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Course CIQ Level 7 Postgraduate Advanced Diploma
Unit No. 204
Unit Name Strategic Management & Leadership
Unit Code UCAM/CIQ/204
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 STUDENT DECLARATION

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 LEARNING OUTCOMES AND ASSESSMENT FEEDBACK

Name of the Assessor

Module Code & Title UCAM/CIQ/204 Strategic Management & Leadership

Module Learning Outcomes

Analyse the concepts and theories of strategic management and critically evaluate
LO1 the relationship between strategy, stakeholder expectations and organizational
performance.
Evaluate the impact of current and emerging Economic, Political and Cultural
LO2
factors on strategic management in an International context.
Formulate business strategies under challenging circumstances of Innovation and
LO3 Change and evaluate those that contribute to the success of a particular
organization
Develop plans for the implementation of business strategies and enhance
LO4
Stakeholder Expectations.
Assessment Types Marks Marks Achieved

Assignment Task 1: Strategic Report 60

Assignment Task 2: Organizational Redesign 20

Assignment Task 3: Presentation 20

Overall Score 100

Overall Grade Click or tap to enter a date.

Summative Feedback

Overall Feedback on
current work with
emphasis on how the
student can further
improve in future.
The following grading criteria will be applicable for the course, CIQ Level 7 Postgraduate
Advanced Diploma:

Marks Grade
70 to 100 A - Distinction
60 to 69 B - Merit
50 to 59 Pass
40 to 49 Fail with Resubmit
0 to 39 Fail with Retake

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Assignment title Strategic Management & Leadership

Read the following Scenario, and prepare a Report with the guidelines provided.

Assignment Task 1 Strategic Report [60 Marks]

Scenario: Your first assignment is to help save a company that is on the ropes: it is losing money, it
is losing market share, and it seems to have lost its identity. Unless you intervene, the company will
have to fold.

You will write a formal report and you may use graphics and charts in the report that will be sent
ahead of the Board meeting to each member of the Board. The report should include full citations for
all references (using the Harvard Referencing System format), to support your claims and approach.
The body of the report should be clear, concise, and compelling.
Your report should include the following aspects:

1. Executive Summary and Introduction. [5 Marks]

2. Focus on the relationships between strategy, stakeholder expectations, and organizational

performance, choosing a theory of strategic management to explain those relationships
and expectations. Justify to the Board why you settled on this approach rather than some
other one. [10 Marks]

3. Identify and evaluate the impact of external factors on strategic management in

international context, particularly economic, political, and cultural factors. [10 Marks]

4. Based on the analysis of the environments (internal and external) use relevant tools and
formulate a new strategy to face the challenges and meet organizational objectives.
Critically evaluate the strategy and justify why this is the best way forward. [10 Marks]

5. Explain how your business strategy encourages and supports innovation and change, and
evaluate your strategy against competing strategies based on its contribution to the
success of your organization. [10 Marks]

6. Develop an implementation plan for the strategy you have developed and document how
your plan will fulfill major stakeholder expectations. [10 Marks]

7. Recommendations and Conclusion [5 Marks]

The report shall not exceed 4,000 words and should include relevant examples and illustrations.

Assignment Task 2 Organizational Redesign [20 Marks]

Scenario: For the above strategy how would you restructure the organization which enables it to
overcome the challenges and improve innovation, collaboration and coordination?

Develop and submit a strategic restructure plan. Include current organization chart and proposed
organizational charts and describe the changes in detail.
 1. Analyse the current organizational structure and evaluate its effectiveness in meeting
organizational objectives. Describe the reasons why a restructure is required to enable the
new strategy implementation. Include current organization chart and proposed organizational
chart. Describe the proposed structural changes and its benefits in detail. [15 Marks]
2. Critically evaluate the restructure plan addressing possible issues and negative consequences
and ways to overcome them. [5 Marks]

The report shall not exceed 2,000 words and should include relevant examples and
illustrations.

Assignment Task 3 Written Summary & Presentation [20 Marks]

Scenario: Finally, you will make a power point presentation on the implementation plan strategy
developed by you as per Question at Serial No. 6 above, which will fulfill major stakeholders’
expectations.

Along with your PPT presentation, you can submit a written summary of the plan along with your
reflections on possible limitations and challenges with the proposed plan and ways to overcome
them. (300 words)
PRESENTATION GUIDELINES AND TIPS:

● Feel free to include short videos. For e.g. example 1 to 2 minutes long.
● Try to use bullet points and keep it short.
● Photos can also be used to tell a story or help explain a point.

GRADING AND RULES:

7-10 slides on PPT

10 minutes to present.
5 minutes for a Q and A session

You will be scored out of 20 with the marks distributed as follows:

PPT
Presentation Skills
(Quality of (Confidence, communication
Contents Interaction/Q&A Total
design, layout, Skills, Posture, Voice
images, overall Modulation)
appeal)
5 Marks 5 Marks 5 Marks 5 Marks 20 Marks
An important Caveat: If your slides includes extensive content then you are likely to go over
your time. It is recommended to stay with bullet points and give an overview of them.
Sometimes it might not be required to detail everything line by line, but to give an overview
and speak around the data. This requires practice but the approach will help you in delivering
future presentations.

The Presentation (in PPT format for Task 3) should be submitted on LMS along with the
assignment.

Table of Contents

TASK 1 ............................................................................................................................................................... 12

PART 1................................................................................................................................................................ 12

1. Executive Summary........................................................................................................................... 12

2. Introduction ...................................................................................................................................... 13

2.1 Introduction to Blockbuster............................................................................................................ 13

2.2 Journey of Blockbuster .................................................................................................................. 13

PART 2 ........................................................................................................................................................... 15

1. Strategy ............................................................................................................................................. 15

2. Stakeholders ...................................................................................................................................... 15

2.1 Classification of stakeholders......................................................................................................... 16

2.2 Categories of Stakeholders............................................................................................................. 16

3. Stakeholder Expectation.................................................................................................................... 17

4. Impact of Strategy Implementation on Organizational Performance ................................................. 18

5. Theory of Strategic Management ...................................................................................................... 18

5.1 Survival-based Theory ................................................................................................................... 19

 6. Justification....................................................................................................................................... 20

PART 3 ........................................................................................................................................................... 21

1. Impact of External Factors (PESTLE Analysis) ................................................................................ 21

1.1 Political......................................................................................................................................... 21

1.2 Economic ...................................................................................................................................... 21

1.3 Social ............................................................................................................................................ 22

1.4 Technological ................................................................................................................................ 23

1.5 Legal ............................................................................................................................................. 23

1.6 Environmental ............................................................................................................................... 24

PART 4 ........................................................................................................................................................... 24

1. Internal Factors (SWOT Analysis) .................................................................................................... 24

1.1 Strengths ....................................................................................................................................... 24

1.2 Weaknesses ................................................................................................................................... 25

1.3 Opportunities................................................................................................................................. 26

1.4 Threats .......................................................................................................................................... 26

2. VRIO Analysis................................................................................................................................... 27

2.1 Value ............................................................................................................................................. 28

2.2 Rare .............................................................................................................................................. 28

2.3 Imitability ...................................................................................................................................... 28

2.4 Organized...................................................................................................................................... 28

3. Organizational Objectives for Blockbuster ........................................................................................ 28

4. Challenges faced by Blockbuster ....................................................................................................... 29

5. Strategies selection to face the Challenges and meet Objectives ........................................................ 30

5.1 Strategy selection method .............................................................................................................. 30

5.2 Strategy Selected ........................................................................................................................... 31

 PART 5 ........................................................................................................................................................... 33

1. Changes and innovation that follows after Strategy Adoption ........................................................... 33

1.1 Alignment of Innovation with business Objectives........................................................................... 33

1.2 Ways by which the strategy encourages innovation and change ...................................................... 33

