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Blockbuster's Management Strategy Analysis

Info: 8019 words (32 pages) Dissertation
Published: 10th Dec 2019

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Tags: ManagementBusiness Analysis

Antioco and management team refused Reed hastings offer to buy Netflix for $50 Million. In the same year blockbuster made a 20 year deal with the Huston based internet provider company company named Eron. However, the deal was called off within a year and Eron filed for bankruptcy. In the next few years Netflix started to gain market share from blockbuster. Netflix introduced a subscription model and delivered DVD’s by mail.  Netflix charged $16.99 for a month and allowed customer to choose 3 movies without worrying about late fee whereas Blockbuster used to charge $5 for one movie. Netflix also provided new movie to the customer when they returned an old one. With late fee abolished and home delivery Netflix started to gain blockbuster customers.  Blockbuster also started to introduce a monthly rental fee but it didn’t stop the late fee as it was a huge part of their revenue. In 2004 Blockbuster also came up with its own delivery by mail service, however, by then Netflix had already got more than 3million subscriptions. To improve the profits blockbuster also abolished the late fees but it didn’t help in recovering the losses as blockbuster had already lost its customers. Blockbuster continued to hang on its retail stores but people had already found a better option in Netflix and Redbox like companies.  Blockbuster strategy to not change its business model with changing times lead to its bankruptcy.

2. Social and Economic effects of the management decisions

Over the course of time, there were various social and economic effects of the decisions that were taken by the management of Blockbuster Inc.

Economic Effects:

The management decisions taken by blockbuster had various economic effects as well. In the initial years after blockbuster was founded in 1985, the company’s sales were increasing and because of that, it was gaining huge profits from 1985 to 1994. Acquisitions of local vendors and expansion of the business to foreign countries were an important aspect of increase in the sales. In 1994, Viacom purchased blockbuster for $8 billion. However, after this merger blockbuster sales got affected. One of the main reason for the affected sales was the change in leadership within the company. The company transformed the rental stores as selling t-shirts, toys, snacks, books, magazines, and CDs along with renting and selling videos. By the end of the year 1996 Blockbuster worth fell to $4.6 billion and the price of its stock fell to 50% of its value in 1993. In 1997 under the leadership of John Anitco blockbuster re focused its attention on selling and renting videotapes. This move helped company chain to increase its sales again, and its share of the home video retail market increased to 31 percent. However, the revenue of Blockbuster was increasing the company still reported losses, of $336.6 million in 1998, for example, compared with a $318.2 million loss in 1997.  In 1999, Viacom made blockbuster public and were able to raise $465 million value for the company.  In 2000, Netflix offered to sell its stake to blockbuster for $50 Million but the top management refused Netflix offer and instead focused on expanding their brick and motor business model. Later in 2002, they purchased videogame competitors like Gamestation, 30 and employed various programs to promote in store rentals. By 2002, Blockbuster had placed video game mini stores representing all the major contemporary gaming platforms in 90 percent of its stores. Blockbuster never gave serious attention to its video rental competitors like Netflix and Redbox when they came up with subscription and kiosks business model respectively. Instead, Blockbuster continued to charge its customer with late fees as it was a huge part of their revenue model. In 2000, Blockbuster collected nearly $800 million in late fees, accounting for 16 percent of its revenue. Blockbuster lost focus of what its core competency was. It focused more on the types of products than on the delivery of the product. While Blockbuster was trying to figure out the best pricing strategy such as late fees, extended rental periods, rent to own, its competitors were developing new methods of delivery of the product such as mail delivery, video kiosk, and on demand rentals. These all actions led to decline in revenue and sales for blockbuster from 2002 to 2011, which had various economic effects. In 2004, Viacom sold its remaining 82% of Blockbuster shares. To cover losses Blockbuster had to divestiture many of its acquisitions and subsidiaries like DEJ Productions in 2005, Game Station Ltd for $150 Million, Rhino Video Games chain to GameStop Corp. and subsidiaries based in Australia in 2007, In 2008 they sold their operations in Chile. In addition, in the year 2009 late fees had plunged to $134 million, or just 3 percent of the company’s revenue. The inability to change its business model according to the time and ignoring the competition from early stages led the management of Blockbuster to make various bad management decisions. The series of bad investments resulted in an overall debt of $1 Billion. The lack of vision and innovation declined the value of Blockbuster from $8.4 billion in 1994 to mere $240 Million when Dish network purchased it in 2012.

