The document "Blockbuster fights for Survival Against Intense Competition" concerns the challenges that the DVD distributor Blockbuster faces in the light of not only new technology, but also in the face of competitors making use of this new technology to provide customers with greater convenience and better prices.
The document begins by providing an overview of Blockbuster in terms of its evolution since its birth. While not all its business decisions resulted in success, the distributor found itself on top of the competitive ladder during the year 2005. The company's traditional format, however, resulted in a steady decline since this time as competitors such as Netflix, Redbox, and other digital providers began to use new technologies competitively.
Netflix, for example, offers online rentals that can be shipped and returned free of charge. Redbox offers convenient locations in other types of stores to save customers an extra trip. Digital distributors offer digital films and television episodes, not only saving customers a trip, but also the inconvenience of having to leave their home to return rental items.
The conclusion is the Blockbuster would need to adjust its position in terms of digital technology if it hopes to survive the increasing competition. The document cites a number of short-term strategies to help the company find its feed, but emphasized that these would most likely not be sufficient to ensure long-term survival. The suggestion is that alternative strategies would have to be implemented to help Blockbuster be more than the "dinosaur" it has become.
Question 1: Netflix
Intense competition from Netflix derives from the company's focus upon the convenience of online rental with next day delivery. In this way, the company makes use of new technology to enhance the traditional way of watching rental films, via DVD. The success of the strategy is also based upon the fact that customers can rent as many films as they wish during a month for a flat subscriber fee. As soon as a film is returned, the next film is shipped to the subscriber. This service is offered on the basis of free shipping in both directions.
In response to the extreme success of Netflix's competitive strategy, Blockbuster found itself obliged to drop its late-fee program. This resulted in a $400 million loss in revenue for Blockbuster. In terms of the future, Blockbuster will have to find ways to implement new technologies into its strategy for the purpose of creating greater convenience and cheaper prices for its customers.
Question 2: Redbox and Fully Digital
Redbox differentiates itself from Blockbuster in terms of both convenience and low prices for consumers. Because films are made available at kiosks at fast food outlets, airports, and shops, customers can rent movies while in the process of other activities. Hence, no special trip is required. Furthermore, the fee for doing so is very low, also providing a competitive edge over Blockbuster.
In response to this, Blockbuster will have to find ways to provide customers with convenience that is perceived as greater than that of Redbox, while also offering special prices for certain items. Careful planning will have to be implemented to ensure the survival of the company in this regard.
In addition to online rentals and partnerships with other businesses, Blockbuster will also have to carefully consider technological advances such as digital film developments. Indeed, digital films are becoming increasingly important in terms of convenience as well as quality. It is projected that these will soon replace the DVD as the favored rental film format. Blockbuster could therefore plan to offer this format within an online environment as part of its strategic long-term planning.
Question 3: Strategic Options
The first important action Blockbuster should take is facing the reality of its traditional brick and mortar format. There is no long-term future in this format. To ensure its long-term survival, Blockbuster will have to construct a strategy that acknowledges the advances of technology, the increasingly online film environment, and the convenience of customers.
In the long-term, therefore, it is advisable that Blockbuster create a platform for online movie rentals as well as for digital film offers. As part of this strategy, Blockbuster should thoroughly investigate existing companies offering these services, how they are provided, the advantages offered to customers, and the potential reasons why customers would choose one company over another. The outcomes of these investigations should then be used to provide Blockbuster with a competitive edge.