In
its time, Blockbuster was a well-known video rental store that dominated the video
rental market. Just about everybody in
the United States visited their local Blockbuster store on Friday or Saturday
night to rent a movie to view over the weekend. In 2000 John Antioco,
Blockbuster’s CEO was approached by Reed Hastings, Netflix founder to form a
partnership. Antioco and his Blockbuster
team laughed Hastings out of the room. They felt that even though Netflix could
disrupt their current operations, they did not want to take the time to alter
its business model and affect ongoing profitability.
Blockbuster
had a good plan and it worked very well as long as they stayed ahead of their competition. One area that led to their failure was that of
new technology. Blockbuster assumed that
their patrons would not wait a day or two to receive DVDs in the mail therefore
did not view Netflix as a strong competitor.
Customers loved the Netflix service and through the use of word of mouth
advertising from its customer base, Netflix slowly grew into a powerful
adversary that eventually put Blockbuster out of business in 2010. The reason that the switch to Netflix took so
long was due to the threshold model of
collective behavior. This model
states that for any new idea there are varying levels of customer resistance;
these levels are termed as Innovators, Early Adopters, Early Majority, Late
Majority and Laggards. Figure 1 depicts
how Netflix slowly absorbed Blockbuster’s Market share.
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Figure
1. Blockbuster and Netflix Market share
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One
missing aspect of Blockbuster’s sociotechnical plan if one was in place, is that
of analyzing prevailing competition and to develop practical solutions to limit
their effects on profitability. The analysis
of Netflix operations and its effect on future Blockbuster profitability should
have been a principal concern of Blockbuster’s management. However, due to the egos of various high
level managers, the sociotechnical plan failed and Blockbuster went bankrupt.
Two
forces that affected the concept of Blockbuster’s existence was the threshold
model of collective behavior as previously discussed and changes in technology which
in this case was the use of the Internet and web services.
Reference
Satell,
G. (2014, Sep, 05). A Look Back At Why Blockbuster Really Failed And Why It
Didn't Have To. from Forbes/Tech. Retrieved from http://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/#4a3dc323261a
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