An Organizational Failure: Blockbuster

1. Describe and discuss how the organization’s culture facilitated the failure. Philips (2011) believes that success or failure of any great company depends on “Events, internal and external” (p. 3). Blockbuster also appears to be a victim of certain events at internal as well as external level. Based in McKinney, Texas, Blockbuster and founded in 1985 (Blockbuster Corporate, 2012) and it ushered in a new era as far as video rental retail industry was concerned. The company gave birth to video rental places that had significant amount of movies under one roof (the first store had 8,000 movies) and were not associated with bad movies or bad neighborhoods (Greenberg, 2008).

Initially, the company’s strategy was to expand aggressively and the leadership defined Blockbuster’s vision to become McDonald’s of the video rental business. Referring to the company leadership’s ambitious goals, Greenberg writes: The Blockbuster strategy was simple – pump as much money as possible into buying local and regional chains while keeping centralized control over the look and feel of the individual stores.

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By the VSDA convention the following year, Blockbuster had acquired two other chains and its more than 250 stores dotted the country. At the convention, Huizenga’s marketing executive Tom Gruber outlined vision for the future of the company, and it was expansive. Gruber had spent eighteen years working for McDonald’s before joining Blockbuster, and both he and Huizenga were explicit: Blockbuster wanted to be the McDonald’s of home video (the comparison was so deliberate that at one trade show presentation, huge photographs of Huizenga and McDonald’s leader Ray Kroc were projected side-by-side).

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(p. 128) So, Blockbuster came into being with a big bang and a unique presentation which was reflected in its slogan “Wow, What a difference” (Greenberg, 2008). In the beginning, the company even hired greeters who would welcome customers at each location’s entrance whereas the employees were provided with manuals about how to deal with customers.

That was the beginning. The strategy and vision worked amazingly well. However, as the company travelled with fanfare down the road, it developed a culture that might have its roots in complacency. The obsession with expansion seemed to derail a process the leadership should have put in place. Rayburn (2009) recalls how Blockbuster’s culture became a liability for the company and ultimately led to its bankruptcy. In 1999, a company called Globix (Rayburn was representing it at that time) was trying to strike a deal with Blockbuster in order to deliver movies to customers online. However, Blockbuster decided to partner with Enron instead of Globix. Rayburn (2009) goes on to point out that though Blockbuster was discussing future developments in advance and contemplated “about a digital media strategy way before consumers wanted the service and the Internet was even able to support it, that foresight on their part never materialized into any real online video strategy over the next ten years” (para. 4).

What surprises Rayburn (2009) is that there was no deal between Blockbuster and Enron as was announced in 2000. In his view, Blockbuster had a great chance to be in the driving seat and “should have been in the position Netflix is in today as they were the first movers in the market. Yet ten years later, the company still can’t seem to get their act together when it comes to digital media” (para. 5). Apparently, it took a bankruptcy to do the course correction as far as the company’s future direction is concerned. Blockbuster’s mission statement now takes into account today’s reality. It says (Retail Industry, 2012): Our corporate mission is to provide our customers with the most convenient access to media entertainment, including movie and game entertainment delivered through multiple distribution channels such as our stores, by-mail, vending and kiosks, online and at home.

We believe Blockbuster offers customers a value-prices entertainment experience, combining the broad product depth of a specialty retailer with local neighborhood convenience. (Blockbuster’s Mission Statement) The timeline of the company’s existence shows the culture of inaction at the top level delayed changes for a very long time. The company introduced Blockbuster Total Access program aimed at online as well as in store renting as late as November 2006 (Blockbuster Corporate, 2012). On the other hand, Netflix started its journey in 1996 and introduced its subscription service in 1999 and by 2010 it had 20 million subscribers (Netflix, 2012).

2. Apply the appropriate learning disabilities and laws that describe this situation. Like other organizations that hit stumbling blocks, Blockbuster had its hurdles in the shape of certain learning disabilities. One such disability is what Professor Senge (2006) calls ‘the fixation on events’. He writes: Conversations in organizations are dominated by concern with events: last month’s sales, the new budget cuts, last quarter’s earnings, who just got promoted or fired, the new product our competitor just announced, the delay that just was announced in our new product, and so on. The media reinforces an emphasis on short-term events – after all, if it’s more than two days old it’s no longer “news.” (p. 21) Another learning disability Blockbuster may have fallen prey to is ‘the parable of the boiled frog’. Senge (2006) explains that “Maladaptation to gradually building threats to survival is so pervasive in systems studies of corporate failure that it has given rise to the parable” (p. 22).

