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Full Name and Ic No: KAARTHIYAINI A/P SUBRAMANIAM 980614106480

Date: 23/10/2023

Assignment (Asgmt) Declaration Form

Jan / May / Sept 202__ SEPT 2023

Student’s Name KAARTHIYAINI A/P SUBRAMANIAM

Student’s ID No: 033220002

Course Code BMG303/03

Course Title STARTEGIC MANAGEMENT

Class Code SMT3-3C

Assignment No: ASSIGNMENT 1

No. of pages of this Assignment 5

(including this page)

Cla Tutor’s Name LEE KEE CHIN

ssi Course Lead’s Name PARIMALA DEVI A/P DHIVANDRAM
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 Numerous cautionary instances involving businesses that went under because of insufficient strategic

planning may be found throughout corporate history. One such example is the history of video rental

giant Blockbuster. Strategic blunders and an inability to adjust to a shifting market contributed to

Blockbuster's downfall. In this case study, we will analyse the decisions that ultimately doomed

Blockbuster and the subsequent efforts at revival. Since its inception in 1985, Blockbuster has become

an internationally recognised brand. The business was an early adopter of the idea of a video rental

store where customers could pick from a wide variety of media, borrow it for a few days, and then

return it. Blockbuster was at its most successful and widespread during the early 2000s, when it

operated more than 9,000 locations throughout the world.

The Blockbuster has been faced poor execution. Late fees were Blockbuster's principal revenue

stream. Movie rentals were fined $1 per day if returned late. Blockbuster earned $800 million from

these fees in 2000, 16% of its revenue. Netflix has one flat fee and no late fees. Hastings created

Netflix because he was upset about Blockbuster's $40 late fee for Apollo 13. Netflix's growth forced

Blockbuster to abolish late fines, reducing revenue. Even after cancelling late fines, Blockbuster

struggled. Customers started keeping films longer because there was no penalty, thus they couldn't be

rented out.In 2006, Blockbuster announced Total Access, allowing online customers to return movies

to stores for a free DVD rental for a nominal flat charge. The programme was a hit, but Blockbuster

lost $2 per DVD exchange. Blockbuster raised the price to reduce losses, prompting customer

attrition.

Then, Viacom shut off Blockbuster in 2004 after buying it in 1994. Blockbuster took out a $905

million loan to pay a $5 per share dividend as part of the purchase. Blockbuster declared bankruptcy

in 2010 with $1 billion in debt. “If it hadn't been for their debt, they could have killed us,” Hastings

stated.

Blockbuster was acquired by Dish Network for $320 million in bankruptcy, far below its 2004 $5.9
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ssi billion sales. With only 300 Blockbuster outlets left in the US, Dish Network announced in 2013 that
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 it would close nearly all of them. In retrospect, Icahn feels Blockbuster was his worst investment. Too

much debt and industry changes doomed it. It had too many stores, Netflix had a better business

strategy, and Redbox kiosks and the digital revolution reduced the necessity for DVD retailers.

Turning down the deal of the century. When Blockbuster backed out of a contract with Netflix, it

made a fundamental mistake. In the year 2000, Netflix attempted to sell its company to Blockbuster

for $50 million. Netflix was only a young upstart back then, having only been in operation for three

years. If the acquisition had gone through, Netflix would have taken over Blockbuster's internet

operations. Blockbuster could have afforded the purchase price at the time since it had raised $465

million in an IPO a year before. However, Blockbuster declined the offer because the price was too

expensive. According to Netflix's former CFO Barry McCarthy, Blockbuster "laughed us out of their

office."

