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Case Title:

Blockbuster’s Bid for Circuit City: A ‘Game-changing’ Opportunity?

Publication Year : 2010

Authors: S Sathe, K Suresh

Industry: Entertainment

Region:USA

Case Code: MAA0174IRC

Teaching Note:  Available

Structured Assignment:  Available

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Abstract:
In 2008, Blockbuster, a leading US video rental company, was struggling. Stiff competition, changing industry dynamics, and technology upgrades had forced the company to re-examine its business strategy. On 14 April 2008, it launched a surprise bid to acquire Circuit City, a consumer electronics retail chain that was on a downslide. The bid's rationale was unclear and synergies, other than short-term savings on distribution costs, were difficult to realise. However, Blockbuster envisioned large-scale cross-merchandising opportunities for the combined entity. It expected the acquisition to play a vital role in its plans to transform itself into a new age digital retail company, uniquely positioned to take advantage of media convergence. The case focuses on Blockbuster's attempts at revival, and explores mergers and acquisitions (M&A) as a strategy adopted by retailers to exploit cross-selling opportunities.

Pedagogical Objectives:

  • To analyse the critical success factors of the consumer electronics retail industry and Circuit City's business problems.
  • To explore the dynamics of the video rental industry and the rationale behind Blockbuster's bid to acquire Circuit City.
  • To analyse M&A as a strategy for achieving cross-merchandising synergies in retailing..

Keywords : Blockbuster, Circuit City, Video rental industry, Consumer electronics industry, Mergers and acquisitions, Media convergence, Cross merchandising, Netflix, Digital download, Late fees, DVDs (digital versatile discs), On-line rental, Best Buy, Jim Keyes

Contents : 
A Comparison of the online subscription for BB and Netflix
Domestic Same-Store Revenues Increase
A Comparison of Revenues and Net Earnings
Circuit City’s Quarterly Net Earnings
Circuit City’s US Superstore Count by Total Square Footage
Blockbuster’s Acquisition Bid for Circuit City
An Overview of the US Media Entertainment Market

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