Social Effects:

The decisions taken by the blockbuster management did had various impacts socially. For example in 1994 when Viacom acquired Blockbuster, The new management decided to move the headquarters from Fort Lauderdale to Dallas. Due to this decision, some 800 employees working for the company and more than 600 people working within the associate companies lost their job in Florida. In addition, the company policy of penalizing the customers with late fees had adverse effects on its customers for a very long time. In fact, this was one of the main reason Blockbuster loose there market share when Netflix introduced the subscription model and abolished the late fees charges. Although, Blockbuster was facing a tough competition from the rival companies like Netflix and Redwood, Blockbuster continued with their “Brick and Motors” business model and did not change their late fee policy. Due to this decision blockbuster started to lose their customer base, which ultimately led to added to loses. Since, Blockbuster was facing tough challenges in meeting the profits; they started closing their stores, which resulted in people losing their jobs. In an estimated report, around 25,500 employees worked for blockbuster and among them 7,700 were permanent. Blockbuster continued to lose business and most of these employees lost their jobs and the company itself filed for bankruptcy in 2010 and ultimately stopped its operation in 2014.

Strategies adopted by their competitor ‘Netflix’ to changing trends and the results of it.

Netflix owners were aware of the inconvenience that the customers faced while renting a movie. Read Hastings the founder of Netflix himself had to face the inconvenience of paying a late fee to   blockbuster. To provide a better customer experience the Netflix founders Marc Rudolph and Hastings came up with the concept of mailing the rented DVD to the customer. They successfully tested it and implemented the same when they started operations in 1998. In the next year Netflix introduced the subscription model as per which at the price of $16.99 Netflix offered a one-month subscription to the customer and a choice of 3 movies that would be delivered to him/her as an exchange for the previous one. The main advantage of this offer was that there was no late fee attached with the rented movies. The customer was not liable to return the rented movie under some time limit.  This feature was very much appreciated by the customers. Due to this Netflix was able to gain market share and build their brand name. Netflix also used to provide ratings for the movies based on the customer’s reviews and viewing history. This helped to be more interactive with end user. Netflix also implanted one of blockbuster strategy of keeping stock of less popular movies in their inventory. Just like blockbuster, for Netflix the major profitable movies are the arthouse movies or some foreign movies. Although, Netflix had to pay higher fees to the studios for getting their material but this was not a big problem as Netflix used to save lot of capital since, it did not operate through stores. One thing where Netflix stand out from Blockbuster is that it understands the changing requirements of the customers with changing time. Netflix continues to upgrade its business model as per the requirements of the customer. Like in present times as internet is, continuously evolving Netflix is focusing on video streaming through internet. Netflix is trying very hard to expand itself even if it required to change their working style altogether.

D. Underlying reasons causing the failure of the strategies

1. Failure to adapt to disruptive technology

Disruptive technology is a term used in a business setting to refer to an innovation that requires companies to change their business model completely from the existing one, which results in a disruption of the existing market and replacement of established products. Disruptive technology tends to be produced by start-up companies. Leading companies in the market would not pursue disruptive innovation because it is not profitable at first, and would cannibalize their core business. Embracing and implementing disruptive innovation may hurt well-managed companies because it would involve great risk in their business models. However, once it deployed in the market, it has far-reaching power to the existing market to the degree that it almost destroys the existing market and create a whole new one. Also, because disruptive technology permeates the existing market at a great rate of speed, when companies consider implementing disruptive technology, timing is critical to determine its success or failure.

