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Module: (FY028) Inquiry-Based Learning
Topic: (A case study of Blockbusters)
Student’s Name: Ahmed Zaman Student ID: H2201096 Lecturer’s Name: Patricia Barnett- Quaicoo Due Date:
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Introduction
In this inquiry-based learning process, a topic has been chosen for discussing the reason behind the failure of retail businesses. For this particular assignment, a failed business has been chosen, named Blockbusters which is an American-based video rental company. This case study can help other businesses, including video chain-based companies, to make decisions as to what they are required to achieve international market growth, and the purpose of conducting this report lies there. This report aims to understand retail business and investigate the lack of critical thinking, which creates barriers for them to achieving growth in this competitive market.
For a better understanding of this chosen topic, this report has been conducted by discussing some critical information about the company and history background, then the failures of the company have been identified. It has been seen that the main reasons behind the failures of the companies are the current international market trends and massive changing demand. Hence these factors also have been discussed here by using the SWOT and PESTEL analysis of the chosen company. Some recommendations have also been provided for the retail businesses that they can avoid failure to achieve success.
Discussion
For this inquiry-based learning essay, the American video rental company, Blockbusters has been chosen, and it was formerly known as Blockbuster LLC. After opening in 1985 in Dallas, Texas, Blockbuster became the most popular and top movie rental business in the US. When there was no Netflix, amazon prime, or HBO, there was Blockbuster which rose rapidly in the early 2000s. But they fail to continue their growth in this competitive market, and it becomes necessary to discuss the reason behind the failures of this company. Which resulted in the year 2010, Blockbuster has bankrupt and closed most of its stores. Here for knowing the background of this chosen, the history of Blockbuster needs to be known (Okami et al., 2020).
While analyzing the company information, it has been known that Blockbuster, a video-rental store, has opened first in Dallas, with the hand of David Cook in 1985. David made his bunnies innovative and different by offering a large range that's 8000 VHS tapes, whereas the other rental stores only offered a couple of hundred movies. Blockbuster became popular as people could watch movies by using the VHS tapes, and with this, Cook expanded his business by opening three more stores. In 1987, with the help of the invested money, that is, around $18.5 million, the success of Blockbuster got hiked. After the departure of Cook, Blockbuster became the topmost video store under the leadership of the new management, with 800 local stores. In 1992, Blockbuster made a milestone in the history of video-rental companies when it expanded its business in the UK, with all over 1200 stores.
But this growth has stopped with the introduction of Netflix in 1997, which became an important competitor of Blockbuster. The late fees for the customers made around 16% of the revenue of Blockbuster which made the customers anxious. And the biggest mistake had been made by blockbusters by not buying Netflix, and as a result, Netflix brought more profit as well as popularity (Widia et al., 2021).
Fig: the reason behind the failure of Blockbuster against Netflix
Source: (Widia et al., 2021)
This provided picture shows how the customers of blockbusters want changes as they started to be unsatisfied due to the fines for rental videos.
Although Blockbuster has made changes to their offered rental services by introducing the Redbox and made revenues of $5.9 billion from their 9000 global stores in 2004, the increasing popularity of Netflix became the reason for the 75% loss of the market shares of blockbusters.
Fig: Redbox, introduced by Blockbuster
Source: (Okami et al., 2020)
Fig: the timeline when Netflix takes market position over Blockbuster
Source: (Vu?ekovi? and Gavrilovi?, 2021)
From this above-mentioned graphical representation, it has been understood how Blockbuster became bankrupt with its lack of critical business decisions.
While investigating the reasons for the failure of Blockbusters, various areas of failure have been identified, which create barriers for them to grow in this technologically advanced era.
Poor management - from the analysis of the company's data, it has been understood that Blockbusters lost many chances for growth due to their lack of leadership styles as the internal management was satisfied by the growth of the company, which caused the avoidance of technological adoption. Lack of capital - due to the lack of capital in the year 2009, Blockbusters has faced a loss of around $116.8 million which is 60% of their shares. And with changing strategy, this company has reported as bankrupt with a $1 billion debt. Overexpansion - expansion cannot be the only goal for business growth. And blockbusters have faced risks as they did not consider the large market expectation, and due to this, they failed to meet the customers' demand. Change of the customer's behavior - due to digitization, the customers' behavior, as well as demand, has been changed, which enhances with the coming of Netflix. And as a result, blockbusters have created a gap between the customers' expectations and the company's capability, and in this way, Netflix gets a competitive advantage over blockbusters. Lack of innovations - though blockbusters offer video-rental services and get success, they fail to offer innovative strategies thus can meet the customers’ needs. But in that case, Netflix offers more innovative strategies by offering suggestions of their favorite movies or games, which can attract many customers. In this way, they get successful (Vokoun, 2018). Very slow or late entry into online shopping - for the case study analysis, it has been seen that blockbusters realize the importance of online shopping very slowly after coming off Netflix, and in that case, they have failed to grab the market opportunity of e-commerce and fail to meet with the customers’ needs. Lack of flexibility in terms of the market trends and changes - due to the lack of flexibility to the market trends and change, blockbusters have to face challenges to adopt advanced technologies, and as a result, they have faced debt. Ignoring the competitors - blockbusters did not give importance to Netflix, and as a result, Netflix became broadly accepted by the people. Economic reasons - lack of considerable sales and due to the closure of late fines, the amount of revenues dropdown. The range of products is not attractive to the customers anymore - as Netflix comes with more attractive features than the blockbusters; hence this became the reason that customers did not enjoy the products of the blockbusters.
