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Submitted to: Mrs. Salma Akhtar Subject: ITB301 Section: 03 Submitted by: Quazi Aritra Reyan ID: 2010-1-10-145

Blockbuster VideoQ.1 Why do you think Blockbuster has used various operating forms ( company=owned operations, joint ventures, and franchises) for the different foreign markets it has entered?

Ans. Blockbuster used various operating forms such as company-owned operations; joint ventures, and franchises for their different foreign markets. The operation they used depends upon the place they entered. They need to use strategy that applies to that certain country. Like for example, in the British market, the operating form they used was the company owned operation. This is because franchising was not yet developed in the United Kingdom video store market. While in Japan, the company planned to expand in this country through franchising its outlets and expected to have a thousand store by the year 2000. Another reason why they need to use various operating forms is that they get different benefits from the different operations. Joint venture refers to a cooperative effort among two or more organizations who

share a common interest in a business enterprise or undertaking. In this case, Blockbuster made a cooperative effort with Cityvision in the United Kingdom as a springboard for their expansion into France, Germany, and Italy via joint ventures. The company also made a 50/50 joint venture with a Japanese partner, Fujita Shoten. The benefits they get from having a joint venture are: First, the tax benefits that some nations extend to companies with local partners or a lack of finances, personnel, or local marketing expertise. The second benefit is a matter of policy so as to reduce investment.

Q.2 What are the advantages & disadvantages of Blockbuster expanding abroad rather than concentrating on the U.S. market?

Ans. Advantages: Faster growth: Firms that have operate internationally tend to develop at a much quicker pace than those operating locally & Blockbuster also made quite a quick growth in U.K., Japan, France, Germany , Italy. Access to cheaper inputs: Operating internationally enabled Blockbuster to source raw materials or labor at lower prices Increased quality and efficiency: Exposure to foreign competition increased Blockbusters efficiency. Doing business in the international market allowed Blockbuster to improve the quality of their product in order to gain a competitive advantage. New market opportunities: International business presents firms with new market opportunities. These new markets provide more opportunities for expansion, growth, and income. A bigger market means more customers, increased revenue, a larger profit margin, and allows the business to realize economies of scale.

Diversification: As the firm diversifies its market, it becomes less vulnerable to changes in local demand. This reduces wild swings in a company's sales and profits. Disadvantages: Increased costs: There are increased operating expenses including the establishment of facilities abroad, the hiring of additional staff, traveling of personnel, specialized transport networks, information and communication technology. Foreign regulations and standards: The firm may need to conform to new standards. This may require changes such as in the production process, inputs and packaging, incurring additional costs. Delays in payments: International trade may cause delays in payments, adversely affecting the firm's cash flow. Complex organizational structure: International business usually requires changes to the firms operating structure. Training/retraining of management may be necessary to facilitate restructuring.

Q.3 Blockbusters earliest & primary foreign thrust was into the British market. Do you agree with this expansion theory?

Ans. Blockbuster entered British market in 1990 & by the end of 1991 had built fifteen stores. Blockbuster had good reason for entering British market & I agree with their expansion theory. They expanded because U.S. markets matured in the sell of V.C.R.

Blockbuster faced increased competition from rivals (example: pay-per-view movies)

One of the most important reasons that caused Blockbuster to expand was the growth of retail sales of video tapes for home use which paled the idea of movie rentals as customers could keep the movie.

More importantly sell through markets like K-mart could get sell-through tapes for $14 from distributors whereas Blockbuster bought rental tapes for $65. As a result many retailers competed against Blockbusters for tape sales rather than tape rentals.

By expanding to UK, Blockbuster took the 1st step to international business which is obviously a good step for any company & Blockbuster also tested out the country similarity theory through this.

By entering U.K. market, Blockbuster became more experienced & stronger in business through joint venture with in the absence of franchising.


by Blockbusters business in U.K. became

springboard for the companys expansion to France, Germany & Italy through jointventure.

Q.4 Blockbuster bought video store chains abroad that already had well-known names. Why should the company change these stores to Blockbuster stores?

Ans. Why should the company change these stores to Blockbuster stores because

For best customer recognition and brand power By converting to Blockbuster stores, the stores were later used as a springboard to expand to other countries via joint-venture.

By conversion, Blockbuster gained additional ecomoies of scale. For example: in Canada Blockbuster used this strategy to advertise themeself to Canadian people who are out pf cable range.

Blockbuster acquired a new brand beforeit started renaming brands. During the brand transition phase, at first Blockbuster kept the name of the acquired companys name and logo & later renamed it to Blockbuster as a part of redeveloping the online and advertising strategy.

The stores were converted to Blockbuster stores also because, Blockbuster was developing an acquisition message for stakeholders clients, employees, analysts, prospects, investors, and media. This message also addressed when the acquired brand would be retired and how business as usual would be handled.

A name change was necessary for employees of acquired comapny to get used to with new management.

A name change was necessary as Cityvision took a major economic hit just before Blockbuster video bought it. It is a common trait in business disastrous happen. to change names after something

Q.5 What factors other than those presented in the case might inhibit Blockbusters expansion into lower income countries?

Ans. Blockbusters expanded into lower income countries may be because

It wanted to be a market dominator in another country.

Poorer countries may have no rival at all, so Blockbuster maybe able to do monopoly style business.

Poorer countries have cheap factors of production which will save money.

Poorer countries have less restrictions & regulations for foreign investors, so gaining a new market will be a lot easier. Tax might have been low Blockbuster in the poor countries. Blockbuster might expand to poor countries for an additional source of money which can be used for further expansion or supporting business in home country. Blockbusters true intention maybe was to expand to other rich neighbouring countries around the poor country. The poor country can be used as a route to those countries as the

transportation cost will be low. The poor country could be used as a base.

Q.6 Why would many Cityvision stockholder sell for cash rather than Blockbuster stock?

Ans. Many Cityvision stockholder sell for cash rather than Blockbuster stock because In cash transaction acquiring shareholders take all the risk that the expected synergy value embedded in the acquisition premium will not materialize, where as when we deal is stock the risk is spread and shared with the acquired shareholders too.

In a cash deal it is pretty clear who is acquirer and who is acquired, when it comes to stocks and the stock value can change at any time. A really confident acquirer will tend to pay for the acquisition by cash and the markets historically have been rewarding this confidence by responding through rise in share value, a stock buy out could (almost certainly) take the opposite direction if they sense that the stock is overvalued. In about 75% of the cases, the stock value of acquirer has taken a dip soon after the deal is announced. The cash buyout also

makes sure that its shareholders do not give up any merger gains to the acquired companies shareholders.

The more sensitive the acquired companies compensation is to changes in acquirers stock, the less favorable the response from the market. There are many tools and frameworks that one can use to arrive at the SVAR (Shareholder value at risk) and then make a decision on the best mode. In conclusion I would say that this is not an easy decision , there are several macroeconomic factors that drive this and also this should come out as a result of your strategic due diligence done upfront. These need not be all cash or all stock, people thats why Blockbuster Video used a % of both, the deal structure and tax issues will drive a lot of this.

BataQ.1 Evaluate the different ways in which Bata has interacted with foreign political systems in its investments & operations abroad.

Ans. Bata's effective organizational structure and managing style: With activities in 60 countries, Canada-based Bata Shoe Organization has much operational experience both in developed countries and developing countries and can deal with dif