Essay About Such Strong Market Position And Robust Growth

Netflix Swot Analysis
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Strengths
Strong market presence
Netflix is one of the worlds largest online movie rental services, offering more than 8 million
subscribers access to 100,000 DVD titles. Netflix operates more than 50 distribution centers located
throughout the US. On an average day, it ships two million DVDs. In addition, it has no due dates,
late fees and shipping fees. As a result, the number of its subscribers increased from 1.5 million in
2003 to 8.4 million subscribers in FY2007. Furthermore, Netflix was rated number one in American
e-commerce customer satisfaction surveys which were conducted independently by Nielsen Online
and ForeSee Results in 2007. Therefore, such strong market position gives Netflix a competitive
advantage.
Robust growth in revenues and operating profits
Netflix has recorded robust growth since the launch of subscription service in 1999. During 2004-07
its revenues increased at a CAGR of 34%. In 2007, Netflix continued its rapid growth, with revenues
up 20.9% to $1,205 million from 2006. The operating profit of the company was $91.2 million in
2007, an increase of 41.5% over 2006. The operating margins also increased from 6.5% in 2006 to
7.6% in 2007. Strong revenue growth indicates strong market penetration capabilities while improving
operating margins indicate a healthy cost structure.
Strong inventory of DVDs
Netflix currently has stock of approximately 90,000 titles and more than 69 million DVDs which are
separated into 21 different genres including new releases, indies and television. In addition, the
company allocated substantial resources to develop, maintain and test the proprietary technology
that helps the company in managing the individual customer orders. Netflix distribute and also receive
DVDs from a nationwide network of shipping centers located throughout the US. Strong inventory
help Netflix to capitalize on the customer traffic and on the spending behavior of customers.
Weaknesses
Decrease of rentals per average paying subscriber
Netflix