The case covers Blockbuster’s emergence in the video rentals market. After detailing the intricacies of the video rental market, the case takes a deeper dive into Blockbuster’s business model, based on brick-and-mortar locations throughout the US. This costly infrastructure has slowed the entertainment giant’s growth in an industry that has rapidly transitioned from the traditional store-based model, to mail rental and video-on-demand alternatives. The rapid transition of customer demand and the emergence of Netflix (Blockbuster’s main competitor) has incited Blockbuster’s rapid entrance into the video-on-demand market through the acquisition of Movielink.
The key challenges that Blockbuster faces in 2009 include: rising consumer expectations, increases in media piracy, the impact of rising fuel costs on systems based on the distribution of physical media, and the intricacies of competing in a rapidly changing technology industry where new entry is enabled by low infrastructure costs.
Summary of key learning points and strategic issues
1. Understanding the challenges associated with a rapidly changing technology based industry 2. Flexibility in the face of a evolving market with high competition and new technology 3. The role of acquisitions in company growth
4. The importance of brand image and marketing in an increasingly tech-savvy market 5. Adjusting business-level strategy in light of disruptive business models
1. Perform a STEEP analysis to understand the general environment facing Blockbuster. How will Blockbuster be affected by external factors? 2. Use Porter’s Five Forces Model to analyze the mail rental and video-on-demand industries in the US. Given this analysis, are these industries attractive or unattractive? 3. Entering the video-on-demand business requires Blockbuster to shift its corporate business strategy and compete in a new space. Discuss this shift and the key challenges associated with it? 4. Who are Blockbuster’s main competitors and how does Blockbuster measure up against these competitors? (It may be helpful to chart competitors and product offerings) What advantages does Blockbuster have and what advantages do competitors hold? 5. What are the main capabilities of Blockbuster? Does Blockbuster have a core competence? 6. Create a SWOT analysis to understand Blockbuster’s strengths and weaknesses. Does Blockbuster have a sustainable competitive advantage in the mail rental and video-on-demand industries? If so, what is the source? What about Blockbuster’s evolution and current business strategy may pose problems going forward? 7. What is Blockbuster’s business-level strategy? Is the strategy appropriate to offset the forces in the industries? How has Blockbuster attempted to overcome obstacles posed by being a late player in a rapidly changing marketplace? Do you recommend any changes and/or foresee any challenges? II. EXTERNAL ENVIRONMENT ANALYSIS
Summarize the external environment, including conditions in the general, industry, and competitor environments.
a. The General Environment
Definition: The general environment is focused on the future and can be analyzed by considering the STEEP framework: Social/demographic, Technological, Economic, Environmental/geographic and Political/legal/governmental factors at play.
Discussion Question 1: Perform a STEEP analysis to understand the general environment facing Blockbuster. How will Blockbuster be affected by external factors?
• Rising customer expectations and IT literacy prompt a need for Blockbuster to digitize its entertainment offerings for customer convenience. • Increases in consumer access to pirated media through online...