Exam 12: Section 1: The Hard Lesson of Business: Change or Vanish

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Blockbuster video faced a dramatic change in its external environment as people stop renting DVDs from stores in favour or online streaming (like Netflix, iTunes...) or mail-order DVD rental (e.g. Netflix in the US).
So the forces for change are mainly technological (online streaming, downloading) and competitive (mail-order DVD rental), though students can explore other forces (societal, global, economic?) as long as their arguments are sound.
When customers stop using your product/service because of new technology or competitive substitutes, the organization needs to re-invent itself completely in order to adapt. This is certainly a form of transformational change since it requires a significant change in the firm's strategy and structure (change from a brick-and-mortar business to online or mail-order) that entails changing the organizational culture, mindset... The other alternative for Blockbuster is to remain a brick-and-mortar organization but change their strategy from DVD rental to some other retail business (coffee shop?) - also a significant transformational change. Developmental changes are small incremental changes that simply require firms to the same thing better, more efficiently... while using the same organizational strategy and structure.
The key issue is why it's difficult to implement transformational change: The reasons why organizations resist change are discussed briefly on p.475-478 and include institutionalization, bureaucracies and roles, cognitive scripts. Eg. Can discuss how organizations develop routines and processes that make them reliable and accountable to external stakeholders but that these routines and processes become embedded in the organization's structure and make it more difficult to change and inert. Transformational changes are the most difficult ones since they require radical and significant changes to organizational structures, strategies, culture... Organizations have great difficulty changing because they are rewarded for delivering reliable and consistent results. In order to become reliable and accountable to their stakeholders, organizations develop these reproducible routines and bureaucratic procedures that allow them to deliver stable and consistent outcomes. Changing these routines and procedures is very disruptive to organizations since they lose the reliability and accountability that stakeholders require. If stakeholders withhold their support because of the uncertainty and instability surrounding the organization, it will likely fail. Transformational changes are therefore very disruptive, costly and rarely successful.
Students may also discuss bureaucracies, institutionalization, cognitive scripts as factors making organizations more resistant to change. Assess how well they explain the theories (or use an alternate but equally valid theory) and apply them to the Blockbuster case. The problem with institutionalization is that when organizational processes become 'taken-for-granted', it's much harder for organizations to experiment with new ideas and engage in double-loop learning.
Blockbuster likely had great difficulty implementing changes that addressed the underlying reason for their problems (fewer customers willing to go to a store to rent a DVD that they must return 1-2 days later or pay late fees...) because their way of doing things was so ingrained in their organizational structure and culture that they simply changed superficial things (i.e. reducing late fees) that did not address the root cause of competition from mail-order or online movies. This is single-loop learning.

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Political context: You might suggest that the government' reduction in trade barriers (eg. NAFTA) has paved the way for more competition in Canada. As a result, SRM faced fierce price competition from U.S. retailers and other distributors, which it did not face in periods prior to the advent of free trade when Canadian industries were protected by tariff barriers.
Economic context: You might argue that businesses like SRM are very much influenced by the health of the economy. For example, any economic slowdown could have led to an overall drop in spending for discretionary goods such as music products and CDs.
Global context:: Similar to the political forces above, maybe you could refer to free trade agreements such as NAFTA which have opened the door to new sources of global competition for Canadian firms. This could impact businesses like Sam' by creating more (global) competitors. As the case points out, SRM faced stiff price competition from Wal-mart, an American-based retailer.
Technological context: You could comment on how technology, specifically, the internet has impact the retail music industry. For example, the introduction of internet websites offering users the opportunity to download music shifted the nature of music sales (eg. Napster). This technological shift in the industry cut into the revenues of every participant in the retail music industry.
Competitive context: The market for retail music sales in Canada appears to be filled with many competitors. For example, in addition to specialty music stores like SRM, there are retailers such Wal-mart, and specialty retailers such as Starbucks. And of course the internet (as above) and the internet download sites has attracted much more competition and made it increasingly difficult for SRM to survive...
Societal context: Perhaps you could argue that changing consumer tastes can affect SRM. For example, perhaps one could argue that as Canada's population has become larger, more diverse and more multicultural, consumers' preferences may have shifted towards more recognized international talent. SRM's business model appears to have been unresponsive to these societal forces.
Labour context: again, you would need to make assumptions. Maybe Sam did not take advantage of changes in the labour force. How demographically diverse was Sam' staff? Not suggesting any actual problems here but simply trying to address questions using assumptions...