2. Blockbuster’s competitor and their Strategy ...................................................................................... 34

PART 6 ........................................................................................................................................................... 35

1. Implementation plan for the proposed Strategies............................................................................... 35

2. Fulfillment of Stakeholder Expectations ........................................................................................... 36

PART 7 ........................................................................................................................................................... 37

1. Recommendation............................................................................................................................... 37

2. Conclusion ........................................................................................................................................ 37

TASK 2 ............................................................................................................................................................... 38

1. PREVIOUS ORGANIZATIONAL STRUCTURE OF BLOCKBUSTER ............................................................... 38

2. EFFECTIVENESS OF THIS STRUCTURE FOR THE COMPANY ..................................................................... 38

3. MERITS OF THIS STRUCTURE ................................................................................................................. 38

4. UNDERSTANDING WHY A COMPANY NEEDS TO RESTRUCTURE ............................................................... 39

5. REASONS FOR RESTRUCTURING AT BLOCKBUSTER ............................................................................... 40

6. PROPOSED ORGANIZATIONAL STRUCTURE FOR BLOCKBUSTER ............................................................ 41

7. MERITS OF THIS ORGANIZATIONAL STRUCTURE ................................................................................... 42

8. DEMERITS OF THIS ORGANIZATIONAL STRUCTURE ............................................................................... 43

9. STRATEGIES TO OVERCOME THE CHALLENGES OF THE STRUCTURE ..................................................... 44

TASK 3 ............................................................................................................................................................... 44

1. SUMMARY OF THE PLAN ........................................................................................................................ 44

2. POSSIBLE LIMITATION ........................................................................................................................... 44

3. WAYS TO OVERCOME ............................................................................................................................ 45

BIBLIOGRAPHY .............................................................................................................................................. 45
 TASK 1
PART 1

1. Executive Summary:

Blockbuster was a once billion-dollar company with thousands of stores and employees
worldwide. However, its success was short-lived, the profits made by the company turned into
losses and soon the company had to declare chapter 11 – bankruptcy. This report is focused on
saving Blockbuster and helping it reintroduce in the market and help it retain its identity.

The first part of the report explains the term strategy, stakeholder and stakeholder expectations. It
then whether there is an impact of strategy implementation on the performance of the company.
Amongst all the theories of strategic management an appropriate theory for Blockbuster is
selected.

The second part focuses on the internal and external analysis and factors that have an impact on
Blockbuster. These analysis include, PESTLE, SWOT and VRIO analysis. Considering the
organizational objectives and the current challenges faced by Blockbuster, appropriate strategies
are formulated to help the company in terms of profit and increased market share. Once a
strategy is implemented, a company witnesses changes and innovations which is then discussed
next. It is essential for a company to keep a keen eye on their competitors to make sure that they
do better than them in serving the customers. For Blockbuster, the greatest competitor is Netflix.
Netflix’s competitive strategy is brought under discussion. Lastly, appropriate recommendations
and conclusions are provided.

The next part of the report highlights the previous organizational structure of Blockbuster and
why this structure proved to be a failure for the company. General discussion is done on the
reasons a company needs to restructure followed by the reasons for restructuring at Blockbuster.
An organizational structure is proposed for Blockbuster with discussion on its merits and
demerits and ways for Blockbuster to overcome them.
2.
Introduction:

2.1 Introduction to Blockbuster:

Blockbuster LLC formerly Blockbuster Inc. was an

American-based provider of home movies and video
game rental. The company gained popularity by its
video rental shops however later added services of Founded
DVD-by-mail, video streaming on demand and cinema •October 19, 1985
theater (IMDb, 2007). Founder
•David Cook
Previously operating as Blockbuster Entertainment,
Headquarters
Inc., the company expanded internationally all
throughout the 1990s. The peak year for Blockbuster •Englewood, Colorado
was 2004 when it had employed around 60,000 people Fate
in 9,000 stores worldwide and made a revenue of $6 •Chapter 11 Bankruptcy
billion (Tyler, 2017). Services
•Home video rentals
The company eventually filed for bankruptcy on Number of Stores
September 23, 2010 (PaceMonitor, 2010). On April 6, •9,094 (in 2004)
2011 it was purchased by satellite television provider, 1 (in 2020)
Dish Network at an auction for around $233 million. Revenue
The acquisition was made final on April 26, 2011. •$3.24 billion (2010)
Eventually by 2013, stores of Blockbusters around the Employees
world started to shut (Hayden, 2013). Currently, only
•84,300 (in 2004)
one store of Blockbuster remains open in Bend, 25,000 (in 2010)
Oregon, US (Gourarie, 2020). The mission statement 3 (2019)
stated on Blockbuster’s website is ‘To be the global URL
leader in rentable home entertainment by providin g •www.blockbuster.com
outstanding service, selection, convenience and value.’ Parent Company
•Viacom (1994-2004)
2.2 Journey of Blockbuster:
•Dish Netwrok (2011-present)
Fig 1.1. Source: Researchers Work (2020)
The founder of Blockbuster, David Cook initially
started a company named Cook Data Service in 1978, which provided software services to the
oil and gas industries throughout Texas (Hyatt, 2003). However, this business did not prove to
be much successful for Cook. His wife, Sandy Cook suggested to invest in the video business.
David Cook after studying the industry and its future prospects, used the profits from the sales
of David P. Cook & Associates to open a video store in Dallas with the name Video Works.
However, he wasn’t allowed to decorate the interior with blue and yellow design so he
departed the franchise and opened the first Blockbuster Video in 1985 under his own
company Blockbuster Video Inc. Once the profits started to pour in, Cook finally abandoned
the oil industry and began the franchising of Blockbuster stores. Its first store had an
inventory of 8,000 VHS and 2,000 Beta tapes (Businessweek, 2010).

By 1987, cofounder of Waste Management, Wayne Huizenga acquired several Blockbuster

stores, at that time it had around 19 stores. Huizenga along with his associate John Melk
massively expanded Blockbuster. They took over several existing Blockbuster franchise
stores and also acquired several of its rivals and opened many stores (DeGeorge, 1995). Even
though it had become a multibillion-dollar company, Huizenga was worried about the rise in
technology which could threaten the company. In 1993, he attempted to expand in other
sectors by investing in Viacom but soon dropped his decision saying that it was an unknown
territory (Google News, 1994).

However, because Huizenga couldn’t come up with a proper solution to improve

Blockbuster’s situation in front of the rising competitors, he decided to sell Blockbuster to
Viacom and pull out. Viacom acquired the company for $8.4 billion in 1994 (Johnson, 1994).
For the following years, Blockbuster saw its popularity grow and opened thousands of stores
worldwide. However, the increasing competition from Netflix, Redbox and other video-on
demand services led the sales of Blockbuster’s to decrease. On July 1, 2010, it was delisted
from the New York Stock Exchange and by September, 2010 it filed for Chapter 11
bankruptcy protection due to challenging losses and a debt of $900 million. US Department of
Justice claimed in March 2011 that Blockbuster should liquidate however, in April 2011, Dish
Network won the auction to purchase Blockbuster for $320 million. Even though it was
announced that Dish would keep 500 Blockbuster stores open, gradually all stores of
Blockbuster were closed leaving 1 store in Bend, Oregon as of 2020 which was transformed
to a 90s-themed Airbnb (Madani, 2020).

Fig 1.2. Source: Researchers Work (2020)

 PART 2:

1. Strategy:

The terminology strategy can be understood by various meanings and all these meanings hold
vital importance to the people who are setting strategy for their companies or corporation.
Formerly, the concept of strategy was associated with military as the word strategy is derived
from the Greek word ‘strategos’ meaning ‘army’ (Athapaththu, 2016). However, after World
War II, because the business moved from a relatively stable environment to a competitive
environment, the need for the concept of business strategy became more important. Since then,
many scholars have written about the concept of strategy.

