Blockbuster Life Cycle

As an industry is born, it naturally begins to move through the industry life cycle. This includes five stages: introduction, growth, shakeout, maturity and decline. Business strategy is significantly affected by each one of these stages. In some cases, entire industries have fallen at the hands of this natural cycle. Take the video rental industry, for example. The introduction of videos and video cassette recorders (VCR) occurred in the 1950s. It wasn’t until the 1970s, however, when the first video rental store popped up. These stores provided ways for consumers to pay a small price to rent a video for a few days rather than pay a large price to own it. As is typical with the introduction stage of the cycle, there were few competitors

Video rental stores entered this phase and entered into intense competition with one another. It was at this time that the strongest competitors began to take on a larger share of the market by slashing prices or offering additional services.

Those firms that made it through the shakeout stage now entered the penultimate stage of the life cycle, the maturity stage. Now that only a few firms remained, they enjoyed an oligopoly of sorts. Possibly the largest name video rental store at this time was Blockbuster, and they enjoyed the largest share of the market and the greatest percentage of profits.

As is almost always the case, however, the industry then entered into a stage of decline. Changes in the external environment, such as the introduction of DVDs and rental services such as Netflix and Redbox decreased the demand for video rental services. More and more frequently, consumers were turning to these other, more convenient forms of television and video. While some firms may have chosen strategic options such as harvesting, maintenance or consolidation, most others were forced to exit the industry and others soon followed. Video rental stores flourished for a while but eventually succumbed to the natural life cycle of an industry. Today, the idea of a video rental store is foreign to some and, for others, merely a distant