Blockbuster Case Study

1531 Words 7 Pages
Register to read the introduction… In the beginning, Blockbuster's strengths were family centric, marketing innovation, and adaptability to the needs and wants of customers. Because they were much smaller, change, once noticed, was much easier to implement. In today's market however, Blockbuster's composition, business model, and economic status has changed quite drastically, especially in the last 5 years. Their largest strength today is goodwill or their name, and the connotation associated with the name Blockbuster. Another strength is their customer base, which reportedly has grown to over 43 million households across the United States. Because memberships are required at most video rental outlets, many customers are reluctant to change video rental stores merely for the hassle of creating an additional …show more content…
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

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