One of the first scholars to link strategy with business were (Neumann and Morgenstern, 1947).
They explained strategy as ‘the series of actions which is decided by the firm according to the
situation is known as strategy.’ Based on this definition, several authors have developed and
improved the concept of business strategy.

Even though the explanations of all these scholars point towards a similar idea, some scholars
incorporate elements such as mission, vision and objectives of the company in the definition of
strategy. Drucker (1954) states ‘analyzing the present situation and changing if it necessary is
known as strategy.’ This definition highlights that strategy basically serves as guidelines for
decision making based on the market scope, competitive advantage and growth rate. Harvard
professor Michael Porter gave a short definition on strategy based on competition, he states that
strategy is a way that ‘helps organization to compete, set goals and objectives to decide which
policies should be undertaken to accomplish the goals (Porter, 1985).’

2. Stakeholders:

Freeman and Reed (1983) state stakeholders as any group or individual that ‘may affect or is
affected by the achievement of an organization’s objectives.’ This definition of stakeholder has
now become the most widely accepted definition and has greater precision over the shorter
version ‘those who can affect or can be affected by a company.’ Scholars, such as, Thompson et
al. (1991) elucidate that stakeholders could be anyone that has a relationship with the
organization, this relationship could either be direct or indirect.
2.1 Classification of stakeholders:

Literature has made several attempts at classifying The 4 category of

stakeholders with different criteria; primary or Stakeholders as described by
secondary, generic or specific, legitimate or Robert Phillips
derivative. Phillips (2003) classifies stakeholders as
normative, dangerous, derivative or dormant Normative Dangerous
stakeholders. Normative stakeholders hold moral Derivative Dormant
obligations over the company, derivative Fig 1.3. Source: Researchers Work (2020)
stakeholders are the groups that could either harm or
benefit the company but have no direct moral obligation as a stakeholder, dangerous and
dormant stakeholders can affect the company and are considered dangerous but have no
legitimate relationship with it.

Another compelling classification of

stakeholders is the primary and
secondary stakeholders. Clarkson
STAKEHOLDERS
(1995) identifies these set of people
to be directly or indirectly involved
in the organization’s operation.
Primary stakeholders are people or
groups involved directly whereas
Primary Stakeholders: Secondary Stakeholders: secondary stakeholders are the
Employees
Investors Government people who are directly not involved
Suppliers Regulators
Media in the decision making of the
Customers
company, these people may get
Fig 1.4. Source: Researchers Work (2020) influenced by the company.

2.2 Categories of Stakeholders:

Even though the list of stakeholders for every company is different depending on the nature of
the company however, there are few prominent stakeholders that are roughly the same for
most companies:

• Customers: The most vital stakeholder for a company. The main purpose of every
company is to serve this stakeholder as they earn their profits by serving them.
• Employees: The are the workers or the helpers of the company. Without this
stakeholder, the company won’t be able to survive.
•
 • Investors: They invest money in the business so that it can operate. This stakeholder
has a major say in the important
decisions such as merger,
Customers
acquisition.
• Suppliers: Provides goods or raw
material to the company. To operate Government Employees

and function, a company is majorly

dependent on this stakeholder.
• Community: This stakeholder is
influenced by the decisions or
Community Investors
actions of the company such
employment opportunities or
economic development. Suppliers

• Government: Collects taxes and

imposes rules that is important for Fig 1.5. Source: Researchers Work (2020)
every company to comply with.

3. Stakeholder Expectation:

When a stakeholder gets associated with a company and its functions and is linked to its
successes and failures, they develop expectations from the company. This means that the
company is supposed to uphold the expectation of every stakeholder. Authors have stated that
the only way a company can expect to flourish is by keeping all their stakeholders satisfied. Even
if one stakeholder is unsatisfied with the company, it could majorly affect its course of action
(Gaur, 2013). Research has shown that around 57% of the projects fail if the expectations of the
stakeholders are not met, such as if they were not communicated with properly or there wasn’t
enough transparency (McHale, 2019). The goals set by a company gets easier to achieve if the
stakeholder expectations are met appropriately. Scholars have presented with different point of
views on stakeholder expectations that are condensed in Table 1.

Identification of Stakeholder Expectation Author, year

Stakeholder groups expectations are identified according to the Longo et al. (2005)
creation of value by business
Distinguish the stakeholder expectation based on the corporate Andriof et al. (2002)
social responsibility perspectives; environmental, social,
economic
Stakeholder expectations are identified according to their Post et al. (2002)
relationship with company and access to the company’s
Table 1.1. (2020)
resources
4. Impact of Strategy Implementation on Organizational Performance:

Scholars have widely accepted the notion that strategy implementation and an organizations
performance goes side-by-side (Noble and Mokwa, 1999). Organizational performance is a
recurrent theme in strategic management research and often is linked with efficiency and
effectiveness (Aosa, 2010). Performance as indicated by Kaplan and Norton (2012) are a set of
factors that explains the procedure though which several outcomes and results are achieved.

The importance and impact of strategic implementation on organizational performance can be

seen from the theoretical, empirical and managerial lenses. The theoretical lens focuses on the
effectiveness of strategies that influences the level of performance whereas the practical lens
sheds light on the various constructs that have been utilized to capture performance (Mintzberg
and Lampel, 2009). The way of determining if the strategy implementation has improved the
organizational performance is by assessing the financial, customer satisfaction level, internal
business processes and innovation and learning in the company. If all these factors tend to be
positive, the strategy implementation has resulted the organizational performance to improve
(Njagi and Kombo, 2014).

The conceptual framework

examines strategy
implementation as being a key
factor in enhancing
organizational performance in
strategic management. According
to the framework in fig 1.4,
strategy implementation holds
the independent variable whereas
Fig 1.6. Source: Njagi and Kombo (2014) organizational performance holds
the dependent variable. Strategy
implementation is assessed through different activities of operationalization and
institutionalization of strategy and this is expected to result in improved organizational
performance.

5. Theory of Strategic Management:

By the chain of definitions of strategies discussed above, it was observed that strategy is
basically a pattern of decisions for a company that generally determines and analyzes the
objectives, purposes, goals and defines the range of business which the company is to pursue.
However, the term strategic management, is the management of combined components of three
stages of strategy process; strategy development, strategy implementation and strategy
 evaluation. Strategic management basically involves understanding the strategic position of a
company, make sensible strategic choices for its future and manage strategies in action.

Omalaja and Eruola (2011) have identified strategic management theories as ‘supposition,
proposition or a system of ideas intended to explain the origin, evolution, principle and
applications of strategic management.’ These theories actually stem from system perspective,
contingency approach and information technology approach to corporate management. One of
these strategies that will be highlighted in this study is the survival-based theory.

5.1 Survival-based Theory:

The survival-based theory was formulated by Herbert Spencer. It was given the name of
‘survival of the fittest’ (Miesing and Preble, 1985). The concept of this theory is that for
survival every organization constantly needs to adapt to the changing environment. The key
teaching from this theory is to understand how a company will succeed in a massively
competitive business environment. Not before the late 19th and early 20th century did this
theory receive immense popularity. Scholars then emphasized that following the principle of
nature, only the companies that are the most competitive would surface and do better to
enhance not only the organization culture but the society as well. One key taking from this
theory is that a successful business is the one that has faced difficult times, learned from their
failures, evolved, adapted to new circumstances and survived. However, this is only possible
if the company keeps a keen eye on the changing internal and external environment and adapt
likewise (Adekiya, 2016).

If a company fails to adapt or stay relevant in the competitive environment, it will most
probably fail to succeed and its competitors will most likely take over. On the other hand, a
company that is smart enough to make relevant changes in their operations will not only be
able to survive but thrive (Abdullah, 2010). Considering the nature of business world which is
characterized by constant changes, businesses that are most likely to survive will implement
efficient strategies that focuses on operations resulting in the satisfaction of the stakeholders
and giving them a competitive position in the market.
6. Justification:

Considering that there are several theories of strategic management, survival-based theory was
selected for this study. To justify the selection of this theory, Blockbuster was a company that
saw immense popularity in its peak times but because it failed to make strategic decisions and
implement them, the company
suffered by losing its prominent
place in the market to its
competitor Netflix that took the
lead in the market.

