Netflix : An Online Movie Rental Company Essay

Netflix is in a fairly favorable position on the strategic group map. Where Added value is measured in terms of instant movies and recommendations, and market coverage is measured in number of stores, vending machines, and online presence.

Netflix was founded in 1997 with the intent to revolutionize the way in which consumers watch movies and television shows. Their accomplishments both in innovation and in customer base for their service indicate that the firm has been, and continues to be, successful in doing so. Currently, the

Netflix, an internet television network that is revolutionizing the way we watch TV series and movies without having to leave the comfort of our couch has over 50 million subscribers in more than 40 countries.

The downturn of the economy has taken away many peoples disposable income and Netflix’s limited online library may have caused customers to question if it was worth it or not.

Netflix introduced an online streaming service in 2007. At the time of its introduction, the streaming service had a catalog of 1,000 movies and TV shows (Helft, 2007). From 2008 to 2010, Netflix partnered with different electronic companies to provide streaming through Xbox 360, Blu-ray players, PS3, smart televisions, Apple devicesm and Nintendo Wii. (Netflix) Since 2010, Netflix began to launch the service outside the United States with Canada being the first country. In 2016, Netflix became available all over the world (Netflix).

Entering and transforming the video rental industry was a large undertaking for the start-up company. The first marketing objective the company undertook was the process of building a brand. Netflix’s identity was crucial to future growth and success. Without a strong brand, competitors with deep pockets could have easily duplicated the company’s business model. Secondly, leveraging technology was critical to establishing the business and infrastructure growth. The consumer base was the final objective Netflix sought to achieve. Retaining and growing subscribers were fundamental to revenue and marketing goals.

Netflix began in 1997 as a revolutionary idea by CEO Reed Hastings and software executive March Randolph. Before long, in 1999 Netflix launched its major line of business, the online subscription service, which radically changed the way consumers viewed movies and television. For a young company in an innovative and growing industry, Netflix has set itself up for a tremendous journey. The company has had much success due to its adaption of a modern business model and strength in operations management. Its continued reliance on and improvements of operation management principles is necessary to continue growing and bringing in profits.

Netflix inventory of approximately 75,000 is significantly larger than the average video rental store. The average video rental store has approximately 5,000 titles. Traditional video rental stores rarely stock sufficient copies of popular releases to meet demand. Customers unsuccessfully seeking a particular title may leave without making a selection. The large inventory of creates added customer value through

“Netflix, Inc. is the world's largest online movie rental service, with more than 10 million subscribers (Netflix Media Center, 2009).”

As of August 2005, Netflix employed approximately 1,200 people in the United States. About 1,000 of them work in the company 's distribution centers around the country; close to 200 employees work at the company 's headquarters in Los Gatos; and 20 employees work in studios in Los Angeles (ChronicleJobs, 2005). Netflix offers their members more than 55,000 DVD title selections. This is more than any other online rental service in the United States. In 2005, Netflix shipped more than 1 million DVDs a day. Its inventory was approximately 20 million DVDs, and Netflix spent $84.2 million acquiring new DVDs. As of September 30, 2005, the company 's balance sheet showed its DVD holdings at a net value of $52.7 million after depreciation (Maddox & Thompson, 2006).Today the revenue of Netflix reached to $440 million and continuing ways of success.

Many of their competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than Netflix does. Some of their competitors have adopted, and may continue to adopt, aggressive pricing policies and devote substantially more resources to marketing and Web site and systems development than Netflix does. The rapid growth of their online entertainment subscription business since their beginning may attract direct competition from larger companies with significantly greater financial resources and national brand recognition. For instance in 2003 the extremely wealthy Wal-Mart used their online site to launch an online DVD subscription service, Wal-Mart DVD Rentals. With increased competition reduced operating margins may result as well as a loss of market share and reduced revenues. In addition, our competitors may form or extend strategic alliances with studios and distributors that could adversely affect our ability to obtain titles on favorable terms.

Netflix is currently utilized in 190 countries and projecting expansion to over 200 countries within the next two years. CEO Reed Hastings and CFO David Wells wrote to their investors stating: “Progress has been so strong that we now believe we can complete our global expansion over the next two years, while staying profitable, which is earlier than we expected”. Strategically, Netflix decided that now is time to expand globally. As a result, Netflix ended the year of 2014 with a total of 57.39 million subscribers increasing from 44.35 million in 2013.

In Netflix’s own description of its vision for sustainable long-term future, the company describes a few critical elements necessary for growth [Netflix.com]. Its vision encompass the evolution of internet TV, replacement of “linear TV” by the internet TV, development of interactive applications, and enhancement of streaming capability to virtual limitless access capability.

Marc Randolph and Reed Hastings founded Netflix in 1997 in California. It is said that the idea came to Hastings after having to pay $40 in overdue fines for returning Apollo 13 to late. Netflix was originally a website (launched on August 29, 1997) that rented DVDs through rental posting and a traditional pay-per-rental model. In the early 2000, Netflix dropped this model and

Netflix was founded by Reed Hastings and Marc Randolph in 1997 and was originally based out of Scotts Valley California. The business model that they were working towards was to create a company that would offer online movie rental service made available by streaming media as well as DVD’s that could be ordered online and delivered to the customers’ homes. (Wheelen, Case 12). Netflix had a strategic plan to undercut the competition in an effort to stress the market and force weaker competition out of the field. This was a very successful plan and over a period of years it was able to force the closings of most of its competing market to include the mega giant Blockbuster video. Using a business