Outline the relative strategic positions of Netflix and Blockbuster. What are the key factors that explain the ultimate Blockbuster demise? (as of the time of the case) In the following assignment I will begin by giving the relative strategic positions of Netflix and Blockbuster as of January 2007.
I will then outline what I believe to be the top three key factors that explain the ultimate Blockbuster demise.
Netflix – An outside-in company
At the time of the case, Netflix was a perfect example of an outside-in thinking company. Netflix‘s strategy was very straight forward - it was to allow the best home video viewing for its customers. This was a simple and clear strategy. This strategy meant Netflix could adapt and change its model of allowing the best home video viewing for its customers as its customers habits changed.
By January 2007 Netflix was fulfilling this strategy via its DVD home delivery service. By the end of 2006 we are told in the case study that Netflix had 6.6 million subscribers, a library of 70,000 different titles which were held on over 55 million DVD’s, revenues of nearly one billion and free cash flow of $64 million. The company could deliver to 90% of its subscribers within a single day.
Netflix demonstrated that it listened to customer feedback from very early on. When something didn’t work they changed it until the results showed that the replacement service was working. They changed their charging model from a per-movie price to a monthly subscription, they improved their delivery service through opening more distribution centres to allow for quicker delivery and therefore improving customer service, the range of movies on offer was not being limited to new releases but was instead being broadened to offer its customers more of what they liked, the tailoring of movies to the individual and finally carefully considered partnerships and alliances to increase their customer portfolio.
Bibliography: 1. Ackermann, Fran & Colin Eden. (2011) ‘Strategic Management of Stakeholders: Theory and Practice’, Long Range Planning 44, pp.179–196.
2. Johnson, Gerry, Richard Whittington & Kevan Scholes. (2011) Exploring Strategy, Text & Cases, Ninth Edition. Harlow: Prentice Hall Financial Times.
3. Johnson, Mark W., Clayton M. Christensen & Henning Kagermann. (2008) ‘Reinventing your business model’, Harvard Business Review, December 2008, pp. 50–59.
4. Pugatch, CB. (2007) ‘Rent this’ (Online). Available at:
http://www.response-digital.com/response/200707/?pg=42#pg42 (Accessed 19th June 2013).
5. Ritson, Mark. (2010) ‘This Blockbuster is one you mustn’t miss’ (Online). Available at: http://www.marketingweek.co.uk/this-blockbuster-is-one-you-mustnt-miss/3018752.article (Accessed 19th June 2013).
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