Creating a strong supply chain is the first step toward improving the performance rates of a company. A well-designed supply chain allows improving the firm’s overall performance by enhancing the cooperation between its departments and providing opportunities for timely deliveries and, therefore, an increase in customer satisfaction rates.
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By deploying the concept of revenue-sharing contracts into the company’s design, one is likely to boost its revenues as the specified contracts create an opportunity for an adequate pricing strategy. However, the use of the strategy in question is linked directly to the lack of coordination in Blockbuster. Since the Blockbuster Company may fail to navigate its financial and retail processes, the strategy may fail in the future. Thus, the quantity-flexibility strategy has to be adopted instead.
When addressing the use of a revenue-shared contracting Blockbuster, one must mention that the specified approach may be viewed as quite useful for the organization. The revenue-sharing contract presupposes that the company producing goods, Blockbuster being the case in point, shares its revenues per every item sold.
The given approach can be deemed as rather welcome for the organization since it helps raise revenues by increasing the price per movie shown in theaters (Revenue-sharing contracts boost supply chain performance, 2000). Moreover, the company retrieves a substantive amount of money from video rental stores:
The end result is that instead of inking a deal in which the video rental store pays the studio $60 per tape and keeps all the revenues, the retailer now pays around $8 a tape and gives half the revenues back to the studio. (Now showing at Blockbuster: How revenue-sharing contracts improve supply chain performance, 2000, par. 5)
However, the approach under analysis has its limitations, therefore, affecting Blockbuster in a rather undesirable manner. Specifically, the coordination issues deserve to be mentioned. The lack of control over the key financial transactions is clearly a threat to the stability of the firm. Thus, the Blockbuster leaders should consider switching to a different type of contracting.
Particularly, the approach known as the quantity-flexibility strategy (Tiwari, Tiwari, Samuel, & Bhardwaj, 2015) can be viewed as an option. Because of the flexibility that it provides for the company in terms of its financial strategy, the given strategy is clearly going to make a difference for Blockbuster.
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It would be wrong to claim that Blockbuster should switch to the quantity-flexibility strategy immediately abandoning the current one. Since the revenue-shared approach has been working quite well for the firm, it will be unreasonable to try to fix what has never been broken in the first place. However, for the organization to become more sustainable and get ready to compete in the realm of the global economy, a shift to a more sustainable approach has to be viewed as an option.
The flexibility, which revenue-sharing contracts create for the parties involved and, therefore, the chances to increase the firm’s revenues several times can be deemed as the key reason to integrate the given type of contracts into the supply chain.
However, the choice of the given approach can only be deemed as efficient once a Once the specified approach is introduced into the firm’s framework the performance rates are going to increase significantly due to the following enhancement of the financial strategy. Although revenue-sharing contracts cannot be considered an immediate solution to any supply chain problems, the given type of agreements clearly affects entrepreneurship in a positive way.
Revenue-sharing contracts boost supply chain performance. (2000). Web.
Tiwari, A. K., Tiwari, A., Samuel, C., & Bhardwaj, P. (2015). Measuring supply chain flexibility (SCF) considering inventory buffers in uncertain business environments. International Journal of Advanced Manufacturing Systems (IJAMS), 15(2), 141–149.