Blockbustervideostores

In 2010, when most people preferred to rent videos rather than purchase and keep them, the Blockbuster videostore chain was introduced and proved to be a rapidly expanding group of stores that rented out movies or videofilms. All of this began in the United States of America (USA) and expanded gradually into the Europeanmarket. Each store had a vast selection of the most recent Hollywood films that customers could borrow for alimited amount of time, typically overnight, to view on their videocassette recorders (VCR) and then return thefollowing day. Blockbuster had exclusive contracts with major film studios to ensure that it could stock thenewest films, especially soon after their theatrical release. At the time, Blockbuster's business model ofretaining 60 percent ofits rental incomeandreturning 40 percentto thefilm studio's expenses appearedfeasible.

Aftera fewprosperousyears,theAmericanmultinational mediacorporationViacomacquiredBlockbusterfor

$8.39 billion. Viacom was somewhat cognizant of Blockbuster's $1.49 billion in cash, which it required forfurther acquisition of Paramount Pictures. However, it was also possible that Blockbuster was overpriced, as thecompany was struggling financially at the time, as Blockbuster's incomes were significantly lower in the yearfollowing itssales.

Since Blockbuster's founding to the present, there has been a significant technological shift. Not only werevideotapes supplanted, but the internet was also developed to transmit large and rapid computer files. Newbusinesses rushed in to capitalize on this revolution. A small company called Netflix, for example, wasintensifying its marketing efforts at the time; it was already selling DVDs by mail, but it was also beginning todeliver the same content via broadband in the United States. Blockbuster reportedly turned down theopportunity toacquireNetflixfor$50 millionwhen it wasasmallcompany.

N.BAnswerallthequestionsfrom thissection.

Questions

1. UsingBlockbusteras anexample, discussindetail anyfive benefits of planning.(10 marks)

Describethedifficultiesandbenefitsof managingatBlockbuster. (10