Brief introduction of Blockbuster
Discuss about teh Innovation and New Technology for Blockbuster.
In this assignment, an incumbent has been chosen that is beaten by a challenger. The incumbent has been taken as Blockbuster and the challenger has been chosen as Netflix. In this assignment, several analysis models and assessments have been taken to help Blockbuster remerge in the market.
Blockbuster is an American based movie provider which rents movies and games through mails, rental shops and streaming services as well as movie theatres. In its peak time, it had over 83000 employees and had over 20000 employees coming from abroad. The organization eventually closed in 2014 due to continuous competition from Netflix and other video on demand services. In 2010, the company filed for bankruptcy. Later its last remaining stores were bought by Dish Network.
Netflix is an American entertainment company which was founded by Marc Randolph and Reed Hastings. The company specializes in online video on demand services, streaming services, DVD by mail and invests in TV and film production. The company initially started its business by rental services and DVD sales but later they decided to send the DVDs by mail service. Netflix first started its streaming service in Canada and later expanded worldwide (around 200 countries).
The required strategic analysis frameworks are written as follows to understand the present condition of Blockbuster with respect to Netflix.
The Pestle analysis of Blockbuster is written in the following sections. The PESTLE analysis will help to understand the general environment that Blockbuster is facing.
Political – The availability of entertainment content with associated risks of digital right violation issues as well as piracy issues make the process legally costly and increasingly complicated. Further political factors faced by Blockbuster include issues with employment taxes, safety and regulations, tax guidelines and political stability.
Economic- The increasing cost of fuel will affect the distribution costs of Blockbuster. Substantial strain will be faced by the company to manage the distribution network. The consumer discretionary spending is decreasing with the starting of the subprime mortgage crisis. Blockbuster has also faced other economic factors such as rise in the rate of unemployment, internal and external policies, decrease in the economic growth and inflation (Blockbuster to close U.S. retail stores, mail DVD operation, 2018).
Social- Rising pressure on Blockbuster will affect its business operations due to its rising IT literacy and rising customer expectations. The rental industries and the media sales of Blockbuster has been significantly affected with the rising consumer access to bootlegs, online resources and pirated Medias. Other social factors include the rising awareness of consumers towards the green initiative that comes with the adoption of digitization (Blockbuster Video Stores & On Demand Movies, 2018). Moreover, change in the lifestyle attitude of people, education on piracy and different customer demographics has also affected the market conditions of Blockbuster.
Brief introduction of Netflix
Technological- As consumers are increasingly opting the digital media offered through web, it opens up a market entry for Blockbuster to survive in this changing market scenario. The inevitable role of internet in the market scenarios of the future and technological advancements in the digital sector has affected the external market conditions of Blockbuster (How Blockbuster Failed at Failing, 2018).
Environmental- With the dawn of globalization, customers are rapidly getting access to more web content due to the presence of multinational brands and online media. Increased digitization will improve waste management of companies which was not followed by Blockbuster, Moreover, lack of use of eco-friendly products by the company also affected their market conditions.
As products that are provided on an hourly basis and DVDs are easily available to the consumers in the market, Blockbuster has created a good control over its prospective customers. Good quality product are provided by Blockbuster and the games and movies they provide are updated regularly. This provide the consumer with totally updated version of their content prior to their release. Blockbuster also provides multiple ways of offering their services and products to their customers (A Look Back At Why Blockbuster Really Failed And Why It …, 2018). The product are offered all over the world so Blockbuster has a good control over the global market. The prices are also low compared to other services.
One of the main weaknesses of Blockbuster is that it has little or no control over the shipping costs of its products. The movie player that is provided by the organisation is not popular as well. Moreover, countries such as Africa has huge opportunities for growth but Blockbuster is not interested enough to tap into the market. Blockbuster is also facing problems with issues such as proficiency and funding.
Blockbuster can use the business functions that are used by its competitor Netflix (Blockbuster | Netflix Official Site, 2018). It can start by digitizing its contents just like its competitor or it can formulate a new revolutionary idea to tackle its competitor. With recent surveys showing that customers prefer online content more than physical ones, this factor becomes more evident. The market demand that is used by Blockbuster is very innovative with product prising rising during holidays.
The damage that Blockbuster can face due to piracy concerns can be extremely significant and can hinder its future growth process. Blockbuster has already garnered a lot of competitors which is why it has to update its contents regularly (Blockbuster (@blockbuster) | Official Twitter, 2018). Otherwise, the company can face significant losses. Blockbuster also faces problems when the mobile is not released in due time affecting its services.