One of the major reasons why these three market-leading companies, Kodak, Blockbuster, and Nokia, ended up failing in their businesses is because they ignored the fact that how new technology can change the existing market completely so fast. In the case of Kodak, even though the engineer developed the very first digital camera in 1970s, the top management failed to foresee a well-timed introduction of Kodak’s digital camera. When they introduced their digital products aiming at the mass market in late 1990s, they had to face excessive competition. It was too late for Kodak to hold a competitive position in the digital camera market. Even worse, Kodak overlooked the disruptive force affecting their industry. Kodak did not expect that the moment would come so fast that their customers do not need to print images at all. Therefore, Kodak tried to keep their core film business even when they started to compete with other digital camera manufacturers. For example, when Kodak acquired Ofoto, which was a photo sharing website, Kodak used the site to get more people to print out digital pictures. Kodak wanted to make the best use of its printing and film business instead of pioneering new markets. If Kodak had rebranded Ofoto and promoted it as life networking tool to the people by enabling them to share pictures and post links, Kodak could have avoided bankruptcy. However, Kodak totally missed that.

Blockbuster is the same case as well. The business model of Netflix was to earn its revenue from monthly subscription fees. It was brand-new concept for customers to pay monthly flat fee and reach unlimited rentals without late fees. The management of Blockbuster was also aware that Netflix’s new business model has a competitive advantage absorbing their customers, but they rejected embracing the innovation because late fee was a huge part of their revenue. Like Kodak, Blockbuster also failed to see the disruptive potential of Netflix’s new business model.  As a result, blockbuster abolished the late fee policy later, but it was too late to capture leaving customers and recover the losses. The top management of Blockbuster decided to concentrate on retail stores to attract customers. However, it turned out to be completely wrong strategy later. When Netflix successfully expanded its business to streaming media market in late 2000s, Blockbuster had to spend huge amount of operating expenses to manage over 5000 stores.

Nokia made the same mistake. Nokia underestimated the influence of disruptive technology has, and failed to foresee how fast the new technology could replace the existing market that Nokia dominated. Nokia, once the world is leading mobile company, failed to respond to the iPhone at right timing. Nokia’s Symbian platform aged compared to iOS and Android. Nokia did not expect that how quickly people changed their phone to iPhone. Because the competence of Nokia was more related to its operating system which was designed mainly for calling and sending text messages, it was hard to break through new market where customers started to buy thinner and cheaper smartphones having new features of camera, music players and apps.

All these companies had established set of competencies, which brought them a great amount of revenue. It would have been very difficult for them to leave the existing market that they dominated for a long time and to pioneer a new market where they cannot capitalize on their strengths anymore. In particular, a large company would struggle to allocate their time and financial resource to breakthrough innovations. However, because the impact of disruptive technology is so big and fast, once companies miss the right timing, they would face a barrier to enter a new market and end up failing in their businesses.

2. Corporate culture

After deeply analyzing the history of the three companies, that is Kodak, Nokia & Blockbuster and learning about their strategies, we can make an assessment that these three companies had various similarities in their respective corporate culture.  All the three companies at given point of time-captured majority of the market globally. All of these companies were leading brands in their respective fields and were the most profitable in their area of business.

Based on the findings in the above section the following can be concluded regarding the corporate culture of all the three companies:

First, the management of all the three companies lacked courage to take risk and change the respective business model since they did not want to lose their monopoly. As they had control over all the market, they resisted the change. For example, in the case of Kodak, they were the first company to develop the digital camera in 1975 but the management forfeited the model and never developed it.

Secondly, these companies lacked the vision to foresee the future trends and changes in the market. For example in 2008 when Apple, introduced the smart phone, Nokia had the majority of the market. They could have collaborated with google to develop android operating system on their devices or developed their in-house operating system Symbian to be compatible with smartphones. They had the required capital and capabilities to move forward and develop these elements but instead Nokia chose to continue with their old technology this clearly depicts that they were not able to anticipate the future changes.

