Executive Summary
The case on Blockbuster Videos, Netflix, and Redbox unearth vital issues surrounding the stiff rivalry between the companies, changes in customer perceptions, and technological advancements. The paper discusses major details highlighted in the report, which include competition, market trends, and the role played by technology in determining customer behavior. The stiff rivalry between the two service providers, Blockbuster Video and Netflix, dominates the case right from the beginning to the end. The present situation of Blockbuster Video and Netflix portrays them as companies that have experienced major shifts in client behavior. Notably, shifts in customer behavior emanate from the demands introduced by technological advancements.
From the paper, it is noticeable that although past clients loved renting new releases, modern clients love services that they can comfortably access in their places of residence. The change in behavior is evident from the new services introduced by the two companies, which focus on delivering videos to clients at their various homesteads or in their workplaces. Moreover, advances in technology have also facilitated the change in demand for videos. Unlike in the past, advances in technology led to the introduction of DVDs developed using high definition (HD) or Blue-Ray Discs (BD). Therefore, a high level of rivalry, changing client dynamics, and technological advancements are some of the factors that make the case important not only for large companies like Blockbuster Video and Netflix but also for individuals who intend to establish their enterprises.
Introduction
Blockbuster Video and Netflix are the major competitors discussed in the report. Although the report highlights Redbox, Vudu, and Amazon as additional competitors, the level of rivalry that they exert are not equivalent to that manifested by the two giants in the video industry. In the report, it is practical that technology is a major player that dictates the changes witnessed in the market. These changes occur unexpectedly and in an unforeseen manner. The present situation of Blockbuster Video, for instance, was triggered by unexpected changes, which took place in line with technological developments. Losses incurred by the company that forced it to file for bankruptcy, are largely a result of the poor planning and absence of preparedness in the face of high competition and technology. The case is important because it helps large companies like Netflix, Redbox, and even Blockbuster Video to move with the changing trends in the market and experience minimal losses. The purpose of this paper is to discuss the details and key issues of the case, provide a theoretical implication, and give recommendations on the possible future of the video industry.
Relevant Details of the Case
Technology and competition
After going through the case, it is clear that technology and competition are the two major details. Technology and competition are pronounced, and their dominance is evident in the case study. While rivalry concerns Blockbuster Video, Netflix, and Redbox, technology has changed the dynamics prevalent in the market significantly. Therefore, some clients who used to rent videos currently stream movies via online platforms or purchase BD or HD DVDs. The shift from new releases to DVDs is a challenge for both Netflix and Blockbuster Video, and it has triggered costly write-offs. On page 3 of the case, Blockbuster Video had to write off more than $450 million tapes after consumers switched to DVDs. Importantly, technology advancements still play a major role in determining the direction that firms take due to their immense influence on client behavior.
Consequently, competition is another detail that emerges from the report. It centers on three major companies that provide video services: Blockbuster, Netflix, and Redbox. The nature of services offered by them is similar, a scenario that widens the scope of choice for video consumers. As such, when any of the three competing firms adjust their prices, the change initiates major shifts in the market. On page 7 of the case, Netflix received more than 80,000 negative reviews on Facebook after it had increased its prices and changed the nature of streaming and renting its services. The high number of negative reviews is in line with the scope under which the other competitors were operating. Therefore, the change in pricing depicted Netflix as a company that did not care about its consumers, a move that affected its revenues.
Case Analysis
The case discusses three companies that provide video services to consumers mainly based in the United States. Blockbuster Video, Netflix, and Redbox are the companies under discussion in the light of increasing rivalry and changes in technology. Although there are few instances when other companies like Best Buy tried to enter the market and challenge Blockbuster Video and Netflix, the complications experienced in the industry led to their swift exit. In the case, competition, technological advancements, and changing market trends triggered several adjustments. Blockbuster Video, for instance, tried all manner of new products including candy and music all of which failed to improve its revenues. From the case, it is clear that well-structured research and timing are missing in Blockbuster Video Company, a factor that at times causes massive losses.
It is noticeable from the report that when the company merged with Viacom under the management of Redstone, it acted as a source of income used to generate revenues for Viacom instead of improving its position in the market. As such, Blockbuster revenues, which totaled $1.5 billion, helped Redstone to purchase other ventures different from Blockbuster’s main goal. On the other hand, the case also presents the unprecedented switch demonstrated by clients in the video industry. These changes are unexpected and take place when the video companies have stock forcing them to write off and incur losses. In 2000, few investors believed that individuals would stream videos from their phones and personal computers. However, only 17 years later the bandwidth used to stream videos has significantly improved, and clients can now stream real-time movies and trailers using their smartphones. It is out of the case that one realizes the distinct importance of timing and preparedness concerning the changes posed by clients in any particular market.
Theoretical Implications
To discuss the theoretical implication presented by the case concerning Blockbuster Video and its competitors, which include Netflix and Redbox, there is a need to analyze a theory that coincides with the events outlined by the report. Advanced by Ice Ajzen and Martin Fishbein, the theory of reasoned action has its origins in the 1960s and is useful in understanding the events surrounding the video industry. From the provisions of the theory, customers decide to purchase a product using the expected outcomes. If the outcomes of purchase are productive, then the client is likely to buy a product. However, if a product does not have a positive outcome, an individual’s willingness to buy it decreases. The theory also outlines the role played by inefficiencies that some firms can portray. The theory of reasoned action notes that when clients take time to receive a product, they gradually develop a negative attitude towards it and may change their initial purchase decision.
