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Strategy: Netflex & Blcokbuster

Kirkpatrick (1997) explains that Blockbuster Inc is a company that deals with operating rental stores for DVDs, Blu-ray and video games. It is based in Texas, US and has opened more than 9,000 rental stores in 25 countries. The company was founded by David Cook in 1985 and the company logo was developed by Lee Dean. The company has the strategy of opening as many rental stores as possible to increase its sales. In the US market Blockbuster has opened 3,750 stores and is planning to open as many as 10,000 by the end of 2010. In the international market the company has opened more than 2,600 stores. Online DVD rental services have been established to place the company in a competitive position. The company has made several mergers and acquisitions in the industry to achieve a competitive edge in the market. Blockbuster has used the strategy of providing its customers with the most recent movies in the market. A few rental copies are retained after the first year of release. This strategy was established to maintain the modern movies in the market and increase customer satisfaction. Movies which have been viewed are rented at a lower price. Previously rented movies as well as used DVDs are sold after a given period of time. To maintain work ethics Blockbuster does not rent pornographic movies in any of its stores. Movies which are youth restricted viewing titles are not sold to children under the age of 17 unless they have permission from their parents (Blockbuster MediaRoom, 2003). Its headquarters are in Scotts Valley, California. Netflex develops and maintains a wide range of personalized video-recommendation for the customers to rate and re view the products of the company. This strategy has given the company a strategic position in the market and has achieved a competitive edge against its rivals such as Blockbuster Inc and Apple Inc. the company mails more than 190,000 discs every day to more than 670,000 monthly subscribers. E-commerce is the main strategy that the company has adopted to expand its market and to dominate the market. Netflex spends a lot of money in posting DVDs. It has delivered more than two billion DVDs to its customers. The company has been listed in the top 100 retail satisfaction index. Customer satisfaction has been the main target of the company (Liedtke, 2005). Customer survey is done by the company to create awareness about the satisfaction levels of the customers in the market. Customers order the DVDs and the Blu-ray movies via the internet and the deliveries are made through regional warehouses of the company. In US there are more than 50 shipping points for the products of the company to enable the company distribute its products efficiently. Netflex allows its customers to use the rental queue system whereby the customer rents the movie after mailing a previous movie back to the company. This system ensures that all customers get the available movies without delays. In 2007 the company expanded its capital base to increase the number of movies a person can rent at a time. Customers can now rent three movies at once (Talley, 2009).Netflex was established as an online pay-per-rental company. The company has made several transformations in the online marketing of its products. It started by using an older version of pay-per-rental model in 1997. In 1999 the company introduced the monthly subscription model. The single rental system was abandoned in 2000. Netflex has introduced the customer video-recommendation to rate the progress of its product delivery to customers. Use of modern technology in developing products in the market has been a major strategy that the company has majored in. independent film distribution is a strategy that has been adopted by the company to capture a large number of customers. Red Envelope Entertainment division has promoted the use of independent film distribution. The company has announced that it intends to close the Red Envelope Entertainment to reduce competition in the market. In 2002 Netflex issued its Initial Public Offer and sold 5.5 million shares at US $15.00 per share. The company has established the strategy of employee oriented culture to motivate its employee and encourage innovation in the market. Netflex has been very successful in the use of e-commerce. The company can mail more than 190,000 discs a day to 670,000 subscribers (Liedtke, 2005). Blockbuster has followed the strategy of opening many retail stores to expand its market. The company started by acquiring sound warehouses and music plus retail chains. It also created Blockbuster Music. The company merged with Viacom in 1993 and in 1996 it retained its original status. Blockbuster acquired Movie Trading Company in 2002. This enabled the company to study potential models of operating the business of DVDs and game trade. Game station was acquired 2002 by Blockbuster. In 2004 Blockbuster launched its online DVD subscription after separating with Viacom. In the recent years the company has lost a lot of its market share to competitors. In 2007 the company elected James W. Keyes as the president as one of the strategies to recover its market share. Keyes has introduced the strategy of online service access. Despite the factor the former president of the company, John F. Antioco, had established the same strategy, Keyes has established several structures to ensure the strategy succeeds. Blockbuster continues to buy retail stores to expand its market. The company has also partnered with NCR in 2009 to install Blockbuster Express Kiosks to increase competition with Redbox. Due to the decline in the market share the company as well as the internet piracy and lack of government support, Blockbuster has closed all its retail stores in Portugal in the beginning of 2010 (Blockbuster MediaRoom, 2003).Netflex has the potential of expanding its market to the international scene since it has not yet exploited the global market fully. Since the company is using online retailing services it can market its products in the entire world. There are many potential customers in the international market who can increase the market share of the company (Netflex, 2008). There are several risks associated with online marketing. The competitors can access the strategies used by the company to compete in the market. Since the online information is available to all people competitors can use this as a strategy to drive the company out of market. The competitors have threatened the company by establishing differentiated marketing approaches which have reduced the market share of the company (Netflex, 2008). Blockbuster has several