Blockbuster Case Study: Operational Performance and Innovation

This report examines Blockbuster's strategic misstep in prioritizing operational performance over innovation, leading to its decline and eventual bankruptcy. It identifies the reasons behind this decision, including the belief that operational efficiency was the fastest route to profitability and a skepticism towards emerging digital technologies. The report also explores potential innovations Blockbuster could have implemented, such as a video-on-demand platform, digital marketing strategies, and developing their own video games, to remain competitive against rivals like Netflix. The analysis highlights the importance of adapting to changing market trends and integrating innovation into business operations for long-term success, a lesson underscored by Blockbuster's failure to evolve with the digital age.

Management and
administration of
operations

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY .................................................................................................................................1
Identify and discuss what were the reasons why operational performance was prioritised over
innovation....................................................................................................................................1
What are the innovations that Blockbuster could have done to bring in innovation that would
have not had a serious operational impact, yet allow company to be competitive......................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Management and administration in businesses is the process of organisations comprising
operating, administrating, organising and controlling business activities. Management operations
is the activities of business that helps in developing and increasing efficiency of companies. It is
associated with transforming materials and labour into products or services in order to achieve
targeted goals. It also provides systematic measures to manage employees and things of
organisation (Camarena Gil, 2019). Administration of operations compile all the business
activities like coordinating, planning and guiding processes that are crucial for smooth running of
enterprises. It is defined as an activity of administrating the whole company as one unit. The case
study provided in the brief gives an understanding of why the company Blockbuster failed to
compete with its rivals and how lack of innovations has resulted in failure of the organisation.
This report identifies and discusses the reasons of why operational performances are
important as well as prioritised over innovation. It also highlights the new innovation that
Blockbuster could have bring in the organisation which can make the competitive and profitable.
MAIN BODY
Identify and discuss what were the reasons why operational performance was prioritised over
innovation
Every organisation lays great emphasis on their operational performance as they believe
this is the fastest way to bring efficiency within business. The company Blockbuster was no
different. Blockbuster is an American based company which provides rental services of movies
and video games. In 1994, the company was at its peak with around 9000 stores and
approximately 84000 employees all around the world. But due to lack of good leadership and
management of operations, it begins to decline (Fordham, 2021). By that time Netflix started to
gain attention in market which Blockbuster failed to cope up. In late 2000s, Blockbuster faced
heavy loses and for that reason the firm filed for bankruptcy in 2010. all of its stores were either
shuts down or were bought by other television providers. The biggest mistake management of
company did was not bringing any new innovations in company and prioritised operational
performances over it. It was given more emphasis as the management and administration of
Blockbuster believes that they can produce great output and revenues just by increasing
efficiency of their services and labour. It is not easy to put equal efforts to all practises of
1

organisation as the resources are limited and have to be used in effective way possible. Thus,
Blockbuster identifies their core operations areas and puts great influence on performance of
those. But operational innovation is another factor that should be considered by management of
Blockbuster.
In early 2000s, the craze of renting DVDs for films and video games was extremely high
and one of the biggest company meeting this demand of customer was Blockbuster. The
company was in this business since 1985 and succeed to establish itself as one of leading
company for renting movies. Administration of Blockbuster makes various modifications with
time to attract more customer. The company took rights to sale certain films before their DVDs
went on sale for public. It also started various loyalty programs named Blockbuster rewards to
give its regular customers a chance to earn free rentals (Nunneley, 2021). With all the
improvements in management and administration operations, Blockbuster saw a high rise in their
sales which resulted in opening of more stores. The administration of company always focuses
more on its operational performances which also showed required results to some extents.
When Netflix started their business they tried to collaborate with Blockbuster but the
management of company denied the deal. It is one of the critical error that Blockbuster made at
that time. The management of company was skeptical about making deal with a new company
thus makes the biggest mistake. Blockbuster also emphasis on renting DVDs through its store
rather than providing it online, the way Netflix did. Blockbuster administration believes in
composing strategic business planning to increase their profitability. They invest more time and
resources in opening of new stores rather than bringing innovations to the existing ones.
Operations performance was prioritise as it boosted business results and attract more people to
the brand (Osejo-Bucheli, 2021). The operation performance of Blockbuster were cost effective
and helps in minimising wastes while providing great services to customers. The record of
operation performances can be assessed by evaluating increase in sales and growth. By
maximising efficiency of management and administration of operations, Blockbuster have
managed to reduce cost of production and maximise output for the same input. The company
follows the theory of enhancing operational efficiency which they believe will bring incremental
change in future. The management of Blockbuster focuses more on maintaining their brand
image by opening new stores and increase inventory of films and video games.
2