Discussion
PORTER’S FIVE FORCES
As the products are not differentiated properly, there is a threat from new entrants in the market scenario. The cost of starting a new movie outlet is also relatively low. The only setback that the new entrants will face is that loyal customer base that Blockbuster has achieved by offering their services over the year (Jr. & Schacknow, 2018). The risk is still high.
As the products are not differentiated and the industry price of the products are also sensitive, buyers have a lot of bargaining power (high) in this aspect.
Threat faced from Substitute services and products
The threat is low as consumers are only availing similar type of products such as movies and games. However, similar services are offered by Prime, Hulu and Netflix which can turn into a serious threat if Blockbuster does not innovate (O’Reilly, 2018).
Due to the low switching costs of the products, the suppliers have low bargaining power in this aspect. Moreover, the products are not well differentiated and the innovative products such as Blue ray disks have low demands.
As the prices of starting a rental company is relatively low and with rising digitization, the threats from competitive rivalry is high. With companies like Netflix taking over the market with their digitized services and well differentiated products, Blockbuster can face serious issues in this aspect.
Structure- The organisational structure of Blockbuster implemented on a broad scale. The employees were separated in teams to focus on target customers and the process management was also involved in the business processes (Blockbuster still exists in a couple of places, but they …, 2018).
Systems- The method of operation in Blockbuster was informal in approach. The communication flow and organisational procedures were although formal in nature.
Style- The style element of Blockbuster is about leadership and management. The leadership of Blockbuster was pretty weak and adamant to change in testing times. When Netflix was acquiring all the market shares and prospective customers, the CEO and the management team did not deviate from their business processes which was a big mistake (Vena, 2018).
Staff- Blockbuster employed around 83000 employees in its peak time. More than 53000 people were hired from US and the other 23000 was hired from foreign countries.
Skill- Blockbuster had enough strategies to stay above the competition but due to the few mistakes of the upper management it failed to defeat Netflix (Contact Us – Blockbuster LLC, 2018). The rise of Blockbuster from a single store to a global store was only possible because of its hard working employees.
PESTEL ANALYSIS
Strategy- Blockbuster used a strategy of opening as much store as possible to lure customers. But this strategy ultimately led to its demise. The high cost that was involved in setting up so many stores as well as not availing classic movies in its marketing strategy proved ineffective (Blockbuster Inc. – The New York Times, 2018).
Shared values- Blockbuster inculcated the value of treating their colleagues as well as their customers as their family. Valuing differences was collectively called as diversity in Blockbuster (Blockbuster has survived in the most curious of places …, 2018). The company treated corporate value as a continuously evolving thread that needs to be embraced for running the business.
The four broad phases of the cycle have been show namely, start up, growth, maturity and decline. The TR technology cycle of Blockbuster shows a general model for the strategy of the organization. In the given figure, the four broad phases of the technology cycle has been mentioned which corresponds the effect caused by the initiatives taken due to the original strategic positioning (with the help of extension and acquisition). The other one shows a revision of that same position when the conditions become unsustainable and shows a downward trend.
The company was introduced in 1985. The first store was opened in Dallas, Texas. From 1987 to 1994, the growth cycle continued. At the beginning the store had just eight stores. By the end of 1991, the store has already made more than 1600 stores. The maturity phase continued from 1994 to 2002. The management and corporation propelled the company towards success in this phase. The company began charging inflated prices as it was the one and only competitor in the scenario. Late fees were also applied in some cases. From 2002 to 2014, the decline stage started (Blockbuster to close U.S. retail stores, mail DVD operation, 2018). Netflix came in the market in 2002 and the online strategy adopted by it completely changed the market scenario with the dawn of advanced IT technology. The last store closed in 2014.
The technological and marketing uncertainties of Blockbuster are included in this phase. The manufacturing process of Blockbuster required high labour and dispatching the products needed additional labour. The company had no effort for innovation and had no idea how fierce the competition will turn out in the later phases. Blockbuster could have followed two strategies. First it could have outmanoeuvred Netflix, its competitor by designing an innovative product or a dominant design. This needed agreement form marketing investors and distributors. The second strategy involved taking control of complementary assets.
SWOT ANALYSIS
As the market starts to appreciate the products of Blockbuster, they start accepting the product and the market started to grow. Blockbuster managed to dominate the market in this phase bringing a new concept of renting movies and games all around the world whenever they needed (Blockbuster CEO passed up chance to buy Netflix for $50 …, 2018). Back then, Blockbuster was the only name for movie watching due to their transition of following leading technology.
