Question
Case Study: The Rise of Netflix (and the Fall of Blockbuster) When Netflix launched in 1997, Blockbuster was the undisputed champion of the video rental
Case Study: The Rise of Netflix (and the Fall of Blockbuster)
When Netflix launched in 1997, Blockbuster was the undisputed champion of the
video rental industry.
Between 1985 and 1992, the brick-and-mortar rental chain grew from its first
location (in Dallas, Texas) to more than 2,800 locations around the world.
Two years later, Viacom paid $8.4 billion to acquire Blockbuster.
So by the time Netflix showed up on the scene with its video rental-by-mail service,
it appeared to be a classic case of David vs. Goliath.
In fact, in the year 2000 perhaps realizing that itd be easier to fight alongside
Blockbuster than against them Netflix co-founder and CEO Reed Hastings
approached Blockbusters then CEO, John Antioco, with a merger proposal:
Hastings wanted $50 million for Netflix. And as part of the deal, the Netflix
team would run Blockbusters online brand.
Of course, that deal never materialized.
At the time, Antioco considered Netflix to be small potatoes, and would come to
realize only too late that having an online platform would be the way of the future.
In 2004, Blockbuster did launch a Netflix-like online DVD rental platform, and even
abandoned their unpopular (but lucrative) late fees for overdue rentals.
By 2006, subscribers for Blockbusters online services had grown to more than 2
million. (Meanwhile, in that same year, the number of Netflix subscribers reached
6.3 million.)
The Rise of Netflix
(and the Fall of Blockbuster)
BUSD 2013 Change Management Types of Organizational Change
Business Administration Page 2 of 2 NorQuest College
Then in 2007, Antioco left Blockbuster, late fees were reinstated, and Blockbusters
online efforts were put on the back burner.
The companys fate was sealed.
Flash forward to 2010, and Blockbuster was filing for bankruptcy, having incurred
more than $1 billion in losses on the year.
Their valuation at the time?
$24 million.
For comparison, today, Netflix is valued at around 65 billion a 1,300x increase
from their valuation back in 2000.
Case Study: The Rise of Netflix (and the Fall of Blockbuster)
Refer to Table 1.2 on the back page of this document to guide your discussion.
Tuning
What tuning changes could Blockbuster have made? Consider that this type of organizational change is anticipatory and incremental/continuous.
Adapting
What adapting change could Blockbuster have made? Consider that this type of organizational change is reactive with incremental/continuous measures.
Redirecting or Reorienting
What redirecting or reorienting changes could Blockbuster have made? Consider that this type of organizational change is anticipatory with discontinuous/radical measures.
Overhauling or Re-creating
What type of overhauling or re-creating change could Blockbuster have made? Consider that this type of organizational change is reactive with discontinuous/radical measures.
Which type of organizational change should Blockbuster have ultimately implemented to prevent its failure? Why?
Table 1.2 Types of Organizational Change
Incremental/Continuous | Discontinuous/Radical | |
Anticipatory | Tuning Incremental change made in anticipation of future events Need is for internal alignment Focuses on individual components or subsystems Middle-management role Implementation is the major task For example, a quality improvement initiative from an employee improvement committee | Redirecting or Reorienting Strategic proactive changes based on predicted major changes in the environment Need is for positioning the whole organization to a new reality Focuses on all organizational components Senior management creates sense of urgency and motivates the change For example, a major change in product or service offering in response to opportunities identified |
Reactive | Adapting Incremental changes made in response to environmental changes Need is for internal alignment Focuses on individual components or subsystems Middle-management role Implementation is the major task For example, modest changes to customer services in response to customer complaints | Overhauling or Re-creating Response to a significant performance crisis Need to reevaluate the whole organization, including its core values Focuses on all organizational components to achieve rapid, system-wide change Senior management creates vision and motivates optimism For example, a major realignment of strategy, involving plant closures and changes to product and service offerings, to stem financial losses an return the firm to profitability |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started