As the once market leader,

Blockbuster saw itself being
replaced by a technologically
advanced company such as
Netflix. Fig 1.7 depicts the
downfall and uprise of revenues
of these two companies. This
clearly shows that Blockbuster
failed to come up with strategic Fig 1.7. Source: Tyler (2017)
decisions to save or change their
company structure when it was required the most. However, for all these reasons, to survive and
regain its place, Blockbuster needs to come up with survival strategies that would reintroduce
them in the market.
 PART 3:

1. Impact of External Factors (PESTLE Analysis):

Blockbuster was founded in Dallas, Texas around 35 years ago. Because it was an American
company, for the purpose of this study the external environment for a business in American
market is discussed.

1.1 Political:
• Free Trade Agreements (FTA):

USA has trade agreements with around 20 countries including Australia, Oman, Jordon,
Singapore. As of 2019, USA has applied to attain FTAs with several more countries
which will serve as a golden opportunity for businesses as it exponentially reduces the
obstacles of import and export with minimal government tariffs (USTR, 2019).

• Political Environement:

USA has a fairly stable political environment with advanced infrastructure and
technology and provides opportunities to companies prosper. It has positioned itself as a
great destination for foreign direct investment (FDI). USA has become the first choice for
many multinational companies for FDI for a long time. Companies such as Apple,
Microsoft, McDonalds and Google started their journey as American companies and was
supported by the government (BEA, 2020).

1.2 Economic:
• Economic Condition:

USA has the largest economy

in the world in terms of GDP.
It holds a GDP of $21.43
trillion as of 2020 with an
annual growth rate of 2.2%
(NASDAQ, 2020). Fig 1.8
shows that it is predicted that
by 2023, the GDP of USA is
expected to reach $24.9
trillion (FocusEconomic,
Fig 1.8. Source: FocusEconomic (2020)
 2020). USA has also accounted for 14.93% of global gross domestic product (Statista,
2020).

• Economic Downfall during COVID Pandemic:

The COVID’19
pandemic has caused
the world to go
through another
recession. This has
caused the GDP of
USA to fall down as
well. In 2020, USA
has experienced
consecutive 2 quarters
Fig 1.9. Source: Bauer et al. (2020) of decline in its GDP,
alongside, it has also
recorded the steepest quarterly drop in economic output on record with a decrease of
9.1% in Q2 of 2020 as seen from fig 1.9. Historically, quarterly GDP has never
experienced a drop more than 3% since the recession of 1980 (Bauer et al. 2020).

• Economic Condition of Blockbuster in USA:

Since its beginning, Blockbuster had only witnessed gradual increase in their revenues.
During the early 1990s, it was generating a revenue of $400 million and through its peak
years in 2004 Blockbuster was generated revenue of around $1300 billion (Olito, 2020).
In the US alone it had around 58,500 employees with 9,094 stores (Harress, 2013).

1.3 Social:
• Demographic:

USA is the third most populated country with around 331 million people (Poston, 2020).
As the world is gradually moving towards digital economy, the choices of an average
American for entertainment also goes towards digital entertainment. Watching movies or
TV and playing video games has been listed as the top two choices by US citizen as
forms of entertainment (Stych, 2019).
 • User Preference:

More and more people are now interest in

video streaming as a form of entertainment.
Most of the US population is millennials
who have grown up during a time of
change, thus their preferences are also
different. Rather than renting movies they
prefer to sit at home and watch TV or
movies online. As of 2020, the biggest new
video-based social network has around 800
million active users (Byers, 2020).
Currently, as witnessed from fig 1.10, Fig 1.10. Source: Iqbal (2020)
Netflix has the highest number of users
compared to other video streaming services (Iqbal, 2020).

1.4 Technological:
• Condition of Innovation and Technology:

These two factors have become cornerstones for the US economy. Since many years, US
have been the leaders in terms of adapting and applying technology. Even though it is
faced with competition from rising economies, it is still expected to continue to uphold its
technology supremacy over the competitors.

• Evolution of Video Streaming:

In the past, when people wanted to watch movies, they would have to go out and rent
movies. However, there has been a tremendous change in the consumer viewing
experience mainly due to the evolution of video streaming. Watching movies on demand
and viewing video content has shifted from CDs and DVDs to video players, desktop,
laptops and smartphones. People enjoy the convenience of online video and high-
resolution and 3D features available (West, 2014).

1.5 Legal:
• Legal Environment:

In terms of a legal environment, USA is a country that has several business, employment
and legal framework that they tend to follow very strictly and expects every company to
comply with. Before taking any strategic steps for the betterment of the company, it is
essential to make sure that the consumer and employee rights are protected.
 • Consumer and Copyright Laws:

For any video streaming service provider, it is paramount to recognize that the consumer
and copyright laws hold high importance. Consumer rights state that any content that is
offensive to a group of people should not be streamed. Copyright laws state that before
streaming any movie permission of vendor should be acquired. One such example of
legal issues faced by Blockbuster was in 1989 when Nintendo made an attempt to stop
Blockbusters ability to rent video games. They filed multiple lawsuits and lobbying the
US Congress to ban the practice however, Nintendo ultimately lost the case (Lauderdale
and Sentinel, 1990).

1.6 Environmental:

The environmental factors in regards to any company operating, guides the CSR related
initiatives. Companies are expected to take steps to reduce their carbon footprints and take
steps to use renewable energy and in general adopt activities that cause less damage to the
environment. Apart from that the companies are also expected to reduce the amount of
pollution by reducing the amount of land and sea disposals.

PART 4:

1. Internal Factors (SWOT Analysis):

1.1 Strengths:
• Strong presence in the market:

Blockbuster started its journey as a pretty strong company and for several years
dominated the market earning a huge share of profit. The company once employed
around 84,000 people worldwide and started earning billions as revenues. It was reported
that by around late 1980s, due to its immense popularity amongst people, Blockbuster
was opening a new store every 24 hours (Carey, 2014). During this time, it had acquired
several companies that became its competition.

• Predictable popularity:

It has become very easy to attain success in the movie industry due to its predictable
popularity. Survey showed that two-third of Americans prefer watching movies either at
home or at the theater as a form of entertainment (Lay, 2014). Online games and video
 games have gained immense popularity in the digital era, in 2020, it was surveyed that
most gamers spend an average of 6.33 hour to play games (Limelight, 2020).

• Vast options in the gaming sector:

Blockbuster has improved their variety of gaming options which has resulted several
people to stay loyal to the company. It has game CDs for all brands such as Nintendo,
PS2, DS, PS3, PSP, Xbox, Wii, Xbox 360.

• Global market:

The company was able to provide its products to most of the countries in the world thus
holding the control on the global market. It had stores all over Australia, Brazil, Peru,
Norway, Mexico, Japan and Germany (Only Sydney, 2012). Blockbuster operated in 27
countries and had around 8,000 outlets, over 1,500 of these outlets were franchise stores.

1.2 Weaknesses:
• Missed opportunities:

Blockbuster had an opportunity to purchase Netflix for $50 million. The then CEO of
Blockbuster, John Antioco refused saying that it was a ‘very small niche business’
(Chong, 2015). This missed opportunity costed Blockbuster to lose its position in the
market as Netflix now has become $125 billion company (Visnji, 2020).

• Reluctance in changing their business model:

Blockbuster earned an enormous amount of money by charging its customer late fee. This
had become a crucial aspect of their revenue model. Achilles heel for the company was
that it was highly dependent on penalizing its own patrons. On the other hand, Netflix
abandoned the idea of charging to rent videos and instead offered subscriptions which
was appreciated by many people (Satell, 2014).

