Netflix vs Blockbuster Hbs Case Stufy

1. When evaluating stock decisions for blockbuster, should be divided into 2 separate decisions could feature been made, depending on the distributor point in the test case. At the outset stoppage of the text, 1997-2002, Blockbuster is the undisputed market leader (2, 1) of a giant, fragmented and starchy industry, it has superior access to suppliers (brought the hottest titles faster than anyone in the industry) , this was its inwardness cable.Blockbuster had a wide coverage on a national level of stores (2, 2) , stretch top executive almost 70% of the U. S population within a dead drive length, and were recognized as the most powerful brand in the industry by 90% of the population. Furthermore it sustained a maturement rate of sales growth within stores within that period on 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 convinced(p) and solid decision.However the tide is changing at 200 2 following the hold water of Netflix, Blockbuster strategy to ignore and mock at the treat or else 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 moving pictures) generate of a company which lacks the intro to face the new treat and the ability to understand the new customer taste (Movies as diversion quite a than special occasion).The late response in entering the online rental business caused severe financial losses to the company due to stiff information curve (stock, suppliers), marketing expenses, price war and giving up on late fees (10,1), all along while keeping its conventional personify structure, with an expensive 10 people per store staff (2,2) . Therefore I would hold the stock at short starting 2002 , Blockbuster safe doesnt seem like its understanding the new market, instead of being innovative they are fighting a losing b attle and react recently instead of initiating in the areas where Netflix 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 statistical distribution technique which excite never been tasted in full scale (3,4) and without a proven track of handling a huge inventory, the company did jumble 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) , development an highly advanced recommendation system (5,4) and allowing for user rating have highly differentiated the companys service at the direct points in which Blockbusters service were lacking.Furthermore, the collaboration with major studios (6,1) and with the USPS (8,1) have improved Netflixs soft spots and allowed for the service to improve coarsely and the have a huge growth potential (opening the entire variety of pictorial matters for rent not just expunges , reaching 90% of its subscribers in a single day), the innovation process in addition shows in financial status, Netflix is performing at great annual rates starting 2000, of doubling its subscribers number , maintaining a despotic 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 operative 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 limited amount of advice (2, 5) from the staff present at each store.The costumers were supposed to rent the movie for a movie n ight and return it as quickly as possible. Netflix initially set up to perform the same task represent costumers with the movies they were looking for before logging of the site and in addition bring out them with some 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 heighten features not offered by blockbuster. The proprietary recommendation system developed (5,3) by Netflix allowed to use movies as a taste base product, meaning that Netflix started offer 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 real 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