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Chow Wei Ming

Tang Hao Xue

Gavin Ng Sze Keong

Soh Sian Hwei

Sia Jiea Huan

Tan Hock Soon. Jeffrey

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Blockbuster Inc.

American-based provider of home video and video game rental

services

Originally through video rental shops

both owned and franchised

Later adding DVD-by-mail, streaming video on demand, and

kiosks

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Source: http://www.blockbuster.com/

http://www.blockbuster.com/http://www.blockbuster.com/

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Section 1

Analyze and record the current

situation

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Section A : The EnvironmentState of Economy

The movie rental sector was growing

Game software sales increasing

Current Trends

Prefer watch movie at home

Home theater electronics less expensive

Direct movie distribution

Potential Threats and Opportunities

Changing technology and customer preference

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Section B : The Industry

Industry - Home video rental industry

Competitors - >21 major competitors

Movie Gallery No.2 company in the movie rental industry

NetFlix Online entertainment subscription services

Hasting

Entertainment

Sales and rental of movies and video games

RedBox Movie (Kiosk)

Fully digital

Competitors

Apple, Amazon, Hulu and so on.

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What strategies are competitors using?

Movie Gallery Acquisition

Expanding gaming component

Franchising (Distribution)

NetFlix Acquisition

Expanding gaming component

Franchising (Distribution)

Hasting

Entertainment

Unique amenities (Environment- Coffee bar)

Target on small communities

RedBox Penetration pricing ($1/day)

Online reservation systemWide distribution

Fully digital Competitors Apple iTunes store

Amazon Video on demand

Hulu Variety of movies and traditional broadcast

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Porters five forcesRivalry among existing competitors Strong

Many competitors

Fierce competition, lower profit due to market share are

shared

Threat of new entrants Strong

Low barrier to entry (Due to low start up cost)

Example, You Tube, Microsoft

Threat of Substitute products Moderate

Traditional DVD industry decline

Netflic, Redbox, video on demand, digital download, IPTV,

increasing in moving-renting convenience for consumer

Bargaining power of supplier Moderate

Many supplier exist in the market (Weak)

Nevertheless, movie right with suppliers (Strong)

Bargaining Power of buyers High

Large number of competitors

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Section C : The marketing StrategyWhat is the target market?

consumer who prefers to watch movie at home

rather than watch movie at theaters

What competitive advantagesWithin the movie title, 70% rentals are new release

PromotionSubscribers will obtain two free in store rentals

Giving new subscribers a free movie or game rental eachweek

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Marketing Strategy 4 Ps

Products Movie, Games (Rent)

Promotion mix New subscribers a free movie or game rental each

week

Gave online subscribers two free in-store rentalseach month

Channels of distribution Offline and online distribution channels

Pricing strategies 99cent to $4.99

Psychological pricing strategy

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Section 2

Analyze and record the problems

and their core elements

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First Problem

Problem - Competitors increasing

Proof based on factsmore than 21 major competitors

Proof based on assumption - Microsoft and YouTube

Symptoms - Blockbuster lost $36.9 million

Recommendation:

Short term - Price Discount- Promotion for example bundle pricing

Long term - Offer value added product

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Second Problem

Problem - Stock price had fallen

Proof based on facts - $26 in year 2002 to $4.30 in 2005

Proof based on assumption - Investors lost confidence

Symptoms - Reducing number ofBlockbusters outlets

Recommendation:

Short term -Public relation and publicity

Long Term -Strategic alliance

-Partnership

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Are the problem related?Yes

Increase in competition

Reduce revenuesChange business concept

Closing stores

Reduces investor confidence

Stock price decrease.

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Section 3Formulate Evaluate and Record

Alternate Courses of Action

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First Alternative

Alternative

Improve their product mixstrategy

Enhance their product line forexample: software, songs

Limits

Have to obtain new raw material(Resources management)

Reasonable

Yes

Cost

Costly require huge investmentcost to enter another productline

Second Alternative

AlternativesDiversify business

Invest into another kind ofbusiness

LimitsKnowledge management, needs

of other business relatedexpertise

Reasonable

YesCost Entering a brand new business

require company to use up aextremely large amount ofcapital

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Which alternative best solves the problems???

1st alternative

Improve their product mix strategy

Enhance their product line

Through implementing this alternative

Increase revenue

Avoid direct competitions

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Section 4Select and record the chosen

alternative and Implementationdetails

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What must be done to implement thechosen alternative?

Conduct Market research

Acquiring more resources:

Raise capital - For advertising and R&D

Suppliers - raw material/finish goods/inventory

Management team - Expertise

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What personnel will be involved?

Expertise in R&DMarketers in marketing 4ps

Stakeholders

When and where will the alternative be

implemented?

WhenImmediately right after obtaining enough capital

WhereThe United State

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What will be the probable outcome?Solve the companys existing problem

Increasing the company reputations and

image

How will success of failure of theoutcome be measured?

Sales volume

Stock price

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Thank You