The specific phase includes the product costs and performance assessment of Blockbuster. After the transitional phase, Blockbuster had understood the market segments and their potential customer groups. They specifically employed labour and invested in making more shops to bring in a commodity like structure where the customers as well as their suppliers can benefit mutually (The Internet Didn’t Kill Blockbuster, The Company Did It …, 2018).
Blockbuster has to get rid of the late fees business structure. The $40 late fees was too much for some customers to handle. Blockbuster can remerge in the market through innovation. The way Netflix has controlled the market with online streaming service, Blockbuster needs to take the same business model of innovation. To become competitive, they need to embrace the change that comes with it. They can reintroduce the $1 dollar a day all rental pack along with online services (How Blockbuster Failed at Failing, 2018). They can train their staff better to introduce new marketing strategies to attract more customers. They can also introduce faster delivery dates.
Conclusion
To conclude the report, it can be stated that Blockbuster needs to embrace the change that comes with new innovative products in the market. Netflix had an innovative idea and they have delivered well in executing it. The CEO of Blockbuster once refused an offer to sell Blockbuster to Netflix which would have been the right move considering their market share at that point of time. Their arrogance cost them their entire business.
Through PESTEL analysis, the external market environment of Blockbuster has been assessed. The SWOT analysis revealed the internal and external aspects that the company may be facing. The Mc Kinsey’s model revealed the importance of critical role of coordination that Blockbuster needed. The Porter’s five forces analysis revealed the competitive forces that Blockbuster was facing and help to determine the weakness as well as the strengths. With TR technology cycle and 3 phases of innovation model, a thorough analysis was performed that helped to understand the current condition of the market for Blockbuster. The assignment has been designed to propose solutions to Blockbuster to stay ahead of the competition in the coming years. The analysis frameworks that has been taken in this assignment has helped to deduce why Netflix excelled over Blockbuster and where it went wrong.
References
A Look Back At Why Blockbuster Really Failed And Why It …. Retrieved 2018, from https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/
Baker, M. J. (2014). Marketing strategy and management. Palgrave Macmillan.
Blockbuster (@blockbuster) | Twitter. Retrieved 2018, from https://twitter.com/blockbuster
Blockbuster | Netflix Official Site. Retrieved 2018, from https://www.netflix.com/title/80194737
Blockbuster CEO passed up chance to buy Netflix for $50 …. Retrieved 2018, from https://www.businessinsider.com/blockbuster-ceo-passed-up-chance-to-buy-netflix-for-50-million-2015-7
Blockbuster has survived in the most curious of places …. Retrieved 2018, from https://www.washingtonpost.com/news/morning-mix/wp/2017/04/26/blockbuster-has-survived-in-the-most-surprising-of-places-alaska/
Blockbuster Inc. – The New York Times. Retrieved 2018, from https://www.nytimes.com/topic/company/blockbuster-inc
Blockbuster still exists in a couple of places, but they …. Retrieved 2018, from https://www.businessinsider.com/blockbuster-still-exists-in-a-couple-of-places-2017-4
Blockbuster to close U.S. retail stores, mail DVD operation. Retrieved 2018, from https://www.usatoday.com/story/money/2013/11/06/blockbuster-closing/3456271/
Blockbuster Video Stores & On Demand Movies. Retrieved 2018, from https://www.blockbuster.com/
Contact Us – Blockbuster LLC. Retrieved 2018, from https://www.blockbuster.com/contactus.html
How Blockbuster Failed at Failing. Retrieved 2018, from https://content.time.com/time/magazine/article/0,9171,2022624,00.html
Jr., B., & Schacknow, P. (2018). Wall Street is set to open higher after blockbuster earnings. CNBC. Retrieved 18 April 2018, from https://www.cnbc.com/2018/04/18/wall-street-is-set-to-open-higher-after-blockbuster-earnings.html
O’Reilly, L. (2018). CMO Today: Roberto Quarta and WPP’s Future; Netflix’s Blockbuster Earnings; Facebook Explains Non-User Tracking. WSJ. Retrieved 18 April 2018, from https://www.wsj.com/articles/cmo-today-roberto-quarta-and-wpps-future-netflixs-blockbuster-earnings-facebook-explains-non-user-tracking-1523964971
The Internet Didn’t Kill Blockbuster, The Company Did It …. Retrieved 2018, from https://www.forbes.com/sites/jonathansalembaskin/2013/11/08/the-internet-didnt-kill-blockbuster-the-company-did-it-to-itself/
Vena, D. (2018). Netflix Earnings Shine on Blockbuster Growth. The Motley Fool. Retrieved 18 April 2018, from https://www.fool.com/investing/2018/04/18/netflix-earnings-shine-on-blockbuster-growth.aspx
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