An Organizational Failure - Case Study of Blockbuster

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An Organizational Failure: Blockbuster
Rana Fawad
1. Describe and discuss how the organization’s culture facilitated the failure. Philips (2011) believes that success or failure of any great company depends on “Events, internal and external” (p. 3). Blockbuster also appears to be a victim of certain events at internal as well as external level. Based in McKinney, Texas, Blockbuster and founded in 1985 (Blockbuster Corporate, 2012) and it ushered in a new era as far as video rental retail industry was concerned. The company gave birth to video rental places that had significant amount of movies under one roof (the first store had 8,000 movies) and were not associated with bad movies or bad neighborhoods (Greenberg, 2008). Initially, the company’s strategy was to expand aggressively and the leadership defined Blockbuster’s vision to become McDonald’s of the video rental business. Referring to the company leadership’s ambitious goals, Greenberg writes: The Blockbuster strategy was simple – pump as much money as possible into buying local and regional chains while keeping centralized control over the look and feel of the individual stores. By the VSDA convention the following year, Blockbuster had acquired two other chains and its more than 250 stores dotted the country. At the convention, Huizenga’s marketing executive Tom Gruber outlined vision for the future of the company, and it was expansive. Gruber had spent eighteen years working for McDonald’s before joining Blockbuster, and both he and Huizenga were explicit: Blockbuster wanted to be the McDonald’s of home video (the comparison was so deliberate that at one trade show presentation, huge photographs of Huizenga and McDonald’s leader Ray Kroc were projected side-by-side). (p. 128) So, Blockbuster came into being with a big bang and a unique presentation which was reflected in its slogan “Wow, What a difference” (Greenberg, 2008). In the beginning, the company even hired greeters who would welcome customers at each location’s entrance whereas the employees were provided with manuals about how to deal with customers. That was the beginning. The strategy and vision worked amazingly well. However, as the company travelled with fanfare down the road, it developed a culture that might have its roots in complacency. The obsession with expansion seemed to derail a process the leadership should have put in place. Rayburn (2009) recalls how Blockbuster’s culture became a liability for the company and ultimately led to its bankruptcy. In 1999, a company called Globix (Rayburn was representing it at that time) was trying to strike a deal with Blockbuster in order to deliver movies to customers online. However, Blockbuster decided to partner with Enron instead of Globix. Rayburn (2009) goes on to point out that though Blockbuster was discussing future developments in advance and contemplated “about a digital media strategy way before consumers wanted the service and the Internet was even able to support it, that foresight on their part never materialized into any real online video strategy over the next ten years” (para. 4). What surprises Rayburn (2009) is that there was no deal between Blockbuster and Enron as was announced in 2000. In his view, Blockbuster had a great chance to be in the driving seat and “should have been in the position Netflix is in today as they were the first movers in the market. Yet ten years later, the company still can’t seem to get their act together when it comes to digital media” (para. 5).  Apparently, it took a bankruptcy to do the course correction as far as the company’s future direction is concerned. Blockbuster’s mission statement now takes into account today’s reality. It says (Retail Industry, 2012): Our corporate mission is to provide our customers with the most convenient access to media entertainment, including movie and game entertainment delivered through multiple distribution...
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