• Lack of presence in several markets:

Even though the company had a global presence, it still had a lack of planning in
countries such as Africa that have huge potential and is a large market and could’ve
profited the company.
 • Poor management:

The management of Blockbuster did not have a strong hold over the company which
eventually led to its downfall. In the early 1990s when technology was on its rise, CEO of
Blockbuster, Wayne Huizenga was unable to cope with the situation and couldn’t come
up with a proper solution to deal with the circumstances thus decided to sell the company
to Viacom (Gandel, 2010). Another example of poor management is when in 1997,
DVDs were gradually emerging, Warner Bros had offered CEO of Blockbuster, John
Antioco an exclusive rental deal. The company would have right to rent new DVD
releases for a specific amount of time before going to sale for the public, out of this deal,
the studio would receive 40% of revenue, Blockbuster turned down this opportunity.
Walmart was quick to seize the opportunity and, in few years, exceeded Blockbuster as
the studios single greatest source of income. In 2000, Blockbuster had an opportunity to
purchase Netflix but was turned down considering it a small niche business (Zetlin,
2019).

1.3 Opportunities:
• Shift from rental services to online movie streams:

The sudden rise of internet has shifted many businesses online such as, instead of
traditional ways of getting a newspapers, it is now published on a website. Similarly, this
opens new business prospects for Blockbuster if it captures this opportunity and start
streaming videos online.

• Movie industry:

The movie industry is an evergreen industry, the cinema of US is the largest producer of
single-language film with around 700 films coming out every year (Follows, 2017). More
movies means that companies such as Blockbusters have an increased business
opportunities.

1.4 Threats:
• Competition:

Competition has always been a great challenge for Blockbuster. Initially, it paid no heed
to the competition or technology used by Netflix or Redbox, rather focused on Walmart
and Apple. However, once Netflix and Redbox had attained a strong position in the
market and Blockbuster couldn’t save the company, it declared bankruptcy stating strong
competition from these companies as one of the reason.
 • Piracy issues:

Another great threat for Blockbuster comes in form of piracy or the unauthorized
duplication of copyrighted movies or videos. This had led the company to face a lot of
threats which eventually damaged the profits of the company to a large extend.

Further Evaluation of Blockbuster’s SWOT Analysis

Fig 1.11. Source: Researchers Work (2020)

2. VRIO Analysis:

VRIO analysis helps businesses to learn more about their capabilities and be able to protect their
resources better. In long-term, this analysis can help a company to attain competitive advantage.
Before the formulation of a strategy, importance is given to the PESTLE and SWOT analysis to
VRIO Analysis of Blockbuster

VALUE RARE IMITABILITY ORGANIZED

•Yes •No •No •No

Fig 1.12. Source: Researchers Work (2020)

 analyze the internal and external environment, likewise VRIO analysis helps a company to
identify the advantages of applying the strategy. This tactic helps the company approach the
marketplace and make informed strategic decisions that will help shape the future of the
company.

2.1 Value:

The services offered by Blockbusters have proven to be extremely valuable for the company.
Its financial resources have proven be of great value that helped it invest in external
opportunities that arise. The patents that the company had acquired along the years have also
great importance and value.

2.2 Rare:

Although the services offered by Blockbuster checks the boxes of value but it lacks in the
element of rarity. Since the company’s beginning it had faced competition from rising
companies such as Redbox and Netflix. Now companies such as Hulu and Amazon Prime
have also jumped on the bandwagon exhibiting that the services of Blockbuster were indeed
not rare.

2.3 Imitability:

The services and products of Blockbuster might be hard to imitate for a small sized company
because it requires a lot of money to set such a large company. However, for an already
established and earning company, it is not as difficult to imitate the services.

2.4 Organized:

To achieve competitive advantage, a company requires system, process, appropriate culture

and system which Blockbuster clearly lacks. It has had major fluctuations in its management
which pushed the company towards its downfall.

3. Organizational Objectives for Blockbuster:

To help Blockbuster regain its identity and make a comeback in the market, it is essential for the
company to formulate new objectives which will act as driving force for the company to
succeed:
 • Increase profits: A company can only be able to make profits if they. Do well on the
revenue chart. In order to make profits, it is important that the company puts out valuable
services that helps them achieve a huge part of market share.
• Customer satisfaction: The key objective for the company should be to satisfy their
customers and fulfill their needs and requirements.
• Most innovative products/services: A company can only attain competitive advantage if
their products and services are the most innovative amongst their competitors.
• Attract and retain the best people: Employees are one of the most important stakeholder
for any company. Loyal, educated and skilled staff can help the company grow.
• Improve brand awareness: Only by increasing their brand awareness would the company
be able to reach new customers.

4. Challenges faced by Blockbuster:

Missteps and mistakes have led Blockbuster to be surrounded with challenging circumstances,
making it difficult for the company to survive:

• Refusal to purchase Netflix: In 2000, Blockbuster had an opportunity to purchase Netflix

for only $50 million. Co-founders of Netflix Marc Randolph and Reed Hastings along
with its then CEO Barry McCarthy offered Blockbuster’s CEO at that time, John Antioco
to merge with Netflix stating that ‘Netflix would handle the online part of business and
Blockbuster would handle the stores’ (GQ, 2019). Antioco considered it as a joke and
refused. Netflix now is a billion-dollar company, about ten times what Blockbuster was
worth (Hastings, 2020).
• Reluctance to innovate: One greatest factor that became a huge challenge for Blockbuster
was their reluctance to innovate. The company refused to formulate their own streaming
service stating that they never saw home streaming having a promising future. CEO of
Netflix, Reed Hasting said ‘if Blockbuster had launched their own streaming services two
years earlier, Netflix may never have happened’ (Verbbrands, 2019).
• Paying no heed to increasing competition: Blockbusters ignorance when dealing with
their competitors had also become a huge challenge for the company. Initially, during its
peak years, if Blockbuster would come across any company as its competitor, they would
purchase it however by the late 2000s, Blockbuster completely turned their eye from its
competitors Netflix and Redbox who were making advancement with online streaming.
Rather they chose to focus on Apple and Walmart as their primary competition
(Munarriz, 2017).
• Refusal to change business model: Blockbuster collected a huge amount of money by
overcharging its customers as late fee. This had become an essential part of Blockbuster’s
 revenue model. By 2000 Blockbuster had collected around $800 million as late fees
accounting for around 16% of its revenue. This infuriated people who eventually stopped
going to Blockbuster (Anderson and Liedtke, 2010).

5. Strategies selection to face the Challenges and meet Objectives:

Strategy development for a company cannot be done in a vacuum. It needs to be responsive to

the business environment. The strategy should keep in consideration the external environment
which includes the competitors and outside forces that affect the operations. The environment
should be carefully scanned to comprehend the opportunities and threat (Dess et al. 2005).
Uncertainty that is associated with strategy formulation will be determined by the complexity
and change in the environmental factors (Byars and Rue, 1996).

Once a strategy is formulated, it is important to translate that plan into action and implement it.
(Thompson and Strickland, 2001) argues that a strategy can only be considered useful if it is
implemented, if a company has an excellent blue print of the strategy but fails to implement it
would be considered a disservice to the company keeping in consideration the resources that had
been utilized to formulate the strategy. Davis (2011) expressed same sentiments stating that if a
strategy is appropriately put into place, it will produce good results for the company .

5.1 Strategy selection method:

Michael Porter in 1985, in his book ‘Competitive Advantage’ proposed a model named
‘Porter’s Generic Strategies’ (Porter, 1985). In this model he sheds light on various different
types of strategies that can be implemented by the company in order to achieve competitive
edge. The model is divided in 2 segments, competitive scope and competitive advantage. The
former deals with the category of target; broad or narrow. The latter focuses on the type of
competitive advantage the firm is going for; cost or differentiation.

