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Comparing of Managerial Practices at Blockbuster and Netflix Using Fayol’s Four Managerial Functions

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In the present era, most companies with analogue systems are susceptible to getting replaced by companies with digital systems. One such major case was Blockbuster, the DVD rental service getting replaced by Netflix, the giant digital video provider today. Many bad managerial decisions were taken by Blockbuster for this $5 billion company at its peak in 2002 to be filing for bankruptcy in 2010, handling a $1 billion debt (Harress 2013), while Netflix rose to be one of the few $100 billion plus companies. In this essay, the differences between the managerial practices at Blockbuster and Netflix will be compared and evaluated using Fayol’s four managerial functions, planning, organizing, leading and controlling to determine why one failed while the other succeeded.

Planning involves pinpointing appropriate goals and courses of action. Blockbuster’s key blunder in planning was the tacit decision to keep buying new real estate when physical stores had already become outdated with mail order DVDs and online streaming. They should also have had the foresight to accept Netflix’s offer to handle their online business branch, which would have eliminated a rival and strengthened their company.

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Organizing involves developing an organizational structure and assigning workers appropriately. Blockbuster reportedly had no internal structure for innovation. Netflix, however, kept innovating, with DVD on demand, online streaming and content creation. This shows referent power within the company, that is, subordinates feel free to express ideas.

Leaders express a strong vision for the future of the company and hold their employees to it. Netflix has stayed true to their vision of increasing subscriptions worldwide and had a charismatic leader CEO Reed Hastings while Blockbuster’s goals changed substantially without comprehensive research with rapidly changing upper management, vacillating away from true goals to add things like consumer electronics and an ”array of merchandise” in their stores.

In controlling, managers evaluate how well an organization is attaining its goals and react accordingly. Blockbuster took years to react to anything its competitors did. It took 7 years for them to launch an online DVD service, by which time Netflix was already moving on to online streaming. Their organization should have had a mechanism to evaluate their approach to reaching their goal when it was clearly outdated.

Netflix displayed good planning, organizing and control, keeping a small and nimble workforce, able to react quickly to industry changes and implement new changes themselves while Blockbuster acted like a behemoth of a company, slow to react and susceptible to legacy thinking, that is, belief that their old approaches that had worked previously would keep on working no matter what happened. Blockbuster also lacked leadership since it had no consistent vision for the future of the company while Netflix was consistent with its overarching goal.


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