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BLOCKBUSTER ACQUIRES MOVIELINK: A GROWTH STRATEGY I. DISCUSSION QUESTIONS, CASE INTRODUCTION AND KEY POINTS Introduction The case covers Blockbuster’s emergence in the video rentals market. After detailing the intricacies of the video rental market, the case takes a deeper dive into Blockbuster’s business model, based on brick-and-mortar locations throughout the US. This costly infrastructure has slowed the entertainment giant’s growth in an industry that has rapidly transitioned from the traditional store-based model, to mail rental and video-on-demand alternatives. The rapid transition of customer demand and the emergence of Netflix (Blockbuster’s main competitor) has incited Blockbuster’s rapid entrance into the video-on-demand market through the acquisition of Movielink. The key challenges that Blockbuster faces in 2009 include: rising consumer expectations, increases in media piracy, the impact of rising fuel costs on systems based on the distribution of physical media, and the intricacies of competing in a rapidly changing technology industry where new entry is enabled by low infrastructure costs. Summary of key learning points and strategic issues 1. Understanding the challenges associated with a rapidly changing technology based industry 2. Flexibility in the face of a evolving market with high competition and new technology 3. The role of acquisitions in company growth 4. The importance of brand image and marketing in an increasingly tech-savvy market 5. Adjusting business-level strategy in light of disruptive business models Discussion Questions 1. Perform a STEEP analysis to understand the general environment facing Blockbuster. How will Blockbuster be affected by external factors? 2. Use Porter’s Five Forces Model to analyze the mail rental and video-on-demand industries in the US. Given this analysis, are these industries attractive or unattractive? 3. Entering the video-on-demand business requires Blockbuster to shift its corporate business strategy and compete in a new space. Discuss this shift and the key challenges associated with it? 4. Who are Blockbuster’s main competitors and how does Blockbuster measure up against these competitors? (It may be helpful to chart competitors and product offerings) What advantages does Blockbuster have and what advantages do competitors hold? 5. What are the main capabilities of Blockbuster? Does Blockbuster have a core competence? 6. Create a SWOT analysis to understand Blockbuster’s strengths and weaknesses. Does Blockbuster have a sustainable competitive advantage in the mail rental and video-on- demand industries? If so, what is the source? What about Blockbuster’s evolution and current business strategy may pose problems going forward? 7.
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This note was uploaded on 03/22/2011 for the course ACCT 3391 taught by Professor Turpin during the Spring '10 term at Troy.

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