Death by Internet

Today we learn that Blockbuster in the US has filed for Chapter 11 bankruptcy protection while it seeks to restructure its debt – essential if it has any chance of surviving. The restructure will reduce the debt from circa $1bn to around $100 million and it is hoped this de-leveraging will enable the company to compete with rivals; something that it has not been able to do in recent years.
Consumer preferences have changed and technology has advanced – demonstrating that in order to compete companies need to focus externally and on the business realities rather than just internally.
Rivals such as Netflix have taken advantage and stormed ahead as they have harnessed the opportunities presented whilst Blockbuster has struggled to service its debts and lack of liquidity becoming inwardly focused just to stay afloat.
The debt restructure will allow the Dallas based firm to continue trading although it is expected that a significant number of stores will need to close. At this point the separate legal entity in Canada is not included in the Chapter 11 move and continues to trade as normal.
So what hope is there for Blockbuster and how will it use the access to capital and greater liquidity to provide adequate returns for its shareholders? The Internet and digital streaming are here to stay and with ever faster download speeds the user experience is set to improve even further.
Jeffery Stegenga, Blockbuster’s chief restructuring officer, said that Blockbuster can differentiate itself from rivals as the only company to provide products across multiple delivery channels, with access to 125,000 titles. Anticipating how the external market will evolve is key as is the requirement to consider the market linkages, strategic partnerships and the roles that suppliers, buyers, new entrants and substitutional products have to play, so pertinently described by Michael Porter back in 1979.
As we see Blockbuster’s strategy so blatantly exposed by this filing, it is a good reminder for other businesses to spend due time and consideration on strategic planning. It is all too easy to be consumed with internal focus and administration. Holding regular strategic planning sessions allows a business to reassess the environment and future opportunities and threats.
If it is some time since you carried out a SWOT or considered Michael Porter’s model as it applies to your industry then get a date in the calendar and take time to validate your strategy before a rival’s strategy invalidates yours…