Blockbuster The former worldwide leader in video rentals found themselves on the wrong side of public opinion thanks to a failure to innovate. Blockbuster was once known throughout the world as a leader in home movie and video game rentals. Before the digital age, their products were the Netflix of the day. The problem? They refused to innovate. Sensing changes in the market — including by a start-up known as Netflix — Blockbuster began to push for a more in-demand market, creating programmes that allowed people to get videos delivered directly to their homes. However, it wasn’t enough: The company failed to properly prepare for the rise of the digital age and never created a product like that of Netflix that streamed movies directly to people’s internet devices. Their most egregious failure? A lack of imagination and a failure of business strategy. The company was offered the chance to purchase Netflix — but said no. Blockbuster did not have a corporate culture that embraced innovation, effective leadership or thinking outside of the box. Board members were given no director training to help them be better at their job. This led to a failure to see where the market was going and new ideas that challenged their previous assumptions. As a board member, your job is to stay plugged into the functions of the real world, making sure that you are up-to-date on the latest market trends and working to ensure that the company is positioning itself where it needs to be. Unfortunately, this never happened with Blockbuster, and it cost the company everything. If you want to become a board member and provide effective leadership at board meetings, your intent is clear: You want to avoid being on a board that’s part of this list. Thankfully, we can help. Q.3.1 Corporate governance refers to the relationship among the management of a corporation, its board, its shareholders and other relevant stakeholders and to the specific responsibilities of boards of directors and management to ensure and maintain these relationships. Q.3.1.1 What are the board and managements’ responsibilities towards the shareholders? Q.3.1.2 Did the board and management of Blockbuster fulfil these responsibilities? Justify your answer. Q.3.2 Discuss any principle that the risk management culture of Blockbusters should have addressed. Q.3.3 Operational risk can be analysed in terms of the casual factors, risk events and effects. Discuss “people” as a casual factor. Support your explanation with examples relevant to Blockbuster
Blockbuster
The former worldwide leader in video rentals found themselves on the wrong side of public opinion thanks to a failure to innovate.
Blockbuster was once known throughout the world as a leader in home movie and video game rentals. Before the digital age, their products were the Netflix of the day. The problem? They refused to innovate. Sensing changes in the market — including by a start-up known as Netflix — Blockbuster began to push for a more in-demand market, creating programmes that allowed people to get videos delivered directly to their homes. However, it wasn’t enough: The company failed to properly prepare for the rise of the digital age and never created a product like that of Netflix that streamed movies directly to people’s internet devices.
Their most egregious failure? A lack of imagination and a failure of business strategy. The company was offered the chance to purchase Netflix — but said no. Blockbuster did not have a corporate culture that embraced innovation, effective leadership or thinking outside of the box. Board members were given no director training to help them be better at their job. This led to a failure to see where the market was going and new ideas that challenged their previous assumptions. As a board member, your job is to stay plugged into the functions of the real world, making sure that you are up-to-date on the latest market trends and working to ensure that the company is
positioning itself where it needs to be. Unfortunately, this never happened with Blockbuster, and it cost the company everything. If you want to become a board member and provide effective leadership at board meetings, your intent is clear: You want to avoid being on a board that’s part of this list. Thankfully, we can help.
Q.3.1 Corporate governance refers to the relationship among the management of a corporation, its board, its shareholders and other relevant stakeholders and to the specific responsibilities of boards of directors and management to ensure and maintain these relationships.
Q.3.1.1 What are the board and managements’ responsibilities towards the shareholders?
Q.3.1.2 Did the board and management of Blockbuster fulfil these responsibilities? Justify your answer.
Q.3.2 Discuss any principle that the risk management culture of Blockbusters should have addressed.
Q.3.3 Operational risk can be analysed in terms of the casual factors, risk events and effects. Discuss “people” as a casual factor. Support your explanation with examples relevant to Blockbuster.
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