Blockbuster Case Analysis

I. Strategic Profile and Case Analysis Purpose: The Blockbuster firm is a leading provider of rental movie and game entertainment with approximately 8,000 stores. The company operates in the US, Europe, Latin America, Australia, Canada, Mexico and Asia. Blockbuster is headquartered in Dallas, Texas and employs 58,561 people; this figure includes full-time, part-time and seasonal employees. The company recorded revenues of $5,287.9 million during the financial year (FY) ended January 2009, a decrease of 4.6% over 2008. The operating loss of the company was $293.3 million during FY2009, as against an operating profit of $39.1 million in 2008. The net loss was $374.1 million in FY2009, compared to a net loss of
This plan grants customers the option to exchange their DVDs through mail or returning them to a local Blockbuster store in exchange for free in-store movie rentals. On e of the firm’s weakness, is due to Blockbuster’s high amount of debt, their borrowing capacity is severely limited. Currently they utilize variable rate loans, and likely they will continue to do so, thereby increasing the amount of interest payments. IV. Strategy Formulation: A. Strategic Alternative: As Blockbuster finds its firm being attacked by competitor like Netflix who through its First-mover incentives has managed to leave Blockbuster behind. As an alternative Blockbuster could merge with Netflix in order to possibly survive B. Alternative Evaluation: Blockbuster revenues are derived from the movie and entertainment market. The firm’s dependence on this market has been in part a reason the firm is having difficulty competing against its chief rival, which in view of the changes in the market decided to move and provide a new and differentiated service. C. Alternative Choice: Using the Strategic action as a response, as mentioned above, Blockbuster should re-invent ways to compete with its rival or merge. Another good suggestion is to provide services by vending machines at a lower cost than that of the competition. V. Strategic Alternative: A. Action Items: