Wednesday, November 27, 2013

Blockbuster: Stubbornly Staying the Course

Since inception, Blockbuster’s strategy has been to deliver home videos and games to consumers through distribution from its brick-and-mortar stores. Unfortunately for Blockbuster, brick-and-mortar video-rentals have become outdated thanks to the eCommerce and virtual renting trends. Competition such as Netflix and Redbox have redefined the movie rental space and have created a market in which consumers can rent home entertainment without leaving the comfort of their couch. Regardless of this new phenomenon, Blockbuster remained steadfast in its brick-and-mortar approach. Not only did it ignore warning signals, but it also failed to capitalize on important opportunities. For example, in 2000 it turned down the chance to purchase Netflix (a new company at the time).
[1] Although failure to buy Netflix was a major missed opportunity there was still time for Blockbuster to recover. By reshaping its strategy and adapting to changing consumer demand, it could have stayed in the game.  Unfortunately, Blockbuster “delayed its reaction until it was too late.[2]” At the time of its bankruptcy Blockbuster still owned a whopping 3,300 stores, all of which have since closed[3]- despite a takeover effort by Dish[4]. This was compounded by the fact that it had not yet developed a strategy to successfully compete in the virtual marketplace. As one article eloquently puts it, “…the basic needs weren’t changing, how to meet them was. Blockbuster just didn’t understand how quickly things were changing and didn’t respond quickly enough.”

This pitfall, “Staying the Course,” is one of seven traps that Seven Ways to Fail Big discusses at length. Even successful companies, as Blockbuster once was, can fall into this trap by neglecting to take into account the rapidity in which consumer demand can change. Although virtual markets don’t seem to be going anywhere any time soon, there are many more blue oceans to be explored. Netflix is on top for now, but will it be next? Will Netflix be able to appropriately adapt when the time comes?


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