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Netflix
Netflix
Introduction
The following paper intends to thoroughly answer the questions from the case study
“Netflix’s Business Model and Strategy in Renting Movies and TV Episodes”. Netflix has, for the
majority of its existence, been both an innovative and a prosperous company. At its inception in early
the early 2000’s, Netflix provided customers with DVDs via the mail. The selling point to consumers
was that there were no late fees associated with subscribing to a Netflix membership. In 2007,
Netflix gained huge profits when they began streaming their movie content online. Netflix steadily
grew its consumer base and expanded the breadth of the content they provided quite successfully
through 2010. However, Netflix committed an egregious error in 2011. The company decided to
charge consumers with two subscription fees, one for streaming movie content online and another for
DVD through the mail. Their stock prices fell precipitously as a result of instituting these policies.
After the analysis in the following pages, our team will show that Netflix can return to being
successful, or they have caused irreparable damage.
Netflix’s Strategy
The current strategy of Netflix has multiple components. Netflix strives to achieve a
consistent growth rate of subscribers through generating positive word of mouth, while investing in
effective marketing strategies. Its also strives to have a constant growth rate with its revenues. Netflix
offers a wide range of movie selection and constantly updates its movie selection. It strives to
achieve a high level of satisfaction from its customers. It offers its subscribers the choice of
streaming a movie or receiving the movie through the mail. Netflix also makes their service
convenient for its subscribers by using advanced software that is easy to use.
Of the five generic competitive strategies, Best-Cost Provider closely fits the competitive
approach that Netflix is taking. Netflix offer a range of subscription packages to its consumers
ranging from $8.99 a month to $47.99 a month. It also delivers a quality service that contains a large
base of movie and TV episode selection, while also offering its services on a variety of devices.
Netflix is trying to achieve a Best-Cost Provider competitive advantage. Based on the
information given, Netflix has achieved the competitive advantage it was trying to achieve.
Netflix has a sustainable competitive advantage over Blockbuster. Netflix has the ability to
delivery DVDs by mail and stream movies online to its customers. Blockbuster does not offer online
streaming but has implemented the mail-in return of movies. Netflix’s movie and TV episode library
has more to offer consumers than Blockbuster. Its technology is more advanced than Blockbuster.
Netflix provides its subscribers with a one-day delivery time by locating the movie and sending it out
the same day it has requested. Blockbuster does not have the capability of offering a one-day delivery
time. If its store does not have the movie, the consumer will have to until the movie is returned and
available at the store. If its kiosk does not have the movie, the consumer will have to wait until the
kiosk has been restocked with the movie.
Top Priority Issues Management Needs to Address
There are three top priority issues Netflix’s management needs to address. First, Netflix’s
management needs to focus less on the mailing of DVDs and more on the online streaming of
movies. Second, its management needs to update the new releases more often. By the time movies
get to Netflix, they have already been out for some time. Third, its management needs to address the
variety of subscription packages. Two or three of its most popular subscription packages would be
sufficient.
There are three top priority issues Blockbuster’s management needs to address. First, its
management needs to address its need to expand more of the kiosks. Second, its management needs
to address its need to try an online streaming option or online store. Third, its management needs to
address its need to expand its selection of movies.
Questions:
1. Identify and describe how the Information Technology can provide the competitive advantage
for NETFLIX to win the competition? Give the detail framework or the concept of IT that NETFLIX
use and explain how the IT works to get the competitive advantage.
2. What factors contributed to success of IT in gaining the competitive advantage in NETFLIX?