Thirdly, the companies ignored their competitors and failed to judge the capabilities of their rivals. For example in case of blockbuster, the company ignored the moves of Netflix and Redbox when these companies introduced the new subscription or pickup model. Instead, they focused on increasing their “bricks and mortar” model and added more stores. Once the subscription and kiosks model picked up strong word to mouth even the loyal customers of blockbuster left the company for the new ones.

In addition to that, they did not give priority to their customers’ requirements. The management of blockbuster continued to charge late fees to the customer although, knowing that it was an inconvenience for their customers. Even when their competitors abolished the late fee policy, blockbuster continued it for four more years. When blockbuster finally started to lose their revenues and abolished the policy, it was too late for them, as they had lost much of the market share. These were some of the similarities that can be found in the corporate culture of the companies mentioned in the report.

E. An era of new technology and change in market trends.

Ironically, each of the mentioned companies Kodak, Nokia and Blockbuster reached to the zenith by embedding new technology and thus creating a new market trend; however, the inability to vision the same led to the demise for these companies. David Cook who was a computer programmer founded blockbuster. Cook used his experience of managing large databases to create warehouse for the tapes and introduced magnetic tapes and barcode for preventing thefts. This helped in blockbuster to maintain huge inventory, which gave blockbuster an advantage over local video rental stores at that time.  However, the management team failed to anticipate the change in market trends because of new technology in late 90’s.

In late 90’s, when DVD was invented Blockbuster continued to rent movies and games through stores. Meanwhile, their competitors like Netflix and Redbox started developing new methodologies like using postal services and kiosks to deliver DVD’s for the customers. In addition to that, Netflix kept on inventing new business process like subscription model and abolishing late fees to improve customer service and create their customer base. Also, Netflix offered video on demand and movies through Internet. However, Blockbuster ignored these tactics and continued to promote their store rental business model although aware of its disadvantages. When blockbuster tried to stop to losing its customers and adopt the above-mentioned methodologies, it failed to do so. Blockbuster was too late and had lost much of their customers.

III. Conclusion

A. Recommendation

1. Avoiding complacency

In most cases, complacency comes from a sense of success. All three companies, Kodak, Blockbuster, and Nokia, were complacent and did not look for new opportunities or take risks. The reason why complacency about a great business success often leads to a fatal blunder is that a big success may blind eye to dangerous threats even when change is inevitable especially for the most of technology companies. One of the common mistake that all three companies made was that they just focused on what they had worked in the past. They did not put that much effort to look for new opportunities and did not watch cautiously the coming hazards either.

The failure of business due to the complacent corporate culture can be also found in Walmart vs Kmart case. In early 1990, Kmart operated almost 2,200 stores. Moreover, location of Kmarts was expensive urban real estate. On the other hand, Wal-Mart sat in pastures outside small towns and picked off the customers of aging mom-and-pop shops. However, in the first quarter of 2017, the number of Kmarts were reduced to only 591. There are many actors that eventually led Kmart to the business failure, the determining factor would be corporate complacency. Even when Wal-Mart surpassed the sales revenue of Kmart for the first time, the CEO of Kmart, Mr. Antonini, took comfort in the fact that Kmart had 600 more stores than Walmart.

Unlike Kmart, Walmart very early focused on computer technology and invest a lot to manage its supply chain. By embracing innovation on the existing supply chain mechanism, Walmart could take benefits coming from supply chain efficiency such as time savings, more cost-effective inventory management, and improved product forecasting. By 1989, Walmart’s distribution costs were 1.7% of its sales, which were less than half Kmart’s cost. While Walmart successfully pioneered inventory tracking technology, Kmart was late to recognized that such technology could be useful. As a consequence, Kmart’s inventories did not turn over nearly as fast as Walmart. Even worse, instead of embracing the technology of supply chain management, The CEO of Kmart, Mr. Antonini, adopted the strategy of expanding the retail stores aggressively. On January 22, 2002, Kmart which was one of the top retail store once, filed bankruptcy.

