ASSIGNMENT # 2

DEMISE OF BLOCKBUSTER, REDBOX AND NETFLIX.

Subject: - SUPPLY CHAIN MANAGEMENT

Submitted to: - SIR SAQIB MUSHTAQ

Submitted by: - MUNEEB ALI KHAN
Enrollment #: - 01-220191-026
Class: - MBA 3.5 YEAR Section: - 3 A

BAHRIA UNIVERSITY ISLAMABAD

Q. No. 1
In what ways did Blockbuster achieve better strategic fit than local stores?

Ans:
Blockbuster started with the business model of getting massive physical storefronts in high-
traffic neighbourhood locations. By building stores that were larger than existing rental stores,
Blockbuster offered customers a wider alternative of flicks and higher product available. Movies
were generally rented out for concerning $5 for 5 nights.

Given that existing stores were abundant smaller, albeit they carried solely many hundred titles,
it had been terribly tough for them to supply available of those movies given the high price of
inventory (VHS tapes oversubscribed for $60-$80 every at that time) and house. Blockbuster
designed larger stores that aggregate demand across a wider space than a typical rental store. The
larger store allowed Blockbuster to supply bigger selection and higher available at lower price
than rental stores. The aggregation of inventory and physical house allowed Blockbuster to fill
demand from its customers higher than existing rental stores.

Q. No. 2
How did Netflix and Redbox achieve better strategic fit than Blockbuster?

Ans:
Netflix and Redbox achieved higher strategic work than Blockbuster by targeting totally
different segments of picture rentals. Whereas Blockbuster tried to supply its customers each
new releases additionally as older movies, Netflix and Redbox divided the market among
themselves. Netflix primarily targeted a large style of older movies whereas Redbox primarily
targeted a way smaller style of new releases. Blockbuster’s decide to serve each markets
multiplied its price for each new releases and older movies. In distinction, Netflix was able to
offer selection to its customers a lot of effectively (100,000 titles instead of five,000 at
Blockbuster) and at lower price through its mixture model of shipping from DCs. Redbox was
able to offer new releases at lower price than Blockbuster by mistreatment merchandising
machines.

Whereas a Blockbuster store carried around three,000 titles that weren't recent releases, this
delineated a really little fraction of recent movies. In distinction, Netflix carried a really wide
selection of titles however in centralized distribution centers. Netflix had regarding sixty
distribution centers (at its peak of mailing DVDs), wherever DVDs were processed and shipped
everywhere the us. Thus, Netflix had abundant lower facility prices than Blockbuster whereas
providing a way higher style of movies.

Only one wall at a Blockbuster store was dedicated to new releases (which implanted a big
fraction of the rentals). on condition that Blockbuster was paying for the full store, this
multiplied the ability price per rental as a result of most of the house was employed by different
movies that rented at a way lower rate than the new releases. Redbox, in distinction, used terribly
low-price merchandising machines (with low mounted installation prices of $15,000) in high-
trafficked locations like grocery stores, supermarkets, and malls to rent a similar recent release
(much lower PP&E/SG&A) compared to Blockbuster. As a result, the ability price per rental was
abundant lower at Redbox compared to Blockbuster.

Inventories at Blockbuster were high (relative to revenues) attributable to the decentralized

nature of its operations. especially, carrying several low-volume rental titles (after all, there have
been maybe solely regarding thirty movies at any given time that were dealings in massive
quantities) exacerbated the inventory needs. This multiplied the price of each inventory and
house for Blockbuster. Netflix carried a wider choice of titles in its distribution centres, however
was able to carry lower inventories attributable to aggregation at its DCs. Redbox stocked with
freshly discharged DVDs, that rented in massive volumes with comparatively inevitable demand.
As a result, there was abundant less inventory sitting around. every Redbox booth carried on the
point of 630 DVDs comprising two hundred of the most recent picture titles. every DVD was
rented out on the average fifteen times, when that it absolutely was sold-out to the client.

Netflix used a centralized provide chain structure to supply selection within the sort of recent
movies (high uncertainty) to its customers at low price. Redbox used a decentralized provide
chain structure to supply foregone conclusion within the sort of new releases (low uncertainty)
on the point of its customers at low price. a mixture of the 2 centred provide chains performed
considerably higher than the Blockbuster provide chain as illustrated in a very comparison of the
financials in Exhibits one and a couple of (in the absence of Redbox financials, we have a
tendency to use Coinstar financials).