Due to the lack of flexibility to the current trends and change, it has been seen that Blockbusters failed to manage their business and became bankrupt. After analyzing the case study of the failure of Blockbusters, it can be said that this video-rental company started to face challenges with digital disruption. The current trends show that the adoption of technology can help retail businesses as well as these businesses to meet customer needs. Also, it has been seen that the blockbusters did not offer products and services that followed trends of innovation. Here the rise of digital platforms such as Netflix, YouTube, amazon prime, by grabbing the market opportunities and the market trends that are digitalization and innovation (Vu?ekovi? and Gavrilovi?, 2021). Netflix has followed the trends of "one size fits all" and offers video for all types of audiences, and in this way, they have taken the market position over the blockbusters. In this case, Blockbuster fails to choose digitalization in its business which reduces its popularity. Blockbusters offer monopoly tv content like ABC, NBC, Fox, and CBS., which are available inexpensive packages. But the rise of digital platforms reduces the cost and also, they offer on-demand viewing to audiences; thus, they can choose their favorite shows (Mugge et al., 2019).
Fig: the difference between traditional media and digital media
Source: (Mugge et al., 2019)
For an understanding of the micro as well as the macro environment of this company, SWOT and PESTEL analysis can be beneficial, and this can give an idea about this company's internal and external business environments.
SWOT analysis
Strengths
Blockbusters offered a huge number of DVDs with a well-controlled demand, Blockbusters offered their products at mixed and lower prices, It has global market control with large numbers of offered higher quality products.
Weaknesses
Lack of funding and proficiency in business, also, lack of business planning creates challenges to controlling the huge market, they have no control over the shipping expenses.
Opportunities
They have the opportunity to develop the online selling of video, the market demand for this product needed to follow to increase sales.
Threats
Increasing competitors become the main threat for them, the technological advancements create threats to the growth of this company.
PESTEL analysis
Political factors - in the case of international traits, Blockbuster has a good record of maintaining rules and regulations. Also, the regulatory practices considering the global norms help them to do business easily. This business may face judicial independence, which can create conflict between the public interest and proprietary technologies (Pan et al., 2019).
Economic factors - though the business of blockchain increased by 25-30%, the salary has not been reflected, and created changes to hire professional employees. Foreign exchange rates also can create challenges for them.
Social factors - as the social education level can impact the sales of the company; hence have to consider the social hierarchy and norms while offering products.
Technological factors - before launching any new products, this company should consider the technological advancements of society. Also, adopting e-commerce can create opportunities for their business to enter the new market. They also should be aware to avoid corruption in their supply chain.
Environmental factors - blockbusters should make a better corporate social responsibility culture to improve the business, and they have to maintain environmental policies at the local as well as the international level (Brown and Mawson, 2019).
Legal factors - while making business decisions, it is necessary that Blockbusters ensure transparency and clarity in their business, and also, they need to consider the health and safety laws in their business.
As a recommendation for growing this business of video rental, this company should improve its business decisions and should do a market analysis to identify the competitors. The market analysis and competitor analysis help the company to understand the competitors’ positions and help the company to make the business decision accordingly. Also, the business should adopt technological advancements to grab the market opportunity, and this way, they can meet their customers' needs too.
Conclusion
In this report, after the overall discussion on the chosen topic is a failed company, Blockbusters, it can be concluded that due to poor management and lack of circle thinking, the company may face failure, as has been seen in the case of Blockbusters. Due to the lack of flexibility to change and lack of market analysis, Blockbusters went bankrupt, and as a result, they had to close their 8999 stores except for one. From this study analysis about this company, the company's structure, as well as the company's work culture, has been understood clearly. And from the overall discussion, it can be concluded that identifying the failure of the businesses needs to be analyzed to share the lessons, as those types of retail business can avoid such challenges and can be able to achieve growth of the businesses.
References
Brown, R. and Mawson, S., 2019. Entrepreneurial ecosystems and public policy in action: a critique of the latest industrial policy blockbuster. Cambridge Journal of Regions, Economy and Society, 12(3), pp.347-368.
Mugge, P., Abbu, H., Michaelis, T.L., Kwiatkowski, A. and Gudergan, G., 2020. Patterns of digitization A practical guide to digital transformation. Research-Technology Management, 63(2), pp.27-35.
Okami, L.E., Yamamoto, K.N. and Lloyd, R.A., 2020. Exploring the Return on Customer (ROC) Model in the Video Sales and Rental Industry: An Intramodal Analysis of Blockbuster, Redbox, and Netflix. Review of Integrative Business and Economics Research, 9, pp.358-371.
Pan, W., Chen, L. and Zhan, W., 2019. PESTEL analysis of construction productivity enhancement strategies: A case study of three economies. Journal of Management in Engineering, 35(1), p.05018013.
Vokoun, M., 2018. Innovation in the wholesale and retail sector in the Czech Republic 2008-2014. Littera Scripta, (1).
Vu?ekovi?, M. and Gavrilovi?, K., 2021. ‘Digital transformation and evolution of business models. IPSI BGD Trans. Internet Res, 17(1), pp.29-35.
Widia, F., Rosanensi, M. and Rahmawati, L., 2021. Netflix's Strategy to Dominate the World's Entertainment Media Market After the Death of Blockbuster. JBTI: Jurnal Bisnis: Teori dan Implementasi, 12(3), pp.155-171.
