Market Model Patterns of Change

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1. Describe the industry and explain the general pattern of change of the particular market model. The industry I chose to research is the movie rental industry. An industry, which at one time was dominated by Blockbuster Video, has gone through enormous change over the past five to ten years. Blockbuster Video had very little competition when brick and mortar stores were the only way to rent movies. Hollywood Video was their only national competitor; however, they did compete with many regional and local movie rental companies. New technology, along with multiple competitors, have changed the way consumers purchase movie rentals and other video. Once considered a monopoly by many, Blockbuster Video fought the many pressures affecting brick and mortar stores today. The company had stores on every corner, which resulted in high costs. Once the industry started evolving with new technologies, these stores became sunk costs for the retailer. Online-only retailers who enjoyed much lower costs than the brick and mortar stores were able to profitably charge customers a lower rate; however, at the same time, Blockbuster Video was saddled with the high costs of labor as well as the physical stores. It was not long before Blockbuster’s costs became too much for the retailer, as they were forced into bankruptcy. Today’s market landscape looks much differently than it did when Blockbuster Video was at its peak. Many more competitors fight for the consumer’s dollar; however, there are still a few dominant companies that stand out among them. These include Netflix, Redbox, Apple, and Amazon. 2. Hypothesize the basic short-run and long-run behaviors of the model in the industry you have chosen in a “market economy.” Blockbuster became an almost instant hit with its brick and mortar stores. Customers could, for the first time, rent a movie and return it to

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