Blockbuster: An Organizational Analysis What

Blockbuster: An Organizational Analysis

What is the company's mission statement or overriding objective?

Blockbuster's main activities are to operate and franchise entertainment-related stores. It provides VHS tapes, DVDs and video games on rental basis through own operated stores and also franchises stores.

Blockbuster's mission is to be the global leader in rentable home entertainment by providing outstanding service, selection and value (Blockbuster Web site, 2006). To accomplish this, Blockbuster aims to provide its members with the latest and best technology in home entertainment. To stay competitive, Blockbuster stocks more new movies than older releases, in order to capitalize on heavy consumer demand for new release titles.

In which nations does it produce and market its products?

Blockbuster is a global leader in rentable home entertainment and currently exists in many locations around the world. The Blockbuster brand has thousands of stores in twenty-nine countries, including the United States, Canada, Mexico, Argentina, Ireland, Puerto Rico, Australia, the UK, New Zealand, Brazil, Taiwan and Spain. The company has both company-owned and franchise stores that sell video tape, video game and DVD rentals.

Are its production facilities centralized or decentralized?

The company is headquartered at Renaissance Tower in downtown Dallas, Texas; however, it uses a centralized business strategy. The supply of videos and DVDs for rental is essentially a national market given the language and film certification requirements. Blockbuster utilizes centralized distribution centers due to the needs of international locations. For its mail order rental business, sending movies from a closer retail outlet reduce costs and delivery time. Since Blockbuster already owns these movies for its retail business, the cost of goods for the program is relatively low.

Does it standardize products or adapt them for different markets?

Blockbuster's global strategic plan is to build its core business in video rental. The company expands by developing more stores -- both franchised and company-owned -- and distributing its own products. The company's global strategy is simple. Company leaders believe that people from all cultures enjoy leisure time.

While people in one geographic region may like different actors and topics than those in another area, they share a desire to enjoy themselves. Having fun is a repeat business, and it is why Blockbuster believes that its global strategy should be focused primarily on providing entertainment. It main goal is to build on its relationship with their members and become the leading global provider of home video. However, it also seeks to maintain a local flavor. Therefore, the service is standardized, but the products, prices, and promotions are adapted for local markets.

What type of organizational structure does it have?

At the top of Blockbuster's organizational structure is the Board of Directors, which consists of a majority of independent directors. The Nominating/Corporate Governance Committee is responsible for reviewing with the Board, on an annual basis, the composition of the Board in light of the characteristics of independence, diversity, age, skills, experience, availability of service to Blockbuster, tenure of incumbent directors on the Board and the Board's anticipated needs. The Nominating / Corporate Governance Committee is responsible for recommending candidates for election or appointment to the Board, in accordance with the criteria, policies and principles set forth in its charter and in these Corporate Governance Guidelines.

Because Blockbuster is a franchise, its organizational structure requires adequate staff to support current operations and to recruit new franchisees. All new franchise organizations have a director of Operations and director of Franchising. The director of Operations conducts franchisee training, and deals with start-up concerns. Blockbuster also has an operations structure that manages field supervisors, operations training personnel, administration, design and construction, and location assessment and evaluation. The company also has a Marketing team that markets the entire operation. The Franchising team makes sure that new franchisees meet a specific profile suggesting that with the right training they will be able to build sales, rather than the fact that they simply have the money to buy the Blockbuster name.

Which of the two types of international strategy does it seem to follow?

Global strategy is the way a company defines its business and merges organizational competencies and customers. Good global strategy enables Blockbuster to bring value to customers and deliver value at a profit.

Blockbuster achieves international growth by opening new store, especially through franchising. The company chooses new locations based on the following factors: franchise climate, the market for your particular product or service, competitive factors, proximity, language barriers, culture, political climate and relevant legal concerns.

Blockbuster also aims to increase its global business through partnerships and acquisitions. Its marketing partnerships include Time Warner and DIRECTV. In 2004 Blockbuster acquired American Satellite and Video, operator of retail stores that buy, sell, and trade video games.

The company also does whatever it takes to stay competitive. For example, to combat the popularity of Netflix, Blockbuster developed the Blockbuster Online service in which members can rent unlimited DVDs online and have them delivered via postal mail for a monthly fee. The company has also added a monthly in-store subscription service called Blockbuster Movie Pass, which allows members to keep two or three movies at a time with no late fees.

Does the company make use of work teams?

One of the main reasons that Blockbuster is so successful is that it trains its employees well and offers them incentives to work toward company goals. Blockbuster trains its employees to work as a team to focus on service, selection, value, and customers. Blockbuster encourages employees to look at their jobs as careers and provides opportunities for both career and personal growth through training, development and promotions. As a result, there is a positive team attitude at its stores.

A work team is a special kind of work group in which team members activities are coordinated with and depend on one another; each member has a role; and all members share a common goal.

Based on the strategies that this company employs within the organization, will the company be successful in its international ventures? What changes would you recommend the organization make to help it be more successful in international markets?

The video rental retail business is highly competitive, and companies compete primarily on title, selection, number of copies available, and the quality of customer service and pricing. Blockbuster stores around the world share a common objective -- to provide a broad selection of titles and larger inventory than most of its competitors, more convenient store locations, faster customer check-in and checkout procedures, extended hours, friendly and effective customer service, and competitive pricing for all Blockbuster members.

The standard business model for Blockbuster's rental stores is that they pay a flat fee per video and have unlimited rentals. Blockbuster used to pay a high rate for movies and keep the majority of the rental fee. They would then pay a percentage to the studio, reporting rental information on a regular. However, as studios started selling movies to consumers, this arrangement ceased. Today, Blockbuster buys movies at a lower rate and rents them out.