Some companies like Northwood and Hyundai are intentionally making a great effort to be proactive in dealing with complacency. Their effort can be found in their value statements. For example, the value statement of Hyundai is as follows: “We refuse to be complacent, embrace every opportunity for greater challenge, and are confident in achieving our goals with unwavering passion and ingenious thinking.”

Similarly, there are certain ways for companies to be proactive toward corporate complacency. First, companies need to watch new possible disruptive technology. Because it has power to demolish the existing market, the management of companies should choose right timing to transform their business models and completely embrace the new technology if necessary. Second, the management of big companies can invite outsiders to give honest feedback on what they feel complacent about. Lastly, companies should always try to avoid staying in comfortable zone. The management and leaders of divisions need to ask challenging and less certain questions to employees so that they could cultivate creativity and problem-solving skills.

2. Value Creation- Knowing customer needs

In many cases where companies experience failure in businesses, they tend to simply consider customers as source of their earnings. However, if they want to be a pioneer in whole new market with massive potential of making great profit, they need to be sensitive to customers’ need. All three companies. Kodak, Blockbuster, and Nokia, failed to read customers’ need.

The top management of Kodak could not give up their core business since they were earning huge profits based on that over several decades. Therefore, even when they started mass production of a digital camera, they invested in printing business to induce customers to print their digital images at home. This is the main reason why Kodak failed to make the best use of the acquired company Ofoto. If they had truly understood customers’ needs of enjoying digital images on a screen of digital device and sharing them online, they would have been a pioneer of online social network like Facebook.

Blockbuster also failed to create customer value either. Their business strategy had a fatal flaw in that late fees were their main revenue channel. In customers’ view, obviously, the strategy was unwelcomed. However, Blockbuster could not abandon their late fee policy simply because of its financial gains. When they finally left the late fee policy, it was too late. Netflix, on the other hand, first put themselves in customers’ shoes to figure out what the customer values. That is how the founder of Netflix came up with an idea of flat-fee unlimited without due dates and late fees.

Nokia was not that sensitive to customers’ need either. The underlying reason why Nokia failed can be considered as a factor explaining why Apple succeeded. Apple its full touchscreen and app-based operating system, the iPhone changed the very definition of what a smartphone should be. The author of the article “Why apple is a great marketer (2012, July 10) Forbes, explained the three factors of how Apple has been making a success. First, Apple truly understand customers’ needs better than other company. Steve Jobs said that since Apple employees are empathic and committed to the customer’s experience, Apple could successfully make customers enthusiastic about Apple products. Second, Apple invest a great amount of time observing customers using Apple products and other companies’ technologies. Sometimes, even customers do know what they’ve been really looking for. For example, when Nokia hit the peak, people did not expect for a phone could be go beyond the level where they can exchange text massage and receive a phone call. Customers did not expect that touch screen would be attractive feature of a phone. However, what Apple has done is to integrates customers experience into its design and development process so that customers could find genuine value of their products. It was possible because unlike Nokia, Apple knew what their customers want even before they realized.

To avoid the mistakes that Kodak, Blockbuster and Nokia made and deliver customers value of the product, a company will need to make sure to collect the following information of their customers. First, they need to know who their customers are, what they do, why they buy, when they buy and what makes them feel good about the purchase of their products. Based on the information and customers’ relationship, a company will be able to emphasize the benefits that their business can bring to their customers. Also, they should keep an eye on future market and customers’ lives. This effort will enable a company to anticipate what their customers will need and to provide it as soon as they need it.

B. Risk Analysis:

1. Losing profits in the current market:

There is no doubt that there is a reasonable risk in losing profits if the new product does not performs well in the market. Numerous factors can cause new products to fail.

