Blockbuster: Leadership & Strategic Failures Essay

Words: 2043
Pages: 9

Blockbuster: Leadership & Strategic Failures
Scott E. Morris
MGT 460
Professor Robin McCart-Brown
May 30th, 2011

Abstract This research paper will explore and analyze the leadership and strategic failures that occurred within Blockbuster Incorporated. The paper will look at leadership and strategic theories that could have assisted Blockbuster. In addition the paper will discuss the importance of leadership within an organization, and its necessity for the company to survive.

Blockbuster: Leadership & Strategic Failures
Blockbuster started as an idea by David Cook who owned a company called Cook Data Services that provided computer software to the oil and gas industry in Texas. In the early 80’s the oil
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This DVD offered a better picture and zero degradation in picture after thousands of uses, which VHS’s tape could not provide. Netflix began as an idea that took form in 1997, after Reed Hastings a silicon valley software engineer stated, “There has to be a better way”, after getting a $40 late fee on a video rental. His concept was to provide a mail order rental business where the customer could rent a movie, keep it as long as they wanted without late fees and when mailed back, would get their next selected title. This strategy offered a customer friendly, customer cost-efficient, and company low overhead model. Blockbuster ignored this first entry change to their business model. In an effort to be competitive they eliminated the late fees to their renters. ““For the past year, the company has been testing a variety of rental options in markets across the U.S…In no-late-fees test markets, the increased rental transactions and retail sales offset the lower level of revenues resulting from eliminating late fees." (CNN, 2004) This decision back fired with Blockbuster, as their revenue dropped for no longer charging those fees. “While a number of Blockbuster's franchise stores opted to keep the fees in place, the company-owned stores in the U.S. didn't, taking a big bite out of what Bear Stearns analyst R. Glen Reid says was a contribution of $250 million to $300 million a