A New Blockbuster Image

A NEW BLOCKBUSTER IMAGE

(Case Analysis)

Submitted By:

GROUP # 12

Batocabe, Jenny R.

Calderon, Christine Joy G.

Sotalbo, Kim Michael C.

Submitted to:

Mr. Jimmy B. Williams

I. POINT OF VIEW

We are taking the point of view of Chairman H. Wayne Huizenga. Being at the top management, he is in the best position to tackle the issue because he has knowledge and awareness of the problem. Moreover, he has the authority to implement the course of action that will solve the major problem.

II. MAJOR PROBLEM

What should Chairman H. Wayne Huizenga do to keep Blockbuster competitive amidst the changes in the video-rental environment?

III. CASE FACTS (SWOT)

Strengths

• Being a video-rental giant, Blockbuster is one of the most dominant, if not the most dominant, in the video-rental industry.
• Blockbuster has successfully expanded its business globally by having 3,200 stores in 10 countries all over the world.
• Video-rental business is highly-profitable, thriving at $1.2B in sales and is still growing since during the first half of the year, revenues climbed up to 6.1%.
• Blockbuster’s core competency lies on its McMarketing Principles: fast service, convenient location, family orientation and kid appeal.
• Blockbuster capitalized on its strong brand image as “America’s Family Video Store.”

Weaknesses

• No concrete plan to mitigate the risks brought about by the advent of interactive technologies including 500-channel TV and video-on-demand
• Rapid acquisitions, investments and joint ventures will have a big impact on the company’s liquidity

Opportunities

• The current market of video rental business is the 66% of US households that own at least one VCR. There is still an opportunity to capture the remaining 34%.
• There is still a large opportunity to earn in the video rental business because analysts expect revenues to soar up to 75% and it is predicted to remain healthy in the next 10 years.
• New market opportunities brought by:

• Acquisition of Sound Warehouse and Music Plus chains (music retailing in the US) in November 1992
• Forming a joint venture with Virgin Retail Group to open “megastores” in the United States, Europe and Australia in December 1992
• February 1993: Buying Republic Pictures in (television and film)
• Acquiring a majority interest in Spelling Entertainment Group in April 1993
• Buying 21% of Discovery Zone and rights to open 50 new Discovery Centers in April 1993

Threats

• Video-rental business is reaching its maturity on its life cycle thus it promises little or no growth in the future.
• Advent of interactive technologies including 500-channel TV and video-on-demand threaten to obsolete the video rental business.

IV. ALTERNATIVE COURSES OF ACTION

Firstly, our group had used the BCG Matrix to know the status of Blockbuster. The video rental business of Blockbuster has been identified as a cash cow which means it has a lot of money to invest in any market they want. It exists in a mature, slow-growth video-rental industry but is a dominant business in the industry, with a large market share. Also, investments in advertising and store expansions are no longer required; thus the company earns a positive cash flow. The company uses these funds to invest in the strategies that will keep Blockbuster competitive.