The strength of the company mainly lay on its popularity and its wide range of network. Blockbuster had realized these strengths and has taken advantage of them to the full extent. Advertising and in-house promotion have been performed quite successfully in maintaining the image and popularity of Blockbuster, particularly in the eyes of US consumers. Today, the company has also developed a popular presence on the internet and it has help to increase Blockbuster’s competitive advantage against its competitors (Lieberman, 2004).
Blockbuster’s weaknesses include its high cost of operations and maintenance, limited stocks of popular movies and insensitiveness toward recent developments in the industry. Financially, the company needs to reduce operational costs of its stores, because it decreases operating profit into minimum profit or even losses. Strategically, blockbuster needs to maintain awareness of what competitors are doing and develop new programs to attract customers. Within the stagnant market, the company could not afford to miss-out on new development in video rental marketing and sales.
Opportunities Opportunities for blockbuster come in several packages. The first is in foreign investments. The company which already has a significant presence and popularity in United States could easily gain market share in Europe or even developing countries that crave American products. Another opportunity is increasing customer service by recording customer preferences in corporate data. • Threats One of the apparent problems in the video-rental industry is related to copyright issues and legal aspect of the business.
Players within the industry are threatened by the presence of many illegal download centers on the internet. Sales have already been reported decreasing due to the prevalent of illegal downloading activities. On the other hand, video rentals have the obligation to pay legal fees for every title it possess which prevent them from competing with the decreasing costs of downloading movies through the internet. II. Conclusions This paper has elaborated the performance of Blockbuster Inc by using the environmental and SWOT analysis.
From the financial perspectives, the company shows the declining performance due to cost of rental revenue was recorded to increase while sales were decreasing. The companies also experience the hardest force from industry that faces several technology alternatives for seeing movies. The situation causes the company to experience declining revenue into $5. 7 billion in 2006. In terms of sales, 2006 actually revealed a declining performance, but it is still much better compare to 2002. Vertical analysis on the other hand, described a tendency of financial development.
Blockbuster records more than $5 billion in 2006. In terms of sales, 2006 actually revealed a declining performance, but it is still much better compare to 2002 sales (Blockbuster Inc, 2006). The undulating Blockbuster performance has caused the undulating performance as well. Furthermore, from the environmental analysis, we find that movie rental industry has a stagnant market condition since the substitutes of products are vastly available from the video download via iPod and the free sample of video at www. youtube. com, for instances.
Although the company faces threat for their future business, still, they have the strong brand when expanding into foreign market especially the Europe. III. Recommendations Following professional guidance along with taking advantage of the internal and external analysis previously performed, we will then formulate several of the foreseeable solutions and suggestions. These general suggestions to increase Blockbuster’s operational efficiency are ones that might already exist within the corporate strategy, but requires further attention and development:
• Providing Employee with Access to Required Information Employers always suggested that employees should do their best to satisfy customers and generate a rebuy or revisit. Ironically, some employers are doing this without equipping their employees with the proper tools to provide customers with satisfactory services. Those tools could be sufficient training, guidance in the workplace or access to sufficient information. Block buster should pay attention particularly to the latter tool. By developing a customer preference list, employees could help customer pick-out movies that they would like.
This would not only increase customer retention but increase employee working satisfaction. Improve Employee Satisfaction and retention People that have the best knowledge on how to enhance the operational efficiency of a rental operation are the employees. Employers should spend time and effort ensuring that employees are performing their functions with sufficient motivation to recognize efficiency opportunities if they see one. Most workplaces are trapped with poor efficiency performance because they never let employees provide them with suggestions and insights. Develop Long-term Technology Plan.
One of the recorded mistakes of Blockbuster is not to create their presence in the internet when they should have. An untimely entrance to an extremely competitive market could well mean no entrance at all. To prevent similar occurrences, Blockbuster should develop a long term technology plans where managers of the company formulate long term objectives of the company and then revise a technological plan based on the formulated goals. • Reducing Rental Centers For a more radical solution, the company could simply reduce the amount of retail locations to reduce operational cost.
Instead of building and maintaining stores every 5 blocks, the company could otherwise increase the technology investments in remaining stores and provide customers with state of the art customer services. • Rent-out Spaces Furthermore, in locations which are not contributing sufficient profit, Blockbuster could rent the space for external businesses. This has been a normal practice for many gas stations or other business settings when they have unproductive space within their facilities. Other opportunities could be gained from partnering with other video-rent retailers.
Partnering with other Retailers Instead of building new stores and increasing operational costs, Blockbuster could otherwise try to create alliances with other existing resources retailers. An example of those retailers could be the grocery chains. Blockbuster could sign a leasing agreement with the grocery store and perform operations within the grocery store. There are two main advantages of this plan, first, Blockbuster will only need to pay for the lease instead of building and maintaining another building, and second, Blockbuster could benefit from gaining access to customers of the grocery store.
If the first implementation of this strategy is successful, Blockbuster should begin to consider the benefits of moving all of Blockbuster’s retail locations into grocery stores.
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