Blockbuster Leader in the Retail

Blockbuster leader in the retail sales and rental of home entertainment, Blockbuster has been forced in recent years to re-evaluate its core retail strategy. The company rose to prominence with its core offerings of video rentals, but in the past decade has faced intense competition from online media distribution. Movies have faced competition from video games for entertainment dollars. Blockbuster has moved to address both of these competitive threats by expanding their video game offerings, and by adding online video and game rentals.

The current strategic thrust for Blockbuster is to develop better online media delivery capabilities. The firm feels that they have strong brand equity in the media delivery business, and that they can partner with technology providers to compete in this emerging segment (Blockbuster, 2009). The company has also worked to expand their mail-delivery distribution capabilities and product offerings. In 2009, the company has begun to increase its efforts to deliver media via other channels as well. These include DVD vending machines, kiosks, set-top boxes and portable video players (Blockbuster, 2009). The overall strategic goal is for Blockbuster to leverage its brand equity to become the dominant multi-channel content delivery company for a wide variety of electronic media.

Blockbuster is beginning to emerge from the wilderness with respect to their positioning. The firm had adopted a mass market position, based on low margins and high volumes. However, in not keeping up-to-date with changes in the marketplace, the strength of that positioning was eroded somewhat. In recent years, the company has begun to restore the strength of its brand. As a result, Blockbuster is beginning to show signs of a return to a dominant market position. This can be seen by the increase in domestic same store revenues in 2008 (Blockbuster, 2009). The firm's other strategic thrusts will serve to reinforce the company's positioning as the #1 provider of such electronic content.

The retail mix at present is based around four groupings. The first is the company's extensive store network. Blockbuster operates over 7800 stores in 22 countries (2007 Form 10-K). This network forms the basis for delivery of DVDs and video games in both rental and retail formats. The rental market has experienced limited growth in recent years, whereas the retail format has given Blockbuster more robust growth. The second component of the retail mix is the mail-delivery system. Customers order from the Internet, but the content is delivered in hard format in the mail. This channel is modeled after strong competitor Netflix. Blockbuster is working to build their roster of titles for this format and in the past year has focused on adding video game titles.