Blockbuster Case Study

Introduction

This week’s case study involves Blockbuster, a large provider of consumer video and game rentals. The company provides DVDs for rent nightly to the consumer, and also provides video game rentals. Changes in the marketplace have directly impacted Blockbuster’s operating model, and have caused the company to reconsider its position in the market. These changes came about through the different competitive offerings of competing businesses, as well as a slow change in the way consumers like to use the offered goods. This case analysis will examine Blockbuster’s current situation, and seek to apply lessons learned to an existing example company.

Analysis

Blockbuster video opened its first store in 1985. The chain expanded rapidly, and by 1986 the company was trading on the New York Stock Exchange (The Street, 2011). Blockbuster was quick into the movie rental market, and was solidifying its foundation as the market reached maturity. The company continued to grow and expand through the 1990s, though there were bumps in the road. However, around 1999 the video industry was identified as being a dying marketplace, and Blockbuster began to slide (The Street, 2011).

Shortly after this time, rival companies started to seek ways to recapture consumer interest in video rental. Through this effort, a company named Netflix began offering online rentals of movies, where the consumer was able to choose movies online and have them delivered directly to his or her mailbox. Returning the movies was just as simple, and required only dropping their pre-paid container envelope in the mail. The Netflix business model had a tremendous impact on the brick and mortar store based video rental industry.

In 2004 Blockbuster chose to directly compete with Netflix on the new online rental front by adding an online video rental service to its existing offerings (The Street, 2011). In addition to a customer being able to go to a Blockbuster store and physically...