Summary of case study and analysis questions

Blockbuster Case

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.

In short, Blockbuster needs to recognize the reality of digital advances, the limitations of its current strategies, and the possibilities offered by the online environment. Only by doing his can the company ensure its long-term survival.

Question 4: Value-added Components

Blockbuster could offer value-added components such as advertising-based film distribution, as well as a wider range of distribution formats to reach a larger amount of customers. Indeed, films could be distributed via both the traditional and new channel formats in order to entice customers. It is only by acknowledging customers' preferences that Blockbuster can serve as a fully valued distribution system for films.

Question 5: The Long-Term

When thinking about the long-term relationship of Blockbuster with movie studios and customers, its survival can only be guaranteed if it fully immerses itself into the possibilities offered by new technology. The inconvenience to customers must be fully offset by choice. Some customers may still prefer the traditional way of renting films, for which the traditional store component can remain for as long as it is viable. However, in the long-term, this format will not survive. The greater convenience of online rental and digital film formats is simply too overwhelming to ignore in favor of what has become known as a "dinosaur."

To survive in the long-term, Blockbuster will have to change its image as primarily a distributor of traditional film rentals. It will retain its relationship with movie studios and customers alike only by demonstrating its ability to adjust to the times and become more convenient in terms of providing its primary product.

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Case Update

Movie Gallery has an online presence via its own Website, where customers can rent films online. For its product sales, it offers a number of items at Amazon.com. This is convenient, as Amazon.com is one of the largest online distribution of goods on the Internet. Movie Gallery offers a number of game related toys and other merchandise at Amazon. Currently, the site itself does not offer much in terms of specific services by the company itself. There is, however, a promise of a revival within good time. In general, however, the site does not seem very competitive, especially when compared with others like Netflix.

Netflix has expanded its products and services to PS3 and X Box gaming, along with online downloads of films and television episodes. In addition, its Website includes a wealth of information regarding the company, its services, a blog, and a contact option. The site also offers a one month free trail option for its customers. The Website offers a lot of information and materials that can be used in investigations by companies like Blockbuster to determine what can be done in terms of competition.