Blockbuster Case Study
Compared to Netflix, a primary competitor, Blockbuster's overhead is much larger due to actually having stores for customers to go to. In order to continue to compete, Blockbuster will need to transition smoothly and try to control the drastic increase of this overhead.
At this point in the game, Blockbuster has several threats. First of all, credit problems. With the recent talk of bankruptcy, Blockbuster would be put in a very tight position if lenders are not willing to lend additional capital for Blockbuster expansion. As of September 2006, Blockbuster had a quick ratio of .48. To summarize, Blockbuster had half as much cash as was necessary to pay current liabilities for that period. Cash is the lifeblood of business, and unless Blockbuster gets a "blood transfusion" or heals itself, the future could be weary. Another major threat is competition. Because video rentals are moving toward online stores, Blockbuster is a little late getting into the game. Netflix, founded in 1999, is the more popular choice for online video rentals. Currently, Netflix has nearly 6 million subscribers while Blockbuster has only 2 million. Despite Blockbuster's late start of Blockbuster Online in 2004, 2 million subscribers in only two years is a decent