This model provides a company with a wide spectrum of strategies to select from and
implement in the company. Once a company conducts an analysis on the factors micro and
macroenvironment, the company can then decide upon the type of strategy that would be
beneficial considering the position of the business.
 Based on Michael Porter’s model,
the strategy of differentiation is BLOCKBUSTER’S COMPETITIVE ADVANTAGE
chosen for Blockbuster. This PREFERRED Cost Differentiation
strategy calls for developing GENERIC
STRATEGY
innovative and unique capabilities
in the company which provides Cost Differentiation

COMPETITIVE SCOPE
Broad
them with a competitive edge. Target
Because Blockbuster had once
been the market leader,
dominating a huge chunk of Narrow
Cost Focus
Target
market share and has now been Focus Differentiation
replaced with companies such as
Netflix, Amazon Prime and Hulu, Fig 1.13. Source: Researchers Work (2020)

it needs to differentiate from the

products and services that are already been offered by these companies. Once the company
differentiates, it will automatically attract customers towards the business.

5.2 Strategy Selected:

After carrying out the internal and external analysis for Blockbuster and selecting
differentiation as the appropriate strategy from the generic strategies, Blockbuster can
implement the below mentioned strategies to re-introduce themselves in the market and attain
competitive advantage:

• Introducing Blockbusters
personal movie theaters:

Netflix and Amazon Prime

operate as online streaming
service and content
platform, however have not A blockbuster production
been endorsed as movie
theaters. If Blockbuster
initiates a movie theater it
would accomplish
differentiation strategy for
Fig 1.14. Source: Researchers Work (2020)
the company. Fig 1.14,
shows a template of Blockbuster’s movie theater.
• Region based viewing experience:

Online streaming services show limited content on their platform. These content include
TV shows and serials however does not cover the dramas and soap operas that are
broadcasted on television. These serials have a huge audience. If blockbuster was to
incorporate such serials and soap operas on their application along with TV shows, it
would not only threaten the market of Hulu and Amazon Prime but would also target
YouTube and TV cables as such serials are usually telecasted there.

• Minimal cost price:

Majority of the people

who do not own
Netflix have stated its
high cost to be the
greatest factor. The
price hike of Netflix is
shown in fig 1.15. As
of 2020, the company
charges $18 per month
(Johnson, 2020).
Whereas, Amazon
Prime charges $119
annually (Leighton,
Fig 1.15. Source: (Richter, 2019) 2020). If blockbuster
was to make a
comeback in the online streaming service industry with lower costs, all such people who
do not own platforms such as Netflix would prefer Blockbuster.

• Playing viewer’s choice movies on selected days:

Few TV shows or movies provide license to display their content exclusively on their
platform, this causes people who don’t own such platforms to illegally use VPNs or
torrents in order to watch such content. Blockbuster could obtain license from such
producers to show their movies and then set a day from the week where it would telecast
the viewer’s choice movie on their platform for free, attracting more customers.
 PART 5:

1. Changes and innovation that follows after Strategy Adoption:

1.1 Alignment of Innovation with business Objectives:

A business where innovation and company objectives are given equal value, widely promoted
and is fully communicated, a culture exists that promotes the alignment of two. In this culture,
top-down business objectives are communicated throughout the organization so that all levels
are focused on addressing the corporation’s short- and long-term goals. It then becomes the
innovators’ responsibility to align their activities in support of the corporate goals.

There are several ways to naturally bring these two camps together. Jointly developing
technology/product and business roadmaps encourages discussion and debate, forging
linkages that guide actions. Internal business and technology fairs highlight near term
successes while raising visibility to long-term opportunities.

1.2 Ways by which the strategy encourages innovation and change:

Change is witnessed in the operations and functions of the company once the strategy is
successfully implemented. The key goal of the above-mentioned strategies is to improve the
current condition of Blockbuster. The once billion-dollar company now has only 1 store
which is also converted to a 90s-themed Airbnb and is constantly struggling. However, these
strategies aim to bring the business towards betterment and to help regain its place in the
market.

The greatest change that will be witnessed is in regards to its finances. As mentioned earlier,
the key business objective formulated was to increase the profit margin of the company, once
the strategy is successfully implemented, it is bound to attract customers towards the
company. More customers equal to more revenue and more profits. This is the greatest change
that a company witnesses when implementing change. These profits are then used for further
innovations and improvements in the company. It could be used to implement more strategies
or could be also used to strengthen its departments.

Another change witnessed by the company is its strong and definite structure. The strategy
provides the employees with a proper vision to follow and sets a path for company’s future. It
also sets the company in proper direction. A successful strategy provides the business with a
prospect and sets a benchmark for future strategies providing the employees with motivation
to work smarter and harder to push the company towards success.
 Strategy implementation encourages the company to become more efficient in its tasks and
activities. It provides a roadmap to the management to help align the functional activities to
attain the set goals and targets. It allows the management to become efficient on resource and
budget allocation to accomplish further objectives.

Survey of (Ong, 2015) resulted that one of three companies that dominates the market today
will not be the leaders in the next five years due to the changing nature of market. Only the
companies that adopt efficient strategies would be able to make it. Thus, strategy adoption
also helps a company with its durability. Blockbuster was an immensely successful company
however, due to its lack of adoption of innovative strategies, the company failed and its
competitor, Netflix that adopted innovation succeeded. Therefore, strategy implementation
helps the company be resilient in the market.

2. Blockbuster’s competitor and their Strategy:

The greatest competitor for Blockbuster is Netflix. The company was founded in 1997 in Scotts
Valley, California by Reed Hastings and Marc Randolph. Netflix started as a $2.5 million startup
as the world’s first online DVD-rental store with around 30 employees and 925 titles available.
At that time Blockbuster was already dominating the market and making huge chunk of money
by late fee from customers. On stating the reasons and motivation behind the idea of Netflix,
Reed Hastings stated that he came up with the idea of Netflix when he was fined $40 by
Blockbuster store for returning a late copy of Apollo 13 (Keating, 2012).

Netflix witnessed an extremely rocky start of its journey. The company introduced monthly
subscriptions in September 1999 but then dropped the single-rental model in the early 2000s
(O'Brien, 2002). By 2000, Netflix’s losses had surpassed $57 million and offered Blockbuster to
acquire it for $50 million. Blockbuster blatantly refused the offer. Gradually by innovative
tactics and by making strategic decisions, Netflix made a comeback and became one of the most
successful companies in the world.

This success is linked to the strategic decisions and strong strategies formulated by the company.
One of the greatest strategy adopted by Netflix was its ‘phased expansion strategy’. Rather than
forcing its growth, the company strategically undertook a three-phase expansion into new
markets. In its first phase it entered the markets that were geographically close to its domestic
market, USA. Firstly, it expanded to Canada in 2010. To move in foreign markets, it required
strong internationalization capabilities and expanding to Canada offered the company the core
capabilities required for faster internationalization. In the second phase, its growth was faster and
more extensive. In this phase the company expanded to 50 markets. Countries that offered an
attractive market, strong broadband internet and affluent customers became the reasons for
 Netflix to expand in these locations (Pratap, 2020). During this phase, the company also made
significant investments in data and analytics, it continued to learn about internationalization
whilst in this phase, growing partnerships with local stakeholders and increasing its revenues.
The third phase saw aggressive growth for the company when it expanded to total 190 markets
worldwide. By this time, Netflix had matured and gained valuable experience that aided in its

Countries with availability of Netflix as of 2020

Fig 1.16. Source: Ahmed (2020)

fast growth. Understanding the demands of their customer, Netflix organized itself by adding
more languages, optimizing its personalized algorithms and expanding its support for various
devices. Netflix not only made strategic decisions when entering a market but also improved its
content quality and service quality over time (Fata, 2019).

