Failing Organization- Blockbuster

Blockbuster is a good example of an organization that failed due to lack of innovation. Blockbuster was established in 1985 and was known as the largest DVD rental company. The company had an intense customer loyalty and vast high street presence, meaning that it had become a household name. During that period, Blockbuster commanded lots of resources and was thereby thought that it would be a market leader in the industry. Unfortunately, Blockbuster failed to innovate and become part of the digital world. The company’s overheads started to decline as it lost DVD postal services (Marcus & Schaefer, 2011). The other mistake that led to the downfall of Blockbuster was its decision not to purchase Netflix on a number of occasions even though it was a relatively new business that was offering postal services. 

External Factors that Contributed to the Failure of Blockbuster

Rapid technological change and innovation is one of the external factors that greatly contributed to the failure of Blockbuster. Regardless of the enormous resources that the company owned, it failed to adopt an innovative routine that aligned with the technological change in the industry. Blockbuster prices remained high even when competitors were entering the market, and offering similar services at lower prices. The competitors included Redbox, whose prime strengths were high brand awareness and inexpensive products; and Netflix, whose major strengths included market power, a strategic pricing scheme and customer service (Satell, 2014).

The Internal Factors that Contributed to the Failure of Blockbuster

The company failed to hire management team that had the necessary technological know-how to help maintain technological uptrend in the company. Lack of a proper strategy was another internal factor that led to the failure of Blockbuster, because even with the numerous shops the company did not pay attention to the cost that it would incur compared to the market share it would gain from the same. Limited customer focus also contributed in the failure of the firm as the company did not pay attention on the changes in the industry and what competitors were doing in order to gain competitive advantage. Lack of a pricing strategy forced the company to continue charging higher prices while the rivals were charging lower prices and offering quality customer service ((Satell, 2014)).  

Obstacles Encountered by Blockbuster

The company had a huge employee turnover as the employees shifted to join the firm’s competitors, who were offering better pay. Owing to the services that the customers received from the competitors, Blockbuster’s customer base was rapidly declining. Customers were thereby developing loyalty towards the competitors whose services were of quality, especially the postal services, compared to the long lines they had to make at Blockbuster. The poor pricing strategy and high operating costs emanating from the numerous stores that were poorly managed lowered the firm’s profits. Blockbuster handled the obstacles by intensifying its marketing activities and increasing the employees’ salaries, but unfortunately, these strategies only increased the operating costs of the firm.

Blockbuster Failure to Forecast on Changing Marketing

Blockbuster failed to focus on the changes in technology that were taking place in the industry; this gave its competitors competitive advantage. The firm did not invest in market research in order to maintain an uptrend of the changes that were taking place. Market research would have provided the company with an opportunity to identify and define the changing tastes, preferences and demands of its customers, a situation that resulted in the decline of customer base. The company charged highly the late fee was a good sign of poor pricing strategy that the company adopted, while customers sought for the companies that offered the same products at lower prices.

Recommendations to Pivot Blockbuster to Success

Even with the high competition, Blockbuster still holds a strong brand name, which it should take advantage off and re-establish itself in the market. Aggressive advertising and adoption of new technologies that align with the market changes will help the company in taking advantage of the market position that it once enjoyed. Adoption of a new pricing strategy will also offer the company an advantage against its rivalries because it will be in a position to attract back its once loyal customers. Investing in customer service and hiring of employees that have quality understanding of how the market operates will also be an added advantage for the company. Additionally, investing in research and development will set the firm ahead in maintaining technological uptrend, which was the prime reason for its failure.

References

Marcus, M. & Schaefer, S. (2011). A Timeline: the Blockbuster Life Cycle. Retrieved from < https://www.forbes.com/2010/05/18/blockbuster-netflix-coinstar-markets-bankruptcy-coinstar_slide.html>.

Satell, G. (2014). A Look Back at why Blockbuster really Failed and why it didn’t have to. Retrieved from < https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/#2740a06d1d64>.