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Blockbuster business paradigm shift
Crafting and executing strategy case study
Blockbuster business paradigm shift
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Netflix versus Blockbuster versus Video-on-Demand Strategic Issues in the Case Founded in 1999, Netflix is an online DVD rental service whose strategy and market success were predicted on providing an expansive selection of DVDs, an easy way to choose movies, and fast, free delivery via postal mail. The company’s strategic intent was to be the world’s largest and most influential movie supplier. The goal of the company was to make it a lot easier for customers to select and rent movies and to eliminate the hassles involved in picking up and returning them. Its strategy incorporates customer convenience and a wide selection of entertainment selections. Netflix provides extensive information to its customers to help them make good selections and identify films that they may like to rent in the company’s vast library. Netflix’s growth strategy comprised three primary strategic issues. First, Netflix continued to pursue its reputation for innovation and to maintain the high quality level of service that its customers expected. Second, Netflix intended to use its preeminent position in the industry to lead the transition to high-definition DVD’s and eventually to digital downloading of movies on the Internet. Third, Netflix focused on rapidly expanding its subscriber base to maintain its market leadership and to realize economies of scale that will drive down costs. Netflix’s strategy was to create a blue ocean of uncontested market space within the video rental industry, an industry dominated by Blockbuster for over 20 years. Blockbuster was the world’s market leader in the videocassette, DVD, and video game rental business, earning about a 40 percent share of the $13 billion industry. Blockbuster generated most of its revenue from rentals at its company-owned and franchised brick-and-mortar stores throughout the United States and internationally. As of 2004 it still rented and sold videocassettes but revenue from rentals and sales of tapes for VCRs was falling sharply as increasing numbers of households were converting from VCRs to DVD players. In that year Blockbuster earned more than half of its revenue from DVD rentals with the remainder of its revenue generated from DVD sales and the rental and sales of video games and videocassettes. In 2002 Blockbuster had announced a strategic vision of becoming the complete source for movies and games in both the rental and sales markets. However, from 1999 to 2005 Blockbuster was a troubled company, with stagnant sales revenue and reported net losses in six of those seven years.
In 1985, Blockbuster opened its first store in Dallas, Texas. After the first few stores opened, founder David Cook built a six million dollar warehouse, which could pull and package multiple stores in a day. Blockbuster’s ability to customize a store to its neighborhood, loading it up with films geared specifically to demographic profiles in addition to the popular new releases, and a sizable collection of catalog titles. Blockbuster had instant success. In the early 1980’s and 1990’s Blockbuster put neighborhood mom and pop video stores out of business by offering better selection and convenience. However, success like that enjoyed by Blockbuster can foster arrogance. For Blockbuster, arrogance meant they believed they could do anything within their stores. For example, Blockbuster purchased Sound Music and Music Plus chains. This move took Blockbuster from movies to music. Secondly, this Blockbuster Music meant they were no longer renting now they were selling.
Because Netflix can be known for swapping out its roster, be sure to check out these standouts before the streaming company switches it
A critical SWOT analysis of Netflix’s social media techniques clearly shows they are ahead of the game and not backing down from rising competitors like YouTube which is gaining viewers by increasing the amount of online content.
The video rental industry began with brick and mortar store that rented VSH tape. Enhanced internet commerce and the advent of the DVD provided a opportunity for a new avenue for securing movie rentals. In 1998 Netflix headquartered in Los Gatos California began operations as a regional online movie rental company. While the firm demonstrated that a market for online rentals existed, it was not financially successfully. Netflix lost over $11 million in 1998 and as a result significantly changed the business model in 2000. The new strategy included focusing on becoming a nationally based subscription model and focusing on enhancing the subscribers experience on their website. The change in strategic focus has allowed Netflix to grow into the largest online entertainment subscriptions service in the United States with over 6.3 million subscribers (Netflix).
[1] Halal, Bill. "How NetFlix Beat Blockbuster: An Exemplar of Emerging Technologies." William E Halal RSS. N.p., n.d. Web. 09 Dec. 2013.
Companies like Amazon and Netflix are very effective in predicting what customers normally buy and watch. Knowing what your customers are or are not buying will allow you to position products that they are statistically likely to purchase based on recent transactions and activity. This is a powerful tool for Netflix because it keeps users engaged and actively using the service but also allows them to tailor their investments in content towards items that are more likely to keep users active on their site.