1. The company cannot support fast growth.

The biggest problem encountered is lack of preparation: Companies are so focused on designing and manufacturing new products that they postpone the hard work of getting ready to market them until too late in the game. Following are some factors responsible for losing profits in an existing market. Below is an example:

Mosquito Magnet:

In 2000 an American Biophysics company launched Mosquito Magnet, which uses carbon dioxide to lure mosquitoes into a trap. The timing was perfect: The West Nile virus scare had elevated mosquitoes from irritating nuisances to life-threatening disease carriers.

Mosquito Magnet quickly became one of the top-selling products in the Frontgate catalog and at Home Depot. But American Biophysics proved more adept at killing mosquitoes than at running a fast-growing consumer products company. When it expanded manufacturing from its low-volume Rhode Island facility to a mass-production plant in China, quality dropped. Consumers became angry, and a product that was saving lives almost went off the market. American Biophysics, which had once had $70 million in annual revenue, was sold to Woodstream for the bargain-basement price of $6 million. Mosquito Magnet is making money for Woodstream today, but the shareholders who originally funded the device have little to show for its belated success.

Here, the timing was perfect since there was a high risk of getting a disease from mosquitoes, but it did not anticipate such a huge response, which shows they were product ready but not market ready.

2. The product falls short of claims:

A company maybe so eager to launch its product that it neglects the quality or problems associated with the new product. The new product should be launched when it is fully ready. Any product should be tested under controlled conditions and a market response should be generated. A survey or promotional giveaways are necessary to get a “feeling” of the market. Based on the results, editions can be made to the product before its final launch. This would save tons of money and efforts.

3. The new item exists in a product limbo:

Sometimes market research is skewed by asking the wrong questions or rendered useless by failing to look objectively at the results. New products can take on a life of their own within an organization, becoming so hyped that there’s no turning back. Proper research of the product and its’ benefits to the users always prove to be fruitful.

4. The product is revolutionary, but there is no market for it.

Again, this requires market research. There could be various great ideas but the product has to be practical in usage and affordability.

2. Losing existing customer base:

It is important to gain new customers. However, that is a small contribution to any business. The core success lies in retaining the existing customers. Below are some reasons that contribute to shrinking customer base:

1. Change too many players. It is tempting to assume long-term customers love your brand. More often than not, they love your employees. Customers do not buy from companies. They buy from people your people. Since relationships are the lifeblood of a small business, do not rotate salespeople, customer service reps, or key contacts unless you have to. Do everything possible to protect and foster the relationships your employees forge. Employees are rarely interchangeable where strong business relationships with customers are concerned.

2. Treat new and existing customers differently. Offering discounts or incentives to land new customers is often necessary, but existing customers can quickly resent the fact their loyalty is not rewarded.

3. Focus too heavily on price. Being the low-cost provider is a definite competitive advantage. Good luck maintaining that advantage. Somewhere, someone is planning to steal your customers through lower prices. Spend at least as much time finding ways to increase value as you do finding ways to lower costs and prices.

4. Push too hard to grow same-customer revenue. Trying to sell more to existing customers is smart, but don’t do so blindly. First know what each customer needs and only then try to meet those needs. Never suggest a product or service a customer doesn’t need.

And never ask, “Is there anything else we could do for you?” unless you already know the answer and are ready to provide a great solution.

Otherwise you’re just pushing, and customers hate being pushed.

5. Accept high employee turnover. While high turnover is a fact of life in a few industries, in most cases employees leave because they aren’t treated well, So do customers. Unless systems truly drive your business, you can’t expect to have long-term customers unless you first have long-term employees. If turnover is high, find ways to fix it. Otherwise customer turnover will always be high, too.

6. Forget what keeps the lights on. Every business has principal products or services that form the foundation of the business. Every business also has key customers that form a foundation. Over time key products and services-;and key customers-;can get taken for granted while newer, sexier, higher profile initiatives get all the focus. Make a list of the customers you can’t afford to lose. Then list what those customers buy. That list is the foundation of your business. Never forget what keeps your lights on.

