Netflix: Entering a Brave New World

Blockbuster Entertainment, Inc. was once a highly successful and profitable brick and mortar home movie and video game rental store. At its peak in 2004, Blockbuster had up to 60,000 employees and more than 9,000 stores. The idea behind Netflix came from an unsatisfied, embarrassed customer of Blockbuster, Mr. Reed Hastings, now CEO of Netflix, paid a $40 late fee because he returned the movie Apollo 13 six weeks later (Zarafshar, 2013). He began to contemplate ingeniously about a notion to change the movie-leasing pattern into a more pioneering industry. In 1997 Netflix was started as a DVD rental-by-mail business without subscriptions. In 1999, taking a stride additional in the direction of evolving the industry, Hastings began the subscription-based business mode based on renting DVDs by mail with plans reliant on the quantity of titles taken at a time. Netflix put forward 120,000 titles for limitless monthly DVD rental with free shipping no late and per title fees. Since that time Netflix has become one of the most popular subscription services in the world, and is now valued at over $28 billion and steadily increasing. What factors contributed to the success and failure of these two companies?

1. Netflix’s original marketing strategy offered several flat-rate monthly subscription options; in which, members could stream movies and shows via the Internet or have disks sent to their homes in a pre-paid and pre-addressed envelope. Free from the despair of due dates and late fees, members could keep, up to, eight movies at a time. Upon the return of a disk, Netflix would automatically mail out the next movie from the customer’s video queue. Members were able to change and update their queues as frequently as they liked. The sheer innovation of Netflix’s strategy encouraged several competitors to enter the market to compete directly,

Netflix must rapidly and effectively meet customer demands for entertainment services. In order to do so, proper and consistent operation management techniques must be in place for operations and productivity. In the past Netflix expressed a mismatch in operations and productivity goals. Site uptime and new feature goals clashed within the two areas of operations management. In its early stages, Netflix ran out of a central data center where internal operations and production changes were deployed every two weeks to one internal operations team. With a centralized approach, deployments were large and risky. This caused delays and decreased productivity.

Reed Hastings co-founded Netflix in 1997. During this time, Netflix offered DVD rentals by mail. The Netflix organization went public in 2002, a year later their subscription reached one million (Blodget, 2011). Prior to making new cultural changes, Netflix was a created to provide movie videos at a cheaper piece to customers than competitors, such as Blockbuster. The objective of the Netflix organization was to make easier for customers to rent movies and to eliminate the annoyances involved in picking up and returning the movie rentals to the store. Netflix tried to make the company more like Blockbuster and other video stores, which was challenging. Netflix faced issues of getting movies to customers from a warehouse in a reasonable

Netflix is one of the most popular ways to stream television shows and movies, without paying the high cost of cable. Netflix offers several subscriptions plans which allows customers to rent DVD’s and stream movies instantly, but this service has recently declined primarily because the increase price for this subscription. I personally know a few people who have canceled their cable subscription and started using streaming companies in order to save money. I believe that this idea will become increasingly popular within the next few years and cable companies will have to lower their prices in order to stay competitive. The popularity of Netflix is combined with its strengths and weakness.

This case represents an analysis of the DVD rental business and specifically how Netflix positioned itself in the market and the direction of the industry as a whole. Several tools were utilized to help analyze Netflix. Case facts were considered in addition to possible future strategy in relation to market position.

By analysing the external environment of Netflix, it can be said that the firm is quite powerful in its industry. Thus, there is still room for the company to grow and proper marketing strategies may help the company in enjoying more success.

This paper is broken down by layouts that will show how Netflix has strategic planning and overall objectives on how they value their customers, but look for a profitable outcome. The plan of this layout is to help describe Netflix’s mission statement, business model, competitive advantage, and their financial and strategic objectives (Gamble, J., Thompson, A.A., & Peteraf, M.A., 2006).

According to Netflix most recent SEC 10K report here is Netflix’s core strategy and marketing strategy:

Blockbuster Entertainment, Inc. was once a highly successful and profitable brick and mortar home movie and video game rental store. At its peak in 2004, Blockbuster had up to 60,000 employees and more than 9,000 stores. The idea behind Netflix came from an unsatisfied, embarrassed customer of Blockbuster, Mr. Reed Hastings, now CEO of Netflix, paid a $40 late fee because he returned the movie Apollo 13 six weeks later (Zarafshar, 2013). He began to contemplate ingeniously about a notion to change the movie-leasing pattern into a more pioneering industry. In 1997 Netflix was started as a DVD rental-by-mail business without subscriptions. In 1999, taking a stride additional in the direction of evolving the industry, Hastings began the subscription-based business mode based on renting DVDs by mail with plans reliant on the quantity of titles taken at a time. Netflix put forward 120,000 titles for limitless monthly DVD rental with free shipping no late and per title fees. Since that time Netflix has become one of the most popular subscription services in the world, and is now valued at over $28 billion and steadily increasing. What factors contributed to the success and failure of these two companies?

5. Many of their systems and operational practices were implemented when Netflix at a smaller scale of operations and they are undertaking efforts to migrate the vast majority of their systems to cloud-based processors. If they are not able to manage the growing complexity of their business, including improving, refining or revising our systems and operational practices, their business may be adversely affected.

Also Netflix needs to prepare a better plan to recover old customers, gain new customers and make sure that the people who still have Netflix keep it. Establishing a bundle price for both online streaming and DVD rental will allow The Netflix Company to recover some market shares and remain the leading overall digital film company. The recommendations are as follows:

The company was able to take advantage of innovators and early adopters of DVDs to create a niche market for itself within the movie rental industry and when the early majority started to endorse DVD players, the Netflix service offering easily transitioned across the “chasm” and into the “bowling alley” through the beachhead of supplying independent films and lesser known titles. The revolutionary movie rental system also allows for the delivery of unmatched economic value to the customer (EVC). This unparallel EVC is easily explained through Frances X. Frei’s work “The Four Things a Services Business Must Get Right.” As Frei explains, if a company is able to define what excellence is in terms of the type of experience they want their customers to have then that company will be able to create a service that a customer will value. Frei also explains that a company must target specific attributes that that the company will excel in and others that the company is willing to deliver an inferior performance in. Netflix determined that it would excel in the three specific categories of convenience, value and selection while allowing for an inferior performance as it pertains to procuring a large inventor of new released movies.

This high demand for movies has spurred intense competition among firms looking to profit off of streaming music digitally. Netflix was one of the original companies that realized the trend towards streaming and have lead the competition since. Today the top five best companies that provide media streaming services are Netflix, Amazon’s Video on Demand, Hulu Plus, Vudu, and Itunes (Warren). While the subscriptions for these services have increased in recent years, there are some areas of concern for these firms. The economy and market environment in technology is always changing; innovative new products replace old ideas on a daily basis. Netflix has several advantages and disadvantages that, depending on how the company reacts, will dictate their overall success. By using a SWOT analysis we can easily see internal areas that Netflix is strong in, where they need work, and how the external environment will provide them with obstacles as well as great potential opportunities.

Netflix Inc. is in the entertainment market, which is a part of a larger video, film