Therefore, Netflix has fewer problems predicting revenue. ? Netflix enjoys lower fixed costs due to the fact that it is an online DVD rental company. As an internet business, Netflix incurs less overhead costs than competitors such as Blockbuster, as well as having fewer employees to operate the physical locations, thus labor costs are greatly reduced. ? Netflix gives customers unlimited access to the largest selection of DVDs. Netflix?s video library consists of over 45,000 titles, making their selection the worlds largest, beating out Blockbuster, Movie Gallery, and Hollywood Video. ?
As the firm moves forward, top managers must pay attention to staying unique to sustain a competitive advantage. Netflix does not own their content, nor do they have any tangible assets. Netflix is a part of a broad range of network users. As technology continues to grow exponentially, Netflix will have to be readily adaptive to change and innovation. Technology never stops growing and evolving, therefore, Netflix’s business platform should never stop growing and evolving. At the same time, they must be careful to remain user friendly and customer centric by keeping the technology at a level where users will not have to obtain a certain set of technological skill sets.
The twenty year journey of Blockbuster has not been without bumps, valleys, road blocks, and detours. Blockbuster has come under legal fire from Netflix, a major online competitor, the Free Trade Commission for attempting a host...
Reed Hastings (co-founded) founded Netflix in 1997. During this time, Netflix offered DVD rentals by mail. As Netflix went public in 2002, shortly a year later their subscription reached the one million mark (Netflix Management, 2011). Recently, Netflix is recognized as one of the 50 most innovative companies, ranking number eight for “streaming itself into a $9 billion powerhouse (and crushing Blockbuster)” with 20 million subscribers (fastcompany.com, 2011). This success shows how Netflix embraced a business approach where their mission was to take the troublesome experience of everyday consumers and transform them into a business opportunity. Below illustrates how Netflix rank in other categories.
Although Hastings vowed to be divergent from other video retailers, his goal was to use an identical pricing strategy; however, one that would “appeal to customers [. . .] who used online shopping as an alternative to traveling to retail outlets” due to ease of access and more preferences (Shih, Kaufman, & Spinola, 2009, p. 3). Furthermore, Netflix launched its business at a time DVDs had barely hit the marketplace as the firm anticipated the new technology to be a promising venture. Nonetheless, within a year DVD players became so vast...
According to the history of movie rental, home video, and gaming, Netflix was the first company to introduce the movie rental service back in April of 1998 and offered more than 900 titles (Lardener, 2010). Ever since, the industry has become larger with new technology such as online streaming and next day delivery. Also, more competitors are now available and provide the same services, such as Amazon, Wal-Mart, blockbuster, and Redbox kiosks.
The idea inspired Reed Hastings and Marc Randolph, and then they founded Netflix in Scotts Valley, California in 1997 (Netflix, 2014). The company comes into play by developing a subscription-based streaming platform for movies and television shows. Unlike the traditional movie rental businesses such as Blockbuster and Redbox, Netflix’s innovation offers service via Internet, and it does not have any physical stores but instead delivers DVDs through postal mail in the U.S. Since then, Netflix has become the world’s leading internet television network with constant growth of customers to over 48 millions members in more than 40 countries in the North America, Europe, and the Latin America (Netflix, 2014). In this analysis, the main focus is examining the current market environment for Netflix. It identifies the type of market structure that Netflix is currently competing. The analysis also expands on the competitions, product differentiation, pricing strategy, and measuring the level of easy entry-and-exit.
Video Rental and Streaming has partly been of the most significant avenues of the general home entertainment industry in the United States for many years. It promotes constructive development through various channels such as Information Technology, Public Multimedia and it also has a huge impact on people’s lives and their entertainment on demand. One of the best companies which provide this high-advanced service is Netflix, Inc (Netflix). It was incorporated on August 29th in 1997 in California by Reed Hastings & Marc Randolph; listed on NASDAQ as NFLX in 2002. Netflix is the world’s largest Internet subscription service streaming television shows and movies with over 40 million members in 40 countries (Netflix, 2013).
When debating Netflix and movie theaters the factors to consider are convenience, variety, price, and the experience. These are the four most important factors, because people want the best quality that is the most cost effective. Through my research, I show that movie theaters have an unsurpassed experience associated with them, but Netflix is convenient, affordable, and has a wide array of programs.