7. Reward the wrong employee behaviors. This happens most often in sales, like when commission rates are much higher for new customers than existing customers. If that’s the case and I’m a salesman, why should I work to maintain existing accounts when I get paid a lot more to find new ones? That approach only works if your systems ensure someone else takes over the responsibility for forging great relationships with existing customers. Think about the incentives you provide and goals you set for your employees, and make sure they encourage the outcomes you really want.

8. Make problem resolution painful. Policies and guidelines are great for ensuring that employees comply, but a customer with a problem doesn’t care about your policies. She just wants her problem fixed. Let employees use complaint-resolution policies as guidelines rather than rules. Give employees the freedom to make judgment calls. Resolving a customer problem or complaint can help your business establish an even stronger customer relationship when you give employees the freedom to make that happen.

4. Limitations in new business model/ business products:

a) Forgetting about marketing

To neglect marketing is to forget about a whole purpose of the launch. Unfortunately, this is one of the most common shortcomings in a product launch.

b) Not scheduling effectively

Making your product launch successful means mapping everything out to the last detail. Dates, times, personnel, teams, tasks, functions, roles, projects — everything needs to be remembered, acted on, and capably managed.

c) Not sticking to your launch date.

A deadline is important, but you don’t want to let your adherence to a deadline slay your product launch. Launching successfully doesn’t require that you stick to your deadline or die. However, a deadline does help to streamline the process and allow you to maintain momentum.

4.1 Marketing new product:

Problems:

Concept

The first challenge you face when developing new products is choosing a concept that has potential. A good idea is only a first step and often isn’t viable because of cost, production difficulties or regulatory limitations. Your new product development company can only take on projects for which it can establish a reliable path through development, and your team has to learn to recognize such products.

Financing

Developing new products is expensive and risky. A new product development company has to make sure it will receive compensation in line with the risk it is assuming. Common models range from a low-risk one where an inventor pays the company a fee for the development, to one where the company arranges financing with its own resources or with outside investors and receives a share of the profits.

Team

You probably have a permanent team made up of people with varied expertise to evaluate and choose projects, but you need specialists once you are developing a particular product. Assembling a team that can handle the design, create the production drawings, set up manufacturing and identify the target markets for a specific product is challenging. While the work is interesting, long-term planning is difficult, because the success of the project is not certain.

Design

To ensure a successful product development, your team has to design a product that has functionality foreseen by the inventor and attractive to the target market. You must be able to manufacture the product at a reasonable cost, and it has to meet safety regulations. The challenge is for the designers to keep all these aspects in mind while creating a product that will sell.

Production

Your new product design company has to establish limits to its involvement. New product development usually does not include manufacturing products for sale but does include help with setting up the production line and preproduction validation of the design. You have to show that your product can be built for the cost you estimated and that it will work as planned. You may also develop customer documentation and instruction manuals.

Marketing

While you may help with identifying target markets, establishing possible marketing concepts and test marketing, carrying out the marketing plan is usually the job of your client company or the company that will handle the developed product.

4.2 Making the new product scalable

Influencer Marketing

Leveraging industry influencers to promote your brand is one of the least expensive, most effective marketing methods. To begin bolstering an influencer-marketing program, retailers will typically send free products to influencers within their industry or target audience to use and hopefully talk about. The goal is for these influencers to love your company’s products enough to promote and recommend them to their networks and audiences.

Both the influencers you choose and the social channel through which they will promote your product will vary based on industry. For example, if you sell apparel, you might want to look for fashion bloggers with substantial followers whose style aligns with your current line The major benefit of working with influencers is often you send one free product, the image is seen by the influencer’s thousands of followers. Hire a data analyst that can assist your entire team – marketing and then some – to align clear objectives and assess them properly.

