Introduction
A well-developed and established supply chain is fundamental to an enterprise seeking to optimize operating costs and improve profitability. Strictly speaking, a supply chain should be understood as the set of processes and tasks involved in fulfilling a customer’s request, and it includes a range of stakeholders that enable a product to make its journey from starting point A to ending point B (Chopra, 2018). This paper examines the case of Blockbuster, once the leader in movie rental tape with branches on almost every continent.
The report is structured so that, after discussing Blockbuster’s strategic advantage in the case study, the tools that enabled Netflix and Redbox to cope with market uncertainty are described. Finally, it discusses the areas in which competing companies outperformed Blockbuster, ultimately leading to the closure of the once-rental industry giant’s business. Since supply chains tend to consist of many elements and cycles, optimizing each of them and the links between them is a worthwhile practice for companies. Losing this link in supply chain management poses risks to company growth.
Blockbuster’s Strategic Excellence
First of all, it is necessary to define precisely what the term “strategic fit” means in the Blockbuster case. According to Chopra (2018), strategic fit is achieved when there is a direct link between the competitive and functional strategies, company functions are coordinated, and the supply chain is aligned. Simply put, strategic fit is the alignment between a company’s internal resources and its market strategy. Hence, the extent to which this alignment is developed is a predictor of market success, and companies should invest in coordinating their operations and processes.
Several factors explain Blockbuster’s greater strategic alignment than its local competitors (excluding Netflix and Redbox). The rental market at the time was more cohesive and was predominantly represented by small, family-owned stores that did not carry a large assortment of movie tapes. Seeing an opportunity in a comparably vacant market niche, Blockbuster quickly bought up a large number of movie titles. It opened several branches, increasing customer rental access by expanding the number of tape options and geographic availability. It followed that Blockbuster could build a highly efficient business model characterized by a broad assortment and store proximity. Consumerization created an environment where customers could purchase not only older titles (which arguably had higher margins but declining consumer interest over time) but also new releases from the movie industry.
Another explanation was that Blockbuster could build a more optimized supply chain that competed effectively with the chains of local competitors. Specifically, as reported in the case study, the company had a computerized inventory control and ordering system to control inventory and forecast demand. On the one hand, this created an environment in which customer needs could be better satisfied because the control system was authorized (Panigrahi et al., 2021). On the other hand, the company’s management had an idea based on the data showing which tapes were in high demand and needed sufficient quantities to cover customer needs. In addition, Blockbuster applied the principle of cultural differentiation in its sales strategy, in which the movies available at the store were determined not by the head office but by local community demand (Ciocca, 2020). As a result, the model built was highly successful, and Blockbuster quickly became a dominant force in the movie distribution industry.
Hidden Uncertainty in the Attitude of Netflix and Redbox
Blockbuster’s business model remained effective for a long time because it was built on the same principles as successful modern competitors: diversity, increased access, a wide range of products, and availability of new releases. Nevertheless, global circumstances led to the development of Internet technology and, as a result, the emergence of competitors like Netflix, which entered streaming and DVD subscription sales, among other activities. In other words, Blockbuster’s collapse was due to a loss of timing and to market changes, while its competitors, such as Netflix and Redbox, achieved better results.
Several factors are contributing to market uncertainty for Netflix and Redbox. First, the format for consuming video content has shown evolution over time. A business based solely on movie tapes has been defeated as cheaper DVD technology has evolved. In turn, the digital format has proven to be an even more profitable investment, changing how people consume movies (Poster, 2021). Secondly, the number of competitors in the industry is rapidly increasing, and many leading movie and television companies are launching popular streaming services (Cohen, 2022). Since competition in the industry is high, it creates additional uncertainties, as products and services constantly evolve to meet the growing needs of the audience.
Netflix and Redbox can effectively combat the uncertainty through innovation and adaptation. On the one hand, to overtake competitors, companies can develop new technologies and enhance existing ones to improve the consumer experience (Distanont & Khongmalai, 2020). Netflix has already shown how the shift to digital streaming has completely changed the movie consumption market, and such innovation can lead to sustained growth for companies. However, Redbox’s innovation was to develop a new format for renting movies through kiosks located in accessible public spaces.
On the other hand, the companies demonstrated their willingness to adapt to changing market conditions. Redbox expanded its content offerings, while Netflix adapted to the demand for original and unique programs and digital content. It follows that adaptations and innovativeness are the two levers that Netflix and Redbox use to combat market uncertainty.
Netflix and Redbox’s advantage over Blockbuster
The strategic fit for Netflix and Redbox was superior to that for Blockbuster, which led to the collapse of the tape rental company. There are several reasons behind the competitors’ increased advantage over Blockbuster. First and foremost, both companies were focused on customer satisfaction by reducing wait times, reducing the financial burden, and offering more choices. This significantly shortened the supply chain’s timeline, thereby optimizing it by reducing shipping and postage costs.
In addition, both companies proved more innovative, with deeper insight into the zeitgeist, and developed faster solutions for movie rental or digital streaming needs. It is also important to note that Netflix’s greater adaptability compared to Blockbuster has enabled the company to meet customer needs better and thus increase its appeal (Almutairi & Ghandour, 2021). Thus, based on the definition of strategic diversity, all elements and strategies of competitors were more closely interrelated and coordinated to increase the gap between customer value and supply chain costs.
Conclusion
Creating an efficient supply chain that increases customer value and optimizes company costs is a feasible business development. This paper examined a case study for Blockbuster, once the movie tape rental market leader. The company sensed the need to create a mass rental service and build a supply chain that reduced customer wait times, allowing Blockbuster to succeed. Over time, however, Netflix and Redbox were able to break Blockbuster due to their optimized cycles, greater access, better timing, and greater adaptability. Consequently, Blockbuster failed in part because it needed to prepare to rethink its supply chain in an increasingly competitive and changing marketplace.
References
Almutairi, A., & Ghandour, A. (2021). Enterprise systems adaptability and its role to determine organisation sustainability and resilience: A systematic literature review.
Chopra, S. (2018). Supply chain management (7th ed.). Pearson Education.
Ciocca, M. (2020). Online product localization: Challenges and solutions in global online marketplaces. In N. P. Rana, E. L. Slade, G. P. Sahu, H. Kizgin, N. Singh, B.Dey, A. Gutierrez, & Y. K. Dwivedi (Eds.), Digital and social media marketing: Emerging applications and theoretical development (pp. 275-282). Springer Cham.
Cohen, J. (2022). Welcome back, cable tv: Americans think there are too many streaming services. PC Magazine.
Distanont, A., & Khongmalai, O. (2020). The role of innovation in creating a competitive advantage. Kasetsart Journal of Social Sciences, 41(1), 15-21.
Panigrahi, R. R., Jena, D., Tandon, D., Meher, J. R., Mishra, P. C., & Sahoo, A. (2021). Inventory management and performance of manufacturing firms. International Journal of Value Chain Management, 12(2), 149-170.
Poster, M. (2021). Consumption and digital commodities in the everyday. Cultural Studies, 18(2), 409-423.