opportunities to exploit. The company has existed in the market for a long period of time more than any other competitor. The large number of retail stores established should be operated efficiently to increase sales and reduce marketing costs. The online retail services have not been fully exploited and this increases the opportunities for the company to exploit (Blockbuster MediaRoom, 2003). Blockbuster encounters the risk of competition in the market. Since the company has survived in market for a long period of time several competitors have established new technologies in marketing. The company faces stiff competition due to lack of use of new technologies in the market. The price war in the market will create a great risk of driving any of the companies out of the market. Internet piracy is another risk that the company has encountered in the market. The retail stores in Portugal have been closed down due to high risk of internet piracy. Lack of government support from the countries in which the company has established its retail stores are another risk.The strategies Netflex has used have attracted high com petition from the industry. Domestic and foreign competitors have penetrated the market due to the successful implementation of the strategies by Netflex (Netflex, 2008). However, none of the competitors have approached Netflex in terms of market share or sales revenue. Wal-Mart established its online rental services in 2002 but was unable to maintain itself in the market and had to quit in 2005. Amazon.com is another competitor in the market which has made efforts to follow the strategies of Netflex. Netflex has encountered price wars with Blockbuster Video. This has made the two companies lower their prices to maintain their competitive position. Other in-store video rental chains have adopted similar strategies to those of Netflex. For example, Hollywood Video established Movie Value Pass services in 2004. Redbox Company uses kiosk approach in its marketing strategies. Redbox has established a different strategy from that used by Netflex and Blockbuster by creating self service kiosks where customers can pick and return DVDs (Mcquade et al 1996). The strategies by Blockbuster have increased the customer base due to deliver of the products directly to the customers (Talley, 2009). The retail stores have increased the number of customers and this has made the company maintain its market share. However, the large scale opening of retail stores will become more expensive to the company and this will reduce the profits of the company. The strategy to open many retail stores in different regions will increase the sales in the long run and this will reduce the profits of the company. The inefficiency of opening many retail stores has been observed when the company closed several stores in US in 2009. The strategy to use online market similar to that of Netflex Inc will increase competition in the market and this will reduce the profits made by the industry. Blockbuster should invent another strategy to increase sales and attract more customers. The strategy used by Blockbuster by opening many retail stores in many countries has attracted poor government support in the countries it is operating in. Portugal is one of the countries which have failed to stop internet piracy. The poor government support has caused the company to close its retail stores in the countries where there is poor government support (Talley, 2009). The price wars that Netflex and Blockbuster have experienced in the market will affect the sales volume of the two companies. Competition leads to reduced market share and the customers are able to obtain products at lower prices. The price wars will reach a certain level where the firms will no longer compete on prices but on other aspects. When the companies will reach the minimum possible prices that can be reduced other factors will be considered in the competitive environment. Such other factors to be considered will be quality, customer loyalty, and brand image customer satisfaction among others. In a free market the forces of supply and demand dictate the direction of the market activities. The government has no control on the marketing strategies of the competitors as long as the law is protected. Since the two companies are operating on a free market environment the competition will continue until the best suited company will survive in the market (Epstein, 2004). Improved quality of the products is created when competition exists since the competitors try to attract the customers through different strategies. The increasing competition will enable the companies in the industry to differentiate their products. Product differentiation is a strategy that is adopted by many companies in a competitive market. This strategy enables the competing firms provide a variety of similar or slightly different products to the customers. Innovation in the industry will be enhanced to create new products in the market using technologies. When competition increases in any market the rival companies adopt different innovative strategies to create differentiated products which will place them in a competitive position in the market. The increase in the use of online retail marketing has attracted many competitors and this has reduced the profitability of the industry. Other companies have started to invent other marketing strategies to compete in the market. The companies need to invent other strategies to market their product. The use of technology will of great importance in developing better marketing strategies. New technologies should be researched on to develop better strategies. The companies should develop their departments of research and development to enable them comes up with new strategies in the market. Customer survey should be intensively researched on to enable the companies match the market demand with the marketing strategies. All stake holders in the industry should be involved in the development of the best marketing strategies. This will help develop a market oriented marketing strategies which will place the companies in better positions than their competitors. The use of government regulations and legal systems will be required to protect the companies against internet piracy and other unethical practices in the market. Development of partnerships among the companies will be required to eradicate the unethical practices in the market. The price wars should be avoided through establishment of cartels or price negotiation rounds to agree on the most suitable prices which will place the companies strategically in the market (Epstein, 2004).

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