gradually, the company also started losing its reputation as an employer which further constrained its effectiveness in practicing a well-structure recruitment and selection process. Additionally, with the motive of cutting extra costs, and thereby leading the company with the declining revenue earned, the company laid off many of its employees which also included its top level management personnel, adding another disadvantage to the company in terms of human resource management (Clark, 2007). Compensation and Benefits The above explained limitations witnessed by the Blockbuster in practicing its management strategies, as compared to its rivals in the market, explicitly signify that the company was not in a position to render adequate compensation and benefits to its stakeholders of shareholders during its performances in the period of 2005-2010. The revenue decline witnessed by Blockbuster had an apparent effect on its financial position. This particular limitation not only made the company to fumble when deciding upon its pricing policies, but also inhibited its brand value by a substantial extent. Such misbalances in its financial position, further led to a weakening shareholder or investor trust, making the matter worse for the company. As a consequence, the company was unable to provide with adequate compensation and benefits to its stakeholders, including its employees as compared to its rivals. Thus, the company had to witness high degree of employee turnover in its performances. Organizational Climate and Culture The mission of the company clearly signifies the intention of the management to offer its customers with professional services in the entertainment sector, aided with a vivid range of movie and game choices. The management was also noted to be committed to competitive pricing strategies to offer its customers with efficient products and services components aligned throughout its value chain. However, it was evident that the organization failed to adhere to its mission, whereby, its products price range was observed to be higher than that charged by its competitors. The cause of its failure to abide by its set mission statement can also be rooted to the organizational climate and culture maintained by Blockbuster. Lack of employee morale, commitment and shared values towards the organizational goals can be identified as few of the major weaknesses witnessed by the organization in its working climate and culture which again affected its brand position within the global entertainment industry. Current Position of the Blockbuster After Blockbuster filed a bankruptcy in the year 2010 under the clauses mentioned in Chapter 11, it was auctioned and acquired by Dish Network, which is a giant American service provider for direct-broadcast satellite. In its post acquisition phase, the company was certain restructured and currently operates with 2,500 stores. The company now serves an approximated 50 million customers on an annual basis and has a strong presence in both tradition as well as online supply chains of the entertainment industry. In the current phase, Blockbuster LLC operates as a subsidiary of its acquirer Dish Network, which control all its functions from pricing to compensating and recruiting. Additionally, the management has recognized that the only way to attain competitive advantages in the market place is with the creation of uniqueness or differentiation, from the competitors. Accordingly, the company today serves as the only entertainment service provider to multiple channels, maintaining a cohesive relation with the customers, who can forward their concerns and feedbacks to the company through online mode of communication (Blockbuster, 2013). Conclusion The brief analysis of Blockbuster’s current strategies and current market position revealed that the organization is on the track of continues growth and expansion after its restructuring. The dramatic failure of Blockbuster has often been argued as a remarkable event in the entertainment industry which explicitly reflects the effects of competition on traditional organizational structures, causing various competitive disadvantages. A critical review of Blockbuster’s performance reveals that the company had failed to incorporate effective change management and diversity management strategies owing to its rigid organizational processes which further made the products, offered by the company, outdated and also overpriced. Furthermore, the company also lacked in inculcating effective competitive strategies, such as technology advancement and innovation, which empowered its major rivals including Netflix and Redbox to capture a larger market share and therefore, lead to the declining revenue of Blockbuster. Hence, the sole reason for the company’s failure can be identified as its managerial limitation to align its goals and strategies with the customers’ preferences and external market changes. References Almeida, J. C. D. (2011). The fall of a giant. Retrieved online http://repositorio.ucp.pt/bitstream/10400.14/8236/3/Blockbuster%20Inc..pdf Blockbuster. (2013). Company overview. Retrieved online http://www.blockbuster.com/corporate/aboutBlockbuster Clark, E. M. (2007). Blockbuster Incorporated. Retrieved online http://www.slideshare.net/Jack78/blockbuster-incorporated Coffie, L. (2010). Five reasons Blockbuster is going out of business. Retrieved online http://voices.yahoo.com/five-reasons-blockbuster-going-out-business-6061864.html Davis, T. & Higgins, J. (2013). A Blockbuster Failure: How an Outdated Business Model Destroyed a Giant. Bankruptcy Case Studies. Porter, M. E. (2008). Competitive advantage: creating and sustaining superior performance. United States: Simon and Schuster. Reuters. (2013). Blockbuster UK Goes Into Bankruptcy. Retrieved online http://www.nytimes.com/2013/01/17/business/global/blockbuster-uk-goes-into-bankruptcy.html?ref=blockbusterinc&_r=0 Bibliography Burrus, D. (2003). Creating and sustaining competitive advantage. Retrieved from http://www.smallbusinessadvocate.com/small-business-articles/creating-and-sustaining-competitive-advantage-520 Woodruff, W. D. (n.d.). Introduction of test process improvement and the impact on the organization. Retrieved from http://asq.org/pub/sqp/past/vol5_issue4/woodruff.html Read More