Netflix vs. Blockbuster

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Blockbuster opened in 1985 and in its “first 20 years of business, the movie rental giant opened 9.100 stores in 25 countries” (Laudon, 2007, p. 121). Netflix launched in 1998 using a new business model and became Blockbusters biggest threat. The paradigm shift in the rental industry from having to travel to a store and rent a movie to being able to have a movie delivered to your mailbox changed the way people think about media entertainment. The next shift will be having the technology to download movies and shows directly to a television.

Blockbuster and Netflix are using two different information system strategies. Blockbuster, which is a traditional retail store with a physical location focused on creating a market niche. It used “an automated point-of-sale system” and was able to use “these data to monitor sales and to analyze the demographics, and rental and sales patterns for each store to improve its marketing decisions” (Laudon, 2007, p. 121). Netflix came onto the scene with a completely different strategy, product differentiation. Emphasizing convenience, they created a system to allow consumers to order movies sent to their customers homes and returned on the individual’s time schedule. Netflix was able to use mass customization and give consumers an individually tailored service without increasing the needed resources. Using the Business Value Chain Model, Netflix has used information technology on almost all of the primary activities including inbound logistics, operations, outbound logistics, and sales and marketing. The one primary activity that is trying to move away from the newest technology is the customer service department. “Netflix took an unusual step for a Web-based company: it eliminated e-mail-based customer service inquiries. Now all questions, complaints and suggestions go to the Hillsboro call center, which is open 24 hours a day,” (Hafner, 2007). The company, which has so much of its processes...
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