Case Study Ch. 3: Blockbuster vs. Netflix

1. What is Blockbuster's business model? How successful has it been?

Blockbuster has divided its core capabilities into two divisions. The first division focuses on the online target customer and the second division focuses on the "in -store" customer. Their decision to keep the two as its own entity has benefited the company because they require different distribution channels. Although Blockbuster entered the online business knowing that Netflix had a large amount of the market share they have successfully acquired some of the market share in a short period of time. Blockbuster is in a good position because it can target both online and offline customers. Their ability to get online customers to visit their rental stores will also increase their share in the rental industry.

2. What industry and technology forces have challenged that business model? What problems have they created?

The industry and technology forces that have challenged Blockbuster's business model are the companies that have entered the industry, such as Movielink and CinemaNow. Another force that has affected the company is the change in technology. Their target customer has the ability to purchase movies using a cable company. This has created some problems within the rental industry because their market share is affected when customers have the ability to rent through their cable company. Another major problem that may arise in the near future due to the different forms that movies are being viewed. Their is discussion that DVDs may become obsolete and if this occurs Blockbuster needs to have the infrastructure in place to make the right changes.

5. Do you think Blockbuster or Netflix will succeed in the future? Explain your answer.

I believe both companies will succeed if they are capable of keeping up with the change in technology. They need to have the ability to foresee and plan for the changes that will take place as the technology continues to advance. In order for both companies to succeed they need to focus in their core capabilities and invest the time and money to keep that market share.