What are the innovations that Blockbuster could have done to bring in innovation that would
have not had a serious operational impact, yet allow company to be competitive
Blockbuster administration focuses more on enhancing their operational performance
that it forget bring new technologies and innovations to cope up with their competitors.
Blockbuster was a big name in the market of movies and video games in early twenties. People
preferred the company over others as they used to provide quality services to its customers at
economic prices. Blockbuster also have high number of stores all across US and in several
countries which provides convenience to their customers. But the digital technologies were
advancing rapidly at that time which the company failed to adopt in its operations. Blockbuster
leaders failed to recognise the fast changes in video rental market as a result of disruption.
Management of Blockbuster focuses on attracting more customer by improving operational
performances which delays the adoption of innovation in operations (Pinninti and Bhanuprakash,
2021). Over time, innovation has proved to maintain competitive advantage for businesses. It is
important to do deep research and apply advance technologies to business operations and
services which are transforming market of competitors in market and provides various
opportunities to do something different. An organisation should have innovative leaders so the
company never have to face failures. While most of the stores of Blockbuster saw huge rises in
sales, rise of Netflix creates many challenges for the company. Poor execution of business
services and charging extra cost from customers if they delays to give the rental DVDs proves to
be one of the significant factor for Blockbuster failure.
Blockbuster could adapt innovative practices in their operations very soon which can help
in surviving in entertainment industry. In the era of digitalisation, where people are willing to
rest at their home and watch a movie, Blockbuster was providing CDs at rent which hampers
them business processes in a long run. It is significant for organisation to bring innovations with
time in order to being creative and secure their market position as well as gain competitive
advantage. Innovations which managers of Blockbuster can bring is the use of digital platform
like many streaming channels such as Netflix, Hotstar and Amazon Prime. Blockbuster's
obsolete business model is a biggest reason for failure. Managers of Blockbuster had argued that
home steaming can nor be successful in future and does not have prominent presence in
entertainment industry (Scriba, Jette and Santalucia, 2020). However, in its earlier years,
Blockbuster have bring new innovative practices by launching barcode system which helps them
3

to keep an eye on lucrative late fees. Blockbuster can come with an innovative practice of
bringing video-on-demand platform which helps them to keep their customers engaged with
them for a long period in exchange of a specified fees. Blockbuster could bring innovation
through adopting varied digital channels and social networking sites for marketing their
activities. They could bring innovations through hiring an effective and skilled workforce which
helps them to give more creative ideas. Another innovative practice that Blockbuster could bring
in their business operations for being competitive is to develop their video games and stream this
on their website or channel. It would be helpful for them to engage youth and teenagers with
their brand as it is the era of tournaments of e- games. If they would exist till the global
pandemic, managers of Blockbuster can bring innovations by bringing new offers and packages
to use their digital streaming platforms effectively. They could bring innovations in their
payment receiving system. They could provide innovative practices in changing their digital
marketing changes.
At the time of global pandemic, when people do not have permission to leave their house
and go out, they get their entertainment through digital streaming channels through movies and
web series. At that time, Blockbuster would have chance to engage more customers through
digital channels. Managers of Blockbuster have found difficulty with rapidly changing and
dynamic market trends in a quick manner. They have failed due to improper execution of their
processes (Tüzün and Topcu, 2018). They used to charge high fees for rented DVDs as
compared to other brands. Their failure of not bring innovations has hamper their operations and
do not leave them in situation to compete with their rivals. Their business model become
obsolete and outdated which has compelled them to bring innovations. Managers of Blockbuster
try to innovate video-on-demand platform but failed in its testing procedure from their
customers.
CONCLUSION
As per the report presented above, it has been concluded that management and
administration of operations are two major areas of organisations. It involves and oversees every
activity of business from planning to distribution to brings efficiency in operations. But bringing
innovation is also an equal part that companies need to adopt in order to cope up with their
rivals. It has proved to create competitive advantage for those companies who keeps their
business products and services up to date. The company Blockbuster puts great importance on its
4

operations performance which firstly increased their sales and resulted in more growth. But
slowly the revenues of company begins to decline as they failed to adopt innovations. This is the
result of poor planning and lack of leadership in Blockbuster.
5

REFERENCES
Books and Journals:
Camarena Gil, E., 2019. Operations management GADE. Chapter 4: Exercice Kraljic Matrix.
Fordham, S., 2021. Management and Operations. In Learning SD-WAN with Cisco (pp. 377-
399). Apress, Berkeley, CA.
Nunneley, G., 2021. Manual of Operations for a Large-Scale Event During COVID-19.
Osejo-Bucheli, C., 2021. Discovery of blind spots in the epistemology of studies in operations
management regarding the curriculum of humanism in administration. Available at
SSRN 3812005.
Pinninti, V. R. R. and Bhanuprakash, T. V. K., 2021. Contract Management for Outsourced
Operations. IUP Journal of Operations Management. 20(3). pp.7-20.
Scriba, T., Jette, A. and Santalucia, P., 2020. Mainstreaming Transportation Systems
Management and Operations. Public Roads. 83(4).
Tüzün, S. and Topcu, Y. I., 2018. A taxonomy of operations research studies in healthcare
management. In Operations Research Applications in Health Care Management (pp. 3-
21). Springer, Cham.
Wamba, S. F. and Queiroz, M. M., 2020. Blockchain in the operations and supply chain
management: Benefits, challenges and future research opportunities. International
Journal of Information Management. 52. p.102064.
6