Demise of Blockbuster:

A Case Study Review

Group 4
Vatsal Pancholi (2101219)
Yash Mudliar (2101232)
Virag Jhamb (2101224)
Daivik Tandel (2101217)
Tanmay Sharma (2101208)
Agenda
Introduction Strategic Fit of
Blockbuster
How effective was the In what ways did
“Blockbuster” Strategy? Blockbuster achieve better
strategic fit than local stores?

Implied Demand Levers to Deal with Better Strategic Fit

Uncertainty Uncertainty
How much implied demand What levers do they use to How did Netflix and Redbox
uncertainty do Netflix and deal with uncertainty? achieve better strategic fit?
Redbox face?

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Introduction

This case study is revolving around 3 known

companies:
1. Block-buster
2. Netflix
3. Redbox
Therefore, we would be analyzing the company profiles
of all three companies to again an insight on their
strategies.

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BLOCK-BUSTER
● Blockbuster LLC often known to the market as
Blockbuster, was a Home movie & Video game rental
service provider through video rental shops.
● Gained fame during the time span of 1980’s to mid-
2000s; at its peak in 2004, the company had 60,000
employees hired and over 8,000 stores all across United
States of America
● Lost momentous revenue in the later 2000s and early
2010’s thus resulting in the consequences of company
filing for bankruptcy protection in 2010 and in 2011
● Company had to sell its stores where 1,700 stores were
bought by satellite television provider Dish Network

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NETFLIX
● Netflix, Inc. is an American entertainment
company specializing in and provides streaming
media and VOD online and in DVD via mail
● In 2013, Netflix expanded in to film and
television production along with the online
distribution
● Initially Netflix sold and rented DVDs for a fine
period of time by focusing on DVD rental by mail
business
● In 2007, Netflix stretched its business with the
innovation of online media streaming, while
retaining the DVD and Blu-ray rental service
● They released 126 original series and films in
2016, more than any other network or cable
channel

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RED BOX

● Redbox is a DVD, Blu-ray and video games

rental specializing company which works
via automated retail Kiosks machines
● Kiosks are distributed all across US at
convenience stores, grocery stores, mass
retailers, fast foods and pharmacies
● As of the end of November 2012, Redbox
had kiosks over 42000 in number at more
than 34,000 areas
● According to reports in 2013, Redbox had
48% share of the physical rental market

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How much implied demand uncertainty do Netflix and Redbox face?

Netflix
● Channels: Rental and subscription model - Customer demand per channel becomes less predictable than a
store-based model.
● Large variety: 100000 DVD titles - Demand per product become less predictable
● Service level increase: A sophisticated recommendation engine to help customer navigate titles - Now the
firm has to handle unusual surges in demand for a particular title.
Redbox
● Target market: budget-conscious movie renter who wanted to quickly rent a DVD for immediate use
● Quantity: had approximately 23,000 kiosks nationwide & each Redbox kiosk carried about 630 discs,
comprising 200 of the newest movie titles - A wide range of the quantity required implies greater variance in
demand, i.e Higher Implied Demand Uncertainty.

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What levers do they use to deal with uncertainty?
Netflix:
Facilities-
● Operated with 60 regional distribution centers across the United States. (Centralized Location)
Information-
● Distribution center processes were linked to the recommendation software, movies that were likely to be in stock were recommended to
customers.
Infrastructure-
● Automated DCs for rapid processing.
● Didn’t offered newer releases much because of their higher initial cost of purchase.
Redbox:
Pricing-
● Placing its automated red kiosks at easily accessible locations, where customers could rent movies for $1 per night.
Information-
● Easy return services & no membership required
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In what ways did blockbuster achieve better strategic fit than
local stores?

● Higher product availability- It was the leading global provider with more
than 3400 stores around the world, with 365 days operation.
● Higher product variety- With 8000 tapes covering 6500, which is much
higher inventory than local stores.
● Larger stores- The aggregation of inventory and physical space allowed
Blockbuster to fill demand from its customers better than local stores and
at lower cost.
● Information system- Store operations streamlined by a computerized
system for inventory control and check in/out.

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How did Netflix & Redbox achieve better strategic fit than Blockbuster?

Better Usage of Facilities-

● Blockbuster stores carried 3000 variety of old movies which were only small fraction of old movies. Netflix carried
large variety of old movies but in 60 centralized distribution center. So, it provided larger variety with lower facility
costs.
Better Usage of Inventory-
● Only single wall of Blockbuster store comprised of new releases which constituted maximum portion of the revenue
while other space was occupied by old movies. In Redbox used low-cost vending machines at grocery, malls,
supermarkets with all the recent released movies which attracted more customers.
● Inventories of Blockbuster were very high relative to the revenue it generated. This was due to more variety of old
movies and more space utilized by them. Netflix reduced its inventory costs by aggregation of its DC. They had
automated DCs near USPS units for low-cost shipping.
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How did Netflix & Redbox achieve better strategic fit than Blockbuster?

Pricing-
• Redbox offered titles for as less as $1, without the need for subscription and easy returnability. Netflix offered the
largest variety at a reasonable subscription charge while Blockbuster charged for each tile.
Transport-
• Redbox had kiosk system which was easily accessible, and Netflix delivered the tiles directly to homes in a
reasonable time. The customers got more comfort from these companies rather than going to a Blockbuster store for
each tile.
Strategic Advantages-
• Both achieved better strategic fit by targeting different segments of movie rentals. When Blockbuster tried to target
both old and new movies market, Netflix and Redbox divided the large variety of old movies and small variety of
new movies, respectively.
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Thank you
“Supply Chain is like Nature. It is all around us.”
-Dave Waters

Group 4
Supply Chain Management