Netflix Case Study

943 Words Oct 25th, 2012 4 Pages
Summary
The movie rental industry is a living industry; there are constant changes with advances in technology, rights management, and the slow, but steady, move away from physical Media. Companies such as Netflix, Hulu, RedBox, and Blockbuster are being forced to look at new business models and try to keep up with these changes.

Assignment Questions
1. How strong are the competitive forces in the movie rental marketplace? Do a five-forces analysis to support your answer.
Threat of New Competition: Netflix has almost zero threat of new competition. Any new competition would have to overcome large capital expenses to get started; these expenses include obtaining TV show and movie rights from the studios. Even if the starting
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Streaming licenses can be revoked and/or modified at any time by the content provider.
Intensity of Competitive Rivalry: The threat of rivalry is relatively low. The movie rental industry is dominated by a few firms, namely Blockbuster, and Movie Gallery (which liquidated all itself in 2010). However they are in competition with other industries such as cable and satellite companies, VOD services and sites like Hulu and Amazon.
2. What forces are driving changes in the movie rental industry? Are the combined impacts of these driving forces likely to be favorable or unfavorable in term of their effects on competitive intensity and future industry profitability? The demand for digital content is driving changes in the rental industry. Technology is shifting from a physical medium to a digital distribution system. This is likely to be beneficial because Netflix is already rooted in the digital streaming industry and would only have to adapt to minor changes in technology.
3. What does your strategic group map of this industry look like? How attractively is Netflix positioned on the map? Why?

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. 4. What key factors will determine a company’s success in the movie rental industry

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