Facing an inevitable bust?

I was a little alarmed by the comments from the head of the Australian operations of the Blockbuster video store operations this week.

In response to inquiries about the viability of the local concern in light of the likely bankruptcy of their US parent (well sort of parent – it’s pretty much an international franchising setup with the distinct Aussie entity using the US mob’s brand, systems etc), Paul Uniacke indicated (in effect) that he saw no significant threat from alternatives to his bricks and mortar operations. This is despite the US version experiencing a 16% sales drop in the last quarter.

His argument is that Aussie consumers haven’t embraced mail-order DVD delivery offerings from startup competitors, nor have they shifted to streaming/download options.

I would think the missing word there is “yet“.  Surely it is only a matter of time before wandering up to an understocked, inconvenient video store becomes as quaint and antique an idea as using a phone box or sending a telegram?

He is right that the actual decline in store-based DVD rentals hasn’t happened here yet, but I am certain growth slowed a while back, and that decline is just around the corner.

Mail order might not the threat its proponents hoped for, but streaming will be (as demonstrated already by the utilisation of illegal and legal download services).  The much vaunted upgrade in Aussie broadband infrastructure will greatly facilitate this.

The strategic lesson: just because technology and socio-cultural effects haven’t kicked in yet, don’t fob them off as irrelevant.  Learn lessons from similar and more advanced markets.

Blockbuster Australia should be looking very, very hard at web-based video delivery (although, I must say, I can’t see that much in their existing resources and capabilities that would see them out-perform Amazon, Apple or even Telstra on this front). Alternatively, they’ve got to find something interesting to do with all of the stores.

As an aside, my local Blockbuster has halved in floorspace in the past year, and still looks empty every time I walk past…

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Gaining some Indian insights

One of the biggest challenges for multinationals (and international business scholars) is untangling the enormous institutional and cultural differences from country to country. Perhaps the most complex business environment, and one which multinationals are increasingly engaging with, is the world’s largest democracy – India.

Often Western firms, particularly those from former British colonies (such as Australia) mistakenly assume that India’s similar administrative background will make business easier than in other developing and transitional countries. The existence of a sizable English-speaking population exacerbates this preconception.

Quickly they discover that that life on the ground is dramatically more complex (and frustrating) than they expected. India is a multi-lingual, multi-cultural, pluralistic society steeped in thousands of years of traditions and burdened with layer upon layer of bureaucracy. It is also a nation undergoing incredible rates of change, and these changes are impacting on different layers and generations of society in very different ways.

This can make every element of international business more difficult, whether it be starting a business, choosing a location within the country (and a city), negotiating with public officials, hiring workers, securing supply lines, distributing products, adapting designs, or shaping a marketing message.

It would be tempting to through up one’s hands and say “this is too hard”. But, with the world’s largest middle class, a huge pool of skilled workers, and more than a 6th of the world’s population, India is too big an opportunity to ignore. Firms need to learn and learn fast.

One excellent starting point would be the India Reborn documentary series which has been running recently on Australian television (on SBS). This four-parter has done a fantastic job of surveying a broad range of issues in an even-handed and fascinating fashion, juxtaposing the experiences of a broad cross-section of India’s society. Below are a series of short teaser videos that should give you a feel for its approach and content.

Unfortunately, I can’t find an on-line version of said doco. The more web-savvy of you may be able to find it. Alternatively it is supposed to be coming out on DVD very soon. It has this blog’s seal of approval as a means to (slightly) reduce your cultural distance from this labyrinthine environment. There are also numerous moments where the globalisation process is wonderfully illustrated (but I’ll leave them for you to discover).

Another entry barrier gone?

My post about the music business argued that technological change has reduced barriers to entry considerably. In that instance, it was a raft of new technologies that made making and distributing music so much easier. These changes rendered the previously important music labels somewhat redundant.

One further aspect of this was the scope for musicians to market themselves, as they could build their image and communicate their message through extremely low cost means (such as Myspace and Youtube).

Such gains can be seen beyond the music world. Firms can now also bypass the dominant mass-media (and its associated businesses such as ad agencies and media buyers), and attempt to communicate their message directly to consumers via the same sort of sites as the musos.

Here’s an example from web-rental business Rentoid (yes, the one run by my cousin):

It’s low budget but has a chance to go viral and build greater brand awareness than a boring print ad or a billboard (both of which would be much more expensive).

What do you think? Does it communicate an effective message?

And is this a viable strategy for many firms?