Second Presentation - Blockbuster

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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