This essay Block buster has a total of 1063 words and 9 pages.
David P. Cook created the first Blockbuster Video store in October 1985 in
Dallas, Texas. Mr. Cook intended to establish " video superstores" that would respond to
the on going trends in the video industry during the 1980\'s because the number or
households buying VCRs was increasing very much and so was the number of film titles.
He wanted to create a store that would respond to the customer\'s needs such as: nice
facilities, wide selections of videos, fast service, and convenience.
A computer system was developed so that the company was able to track specific
demographic data, customer\'s renting patterns, and the number of times a cassette has
been rented, and the information was collected through the scanning of the customer\'s
membership card. The primary target market of the superstore was eighteen to forty-nine-
year-old adults and six-to-twelve-year-old children. In 1986, it is reported that the
company was composed of eight stores and eleven franchises in cities with a minimum
population of 100,000; for example: Houston, Chicago, Detroit… In May of 1986, the
company officially became Blockbuster Entertainment Corporation (BEC).
In 1987, David Cook, founder and chief executive officer (CEO), left BEC after
selling 35% of Blockbuster common shares to John Melk, Donald Flynn, and H. Wayne
Huizenga. The latter became the new CEO of BEC. Under the new management team
BEC has expanded into the West Coast, Midwest, Southwest, and Eastern regions of the
country; by the end of 1992 the company had a total of 3,127 video stores. BEC wanted
to open many more stores in 1993 because it wanted to acquire 25% to 30% of the market
shares within the following two years; at that time BEC had revenues of $868 million.
BEC was growing fast and so were technology and competition. It faced
competition from other video rental stores like West Coast video, Kroger, and Winn
in different regions. In addition, new technology brought in cable TV with the pay-
per-view or video-on-demand concept; consequently, customers are able to order their
favorite movies from the comfort of their homes. However, BEC continued to expand
and went international as far as Japan, United Kingdom, Chile, Venezuela, and Spain.
The company entered into film entertainment programming, music retailing, and other
new ventures. Finally, in 1995, Blockbuster Entertainment Corporation merged with
Viacom, " major provider of entertainment programming", to "reduce the threat to
Blockbuster from changes in technology." In 1996, BEC became a wholly owned
subsidiary of Viacom with new leadership and unclear prospects.
Chapter seven of the Strategic Management textbook is about competitive
strategy and the industry environment with focus on strategies in fragmented industries,
strategies in the different lifecycles of an industry, strategies to deter entry in the industry,
and supply-and-distribution strategy. This relates to the Blockbuster video case because
"the video- rental is still very fragmented" which means that the industry is composed of
many small companies and barriers to entry are very low. However, the book pointed
out that "the returns form consolidating a fragmented industry is often huge…[so that]
many companies have developed competitive strategies to consolidate fragmented
industries." For example, Wall-Mart pursue a chaining strategy to obtain the advantages
of cost leadership, and Blockbuster opted for franchise and horizontal merger to secure a
national market for its product.
In order to become the world number one video rental chain, with more than
4,600 company-owned stores and franchised national stores and about 2,300 stores in
about 25 countries, Blockbuster had to arrange the merger of its regional stores and
develop franchises to form a corporation. Management created the Blockbuster
Distribution to look over licensing and franchising of new stores, to monitor their start-up
and to make sure that "they keep up Blockbuster\'s high standards of operations as its
chain of superstores grows." The corporate headquarter has all information about each
store; for example, corporate tracks sales and inventory of each store through its point-of
-sale computer system.
Secondly, according to the book, a company can develop competitive strategies
throughout its different lifecycles. For example, in embryonic industries, the high profit
of the innovators may attract potential movers which become known later.The innovators
can protect themselves by exploiting their innovation and develop low cost leadership or
differentiation. In our case, Blockbuster was not the first to start the video
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Topics Related to Block buster
Blockbuster LLC, Dish Network, Franchises, Blockbuster, Video rental shop, Movie Gallery, Viacom, Bec