Mgt 450 Paper Netflix V Blockbuster

Netflix and Blockbuster

Block buster and Netflix are both movie rental companies. While blockbuster has been the de facto movie rental company their dominance made them complacent and they failed to innovate making it easier for Netflix to fill the void created by changing customer expectations. Netflix offered customers cheaper prices with no late fees which affected Blockbuster. Blockbuster lead the movie rental industry, but as times changed so did technology and competition. People wanted services that were more convenient and easier to access as well cheaper prices for the rentals. This brought in competition from Netflix and others that were able to give customers what they wanted, when they wanted it and at a cheaper rate.

Blockbuster was the leader, a stalwart in the movie rental business, but as Netflix and other competitors joined the rental industry Blockbuster began losing market share and subsequently money. The limited selections of movies and games they had to offer, late fees, physical stores and the higher prices for having to go to the store while others offered mail order selections and the online streaming began. Blockbuster had issues with the availability of movies in each store some stores had to remove older movies to make room for the newer ones. Netflix poses a threat to Blockbuster because they have flat rate rental fees for and online steaming and lower costs to customers, convenience. Blockbuster filed for bankruptcy in 2010 and Dish network cooperation eventually bought them. Blockbuster plans to keep some of the remaining stores open, while they are closing others stores that are too close together. Dish officials stated that because of competitive pressure they may have to close additional stores in the future. (Kennedy. 2012)

Netflix enjoyed a sudden rise and favorability among its customers; they catered to the wants of customers at a price they thought was reasonable. But Netflix's sudden rise did not come without cost, they changed customer expectations and as such, they threatened the current content distribution channels. They catered to the new digital generation, generation Z if you will customers who will most likely wait for a movie to come out on DVD rather than go to the theatre, customers who will forego traditional cable subscriptions for streaming content from sources such as Netflix. With the threat of Netflix growing, movie studios imposed an additional 30 day delay on releases to Netflix, Cable channels such as Starz began removing their content and Broadband service providers who are in some cases content providers have threatened transfer caps and bandwidth throttling to their customers the means by which Netflix delivers its streaming content. Another problem they faced was the announcement of Qwikster. This is an example of Netflix suffering from their own success and giving its customers what they think they want. Netflix was going to launch Qwikster to take over the DVD portion of the company while Netflix focused on streaming content. This process would have involved separating the customers' accounts, separate queues, and movie and TV show ratings would not be transferred. The inconvenience upset millions of customers who enjoyed both services forcing Netflix to not move forward with the change because of the complaints from loyal customers. (Huffington Post 2011)

New market trends continue toward streaming either through Netflix, and Blockbuster, but there is stiff competition between the cable companies and the movie rental industry. (Gamble & Thompson 2011). "Rivalry intensifies when competing sellers regularly launch fresh actions to boost their market standing and business performance" (Gamble & Thompson 2011). These tactics include price competition, introduction to newer products, higher quality, improved customer service and sales promotions such as free trials. (Gamble & Thompson, 2011)

Netflix managed to gain a competitive advantage over Blockbuster and other companies in the industry with keeping costs low, ensuring customer satisfaction with a large selection of mail movies and online selection, easy way to choose movies through personal selection lists, fast delivery and convenient returns. They have developed a cost-based advantage which created a durable competitive advantage that Blockbuster and other rental based companies find it difficult to match. (Gamble & Thompson, 2011). Netflix also offered a differentiation-based advantage by giving their customers a massive selection of mail order movies and online selections. (Gamble & Thompson, 2011).

Netflix used five competitive forces, they increased their driving forces with the emerging new internet capabilities and applications, they started focusing more energy into the online portion of streaming movies, improved market strategies, and they increased their opportunities into the global market. (Gamble & Thompson, 2011).

Blockbuster strategy was to offer more movie and game selections in their stores, expansion into the online rental services, and to increase opportunities in the global market. Blockbuster made improvements in their expansion of digital content and convenient access to media content. Newer marketing strategies were to gain more online customers through advertisements and offers. Blockbuster also discontinued their late payment fees. Blockbuster has made changes to the way they rent movies and games they now have unlimited movies and games for a flat rate to compete with Netflix. Blockbuster is price matching with its competitors to stay competitive (Kennedy, 2012).

Blockbuster began to craft new strategies such as "sticking closely with the existing business lineup and pursuing opportunities these businesses present" (Gamble &Thompson 2011).

Blockbuster's alternatives are that they match Netflix in prices and availability. The pro for Blockbuster is that they stay somewhat competitive with