In life or business, the best lessons are learned not just from the success stories but also from the saga of failures and struggles. This is the reason why so much emphasis is laid down on analysis of case studies in business schools. In this article, three prominent business case studies are selected for introspection and analysis to help present day business owners and entrepreneurs get relevant insights on managing their businesses and formulating effective strategies and avoiding blunders.
Blockbuster, founded in 1985 by David Cook, was a movie and video game rental service company headquartered in Dallas, Texas, United States. Blockbuster was the undisputed market leader in video renting services in the United States. It had a wide network of retail stores across the country and a customer base that numbered in millions. Blockbuster went public and its control was acquired by an investment group who sold it to Viacom for $8.4 billion in 1994. Blockbuster went bankrupt in 2010. In between, the company engaged in several purchases and sale of complementary businesses and it also experienced several changes in its own control, management, and ownership. [(1), (2), (3)] But the problem with Blockbuster was not the lack of stability in its control or management or its buying and selling of other related businesses. The hitch was in its revenue model which began to heavily rely on late fee penalties. Customers were subjected to late fees for delayed returns. This was something that did not go well with its customers. As competition started to emerge in the form of companies like Netflix and Redbox, the company quickly started to lose its customer base. Some of the competitors provided subscription based services that did away with late fee penalties. [(1), (2), (3)]
Even though Blockbuster was registering a healthy inflow of revenue, most of it was coming from penalizing its customers. This is a severe blow to a very fundamental idea that price is the consideration which a customer agrees to pay for the value of a product or a service. Here, in this case, what the customers were made to pay exceeded the value they derived from the consumption of the services because of the applicability of late fee penalties. Cases like these also highlight the importance of the tools and software of retail analytics and business analytics in modern day businesses. With the help of the analytical reports and insights on business performance, companies can better understand the trends and changes in customer behavior and revenue patterns vis-à-vis changes in business policies and business environment.
With the help of the analytical reports and insights on business performance, companies can better understand the trends and changes in customer behavior and revenue patterns vis-à-vis changes in business policies and business environment.
Founded by George Eastman in 1888 and headquartered in New York, Kodak is a renowned brand in the world of cameras and photography. Kodak generated huge revenues from photography consumables – films, chemicals and papers. It dominated the US market till 1976. The company faced stiff competition from its Japanese counterpart Fujifilm after undermining it for a while. Fujifilm became the official film partner of the LA Olympics of 1984. Kodak developed digital cameras as early as in 1975 but refused to launch the same fearing threat to its existing photographic film business. With rising competition from Fujifilm and increasing need for diversification to digital, Kodak planned its foray into digital photography from the early 90s and by 2005 it ranked no.1 in digital camera sales in the U.S but its film business (where it was enjoying high-profit margins) fell 18% in the same year. In the next five years, Kodak was surpassed by Sony, Canon, and Nikon etc. By this time, mobile phones with the camera started to grab market share from these giants. (4)
Kodak was nearly a century old company when it first saw traits of rising competition and changing technology. Being a market leader for such a long time, it failed to capitalize on its position. Kodak’s problem area was that it was very slow in responding to the changes in its environment. By letting go of the opportunity to diversify itself with a digital product line (digital cameras and digital photography), which would have been a huge technological leap, Kodak missed out on remaining years ahead of its competition. Of course, this would have entailed some time and investment in research and development and necessary changes in its business model for the migration process. Given the edge of digital photography and Kodak’s market share, it would not have been very difficult for Kodak to market its digital product line. Technological advancement is a brutal truth that hardly leaves any business untouched. Business owners and entrepreneurs need to keep themselves updated of the developments in the field of science and technology that might impact their business. Paving ways to embrace technological advancements is one of the crucial considerations of business planning.
By letting go of the opportunity to diversify itself with a digital product line (digital cameras and digital photography), which would have been a huge technological leap, Kodak missed out on remaining years ahead of its competition.
Hummer was a well-known brand of SUVs originally designed by AM General Corporation in the early eighties for the US army. In 1992, the civilian version of Hummer was launched. In the late nineties, General Motors purchased the brand name while AM General continued with the manufacturing. By 2006, Hummer began to be sold and exported through intermediaries in 33 countries. (5) Problems started to arise with Hummer with the rising prices of oil and gas. It started to be increasingly perceived as a fuel guzzler amidst rising global awareness of environmental issues.
Hummer used to be a powerful brand symbolizing strength, endurance, toughness and an all-terrain all-weather vehicle. But at the end of the day, it had little or no practical use for civilians. It was designed for the military. Sooner or later the fad had to fade as Hummer was a high-maintenance and high-fuel consuming vehicle. Hummer, at the best, was a niche market product. Even with its value and utility, its rising usage cost significantly hampered its market demand. The three case studies discussed in this article brings to the forefront two important elements of business management and strategy formulation – customer cost and adoption of advanced technology. Businesses need to bear in mind that apart from the purchase price, a customer also has to incur usage costs and post-usage costs to extract the intended value from a product or a service or to complete the consumption process. Secondly, businesses need to plan for and adapt and migrate to advanced technologies to remain competitive and match pace with generational shifts.
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Chief Strategy Officer