Blockbuster Case Analysis Summary of Term Paper

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The high level of debt capitalization inherent in how they have financed their stores, which is inferred from the case study, also could be applied to a more effective cloud-based delivery architecture. Netflix did this and was very profitable as a result. Third, Blockbuster has far to go in terms of creating a more effective customer experience. There is significant potential for great upsell and cross-sell as a result.

The threats include a highly commoditized and shrinking move rental market in the U.S. And globally, including the rapid commoditization of titles that are easily gained through other channels. In addition, the growing threat and costs of piracy is very significant for Blockbuster and every other retail chain as well. Third, the cost structure of the chain is slanted towards retail and represents a significant financial risk in terms of continually financing the debt.

Problem Statement

Blockbuster is continually on the defensive both from a technological and current competitor standpoint, lacking the disruptive innovation perspective and creativity necessary to re-order the markets they are in.

Three Strategic Alternatives

1. Create a separate division to fast track new, disruptive innovation that will completely re-order the entertainment industry. This would be a "skink works" of innovation and new product development.

2. Choose to buy Netflix as they have cratered given their pricing policies and have a market cap of just $6B -- ideal for a leveraged buyout by Blockbuster.

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3. Realize that the days of being all things from an entertainment perspective to all people are over. Trim back to only the most profitable customer bases and align product and service offerings to only this group. Choose to become exceptionally strong to customer analytics and gain greater insights into which segments offer the greatest value.

Strategic Recommendation

Start selecting only the most profitable customer bases and begin trimming back all others, and then start align product and services strategies to their specific needs. Practice highly targeted marketing and product development to become more profitable. This will require closing stores and doing many other unpopular strategies yet the company will be more stable and grow more profitably over the long-term if this strategy is taken.

Marketing Implementation

Create an entirely marketing strategy that is based on the highest value customers and their specific preferences in addition to rolling out new technologies to make online entertainment easier for them to use. Seek out a content-differentiated strategy based on their very precise needs and preferences. Become a very focused marketed on the customers with the highest potential for Lifetime Customer Value (LCV) and the lowest churn….....

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