Harshit Negi

500109446
MBA LSCM1

ASSIGNMENT 6

1. In what ways did Blockbuster achieve better strategic fit than local stores?
Blockbuster started with the business model of getting massive physical
storefronts in high-traffic neighbourhood locations. By building stores that
were larger than existing rental stores, Blockbuster offered customers a wider
alternative of flicks and higher product available. Movies were generally rented out for
concerning $5 for 5 nights. Given that existing stores were abundant smaller, albeit they
carried solely many hundred titles, it had been terribly tough for them to supply
available of those movies given the high price of inventory (VHS tapes
oversubscribed for $60-$80 every at that time) and house. Blockbuster designed
larger stores that aggregate demand across a wider space than a typical rental store. The
larger store allowed Blockbuster to supply bigger selection and higher available
at lower price than rental stores. The aggregation of inventory and physical
house allowed Blockbuster to fill demand from its customers higher than existing rental
stores.

2. How much implied uncertainty do Netflix and Redbox face? What levers
do they use to deal with this uncertainty?
The implied uncertainty is within the technology. More people are streaming their movies
versus renting them from the kiosk or through mail order. If they two companies don’t
change with the times of technology they will definitely crash and burn. Price points of the
rentals and purchase of the DVDs. While Redbox offers fewer titles available in their kiosks
at any single time than either Netflix does or Blockbuster did in its prime, but rotates titles
pretty quickly to allow customers a variety of titles to choose from. Redbox also offers
customers around 200 of the newest movies, which is another appealing perk to customers.
Secondly, Allowable Response Time. Netflix’s mail service allowed customers to replenish
their rentals via conventional mail which was tolerable to most customers, though
unallowably slow for early adopters of newly released titles. Netflix’s digital service is nearly
instant response assuming the title they are searching for is in stock at a locally accessible
kiosk. Third, ease of renting: Redbox kiosks are inconvenient locations making it easy for
customers to rent a movie. With the kiosks, the customer no longer has to make another stop
at the nearest Blockbuster to rent a movie. Rather the customer can just rent the movie after
having lunch or dinner at McDonald’s or picking up a prescription at Walgreens for
example. Netflix also eliminates a trip to the store by allowing mail order and internet
streaming. Lastly, the desired rate of innovation: Netflix offers the customers the greatest
 technological advantage of the three options-new titles is instantly available via its digital
download service. Redbox offers an online hold option in its service allowing customers to
utilize an app for reserving titles in inventory to pick up later. They have made advances in
their supply chain technology than Blockbuster facing high implied demand uncertainty.

3. How did Netflix and Redbox achieve better strategic fit than Blockbuster?
Netflix and Redbox achieved higher strategic work than Blockbuster by targeting totally
different segments of picture rentals. Whereas Blockbuster tried to supply its customers each
new releases additionally as older movies, Netflix and Redbox divided the market among
themselves. Netflix primarily targeted a large style of older movies whereas
Redbox primarily targeted a way smaller style of new releases. Blockbusters decide to serve
each markets multiplied its price for each new releases and older movies. In distinction,
Netflix was able to offer selection to its customers a lot of effectively (100,000 titles instead
of five,000 at Blockbuster) and at lower price through its mixture model of shipping from
DCs. Redbox was able to offer new releases at lower price than Blockbuster by mistreatment
merchandising machines. Whereas a Blockbuster store carried around three,000 titles that
weren't recent releases, this delineated a really little fraction of recent movies. In distinction,
Netflix carried a really wide selection of titles however in centralized distribution centres.
Netflix had regarding sixty distribution centers (at its peak of mailing DVDs), wherever
DVDs were processed and shipped everywhere the us. Thus, Netflix had abundant lower
facility prices than Blockbuster whereas providing a way higher style of movies. Only one
wall at a Blockbuster store was dedicated to new releases (which implanted a big fraction of
the rentals). on condition that Blockbuster was paying for the full store, this multiplied the
ability price per rental as a result of most of the house was employed by different movies that
rented at a way lower rate than the new releases. Redbox, in distinction, used terribly low-
price merchandising machines (with low mounted installation prices of $15,000) in high
trafficked locations like grocery stores, supermarkets, and malls to rent a similar recent
release (much lower PP&E/SG&A) compared to Blockbuster. As a result, the ability price
per rental was abundant lower at Redbox compared to Blockbuster. Inventories at
Blockbuster were high (relative to revenues) attributable to the decentralized nature of its
operations. especially, carrying several low-volume rental titles (after all, there have been
maybe solely regarding thirty movies at any given time that were dealings in massive
quantities) exacerbated the inventory needs. This multiplied the price of each inventory and
house for Blockbuster. Netflix carried a wider choice of titles in its distribution centres,
however was able to carry lower inventories attributable to aggregation at its DCs. Redbox
stocked with freshly discharged DVDs, that rented in massive volumes with comparatively
inevitable demand. As a result, there was abundant less inventory sitting around. every
Redbox booth carried on the point of 630 DVDs comprising two hundred of the most recent
picture titles. every DVD was rented out on the average fifteen times, when that it absolutely
was sold-out to the client. Netflix used a centralized provide chain structure to supply
selection within the sort of recent movies (high uncertainty) to its customers at low price.
Redbox used a decentralized provide chain structure to supply foregone conclusion within
the sort of new releases (low uncertainty) on the point of its customers at low price. a mixture
of the 2 centred provide chains performed considerably higher than the Blockbuster
provide chain as illustrated in a very comparison of the financials in Exhibits one and a
couple of (in the absence of Redbox financials, we have a tendency to use Coinstar
financials).