The Closing of Blockbuster Ganeshkumar Raju Organizational Behavior Dr.

Jim Young Southern New Hampshire University

THE CLOSING OF BLOCKBUSTER PAPER OUTLINE

I. Introduction a. Closure of Stores b. Challenges faced by Block c. Details of bankruptcy II. Dish Takeover and Strategy a. Dish Purchase and Layoffs at Blockbuster b. Exploring new channels c. Blockbuster need for innovation III. Employment and Morale a. Renumeration and Quality of work b. Morale and Job Satisfaction c. Company Image IV. Leadership Guidance and Control a. Change in Leadership Style V. Conclusion

I. Introduction

a. Closure of Stores
Blockbuster was in its prime in the 1990s when every nook and corner seemed to have the video rental giant's video renting store. It was a Friday night routine for many households across the USA to rent out some of the latest blockbusters on video,dvd or blu ray. In 2013, Dish Network that ended up purchasing Blockbuster in 2011, announced that it was closing all of its stores and its one renowned distribution centers. Poor decisions were made in the twilight of the company's eventual demise, by CEO Bill Fields. And as unpopular as many of its decisions the real problem was that it was so undemocratic. The company had everything going for it, and it yet did not recognize the employees and consumer demands that clearly demanded the move toward digital distribution of the same entertainment.

b. Challenges faced by Blockbuster

Blockbuster did develop its Blockbuster on Demand service in a reactive need to fulfill the new demand toward the digital distribution of its media. The reactive part is that it was reacting to Netflix's growing strength, the quickly replaced the rental giants name from the minds of its customers. Netflix had patented its online delivery system and sued Blockbuster for the violation.

The two companies settled out of court, but it seemed like the vote swayed completely toward Netflix. Blockbuster was hurt further by DVD rental kiosks like Redbox. Netflix and Redbox both challenged the traditional rental model that Blockbuster followed. For the clout that Blockbuster had in its heydays, if it had focused on the online delivery system and rental kiosks, it would surely have survived even till date, inspite of the competition.

c. Details of bankruptcy
Blockbuster filed its much expected and awaited Chapter 11 Bankruptcy in 2010, after struggling with nearly $1 billion in debt from the competition of Netflix and Redbox. At the time it was immediately going to shutoff almost a 1000 stores across the US, but what was more worrisome was that the consumers had already written off the stores from their daily lives, so much so that the CEO Jim Keyes at that time started thinking of changing from the rental model to a neighborhood entertainment center model, where it sells DVDs, Blu Rays and CDs. He still seemed to have it all wrong. The company owed millions of dollars to many of the leading movie studios, yet Jim Keyes had assurance that his well established brand name will be recapitalized and will provide accesses through multiple new consumer demanded channels like stores, kiosks, mail and online.

II. Dish Takeover and Strategy

a. Dish Purchase and Layoffs at Blockbuster

In an attempt to give Blockbuster a new direction, the solution was for another company to take over the entire Blockbuster business. Dish Network's implementation plan was the one that was the solution that was approved by the board at Blockbuster and the sale was done for $320 million. With Dish Network, a strong brand value already, taking over the Blockbuster stores, it

acted as a new lease of life for the stores. Th takeover soon yielded itself to closures of unprofitable stores immediately both in the North America and in the UK. The included with company wide reorganization that laid off more than 3000 employees across the North America and UK. The dramatic closures of many of its stores was definitely needed and was expected, this was done to make the company lean and profitable, and start creating revenue for Dish Network.

b. Exploring new channels

Analysts wondered why a satellite company wanted to take over a company that sold and rented physical DVDs and Games, and the common public saw that their neighborhood Blockbuster(s) are now closing down and many simply moved on to other services, mostly online. So the expectation was that Dish was going to use the Blockbuster brand name to compete in the digital movie rental space through its satellite service, and hence sell more of its satellite services and hardware. They needed to immediately utilize both the brands and revamp it into a force to reckon with in the digital movie rental space.

c. Blockbusters need for innovation

To implement a strategy that take the company away from its core business, is something that every company needs to do in order to diversify, but Blockbuster needed this reinvention and innovation to stay in business. The strategy needs to be clearly communicated but senior management so that all scope of confusion and conflict is nipped in the bud, and also for everyone to understand their role in the organization. This means that innovation not just in technology but also in the psyche of the new organization. Each team should keep ROI from their team at the center of their operations, and resist chances for conflicts and confusion. This surely takes a lot of patience, agility and focus in order to ensure that the strategy unfolds as planned. Senior leaders in the

company should encourage the teams to look at the enterprises goals, and be unified in the approach to move forward. This didnt happen in the case of Blockbuster and Dish did very little to maintain the calm mental posture. There were constant feuds between Dish Vs Blockbuster teams that deemed toxic to the unified strategy that needed to unfold. It is true that in a merger there is a lot of bad blood, but there are very strong communication strategies that help in moving forward, and this comes from the CEO all the way down to the bottom of the totem pole. The innovation aspect then comes directly down to technology, the entire entertainment industry is evolving, bringing with it consumers that are demanding more and more refined delivery for a prices that was more competitive than previous years. There needed to be new technology related initiatives that enabled Blockbuster to use their brand name to reach their core customers thru new delivery channels.