C. Business Impacts:

The recommendations provided in the previous section can have the following impacts in the short and long term:

  1. Short Term Impact:

 

Loss in Revenue:

In a Short term by implementing the given recommendations, there might be a situation that initially the company observes depreciation in sales and loss in revenues.  This can happen as it takes time for consumers to become habitual to a new product. If the product is good and is accepted by the consumers then it can have a potential to uproot the existing product. For example, Netflix came up with the concept of delivering movie DVD’s to the customers. Although they initially failed to gain any profits for few years; but when their methodology became popular and received strong word to mouth they were able to invade market share of blockbuster and went on to become a multibillion organization. Another example can be when Apple launched IPhone the first touch phone customers had inhibitions about the touch technology and using a phone without keypad. However, once the IPhone got popular it started a new trend in mobile phone technology, which took out the keypad phones out of the market.  So when launching a new product or new business model companies should give it time to blossom and come into effect.

Increase in total costs

Launching a new product or a new business model can lead to increase expenses of the company. Pitching a new product is a tiresome and time taking activity. It involves months of planning and analysis of market and customer needs. The companies would also have to spend a lot of capital on promotions and marketing of the new product. These all things are necessary to make sure that the new product does not fail. The same goes for implementing a new business model. In this case the organization has to take time in planning to first study the various impact of changing their business model and developing a backup plan if it fails to achieve its goals. Moreover, before implementing a new model the companies need to train their employees and partners the new business model so that they better understand it. These all factors will lead to increase the costs of a company. For example technological companies like Apple, Samsung or Microsoft start to work on a new project about 2 to 3years before its launch. Then they exhibit their product through various expos or trade fair.  Apple even hosts its own event annually where they introduce their new products and provide information about their inline products.  These all activities does have impact on the costs but once they are successful, they can yield much more profits than their total costs.

  1. Long Term Impact:

Increase sales and profits:

If a company is successful in launching a new product or a business model than it can lead to high profits and increase in fortunes for the company. There are many examples of successful companies like Apple, Samsung, Tesla motors and Microsoft. Even the companies mentioned in this study; Kodak, Nokia and Blockbuster they all became leaders in their respective fields after they introduced a unique product or business model in the market. For example, Kodak was the first company to develop film and camera, Nokia first integrated camera with cellphones and blockbuster used warehouses to store the tapes. These all companies offered something unique and productive for the customers that helped to become highly profitable and market leaders of the world.

Market Leaders:

Successfully implementing a new model or launching a new product before other competitors will not only help to gain more customers; it will also help in becoming leaders in the respective fields. In addition, the company that is the first to launch a product or model is in most cases the leader of that field. For example, Amazon is the current leader in the world for e-commerce websites, Uber is the leader for taxi services, Apple the first company to launch smartphones is regarded as the leader in that market and other examples include Microsoft, Coca Cola and Netflix. These companies transform themselves as a brand altogether. The other companies that follow their model do not attain that same respect as the companies that are first to develop a product; like in case of HTC or Pepsi. Although these companies are profitable and are a competition, they do not attain the same level of recognition.  Therefore, the upcoming or present companies that will consider the above recommendations will benefit to make a brand for themselves and will emerge as market leaders.

D. Summary

It is quite ironical that all the companies studied in the report Kodak, Nokia and Blockbuster were founded based on an innovative idea and the inability to come up or follow the same approach led to their demise. This report covers the history of the mentioned companies and the way they climbed to the zenith of their respective business. Then a deep analysis is provided mentioning the factors and decisions that went against these companies. It is discovered that due to the inability of the leaders to foresee the future market trends and not avoiding complacency were the main reasons that led to the downfall of these huge corporations. The corporate culture was also the same for the three companies.

Unfortunately, these companies were late to realize their mistakes and when they tried to make amends the damage had already be done. Future startups can learn from the mistakes of these companies and can avoid committing the same, which are part of the recommendations of this report. Of course, there are some risk involved like loss in sales and losing some of the market share along with the limitations of marketing the new product. However, these risk and limitations can be overcome by proper planning and execution. Moreover, if the organization is successful in launching a new product or business model, the business impacts would be very favorable as they would be the market leaders.

 

 

 

 

 

 

 

 

 

 

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