In October 2013 Blockbuster, the DVD and computer games retail chain, became the latest business failure and closed all of its stores.
This was most likely due to….?
Select ONE answer
- an increase in Blockbuster’s cash flow
- an increase in online sales of DVDs
- a decrease in supermarkets selling DVDs
- a decrease in Blockbuster’s labour costs
Show the workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Business Studies KS4 & KS5 classes
The answer is 2
- Not correct – because an increase in cash flow will help Blockbuster to trade effectively in the long term as they have cash to pay suppliers and employees.
- Correct – Definition of business failure e.g. when costs exceeds revenues in the long run OR Definition of online sales e.g. products or services can be bought and received on the internet rather than in a physical outlet. Blockbuster failed because it sold DVDs and computer games from traditional retail outlets rather than through online sales as more people are buying DVDs online. This has resulted in a fall in demand for DVDs bought through traditional retail outlets such as Blockbuster.
- Not correct – because a decrease in competition from supermarkets could increase sales for Blockbuster as customers have less choice as to where to purchase DVDs and games.
- Not correct – because if there is a decrease in labour costs Blockbuster should see an increase in operating profits as costs are lower resulting in the business being able to continue to trade.
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