Netflix vs Blockbuster Hbs Case Stufy

1. When evaluating stock decisions for blockbuster, should be divided into 2 separate decisions could use up been made, depending on the period in the test case. At the head start period of the text, 1997-2002, Blockbuster is the undisputed market leader (2, 1) of a giant, fragmented and steady industry, it has superior access to suppliers (brought the hottest titles faster than anyone in the industry) , this was its core business.Blockbuster had a wide coverage on a national level of stores (2, 2) , gain almost 70% of the U. S population within a short case length, and were recognized as the most powerful brand in the industry by 90% of the population. Furthermore it sustained a growing rate of gross revenue growth within stores within that period along with a stable income from late fees (3,1). In light of these facts, at this period going long for the Blockbuster stock is a very confident and solid decision.yet the tide is changing at 2002 following the rise of Netflix, Block buster strategy to ignore and fling at the treat instead of tackling it (9, 4), the failure to understand the Netflix is giving customers feature which are lacking in Blockbusters stores (Recommendation, no late fees, a wider selection of movies) show of a company which lacks the innovation to face the new treat and the ability to understand the new customer taste (Movies as pastime rather than special occasion).The late response in entering the online rental business caused severe financial losses to the company due to stiff culture curve (stock, suppliers), marketing expenses, price war and giving up on late fees (10,1), all along firearm keeping its conventional cost structure, with an costly 10 people per store staff (2,2) . Therefore I would hold the stock at short first 2002 , Blockbuster just doesnt attend like its understanding the new market, instead of being innovative they are fighting a losing battle and react lately instead of initiating in the areas where Netfli x lacks.However for Netflix the decision is quite the opposite, at its starting era we would play short on the stock. The facts are that Netflix is entering a highly fragmented market (2,1) while betting exclusively on a new format DVD (3,2) using an innovative distribution technique which have never been tasted in intact scale (3,4) and without a proven track of handling a huge inventory, the company did struggle at these years.However starting 2000 we would reverse the decision on the stock. Netflix highly innovative actions such as changing the pricing model (5,1) , developing an highly advanced pass system (5,4) and allowing for user rating have highly differentiated the companys service at the exact points in which Blockbusters service were lacking.Furthermore, the collaboration with major studios (6,1) and with the USPS (8,1) have improved Netflixs blue spots and allowed for the service to improve greatly and the have a huge growth potential (opening the entire variety of movies for rent not just hits , reaching 90% of its subscribers in a single day), the innovation process also shows in financial status, Netflix is performing at great annual rates starting 2000, of doubling its subscribers number , maintaining a positive cash flow and increasing its revenues (Fig1, Fig2), all while keeping its core business and expertise (no restructuring costs) .For conclusion, Netflixs highly innovative approach which is a reoccurring theme throughout the case, along with great financial performance and operational expertise (7, 3) makes a long decision in Netflix the obvious choice. 2. At first Blockbuster supplied a wide base of consumers primarily with hit and new movies (2, 4), in addition Blockbuster offered a express amount of advice (2, 5) from the staff present at each store.The costumers were supposed to rent the movie for a movie night and return it as quickly as possible. Netflix initially set up to perform the same task Deliver costumers with the movies they were looking for before logging of the site and in addition supply them with most highlighted titles with recommendation from limited staff weekly, as with Blockbuster , customers were also supposed to return the movie within a specific due date or be charged.However, Netflix evolved over the years and started supplying costumers with enhanced features not offered by blockbuster. The proprietary recommendation system developed (5,3) by Netflix allowed to use movies as a taste based product, meaning that Netflix started offering a recommendation service to its subscribers for movies they might like, instead of choosing movies ahead or choosing from shelves without knowing too much.Furthermore the recommendation system, along with the user based rating system (6, 3) allowed for the costumers to receive a substantial amount of advice regarding movie choices. Another evolvement occurred when Netflix adopted the new model (unlimited rentals, 3 movies queue), the model actual ly caused customers to related to movies as form of entertainment and therefore Netflix acted as entertainment provider (4, 1) instead of a special event when using Blockbusters conventional video service