With roughly 8,000 locations, the Blockbuster Company is a market leader in rental movies and video games. The businesses rented movies and video games to consumers for personal use. Blockbuster’s eyesight is to be a one-stop-shop for games and films. Its objective is to continue growing its fundamental rental business while leveraging its company image, massive database, retail locations, and cinema interactions to convey an even wider scope of home entertainment to existing and new viewers. The corporation has operations in the United States of America, Europe, Latin America, Australia, Canada, Mexico, and Asia. Blockbuster’s headquarters are in Dallas, Texas, and the company employs 58,561 individuals on a full-time, part-time, and occasional basis.
The business made $5,287.9 million in income during the fiscal year ending January 2009, down from 4.6% in 2008. Blockbuster blamed the profit reduction mainly on non-cash asset impairments against its goodwill and other long-lived investments. By renting DVDs by mail and downloading, or streamed, purchases.
Initially, Blockbuster generated income by renting movies from stores and charging late fees on leases. Blockbuster started an online movie rental program in August 2004 to offer competition to traditional industry leader Netflix and keep engaged with industry developments. The only entity that can genuinely battle with Netflix against other contenders is a sustained strategic advantage in the digital renting marketplace.
In 2000, Netflix understood that perhaps working alongside Blockbuster would be better than fighting against them. Reed Hastings, co-founder, and CEO of Netflix contacted John Antioco, then-CEO of Blockbuster, with a partnership proposition. The Netflix team would manage Blockbuster’s internet trademark as part of the partnership. Naturally, that arrangement never transpired, in part because Blockbuster mocked Netflix during their meeting to explore the transaction. In 1999, Groupe Arnault backed Netflix with a $30 million funding investment that aided in establishing the subscriber-based business. By 2006, Blockbuster’s internet services had expanded to more than 2 million subscribers.
In 2008, Netflix announced a partnership with Starz to broadcast around 1,000 Hollywood films and television episodes. Due to stiff competition in the market, Blockbuster has been hit by countless financial crises that have led to severe revenue losses. This led to the company’s decision to declare the firm bankrupt in September 2010, resulting into an auction that saw Dish Network, win the acquisition. Following the auction, the company operates as a subsidiary under Dish Network ownership.
Role of Management in Blockbuster
There is no doubt that management is a key factor that determines the success of any business organization. Good management allows a firm to align its strategies with goals and objectives for better performance. This segment discusses some of the management styles and principles, which have shaped the performance of Blockbuster Company throughout its history. It is therefore important to mention that the section will highlight negative and positive management styles that have impacted the organization.
With its headquarters in Texas, the company has a stable customer base in the United States of almost forty eight million. In 2002, Blockbuster realized annual revenue of $5.5 billion, with more than 80% of it being generated from America. Importantly, the company was acquired by Viacom in 1994, controlling its voting rights and equity.
Like many other companies in the business world, Blockbusters has witnessed disappointments and failures throughout its business timeline. For instance, Cox enterprise sold more than eighty stores, which belonged to Blockbuster in 1991. This had direct impact on the performance of the company as it struggled with low prices of its shares, which was 14% below the initial value. The defection of the company’s biggest franchise partner was a source of alarm within Blockbuster’s management. While reacting to the defection, Cox’s chief executive officer expressed his disappointment, noting that the company had made a serious mistake by considering joint ventures with Blockbuster.
As mentioned above, the departure by Cox had detrimental effects on the progress of the organization even though it rose to become a leading provider of DVDs, video games and videos. It can therefore be deduced that the failure was as a result of mistakes, which had been made by the company’s management before recovery strategies were put in place.
To achieve its desired strength, the company implemented a series of overhauls. Additionally, Blockbuster was concerned with establishing and nurturing strong relationships with its customers through sourcing of specialized customer care services from other companies like Acxiom, which played a crucial role in 2003. Through Acxiom’s input, Blockbuster was able to develop a stable customer relationship management system that would augment the company’s interaction with its customers by proper utilization of available information. This approach further gave Blockbusters an upper hand in analyzing, mining relevant data and for the marketing department to improve its services through a redefined communication procedure. It was considered as one of the best management decision made, which led to the exponential growth of the company in the United States and in other parts of the world.
Another positive management practice witnessed at Blockbuster was its ability to focus on neutralizing competition threats within the market environment. This was based on the fact that the company realized appealing results despite the fact that video rental business is highly prone to constant changes due to technological advancements being made in the world.