III. Employment and Morale

a. Renumeration and Quality of work

In any buyout or merger, it is the employees that have to manage a lot of their time and maintain balance to get through difficult times. This is without knowing what shape the company really is in. The strategy in these cases is to reward employees thru reward programs, or timeoff, vacations or benefits. This helps keep loyalty through a rough period, and help them maintain a sense of security. Maslow's Hierarchy of needs is a good method to follow during these rough period, becuause it has proven time and again when an employees needs are met, they tend to be

more effective and focused.

b. Morale and Job Satisfaction

One of the very first things to do after a buyout/merger is to invest in the betterment of the environment for the employees. Blockbuster should have thought about communicating the renwed strategy to the old and new employees, and ensure that training and hence morale are taken up a notch. There is a lot of political changes and reorganizations, delivering groups and employees should be kept out of this, so that their pace does not slow down, or worry about new pressures or hindrances to their status quo.

c. Company Image
Blockbuster and Dish Network are companies with a strong public image and they both could have helped each other out in this moment to become a strong brand name and a force to reckon with in the entertainment industry. But instead a lot Dish Networks time was spent in evaluating poorly performing stores across the country over months, on a case by case basis and then shut it down. The big picture of why the merger actually happened was soon lost in the logistics of it all. Blockbuster on Demand was also becoming highly recognized by the public as a true competition to Netflix, this image should have been one of the first things Dish should have focused on after the buyout of Blockbuster.

IV. Leadership Guidance and Control

a. Change in Leadership Style

Two hundred years ago military theorists studied why, time after time, armies-no matter

their size or superiority of equipment or training lost their effectiveness due to a divided leadership council. The principle of unity of command was subsequently introduced, a reminder that overall success depended on an integrated and cohesive decision-making authority (Ressener, H. 2013). Internal friction in businesses whether large or small will eventually result in either operational paralysis and/or waste. This of course is completely true, no matter what kind of employees you have, or any kind of strategy you have in place. There is no longevity of success, if the decisions made by the non unified authorities get implemented. At Blockbuster, this seemed to be true especially after the Dish buyout. Blockbuster spent more time, defending their stand than to focus itself on the future. Blockbuster needs to allow its employees to manage themselves and make their own decisions as well as being involved in critical decision making for the direction of the company.

V. Conclusion There is a reason why companies like Google and Apple are at the forefront in their respective markets and highly competitive in markets that they share. For a company to be truly successful in the long run it needs to be forward thinking, and focus on being the very best. It should constantly look at its consumers and ask how can we service them better. Simple decisions at Blockbuster could have saved them from doom, but they didn't recognize the signs that the consumers were flashing at them. Companies like Netflix and Redbox, were out there ready to serve, so when Dish took the low drawm out approach to resurrection of Blockbuster the consumers simply decided to move on. Blockbuster on Demand can still compete, because companies like Amazon and Redbox

are giving the same services as Netflix perhaps with more value added services, like free 2 day shipping for every good at Amazon, or 4 free DVD credits a month from Kiosks by Redbox. Blockbuster's website still states that Blockbuster is alive and we hope that Dish finally recognizes the potential of the company and the brand name it bought.

References

Blockbuster LLC - Wikipedia, the free encyclopedia. (n.d.). Retrieved November 6, 2013, from
http://en.wikipedia.org/wiki/Blockbuster_LLC

Blockbuster: The End. | The BrandBuilder Blog. (n.d.). Retrieved from

http://thebrandbuilder.wordpress.com/2010/09/23/blockbuster-the-end-2/

How Netflix Innovates and Wins - Forbes. (n.d.). Retrieved from

http://www.forbes.com/sites/chunkamui/2011/03/17/how-netflix-innovates-and-wins/

(http://latimesblogs.latimes.com/entertainmentnewsbuzz/2010/09/blockbuster-files-for-chapter11-bankruptcy-sets-plan-to-reorganize.html)

Ressner, R. (2013). Blockbuster Inc.: A Communications Brief