The theory of reasoned action is important in explaining the events that occurred in the report of Blockbuster Video. Before the shift from single releases to HD DVDs or BDs, clients enjoyed the outcomes of the single releases and purchased them. However, due to advancements in technology and change in perception, customers began looking at the positive outcomes from a perspective of efficiency and reusability, features that are availed by high definition DVDs or Blue-ray Discs. The only option that Blockbuster Video had to do was to move with the changes in the market and ensure that the outcomes of their services matched what the clients expected.
Failure to match its services with client expectations is a factor that made Blockbuster Video incur losses and eventually file for bankruptcy. Several strategies adopted by the company with the intent of improving its revenues, such as the introduction of the latest music and candy, were not in line with the market conditions. A good understanding of the theory of reasoned action facilitates proper planning, research, and correct timing that helps firms move with trends in the market.
Key Issues
Timing and creativity
Timing and creativity are key issues that surface from the case. The downfall of Blockbuster is an eventual result of poor timing. It is important to explain that losses, dwindling market share, and delivery of low-end products are repercussions associated with wrong timing. In the report, it is obvious that Blockbuster Video failed to adjust its products to match the changes in the market. Even after the switch from single releases to DVDs, the company retained its rental services. On page 5 of the case, it is evident that while Netflix focused on the sale of DVDs, Blockbuster was struggling to purchase Hollywood Video, a bid that is lost. Moreover, the wrong merger with Viacom where it helped it to make acquisitions indicates poor planning on the side of Blockbuster Videos, a feature that affects the performance of any company. After incurring losses associated with wrong timing and unplanned mergers, Blockbuster Video eventually filed for bankruptcy in 2010 as explained on page 10 of the case.
Another key issue that is important and emanates from the case is creativity. In modern times when the competition is high, companies need to be creative so that they notice changes before they affect their revenues. Moreover, creativity enables companies to introduce products that amaze clients, propel their revenues to higher levels, and outsmart competitors. In the report concerning Blockbuster Video, Netflix, and Redbox, it is clear that creativity played a momentous role in dictating the market share enjoyed by the firms. It is out of creativity that the video companies like Blockbuster could have noticed that the future was more oriented to online video streaming and sale of DVDs in place of single releases.
In effect, what prompted the straitjacket nature of Blockbuster Video and its wrong experiments was the absence of creativity. As such, the company operated without a compass to guide them towards the direction preferred by potential clients. Wrong experimentation and the absence of creativity hampered the performance of the company greatly and initiated a decline in its market share. On page 12 of the report, the assets owned by Blockbuster Video lost their appeal in the market and were eventually sold at a value of $320 million to Dish Network.
Recommendations
The problems faced by Blockbuster Video can affect any company, which fails to take the right measures in the market. It is worthwhile to allude that companies should not assume any future trends that technology and clients pose. Minor complaints raised by customers can have a momentous impact on the operations of a company. Therefore, firms need to take client complaints and any probable advances in technology with lots of seriousness. The recommendations that are useful in the report concerning Blockbuster Video and its competitors comprise effective communication strategies and creativity. When companies use the recommendations in a well-designed manner, they enjoy high revenues, outsmart their competitors, and sustain their operations.
Effective communication is vital in elevating the quality of services delivered by the video industry. When companies like Blockbuster Video utilize efficient communication platforms to interact with their clients, the nature of services that they deliver improvements to match the market trends. Fundamentally, these interactions and effective communication strategies facilitated by online and offline platforms help video companies to pull out details from customers on what they expect from them. After identifying what their target clients expect, video companies then convert them into finished products. Notably, effective communication should not only take place on platforms such as Facebook, Twitter, and other online sites but should also include customers who interact physically with the company employees in stores and movie kiosks. Through the interactions, potential clients air their views concerning company operations and their perceived service quality.
Consequently, innovation is another recommendation that amplifies the position of any company marketing its products. The modern marketing environment is trendy and firms cannot sustain their operations if they do not have the right scale of creativity. In effect, creativity helps video companies like Blockbuster to sustain their services in the market and introduce new products that match the expectations of their potential customers. The outcomes expected after implementation of the recommendations comprise improved market share, augmented revenues, and sustained performance of video companies like Blockbuster Video.
Conclusion
The case on Blockbuster Video and the challenges it faced reveals the power that technology has on consumer behavior. In the report, technology-facilitated some shifts that forced the company and its competitors to introduce several adjustments and incur losses. Besides technology, Blockbuster Company also made wrong choices in mergers, the introduction of unsuccessful product lines, and experimentations. These mistakes proved to be costly for the company especially after its competitors capitalized on them and increased their market share. When Blockbuster focused on purchasing Hollywood Movies, Netflix introduced videos incorporated on HD DVDs, a move that improved its position in the market. From the case, companies can get information on the importance of moving with the market trends and on studying the ever-changing behavior of modern customers. With the information, subject companies can successfully enter the market by introducing products that match the prevailing demands.