Blockbuster and Netflix: A Case Study on Decision Making

This report delves into the critical role of decision-making in business, emphasizing its impact on organizational success. It uses the Blockbuster and Netflix case as a prime example of how crucial effective decision-making is. The report outlines a structured decision-making process, including problem identification, alternative solutions analysis, selection of the best solution, action implementation, and follow-up. It highlights strategies to enhance decision-making, such as environmental analysis, maintaining business values, prioritizing stakeholder satisfaction, brainstorming alternatives, and promptly addressing wrong decisions. The report also explores common reasons for poor managerial decisions, such as failing to recognize changing customer needs, over-reliance on past experiences, lack of clarity, resource constraints, and missed opportunities. The conclusion underscores the importance of a proactive and strategic approach to decision-making for sustained business growth and success, drawing lessons from Blockbuster's missed opportunity to collaborate with Netflix.

Introduction to management
Decision Making

Executive summary
Decision making for any business is highly imperative for the success of the business. Managers
are often put into situations where they need to make effective decisions for the success of the
firm. In order to achieve the same, managers must adopt a strategically effective decision making
process. DVD renting business Blockbuster was approached by Netflix for a collaborative deal in
1990. However, the former rejected the offer without much thought considering the small size of
Netflix. Today Netflix is valued at over $20 billion dollars while the latter filed for bankruptcy in
2010. This report highlights the importance of decision making as well as the reasons behind
why certain managers make poor decisions.

Table of Contents
Executive summary.........................................................................................................................1
Introduction......................................................................................................................................1
Importance of decision making.......................................................................................................1
Decision making process.................................................................................................................2
Strategies for improving decision making.......................................................................................4
Why do managers take wrong decisions?........................................................................................5
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

Introduction
Decision making is one of the most important aspects for any organization. Making the right
decisions at the right time and in the right manner is exactly what takes organizations to the
highest rung of victory. It is imperative for managers to understand the importance of effective
business decision making in order to make sure that the business is on the right track (Goodwin
& Wright, 2014). Poor decisions have adversely impacted well established and highly successful
organizations making their survival difficult in the industry. Through this report, we aim to
understand the importance of decision making with the help of real world examples. The case
throws light on a terribly wrong decision made by Blockbuster, DVD renting firm.
Importance of decision making
Decision making is very important for the success of any business. There is no other way for
organizations to grow in their respective industries. Proficient decision making helps businesses
in identifying customer needs, evaluating competition in the industry and ensure maximum
stakeholder satisfaction (Ingram et. al., 2015).
During 1980s Blockbuster was the leading name in the movie and game DVD renting industry.
Their massive customer base and strong brand name enabled them to dominate the industry for
over two decades. Leading movie producers and distributors tied up with Blockbuster in order to
make sure that the movie finds its audience through Blockbuster’s customer base.
While the brand was at the top of its game, there were 9904 running stores of Blockbuster and
the brand’s revenue surpassed the mammoth mark of $6 billion annually. However, the firm

failed to adopt the changing needs of the customers and failed to live up to the success that it had
earned for itself.
During 1990s, a small startup Netflix which developed as an online streaming platform offered
itself to Blockbuster. The latter presented a deal for both the firms to join hands for $50 million.
As a part of the deal, Netflix would assist Blockbuster in developing its own streaming platform
while the former would gain Blockbuster’s expertise and develop its on DVD renting and mail
service. However, Blockbuster refused the offer rather rudely considering the startup status of
Netflix and its lack of popularity in the industry.
The tables turned against Blockbuster with the advent of technology, increasing use of internet
and high adaptability of the same. As on 2014, Netflix was valued at $20 billion while
Blockbuster had filed for bankruptcy in the year 2010. By 2013, the brand shut down its last
store and canceled its DVD in-mail service.
The above example helps in understanding the importance of decision making. One wrong
decision can change the fate of organizations and hence it is important to understand the
criticality of effective decision making in the business. Had Blockbuster effectively evaluated its
options and invested in understanding the future of the industry or changing customer needs then
both the firms would have been leading the industry with mutual collaboration and customer
base. Instead, blockbuster no longer exists and Netflix has become a rather irreplaceable part of
people’s daily routines.

Decision making process
While making any decision, it is essential that the decision making process is kept in mind. The
decision making process has various steps and each step of the process is highly important.
Therefore it is important that organization do not falter at any step in order to make sure that the
right decision is taken at the right time and in the right manner which will eventually prove to be
beneficial for the business.
Step 1: The first step in the decision making process is to analyze the problem. It is important to
note that managers of the business may not face a decision making process only during a
problem. But what this step signifies is that while confronting any decision, organizations must
identify the reason behind making that decision. This step helps in identifying the nature of the
decision. In the example stated above, Blockbuster must have identified the changing consumer
needs and the future of technology as a problem confronted to the business.
Step 2: During this step, various alternative solutions are presented before the organization and
the firm must analyze those alternatives one after the other in order to understand the pros and
Identify
the
problem
Analyze
alternative
solutions
Select the
best
solution
Covert
devision
into action
Follow up
on the
decision