Blockbuster has not done anything to undermine the satisfaction of their customers. Blockbuster

made most of its money from late fees, which were charged to customers who kept their VHS videos

for too long.When people didn't return their films by the due date, Blockbuster charged a high late fee

of $1 per day. A monthly membership fee of $19.99 let people rent three films a month.Blockbuster

made most of its money by charging users fees, so the plan didn't last long.In the late 20s, as the

market changed, more and more people wanted to watch films and TV shows online. However,

Blockbuster didn't listen to what customers wanted and didn't switch to online streaming. Instead, it

kept doing things the way it always had and charged customers per hire.Customers were becoming

less interested in this as they looked for easier and more convenient ways to watch movies.But

companies like Netflix saw that people wanted to watch films and TV shows online and made it a big

part of their business. Netflix was able to offer better value and convenience to customers by giving a

monthly subscription plan with unlimited rentals. This made it more appealing than Blockbuster's

rental plan.It was hard for customers to use Blockbuster because they had bad customer service and

Cla high rental fees. Blockbuster failed because it didn't understand what its customers wanted.
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 Because of all of these tactical blunders, Blockbuster was forced to declare for bankruptcy in the year

2010. However, the rehabilitation process started far too late, and the company was never able to

reach the level of success it had in the past. The last surviving Blockbuster locations were phased out

over the course of many years, and by 2013, the firm had effectively ceased operations. In hindsight,

some of the following might have been helpful for Blockbuster to do in order to recover from its

decline.

Blockbuster is a solution for customer loyalty programmes. Blockbuster could have increased

customer retention and acquisition by implementing loyalty programmes and offering rewards. These

programmes could entice customers to remain loyal by providing special discounts, free rentals, or

access to exclusive material. Then, Centre Your Attention on Original Content: Blockbuster might

have differentiated itself in the streaming industry by investing in the production of exclusive content

or licencing such content from third parties. They might have been able to attract customers to their

platform by offering exclusive films or series.

Blockbuster might have been able to find new avenues for expansion if it had expanded into

overseas markets. However, expanding internationally successfully calls for deliberate preparation

and adaptation to local tastes and requirements. The company may have taken the following tack in

their comeback strategy. For instance , Market Research Before entering new international markets,

Blockbuster should have conducted extensive market research to understand the local preferences,

consumer behaviours, and competitive landscape in each region. This research could have identified

the demand for video rental services, the popularity of specific content, and the willingness to pay for

such services. Collaboration with local enterprises, entertainment providers, or distribution networks

could have eased market entry. These agreements could have helped Blockbuster understand local

customer behaviour and regulatory and cultural variations.

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 Blockbuster should have rationalised shop operations by assessing and closing underperforming

stores as part of its recovery strategy. Key reasons why this strategy would have been beneficial.

Blockbuster Reduces Costs: Closing unprofitable locations would have cut rent, utilities, and

manpower. In a competitive market with falling profitability, cost reduction was essential. The profit

margin improved. Blockbuster could have made more money from its remaining stores by focusing on

locations with more customers and foot traffic. Improved profit margins would have allowed the

corporation to reinvest in digital and online services.

Blockbuster might have benefited greatly from embracing digital streaming sooner and

building a competitive online business. Here are some reasons why the business might have

benefited from taking this tack.The Blockbuster name and client base were both widely recognised. If

the corporation had used these assets to adapt to the digital era, it might have been able to keep and

win back subscribers who were moving on to other streaming services.Blockbuster could have

competed with Netflix and other digital streaming services by capitalising on its well-known name.

The loyalty and respect of its clientele could have been an effective selling point.

The company's efforts to recover were ultimately futile. The last of the corporate-owned stores were

announced to close in 2013, signalling the end of an era for the corporation. The demise of

Blockbuster demonstrates the significance of remaining flexible, putting customers first, and

maintaining a long-term perspective in the face of rapid industry shifts.Companies like Netflix, on the

other hand, that were open to digital innovation and could adapt to shifting consumer tastes did well

in the new media environment. Adaptability to new market conditions is essential, and this case shows

how important strategic planning is.

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 Reference

1) "Blockbuster releases IPO". CNNMoney. August 10, 1999. Retrieved March 27, 2018.

2) Blockbuster Stock Trading Halted". The Street. July 1, 2010. Retrieved March 27, 2018.

3) "He Began Blockbuster. So What? David Cook created a household name, but he refuses to

become one". CNN Money. Retrieved January 23, 2014.

4) Stephen, Bijan (August 29, 2018). "The last Blockbuster: what we really lose when video

stores shut down". The Verge. Retrieved April 19, 2019.

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