At the time of the case I would have been short on Blockbuster. The primary reason for this is that Netflix had entered a market seemingly dominated by Blockbuster and by employing a differentiation strategy and innovating, they were able identify a market that that no one had thought previously existed. During the time of the case, Blockbuster seemed like it was in still the growth stage but was also clearly approaching maturity in the industry life cycle. Once a firm reaches maturity and doesn’t pursue some type of incremental innovation strategy, the most likely next step is decline.
On the other hand, Netflix was in the introduction phase of its industry lifecycle, having created a mail-order rental business with several differentiating aspects from a regular brick and mortar video rental chain. The fact that Blockbuster was slow to acknowledge Netflix as a potential threat at first and subsequently trying to imitate their business model speaks to the fact that they were desperately trying to “catch-up” and being reactive instead of innovating proactively. A clear example of this was one of Netflix’s hallmarks, the non-existence of late fees. When Blockbuster tried to imitate this feature, it did not have the intended consequences. Instead of increasing company performance through increased subscriptions, it resulted in tremendous financial losses for the firm.
Also, as soon as the technology for video on demand systems began to appear, observers claimed that it would probably be the “next big thing” in home video. Netflix pursued a strategy of setting itself up for the future by pursuing this type of distribution channel. On the other hand, Blockbuster was still vying to retain some of its old business practices while trying to catch up to Netflix’s innovations. Clearly, Netflix’s corporate strategy and culture had a much more long-sighted approach, leading