The Death of Blockbuster

 

         Blockbuster emerged as the video rental industry powerhouse by the mid-1990s by both organic 

means and through the acquisition of independent video rental businesses (Baskin, 2013).  Despite 

their established dominance in the traditional video rental market, Blockbuster failed to embrace 

technological shifts and changes in consumer behaviors that threatened their business structure and 

dominance. Scenario planning associated with technological advancements and new distribution 

methods for videos for direct to customer viewing may have prevented the downfall and eventual death

 of Blockbuster.

Scenario Planning

Organizations typically leverage traditional forecasting models or scenario planning in significant decision-making processes within their organization (Stoll Quevedo, 2020).  The two methods' critical differences reside in the data used and the processes' analyzed potential outcomes.  Traditional forecasting models leverage historical data heavily in the process and often rely on statistical computations based on the available information to formulate the most likely outcome (Stoll Quevedo, 2020).  Scenario planning employs a more strategic methodology in the decision-making process by considering potential alternative paths beyond the more statistically probable outcome (Wade, 2012).  Wade (2012) argued scenario planning includes the potential for unknown variables not quantifiable by statistical computations to significantly impact the result and facilitate the organization's ability to adjust direction based on the influence of factors presenting a less probable scenario.  The factors driving scenario planning include social, economic, technological, legal and regulatory, and other forces. Scenario planning models, similar to the example depicted in Figure 1,  incorporate a process or matrix designed to map potential scenarios and facilitate organizational planning to adapt or adjust the strategic business plan or model to impact the organization's industry.   



Figure 1 - Scenario Process Planning Map

 

Blockbuster and Scenario Planning Forces

            In the case of Blockbuster, the scenario planning forces affecting the video rental business started with the newly available technological platforms and the increased availability of high-speed Internet to individual consumers.  Secondly, consumer preferences towards the acceptance of improved bandwidth service and access to direct movies shifted demand from the traditional movie rental method to online. Blockbuster's complacency to digital media distribution and failure to conduct scenario planning embodied the first step of the organization's death march.  By the time Netflix had emerged, Blockbuster had waited six years before embarking on their own direct mail video rental program (Gandel, 2010). 

            After adapting to a direct mail business model for video rental, Blockbuster failed to act upon the scenario opportunity to leverage its trademark name and financial resources to obtain market share in the direct-to-consumer video rental business (Gandal, 2010).  Executive management mentioned the potential for Blockbuster to copy Netflix's business model and crush the competition but failed to act on that potential scenario opportunity (Gandl, 2010).

Scenario Planning Summary

            As experienced by Blockbuster, established dominance in a specific industry or market today does not guarantee the success of tomorrow.  While industries and markets may change over time, the speed at which change occurs hinges on factors such as innovations in technologies, changes in consumer preferences and behaviors, and even legal, regulatory, and compliance requirements. Traditional forecasting methods tend to rely too heavily on historical data and past performance and fail to incorporate emerging trends; however, through conducting scenario planning, as seen in the case of the downfall of Blockbuster, organizations can take into consideration external and uncontrollable factors threatening current business models and outline a methodology for planning the future direction of the organization in the event the most statistically probable scenario fails to materialize.


 

References

Baskin, J. (2013). The Internet Didn't Kill Blockbuster, The Company Did It To Itself. Retrieved February 12, 2016, from http://www.forbes.com/sites/jonathansalembaskin/2013/11/08/the-internet-didnt-kill-blockbuster-the-company-did-it-to-itself/#724ac69313c1

Gandel, S. (2010). How Blockbuster Failed at Failing. Retrieved February 10, 2016, from http://content.time.com/time/magazine/article/0,9171,2022624,00.html

Stoll Quevedo, F. C. (2020). A comparison of machine learning and traditional demand forecasting methods (Order No. 27833151). Available from ProQuest One Academic. (2447270249). Retrieved from https://proxy.cecybrary.com/login?url=https://www-proquest-com.proxy.cecybrary.com/dissertations-theses/comparison-machine-learning-traditional-demand/docview/2447270249/se-2?accountid=144789

Wade, W. (2012). Scenario Planning [Colorado Technical University (CTU)].  Retrieved from https://coloradotech.vitalsource.com/#/books/9781118237410/

 

 

 

 

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