Blockbuster also seemed to pay attention to events and little focus on learning new things and look beyond the horizon. Plus, it remained complacent as the leader of video rental company until Netflix and RedBox surged ahead to the extent that Blockbuster had to file for bankruptcy. Levy (2010) also blames Blockbuster for not being proactive in learning and bringing the desired changes. He believes “Change management is not just a tool to deflect distracting maybe-we-should’s, but it’s also a way to handle legitimate we-need-to’s that were missed at the start or that are responses to a changing business environment” (para. 7). So, instead of take charge in a fast changing rental business, Blockbuster refused to budge from its brick-and-mortar edge.

Gradually, that edge fell apart like house of cards because the leadership failed to set in motion certain processes that should have allowed Blockbuster to remain the leader of the video rental retail industry. Moreover, the company’s leadership had their eyes set on something else, too. Is there any reason to believe that Blockbuster once tried to purchase Circuit City in 2008? According to Farfan (2010) it did happen but Circuit City rejected the offer and later on Blockbuster withdrew its offer. “Just two years later, Circuit City is out of business, and Blockbuster is struggling to stay out of bankruptcy court itself. The combination of the two companies seems somewhat symbiotic today, in a sad like-attracts-like kind of way” (Farfan, 2010, para. 11).

3. Explain the elements of the organization’s culture that will lead to similar failures in the future. Lack of focus and clarity in the vision may bring problems for the company in the future as well. Similarly, overconfidence in having physical locations may overshadow the future planning once again. The leadership must look into the fact whether the video store locations in different parts of the country are a benefit or a disadvantage. It may be very difficult to let go those locations, but if it is the right thing to do keeping in view how consumers want movies and games then the company should get rid of those locations.

Though the company has new management after it was taken over by Dish Network Corporation, the mission statement still attracts critics. Commenting on Blockbuster’s future, Levy (2010) argues that the company’s mission statement has competing priorities. He points out: This muddled vision (officially the corporate mission statement) provides no clear guidance against which various corporate managers can test their ideas and initiatives. Drop prices? It’s in there. Raise them to cover our depth? It’s in there. Compete with Netflix? It’s in there. Have brick-and-mortar high-monthly-nut locations? It’s in there. Make money? Oops, that’s not in there. (para. 6)

The new leadership at the company seems to recognize the reality and wants to let investors and other stakeholders know that it is evolving as the media entertainment industry is transforming. “While transforming and diversifying its store-base continues as a company priority, BLOCKBUSTER now offers convenient access to media entertainment anywhere and any way consumers want it – whether in stores, by mail or digital download” (Blockbuster Corporate, 2012).

4. Recommend specific actions the organization can take to prevent future failures from occurring. First of all, it should keep an eye on technological advancements that are happening at a very fast speed. It will allow the company to feel the pulse of what is going on and what might occur down the lane. The company should hire a chief learning officer in order to make learning an integral part of the organizational culture. At the same time, by developing a culture of learning will help the company adjust to changes and challenges that may be thrown at it. As Philips (2011) mentioned in his book, Blockbuster has to make sure events taking place within the organization and outside the organization should not come as surprises.

He advises that learning and changing at a required pace is necessary for organizations. Moreover, if the company believes physical locations still make the company a leader it should build a unique culture of customer service so that people crave for Blockbuster visits. Philip (2011) reminds policy makers that “Just as history is not made by great men alone, so companies and countries don’t go bust just because one or two people chase the dream too hard. They need a support staff” (p. 59).

Since Dish Network has its own subscribers, it should attempt to attract additional customers through combinations of Blockbuster-Dish Network offerings. Similarly, the company should not underestimate other companies just because they are startups. Actually, there may be reasons to learn from new business models in the industry. Woloszynowicz (2010) informs his readers that Netflix was not a success in the beginning as its IPO dropped from $15 per share to $6 per share after it was launched. On the other hand Blockbuster leadership interpreted slide in Netflix’s share as a failure and thought the company is not going to make any difference in the industry.

Blockbuster Corporate. (2012). Company Overview. Retrieved January 17, 2012, from Greenberg, J. M. (2008). From BetaMax to Blockbuster: Video stores and the invention of movies on video. Boston, MA: MIT Press. Levy, S. B. (2010, September). Blockbuster Goes Bust – Outfoxed by Redbox, Licked by Netflix. Retrieved January 17, 2012, from Netflix. (2012). A brief history of the company that revolutionized watching of movies and TV shows. Retrieved January 17, 2012, from Timeline

Phillips, T. (2011). Fit to bust: How great companies fail. Philadelphia, PA: Kogan Page. Rayburn, D. (2009, July 16). Ten Years Later, Blockbuster Still Lacks A Digital Media Strategy (BBI). Retrieved January 17, 2012, from of_online_vi/2009/07/tens-years-later-blockbuster-still-lacks-a-digital-media-strategy.html Senge, P. M. (2006). The fifth discipline: The art and

Updated: Feb 23, 2021
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An Organizational Failure: Blockbuster. (2016, Nov 21). Retrieved from

An Organizational Failure: Blockbuster essay
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