The Demise of Blockbuster: Supply Chain Case Study
Valencia Golden
BUSI740
Professor Yongli Luoa
24 Aug 2025
Abstract
The case study is about the video rental company Blockbuster and discusses its strategies
from the perspective of supply chain management and strategic fit. The company was started in
the time when video rental was the only option for customers. The firm’s choices were
appropriate for that industry and the needs and expectations of the customers at that time.
However, time passed, and customers and their demands changed, but Blockbuster was not able
to change with them. In the video rental business, other competitors such as Netflix and Redbox
came, and were able to better adapt to the customers’ ever-changing needs. The case is a
demonstration of how important it is for a company to have an appropriate supply chain for its
business and how ignoring the customers’ new demands can cause the downfall of even the most
successful companies.
Introduction
Blockbuster was a video rental company which was very famous and which people used
for several years. It did not, however, adapt to the changes and the world shifted to the digital
ways of renting and watching movies. The firm had a strategic fit at first by keeping stores with
many movies for the public to rent from but did not change its supply chain and business model
to fit the new market. This paper will look at how Blockbuster’s supply chain choices have
played into its downfall and how Netflix and Redbox did a better job at adapting to the changes.
Strategic Fit and Blockbuster’s Supply Chain Essay
Strategic fitness is a theory that means the alignment of a supply chain strategy to the
business’s competitive strategy and the customers’ needs. Blockbuster was at first a successful
business because its initial effective supply chain had a large inventory of movies in accessible
locations to the target market. However, customer preferences have shifted with time and the
video rental business has transformed from rental stores to online streaming. Blockbuster’s
continued focus on physical stores and late fee policies was not adaptable to the changes in
customers’ preferences, which became their bane and ultimately to their fall (Sabri, 2019). The
company’s inability to adapt its supply chain strategy to match the changes in customer
requirements caused its eventual fall from grace.
Comparison with Netflix and Redbox
Netflix and Redbox were able to achieve a greater degree of strategic fit by implementing
supply chain models which were more in line with the ever-changing needs and preferences in
the movie rental market. Netflix invested early in digital streaming technology, which eliminated
the need for physical storage and distribution and also offered larger choice and the option of
watching from the comfort of one’s home. Redbox on the other hand used automated vending
kiosks in areas of high traffic, this enabled customers to easily and quickly get new releases at
lower prices (Nawfal & Kartit, 2021). Both Netflix and Redbox are leveraged technologies to not
only give better experience for the customers but also to provide more efficient operations,
giving these firms a great advantage and strategic fit over Blockbuster.
Effects of the Misaligned Strategy
Blockbuster’s strategy was mismatched with its situation and environment. This is
evident in how it continued to make investments in unprofitable stores and how it banked on late
fees. The market was moving towards online streaming and digital downloads, and Blockbuster
was slow to make this adjustment (Davis, 2013). The late adoption of these changes resulted in
the company losing market share to its competitors. The company’s supply chain was also weak
and could not keep up with the rapidly changing environment, this also contributed to the
company filing for bankruptcy in 2010.
Conclusion
The case of Blockbuster provides a great lesson on the critical nature of the need to
ensure there is a strategic fit in the management of a business’s supply chain. It is important for
businesses to continually appraise and hone their supply chain strategies to ensure that they
remain aligned with the ever-changing needs and demands of their customers and the
technological advancements. The failure of Blockbuster shows the dangers of complacency and
the need for innovation to maintain a competitive edge.
References
Chopra, S. (2018). Supply chain management: Strategy, planning, and operation (7 th ed.).
Pearson Education.
Davis, T. (2013). A Blockbuster failure: How an outdated business model led to bankruptcy.
University of Tennessee Legal Studies Research Paper. Retrieved from
https://ir.law.utk.edu/cgi/viewcontent.cgi?article=1010&context=utk_studlawbankruptcy
Nawfal, B., & Kartit, I. (2021). Strategic fit in the movie rental industry: Netflix vs. Blockbuster.
Journal of Enterprise and Business Intelligence, 2 (1), 50–70.
https://doi.org/10.53759/5181/JEBI202202016
Sabri, Y. (2019). In pursuit of supply chain fit. International Journal of Logistics Management.
Retrieved from
https://publications.aston.ac.uk/id/eprint/39289/1/In_pursuit_of_supply_chain_fit.pdf
Schweidel, D. A., & Foutz, N. Z. (2014). The impact of competitive strategy and supply chain
strategy on business performance: The role of environmental uncertainty. Journal of
Operations Management, 32 (7–8), 431–442. https://doi.org/10.1016/j.jom.2014.10.00