The management’s idea to open over two hundred stores annually was a remarkable strategy and a sales driver for the company in its late 90s. In fact, some observers had projected a saturation state in the American market if the expansion strategy was to be maintained.
As mentioned above, opening of more business stores highly favored the success of Blockbuster. Additionally, this approach aimed at protecting existing units from being cannibalized. Through this expansion of customer base, the company was able to utilize demand for DVDs, which was growing in the market.
This strategy was initiated by John Antioco, while serving as the company’s chief executive officer. During the company’s management crisis time in 1997, John Antioco served as the company’s chairman, CEO and president simultaneously. Nevertheless, it was observed that Blockbuster was extremely concerned with business expansion without considering its corresponding cash flow and the need to improve the efficiency in service delivery.
The acquisition of the company’s 80% equity by Viacom also jeopardized the ability of Blockbuster to make independent decisions since the management was accountable to the buyer. In understanding the management trend and performance of Blockbuster, it is essential to note that the company has experienced inconsistent results, attributed to the management’s ability to establish business plans, strategies and diversification techniques.
From the above analysis, it is evident that something was wrong with the management of Blockbuster. For instance, the company’s leadership failed to notice the presence of a superior technology that would guarantee the organization’s success. On the contrary, the management was overwhelmed by the internal growth of the company at the expense of appreciating opportunities, which presented themselves.
A good example is John Antioco who rejected the idea of partnering with Netflix after he was approached by the company. Instead, John Antioco failed to embrace the idea, arguing that it was aimed at killing the future of Blockbuster. As a result, John Antioco and his management were unable to incorporate new ideas, which were to address the needs of customers and grasp a wide range of opportunities that were present in the market at the moment.
According to some analysts, Blockbuster’s bankruptcy was as a result of poor management strategies. For instance, the company’s leadership defined its activities in a narrow manner that exposed the firm to a financial crisis. By defining its products with simple words and statements, Blockbusters could not convince consumers exhaustively. Consequently, customers had to find satisfaction from other competitors within the industry.
By being insensitive to several innovative ways of connecting with its customers, the company created a loophole for Netflix and other players to exploit direct consumer linkage through the internet and emails. This is mainly because new players in any market always explore areas, which may have been ignored by existing companies. It follows that Blockbuster’s narrow definition limited its ability to gain a competitive advantage that was necessary in stabilizing its revenue.
Furthermore, the company did not invest in communication tactics, which was necessary in denoting the expected value of a given brand for customers. Communication acts as a determinant for customers’ selection over business competitors in a given market.
To make matters worse, the management ignored to include a value promise on the company’s website, creating a gap between the expectations of customers and what they perceived as the company’s capability. All these shortcomings within the management contributed towards the company’s dwindling performance and the inability to keep pace in a competitive business world.
Following the poor performance of Blockbuster, which led to its bankruptcy, the company has been seen in a recovery mode, with the new management remaining determined to revive the organization’s lost reputation. The firm was acquired in 2010 by Dish Network, a TV operator in the United States.
Since then, the leadership of Dish Network has adopted new strategies, aimed at re-establishing the brand of Blockbuster in the entertainment industry. Among these strategies and new management models was the launch of free in-store memberships, which was to be applicable for ninety days from the time the idea was initiated. Additionally, Dish Network introduced satellite-membership, efforts that were aimed at reassuring customers and winning their confidence.
Blockbuster has adopted workforce and execution management strategy. In a 2011 interview, Blockbuster’s new president admitted that there was still demand for physical media, despite the advancement in technology and the gradual shift to digital media.
This was also based on a wide range of advantages attached to physical media like the quality of Blue-ray discs and the use of DVDs in cars, which made the technology more acceptable. Additionally, Dish Network believed that kiosks were more user-friendly and offered unique terms of allowing customers to gather with families and friends.
In order to win the confidence of Blockbuster customers, Dish Network has embarked on reminding the public on their commitment towards nurturing the iconic legacy of Blockbuster. To achieve this target, the management focused on establishing new and strong relationships with its customers, giving free emails to new customers and rolling back prices for most of its products in stores distributed around the world.
Moreover, the new management has invested in advertisements to inform its customers about the products available at their nearest video stores. In other words, Blockbuster management is determined to eliminate loopholes, which exposed the company to the wrath of its opponents. Of importance is its focus of customer relationships and exploitation of business opportunities.