PART 6:

1. Implementation plan for the proposed Strategies:

Once the strategy for Blockbuster is formulated, giving accurate reasoning, the next step is to put
the strategies under implementation and make sure that these strategy benefit the company.
Implementing these strategies may take some time, occasionally even years. To help achieve the
goals and accomplish the strategy SMART goals can be incorporated that will help provide
company with vision, helping it focus on efforts and increase the chances of achieving targets.

Strategy no.1: Introducing Blockbuster’s personal movie theaters:

Generally, when a movie is released, it is shown over the big screen. People have little to no
say in what plays over the cinema. Once Blockbuster initiates a movie theater, it could
 personalize it by allowing people to choose what plays. The business could allow pre-booking
of cinemas and movies. This would permit people to enjoy a theater experience with their
own selected movie.

Strategy no.2: Region based viewing experience:

There is a large audience for regional TV dramas and serials which is usually not targeted by
companies such as Netflix and Hulu. Even though the platform of Blockbuster will require
their audience to pay to display other content (a subscription fee), a segment of Blockbuster
could be free where people can enjoy TV serials and soap operas from different regions.
When a customer gets access to free and paid content in the same platform, they would
abandon Netflix for paid content and YouTube or traditional TV for soap operas.

Strategy no.3: Minimal cost price:

Rather than setting a high price and repel the customers, Blockbusters could set a minimal
price to attract the customers. A minimal price of $3 per month would ensure that customers
are attracted while the company still makes profits and offer a better pricing than their
competitors.

Strategy no.4: Viewer’s choice movies on selected days:

Even though millions of people use Hulu, Netflix and Amazon Prime for their viewing
experience, there are several people who still don’t have an access to such platforms either
due to high prices or regional restrictions. These people illegally download movies from
torrent or use a VPN. To cater this problem, Blockbuster could select one day from the entire
weekend and allow viewer’s choice movies to play for free. Prior to the day, on its social
media platforms such as Twitter and Instagram, Blockbuster can hold a poll asking customers
any paid movie they would prefer watching, the movie that gets the highest responses can be
selected and played on the chosen day. This would entice customers who do not own such
platforms yet to be attracted towards the company increasing the number of customers and
numbers of clicks on their application generating revenues.

2. Fulfillment of Stakeholder Expectations:

Once a strategy is implemented and the company is on the path of doing well, the stakeholders
that are associated with the company witness their expectations being upheld. This results them
to be satisfied with the company allowing it to function smoothly in the market and prosper.
Once Blockbuster executes the strategies, the expectations of stakeholders associated with the
company will also be fulfilled:
 • Customers: Customers will receive their desired services at a lower cost with prompt
services. The main benefit of the strategy implementation goes towards serving the
customers; thus, this stakeholder is expected to be the most satisfied.
• Employees: Strategy implementation is associated with new business opportunities
bring in work opportunities and increase in salary/ bonuses for the employees. An
employee expects to have a good employment package which is possible once the
company is doing well.
• Investors: Investors expect the business to do well and make good money and secure a
good share in the market. Strategic decisions bring the company closer to this vision.
• Suppliers: Suppliers run a business and thus expects the company they provide their
raw materials to, make timely payments.
• Community: Community expects the business to follow basic ethics, not endorse
pollution in the environment and generally do good for the society.
• Government: Compliance with all set rules and regulations and timely payment of
taxes.

PART 7:

1. Recommendation:

The above suggested strategies are ways for Blockbuster to reintroduce themselves in the market.
Following these strategies will ensure that not only do they capture the market share but also
gain competitive advantage. While there are many people who are loyal to Netflix and Amazon
Prime, they are highly disturbed by its prices and the fact that even after paying so much they are
restricted on content based on the region. It is equally important for Blockbuster to capture the
requests of the younger audience as they make up the majority of the users. A personalized
cinema theater will elevate theater experience for a customer that loves watching movies in
cinemas however, for the people who love watching movies at home, Blockbuster could set a
day from the week when the viewers can watch any movie of their choice for free. Along with
well-developed strategies, it is equally essential for them to have a robust leadership with
accurate organizational structure that will stir the company towards success.

2. Conclusion:

Implementation of these strategies will help Blockbuster reintroduce themselves in the market
and attain competitive edge. It will also allow them to satisfy their major stakeholder by
upholding their expectations. Due to its fame and prominent name in the past, it wouldn’t be
difficult for the company to regain its customers. In all, these strategies will not only help the
company earn profit but help it do well in the market and gain new perspective.
 TASK 2
1. Previous Organizational Structure of Blockbuster:

Since Blockbuster was founded, it has been following the functional organizational structure. In
such a structure, the important and vital decisions regarding the operations and future of the
company is made by the higher management. The higher management sits atop on the hierarchy
and is responsible for making all the decisions. Workers or sub-ordinates usually have little to no
say in the decision making and are always expected to follow.

2. Effectiveness of this Structure for the Company:

The choice of this organizational structure was one of the reasons for Blockbuster’s failure. The
decisions were solely made by the higher management and the organizational culture had
become stagnant and unwilling to change until it was too late. The company was plagued with
customer dissatisfaction and had poorly directed leadership. Wayne Huizenga took over the
charge of the company in 1987. His leadership was based on unilateral decisions and his only
motivation was to take over as many companies as possible. This over passion drove him to
propose a $4.7 billion merger with Viacom. Employees and senior management at Blockbuster
were not in favor of this merger. However, Huizenga went ahead without paying attention to the
concerns of his employees (Peter, 2016). The merger resulted to be a huge failure for both the
companies and by April 1994, both Viacom and Blockbuster’s stocks tumbled dramatically. The
company suffered a huge loss of $1.2 billion (Tyler, 2017). A strong and robust organizational
structure for Blockbuster was lacking which halted its success and resulted the company to not
be able to sustain itself. This led the company to have several failed mergers and years of losses.
By early 2000s, when online video streaming started to become popular amongst people,
employees at Blockbuster urged the management to change the business structure from rental
services to online services. However, the higher management paid no heed to the suggestions
from their own employees and continued with their business.

3. Merits of this Structure:

Even though, many scholars have associated disadvantages with the functional organization
structure, it still has several advantages. If a company implements this structure with efficiency it
is not necessary for it to fail, such as, Airtel is an extremely successful company in India. They
follow a functional organization system but make sure that employees and manager of every
department are working together towards the goal (Usmani, 2020).
 A functional organization system provides the company with operational clarity, every person in
the company is well aware of their responsibilities and roles. They know the set targets and know
what needs to be done. The work in the company is divided based on the level expertise of an
employee in the company. The higher management includes a leader who is well experienced in
his area of expertise, this leader controls and stirs the company towards the path of success. This
is done by making effective and smart decisions (Waterman et al. 1980).

People working in the same area of expertise have a proper structure and now who to share their
ideas with and who to report to. This helps them perform rather quicker and reduce work related
errors. Employees in such a structure are more dedicated to one area which helps them develop
efficiencies in terms of process flow and management methods (Awa, 2016). It makes reporting
of employees easier and also makes it fairly simple for the managers to know their subordinates.
Resources are utilized efficiently such as, work of finance will only be performed by the
employees in the finance departments, this reduces the duplication of work significantly
(Cristobal et al. 2018).

