Blockbuster LLC and its reason for downfall PDF

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reason why blockbuster went from no.1 to bankrupt...

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External Environment’s influence behind the failure: The first Blockbuster opened in 1985 in Dallas, Texas. Over the next two decades, Blockbuster became the top movie-rental business in the US. However, Netflix and Redbox started challenging Blockbuster since they had no rental fees. In 2010, the company filed for bankruptcy and closed all of its stores except for one — which has been turned into an Airbnb for $4 per night. Now what could be the possible external environment for such a huge fall or a great strategic failure of a once “No.1 video rental chain of America” is explained in the next segment of the report.

Elements of General Environment behind the failure: Demographic: For Blockbuster, one of the reasons behind their failure is that they ignored that future potential customer. Blockbuster's troubles continued through the mid-2000s. After parting from Viacom and experimenting with in-store concepts such as DVD and game trading, Blockbuster was in the midst of an identity crisis. Its foray into video-on-demand streaming came too late. They were too busy making money in their video stores to imagine a time when people would no longer want or need them. And in a bid to rescue their business, their answer at the time was to fight fire with fire. At one point they even opened up rental kiosks, a little bit like a vending machine, but all of these attempts were based on either outdated technology or outdated business models. Blockbuster, they didn't seem to understand how the next generation, particularly millennials, who grew up in a world without hard-copy media like DVDs and CDs, how they would react to video-on-demand as technology improved. And that's why Blockbuster got left behind. Sociocultural: Blockbuster also could not predict the shift in preference regarding product and service and also the change in lifestyle. It earned an enormous amount of money by charging its customers late fees, which had become an important part of Blockbuster’s revenue model. The ugly truth and the company’s Achilles heel was that the company’s profits were highly dependent on penalizing its clients. But clients were growing tired of this. Blockbuster thought customers wanted to walk into a store to pick up a movie and snacks. It turns out, customers want to watch movies and eat snacks, but they don’t want to leave their houses to rent the film. Also for all the excitement surrounding online social platforms such as Facebook and Twitter, we really haven’t scratched the surface on the networks we encounter in real life: The networks of consumers that make up our brands and industries as well as the organizational networks that determine how things get done or don’t get done in our enterprises. In here blockbuster failed to have a impact as well. Technological: Technologically Blockbuster had the most strategic failure. Since Blockbuster was essentially a retailer, it lacked the resources and capabilities to successfully become an electronic player. Blockbuster already had an online presence through its website, which it did not use to sell merchandise or rent DVDs. The company had always been in a traditional “bricks-

and mortar” business, only renting and selling VHS tapes and DVDs through its stores. When other Internet based firms that offered to bring rental movies right to their customer’s home they didn’t do that, they didn’t update for video-on-demand (VOD) service either. Another great technological fail were not going for internet based subscription services. The leading company behind this idea was Netflix Inc. And all that technological fall behind is now considered as a major strategic fail and the reason behind their bankruptcy.

Elements of Industry Environment behind the failure: The threats of industry environment that worked behind the declination of Blockbuster can be explained through Porters 5 forces: Threat of new entrants: As the video retailing industry then was easy to enter with very few legal and economic barriers, Blockbuster had Netflix, Express.com, Reel.com, RedBox, Kozomo.com etc. And those entire entrant gradually captured Blockbusters market share. Bargaining power of suppliers: As for this, Blockbuster didn’t have to face that much of a threat. Bargaining power of buyers: Firstly, though being a market leader, Blockbusters outdated strategy pushed their customer to switch. And that being added with available options caused Blockbusters downfall to be accelerated. Threat of substitute products: The video retailing industry had more than enough competitors to have sufficient substitute product. Netflix, RedBox and YouTube offered the same category product with even better offer. Rivalry among competing firms: In the later period (2000s) of business Blockbuster had a fullfledged competitive market and competitors who were in leading position and taking strategic moves, innovating and being customer driven whilst Blockbuster failed to do so.

Elements of Competitor Environment behind the failure: Blockbuster was challenged not only by the startup Netflix, but also eventually by powerful technology companies (Apple and Amazon) and cable companies with streaming and video-ondemand services. It can be said that Netflix played a role in the decline of Blockbuster. Netflix started by mailing the movie rentals right to the customer’s doorstep upon signing up for its service by paying a monthly subscription fee. Not only that, for a fixed monthly subscription fee, Netflix also allowed customers to rent an unlimited number of movies that were then mailed to them and returning one was as simple as mailing it back.

This proved to be more convenient for most customers and made a dent in Blockbuster’s customer-numbers since they were able to not only have unlimited movies mailed to their doorstep but for the same amount as it would take for a one-time trip to a Blockbuster store. Also, Netflix did not beat Blockbuster by bringing movie streaming right off the bat –it was only 10 years after Netflix was founded that it bought in the option of streaming movies and other content over the internet. Netflix was a niche business. While Netflix started with DVD shipments, it shifted to online streaming early. It took the technology bull by the horns at a time when no one else was doing so and became a leader. Blockbuster didn’t believe a month-to-month subscription service would ever actually work. And it certainly wasn’t planning on going digital. Even when the company was offered a buyout deal early on, it declined, believing that its previous business revenue model would work just as well in the new wave of movie watching as it had in the past. Ignoring a shift only makes it worse. New solutions, trends, and buying patterns won’t disappear because you choose not to see them. Blockbuster took too long to notice—or care about—the change in buyer behavior....