cons of them all (Tomczak, Reinecke & Kuss, 2018). In the above example, Blockbuster must
have tried to identify the pros and cons associated with joining hands with Netflix. Blockbuster
must have also tried to understand if it can imitate Netflix and start its own streaming platform.
Also, they should have analyzed if they could collaborate with any other brand which may seem
fruitful for the company.
Step 3: This third step helps organizations in deciding the best alternative for the decision
making from the alternatives listed above. This is done by conducting a detailed analysis of all
the alternatives that are presented to the brand. This step requires critically examining all the
steps and finally deciding the best alternative. In the Blockbuster’s example, the brand could
have finalized its deal with Netflix if they had analyzed the options effectively.
Step 4: During this step, the decisions taken by the business are finally converted into actions. At
this step, Blockbuster could signed the deal with Netflix. The next step of this process would be
to discuss various intricacies of the deal and discuss various issues regarding the collaboration of
the two brands. This would pave a transparent path for both the firms and clearly specify
responsibilities and accountabilities of the two organizations as a part of the deal.
Step 5: Following up on a decision is highly important as it helps businesses in making sure that
the business decision taken by them is working well for them. This step also involves addressing
new issues that may be faced after the implementation of the decision. For the example
mentioned, during this step, Blockbuster and Netflix would have understood if their deal is
working out and is mutually beneficial or not.

Strategies for improving decision making
Every effective manager works towards improving their decision making process. This is
imperative to ensure that the business takes the right decisions. There are various strategies that
can be implemented by organizations to make improve their overall decision making process.
These strategies are as below:
1. Environmental analysis plays a significant role in ensuring improved decision making
process. In order to improve decision process of the business, managers must conduct a
thorough environmental analysis. Had Blockbuster done the same, it would have been
able to identify with changing customer needs and growing technology.
2. Another important strategy for improved decision making is to keep the value system of
the business intact. Various decisions may seem profitable but may not adhere to the
values of the business. In such a case, it is essential that businesses maintain their values
and take ethical decisions (Shapiro et. al., 2014).
3. Stakeholder satisfaction must always be kept in mind while making important decisions
for the firm. Considering the impact of the decision in all the stakeholders of the business
will help managers in taking ethical decisions for their organization.
4. Brainstorm all the alternatives before completely accepting or rejecting a particular
decision. In this case, if Blockbuster had conducted a “What-If” analysis, it may have
been in a better position to make a profitable deal.
5. Lastly, it is important to identify a wrong decision and put efforts at the right time to
reverse the same. Netflix started gaining popularity in mid 1990s and hence if
Blockbuster had been able to identify the same at the right time, it may still be in
business.

Why do managers take wrong decisions?
There are various reasons behind managers making wrong decisions. First and foremost reason is
the inability of the manager to identify changing customer needs. Secondly, Many times
managers rely too heavily on past experiences for making decisions (Drucker, 2016). However,
with the changing scenario, past experiences of managers may not be as effective. Lack of clarity
is the third reason for poor decision making among managers (Forbes, 2013). Fourthly, a lack of
resources with the organization may sometimes lead managers to make poor decisions. Lastly,
when managers miss out on seeing an opportunity, like in the case of Blockbuster, they may
make wrong decisions.
Conclusion
Decision making is one of the most critical responsibilities of any manager. It is highly important
that managers of the business make the right decisions to ensure the growth of the business. This
report has highlighted upon a poor decision made by DVD renting business Blockbuster by
rejecting the offer made by Netflix to collaborate. Not only did Blockbuster miss out on the
chance of collaborating with a now $20 billion business but also Blockbuster filed for
Bankruptcy.
It can be learnt from the experience that adopting the effective decision making process,
following every step efficiently, understanding customer needs, assessing alternatives and
proficiently timing the decision can help businesses in taking the right decisions at the right time
for the growth of the business.

References
Drucker, P. (2016). The effective executive. Routledge. United Kingdom.
Forbes, (2013), ‘Reasons leaders make bad decisions’, Available at
https://www.forbes.com/sites/glennllopis/2013/05/28/6-reasons-leaders-make-bad-
decisions/2/#6c78259f3343, retrieved on 17 June, 2018.
Goodwin, P., & Wright, G. (2014). Decision Analysis for Management Judgment 5th ed. John
Wiley and sons.
Ingram, T. N., LaForge, R. W., Williams, M. R., & Schwepker Jr, C. H. (2015). Sales
management: Analysis and decision making. Routledge.
Shapiro, J. P., Stefkovich, J. A., & Gutierrez, K. J. (2014). Ethical decision making. Handbook
of ethical educational leadership, 210.
Tomczak, T., Reinecke, S., & Kuss, A. (2018). Introduction. In Strategic Marketing (pp. 1-18).
Springer Gabler, Wiesbaden.