SUPPPLY

SUPPPLY CHAIN
CHAIN MANAGEMENT
MANAGEMENT
IN
IN HOSPITALITY
HOSPITALITY INDUSTRY
INDUSTRY

CASE
CASE STUDY
STUDY
ANALYSIS
ANALYSIS

BESANA, MIA GRACE S.

BSHM 2-2N
1.) IN WHAT WAYS DID REDBOX ACHIEVE
BETTER STRATEGIC FIT THAN LOCAL
STORES?

The ways that Redbox did to have better strategic fit

than local stores are the following:

They identify new ways in which to provide

convenience and relevance to customers in
restaurants, drive traffic, and target budget-
conscious movie renters by placing automated red
kiosks at easily accessible locations where customers
could rent movies for a dollar per night.
By expanding their kiosk nationwide, including in
fast food restaurants and leading grocery stores,
retailers who were struggling to keep people in their
stores realized that having a DVD kiosk in a store
creates higher foot traffic, which results in high
revenue for their stores. As a result, Redbox
accounted for 25% of DVD rental volume compared
to Blockbuster, and the company was on track to
generate more than a billion dollars in annual
sales, far faster than Netflix.

2.) HOW MUCH IMPLIED UNCERTAINTIES

DO NETFLIX AND REDBOX FACE? WHAT
LEVERS DO THEY USE TO DEAL WITH THIS
UNCERTAINTY?

One of the underlying uncertainties that Netflix and

Redbox face is technological. Streaming movies is
now more convenient than renting them from a kiosk
or through mail order. With this uncertainty, these
two companies came up with levers to deal with it.

Price points of the rentals and purchases of the DVDs

While Redbox has fewer titles available at any given
time than Netflix or Blockbuster did when they were at
their peaks, titles are rotated fairly quickly to provide
 customers with a diverse selection of titles to choose
from. Redbox also offers customers around 200 of the
newest movies, which is another appealing perk.

Second, consider the allowable response time. Netflix’s

mail service allowed customers to replenish their rentals
via conventional mail, which was tolerable to most
customers though unacceptably slow for early adopters
of newly released titles. Netflix’s digital service is nearly
instantaneous, assuming the title they are searching
for is in stock at a locally accessible kiosk.

Third, ease of renting: Redbox kiosks are located in

convenient locations, making it easy for customers to
rent a movie. With the kiosks, the customer no longer
has to make another stop at the nearest Blockbuster to
rent a movie. Rather, the customer can just rent the
movie after having lunch or dinner at McDonald’s or
picking up a prescription at Walgreens, for example. By
offering mail order and internet streaming, Netflix also
eliminates the need for a store visit.

Lastly, the desired rate of innovation is: Netflix offers

its customers the greatest technological advantage of
the three options: new titles are instantly available via
its digital download service. Redbox offers an "online
hold" option in its service, allowing customers to utilize
an app for reserving titles in inventory to pick up later.

3.) HOW DID NETFLIX AND REDBOX

ACHIEVE BETTER STRATEGIC FIT THAN
BLOCKBUSTER?

Netflix and Redbox achieved a higher level of strategic

work than Blockbuster by targeting totally different
segments of movie rentals. Whereas Blockbuster tried to
supply its customers with each new release as well as
older movies, Netflix and Redbox divided the market
among themselves. Netflix primarily targets a large
style of older movies, whereas Redbox primarily targets
a much smaller style of new releases. Blockbuster’s
decision to serve each market multiplied its price for
each new release and older movie. In distinction, Netflix
was able to offer selection to its customers very
effectively (100,000 titles instead of 5,000 at
Blockbuster) and at a lower price through its mix model
of shipping from DCs. Redbox was able to offer new
releases at a lower price than Blockbuster by
mistreating its merchandising machines.