Blockbuster Declares Bankruptcy

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Blockbuster Declares Bankruptcy
Yvonne Dedmore
MGT 435 – Organizational Change
Robert Hamamoto
September 19, 2011

Shortly before their 25th anniversary, Blockbuster files for bankruptcy protection with a Chapter 11 petition. The failing company couldn’t compete in today’s market against Netflix, Redbox, Apple, and other internet-based businesses that provided mail-order rentals or digital streaming. Their business model needed to be revamped to stay competitive. This paper will take a look at where the problem was, the measures taken to correct the problem, and how Blockbuster can come back and be competitive. Blockbuster, Inc. started business in 1985 in Dallas, Texas by David Cook. The company rented video cassettes, and later DVDs and video games, to customers for viewing at home. Mr. Cook was a computer programmer and used this to his advantage. While other video stores had no idea what they had still in stock, Mr. Cook had reports that showed him which movies were being rented most so he could optimize the video selection. He also wanted a family environment and had a no-porn policy. (Gandel, 2010). In 1987, Wayne Huizenga bought the business from Mr. Cook, and the company went into an expansion mode, opening stores nationwide and eventually overseas by the mid 1990s. (, n.d.). Mr. Huizenga knew that one day technology was going to put them out of business. He hired consultants to help work on a creative plan on different ways to deliver movies. The consultants even went as far as recommending Mr. Huizenga buy a cable company. Instead of doing that, Mr. Huizenga sold the company to Viacom in 1994 and got out of the business while the company was still worth something. (Gandel, 2010). Under Viacom, the company was losing money. They brought in different CEOs and tried once again to focus on movie rentals. (Gandel, 2010). That helped and currently, Blockbuster has over 3,500 stores and over 25,000 employees. These stores are considered “brick and mortar”. They are physical buildings that franchise owners must buy or rent, stock with supplies, and hire people to work and run the stores. There are overhead costs that internet-based businesses don’t have. This is one reason why Blockbuster has been losing money these past few years. Blockbuster was the leader in video rentals for over 15 years. That was the thing to do; go to the movie store, rent a movie, pop popcorn, and enjoy a good movie from home. Unfortunately, Blockbuster didn’t keep up with technology and didn’t take the competition seriously enough and soon enough to change. When change happens in an organization, managers need to develop strategies that benefit the entire organization. The effects of organizational development are to improve the organization’s ability to handle its internal and external relationships. Organizational development is intended to change the beliefs, attitudes, values, and structure of an organization.

Blockbuster needed to concentrate not only on its customers, but also on their competition. Instead they ignored both and kept everything status quo. Instead of changing their strategy before the competition got their foot in the door, Blockbuster sat on the sidelines. Management said the business models were different and that Blockbuster could co-exist with the other companies. (Carr, 2010). Blockbuster was just too slow to embrace change and flow with today’s environment that consisted of convenience and digital delivery. People try to cram too much into their days. The convenience of having movies, television shows that got missed because of soccer practice or a late meeting, and even video games at your fingertips is too appealing. People today just don’t want to drive to the video store after working all day, driving the kids to activities, doing homework, making dinner, and cleaning up. They want the movie or television show to be just a click away. With the busy...
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