Blockbuster’s competitors are making it difficult for the company to make strides toward profitable growth. Netflix, the leading online DVD rental business, just announced a price cut in an attempt to double the size of its business (a bad move, but that’s another story…). And Blockbuster, in order to not be under-cut, dropped its own prices in response.

This is the problem with Defend and Extend management. While Blockbuster is busy fending off competitors to its current business, it is consuming scarce investment dollars and organizational attention that cannot be applied to meeting the real threat, which is video on demand.

Even if Blockbuster succeeds against Netflix, how will they out duel Wal-Mart on price in this space? And now is rumored to be getting into the market, and Netflix may find a deep-pocketed buyer. Can Blockbuster keep this up indefinitely? Of course not. Instead of chasing around after paper-thin margins in a business that has no future, the company needs to wake up to the reality that it doesn’t have a Success Formula that can win in the long run and act now to reinvent it.

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