4. Understanding why a Company needs to Restructure:

The changing landscape of the business market forces the companies to make alterations in their
organizational structure. Many businesses are adamant to follow the structure they had been
previously following that made them successful sometime in the past. However, now, if a
company does not adopt the changes and do not alter their structure with the alterations in the
market, they are expected to fail. Organization restructuring is a way for the company to address
unsatisfactory status quo in the evolving market. This restricting is established on a number of
factors such as the strategic planning which is driven by innovation and tactical reaction to
unexpected circumstances. Organization restructure also calls to focus on the long-term vision of
the company. Restructuring should be done in such a way that the mission and vision of the
company align, if these factors are not kept in focus, the organization may end up in the wrong
direction.
 One of the greatest reason for any company to restructure is to satisfy their customers. To do
that, the company completely alters its way of business operation and shifts the ways things are
done to attract more customers. If the demands
Reasons for Organizational Restructure of the customers are evolving, the business
needs to evolve with it. Other reasons include,
Customer Satisfaction new innovations by the competitors that
completely changes the landscape of the market
Merger with another company
putting the company at survival risk. To ensure
Performance gaps that their market share is not threatened, the
company restructures. Performance gaps also
To regain its position in market act as motivating factors for the company to
To fit in the evolving market restructure. If the organizational objectives are
not met, changes are required to close such
Introduction of new strategy gaps. After the identification of the gas, the next
important step is to analyze the reasons of those
Fig 2.1. Source: Researchers Work (2020) gaps. Most times, such gaps are caused by
inefficiencies in the company such as
communication barrier or lack of support between the departments.

Example of a company that has found the perfect balance and pace of restructuring is Dow
Chemicals. The company had already restructured in 1985, 1995 and 2000. Then the company
went on to restructure again in 2009 to attain a new strategic direction following the acquisition
of specialty chemical manufacturer, Rohm and Haas. The preferred organizational structure by
Dow Chemical was matrix structure with 5 different divisions and geographic regions supported
by common Business Services Group and stronger central function. Since 2009, it has dissolved
2 units per year to focus on specialty and advanced chemicals. By 2013, the company’s profits
nearly doubled (Girod and Karim, 2017).

5. Reasons for Restructuring at Blockbuster:

Since the beginning, Blockbuster had been focusing on a similar organizational structure. Even
though it saw companies such as Netflix develop, restructure and dive into different sectors of
the market, Blockbuster did not alter its structure. This gradually led its competitors to take its
place and replace its products. Blockbuster was once considered the market leader however now;
Netflix has taken its place. If Blockbuster expects to make a comeback in the market, along with
stronger strategies it also needs to have a solid organizational structure.
6. Proposed Organizational Structure for Blockbuster:

Considering the fact that Blockbuster aims to make a comeback in the market, along with new
strategies, a better and stronger organizational structure is also required. For that purpose,
Circular Organizational Structure is proposed. This structure is completely different from the
previous structure followed by the company. In place on an autocratic leadership style, this
structure promotes the leader to be democratic and be inclusive of his team. One main feature of
this structure is its ‘Open door policy’ where any employee can freely communicate with the
higher authority and make suggestions.

Fig 2.2, depicts the previous organizational structure of Blockbuster:

FUNCTIONAL ORGANIZATIONAL
STRUCTURE OF CEO
BLOCKBUSTER CFO & CAO COO
Corp Strategic
Comm Planning
Finance & HR & Internal US Community Market
IT Legal
Accounting Admin Audit Operations Affairs Planning

Franchise & Event

Controller
Dev Services

Finance Canada

Tax &
Europe
Treasury

Investor
Mexico
Relations

Asia
Fig 2.2. Source:
Researchers Work (2020)
 Fig 2.3, shows the proposed organizational structure for Blockbuster:

CIRCULAR ORGANIZATIONAL STRUCTURE

DEPARTMENT KEY:

Fig 2.3. Source: Researchers Work (2020)

7. Merits of this Organizational Structure:

The circular organization structure is different from other structures. The middle circle represents
authority and position of control and all the other functions radiate in all directions from the
middle. The higher the position of authority, the closer it is placed from the center. The lines
form different blocks of occupation which indicates the channels of authority.

Contrasting to other structures, in a circular structure, the higher management or authority is not
seen as sitting ‘atop’ or controlling the subordinates by sending down directives but instead are
in the middle of the company spreading their vision outwards.
 Blockbuster can gain advantage by adopting this structure. As previously discussed, blockbuster
has a history of making wrong decisions even when their employees were not in favor of the
decision and also has a history of dissatisfied employees. Adoption of such a structure firstly
eliminates the autocratic element, it embraces active communication between the employees and
the management. Sharing of ideas and suggestions has helped may companies grow. For
example, the idea of Flaming Hot Cheetos came from the janitor working at Cheetos. The
management heard and incorporated his idea which later went on to be a great success for the
company (Elkins, 2018). This shows how adopting a better structure helps the inflow of ideas
and consequently helps the company grow. In such a structure, an important decision is only
made by informing the employees. Such a structure encourages employees to work freely
without the pressure of reporting to their bosses. This helps the employees to stay committed and
loyal to the company. Incorporating such a structure in Blockbuster will give rise to employee
satisfaction, make the process of communication easy between employees and management.

8. Demerits of this Organizational Structure:

Alongside, merits, this structure also has some major demerits. For some employees this
structure could be very confusing as it makes it difficult to understand who they have to report
to. In a typical structure when the line of command is known, it is easy for employees to
complete a task and present it to their supervisor. This can cause major delays in work
submissions and can also cause confusions hindering the organizations performance. In many
cases, it has also been reported that this structure causes the decision-making process to slow
down. Suggestions and inputs from a lot of people can cause the organization to deviate from the
purpose or their set goals. Handling the employees also becomes difficult without the top-down
Bewilderme Too many Difficult to
control. Many scholars
Confusing
for
nt in who to people handle have also stated that this
report sharing employees
Demeri Employees
ideas organizational structure
ts
goes against the
Proper Setting a Listing down Bringing in a decorum of a company,
guidance on senior of all ideas strong CEO
Ways employee executive for and selecting it reduces the fear of
to maintain
to roles and every the one that the decorum supervisors from their
overc responsibiliti department aligns best of the
ome it es with company subordinates making
organization's
goals them too comfortable.
With the absence of
Fig 2.4. Source: Researchers Work (2020) professionalism from
the employees, they
tend to overlook their responsibilities compromising on the organizational goals.
9. Strategies to Overcome the Challenges of the Structure:

Considering that there are several demerits of this structure, it is important to mitigate these
challenges rather than overlooking them. To avoid the confusion of roles and responsibilities, the
department of HR can clearly guide the employees on their set of responsibilities and also guide
them on who to report to. Every department should have a senior manager that should be directly
approached by the employees. To welcome ideas but halt the inflow of too many idea, weekly
meetings should be called to check on the progress, discuss new ideas and prospect and ask for
suggestions. Lastly, a CEO that understands the importance of work as well as their employee’s
well-beings should be hired. The person shouldn’t compromise on the goals but should also
understand the importance of being a dedicated team member.

TASK 3
1. Summary of the Plan:

The strategies are selected to help Blockbuster reintroduce with better products and services in
the market. Firstly, the company could introduce personal theaters for people who enjoy the
cinematic experience but also prefer movie of their own choice. Next, the company could play
regional based TV serials to capture a larger market. Netflix and Amazon Prime have several
subscribers but lately, due to a hike in their prices many subscribers have stopped using these
platforms. Blockbuster could make use of such a situation by offering lower prices to these
people. And lastly, the strategy of playing viewer’s choice movies on selected days for free will
help capture more and more audience for the company.

2. Possible Limitation:

The greatest limitation that could arise for Blockbuster when implementing these strategies is the
cost aspect. Regardless of strong strategies, companies sometimes are still not able to attract the
customers partly because people are comfortable with their current movie streaming platforms
and partly because of brand loyalty. Another great limitation for the company is the strong and
intense competition. Netflix and Amazon Prime are the two companies that are increasing
coming up with new services which has made it very difficult for other streaming platforms to
compete.
3. Ways to Overcome:

In order to ensure that these limitations don’t become a restraining factor for Blockbuster, it is
important that they overcome these strategies. To overcome the cost aspect, the finance team at
Blockbuster needs to allocate money efficiently setting priorities depending on the department.
In order to attract the customers, the marketing and sales team need to be very sharp and offer
value packages to the customers.

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