Renting Movies and Tv Episodes
Netflix has revolutionized the way people watch TV shows and movies. It provides customers the opportunity to watch more than one billion hours of TV shows and movies anytime, anywhere, and on nearly any Internet-connected screen. In 1997 Netflix burst onto the scene when Reed Hastings and Marc Randolph co-found the company as an online subscription-based DVD rental company. This disruptive technology entered the video industry offering online video rentals while the current competition (Blockbuster, Movie Gallery, and Hollywood Video) were only offering retail rentals. This first-movers advantage allowed Netflix to achieve a sustainable competitive advantage in the market place, as a large number of buyers preferred its products and services over the offerings of its competitors.
In this case study, we will be analyzing what we feel to be the most pressing problems and opportunities facing Netflix. We will discuss their strategy/strategic approach, their position, potential, and business direction through a PEST analysis. As well as their internal strengths and competitive deficiencies, their market opportunities, and the external threats to their future well-being. Finally, we will conclude with our recommendations as to what Netflix’s management should do at this point.
STRATEGY
Strategy is the most important function firms perform, as it is about the decisions their leadership must make regarding the business they want to be in and the business opportunities they want to pursue. These choices can make or break the firm for years to come. Netflix had a multipronged strategy to build an ever-growing subscriber base that included: providing subscribers with a comprehensive selection of DVD titles, acquiring new content, making it convenient and easy for subscribers, aggressively marketing and advertising to build brand awareness, and transitioning to streaming delivery.
In order to quantify whether Netflix has a winning strategy we must use the three tests of a winning strategy. Using the three test of a winning strategy in order to access Netflix’s strategy begins with the compatibility of the strategy and the company’s situation. With the rapid changes in technology and the increasing numbers of video-on-demand subscriptions, vending machine rentals, etc. Netflix was able to capitalize on the shifting demand. Netflix strived to be “the world’s best Internet movie service and to deliver a growing subscriber base and earnings per share,” and with the increasing demand for a new way to view movies and TV shows, Netflix synced a strategy that positively delivered to the industry environment. Competitors like Blockbuster and Movie Gallery/Hollywood Video were unsuccessful in changing with the tide. The next test of a winning strategy is the question of how well the strategy helps the company achieve a sustainable competitive advantage. In 2010, Netflix was growing rapidly