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 is first provider of delivered DVDs by mail that became common way and convenience for customer. Netflix offers DVDs to customers with quick delivery, which is mostly within one day (Willy Shih, Stephen Kaufman & David Spinola, 2007). In addition, customers utilize good recommendation system provided by Netflix (Scoot Merrill, 2009). Besides, customers are able to be given good customer service support (Katie Hafner, 2009).
Another weakness is their lack of movie selection since they are primarily focusing on TV shows. Competitors, such as Netflix, dominate in the movie category, making it hard for Hulu to make a higher known presence.
Netflix finds its competition and strategic challenges against big names in the market –Google, Apple and Amazon to name a few (Roberts & Zahay, 2012). The challenge for Netflix lies in maintaining the innovative streak, which will add creativity and youth to its brand image and the brand itself. This innovative streak has to be continual and has to match the demands and preferences of the customers in their taste and liking. The brand and the company cannot afford to remain stagnant and rigid in the ever changing and demanding market place. The core competency that Netflix will have to focus on to meet this challenge is to develop and train its human resource. Effective and efficient human resource management will allow the company to tap into present and potential customers, as well as, allow the company to serve them appropriately.
Although there is not much competition in this market, consumers always have alternate methods of receiving the same services and more than likely the same quality of services elsewhere. Whether it is choosing to stream videos online, watching them via “Pay per View” or “On Demand” it is truly a buyer’s market considering the services rendered aren’t considered necessities.
Netflix is an entertainment company that specializes in streaming media and online video-on-demand. Over the years, it has grown to include film and television production and other distribution services. Its business model has changed, and so has its overall production cost grown to keep up with the increased market share. As a result, its current position in the market has made it more exposed to competition from other firms, which is why it needs to develop new strategies to remain profitable. Netflix has grown over the past years despite competition and its unprofitability (Helft, 2007). Therefore, to understand its success, it is important provide a microeconomic analysis of Netflix, its history, its products, and the market.
First formed in 1991, Netflix has become today’s predominant video rental service. They offer a hybrid service allowing DVD delivery by mail as well as streaming movies and TV shows via their company website or access on 200 other devices. Their unique business process has netted them over 16 million subscribers and revenue around $500 million annually. The reason for their growing success can be attributed to a good business model and just as important, properly implemented systems. An extremely efficient supply chain management system (SCM) and customer relationship management system (CRM) have helped Netflix become the world’s largest video subscription service.
Growing competition as a challenge represents the various companies that are now entering the market of online media-streaming. Companies such as HBO, Amazon, Google, and Hulu Plus have all began to offer media-streaming on the same electronic devices as Netflix, Inc. Currently Netflix, Inc. remains in the lead amongst its competitors; however, there is no guarantee that this advancement is a permanent one. It is inevitable that emerging companies will come up with creative ideas to gain the competitive edge and receive more consumers. For example, Amazon.com has “amplified
A three circles analysis is a beneficial way to look at competitor benchmarking that helps provide vision of a company’s comparisons with competitors in the same market, what needs the company provides, what needs the customers want, and what needs the competitor fulfills (Pearce II, J., Rovinson, R., 2015). In using this format to analyse the company Netflix, we are able to see where Netflix has strengths internally and compared to its competitors.
As the world entered into the 21st Century, humanity has witnessed an ecology of innovation that ranges from artificial hearts and livers to iPods to Bluetooth technology to smartphones and many more ("21st Century Inventions That Made an Impact”). Each with its own unique attraction has become a catalyst in nature for how individuals think, act and live. Along with these state of the art developments, Netflix has become the cutting – edge service for internet streaming media. Deemed as “a worthless piece of crap” from Wall Street analysts, Netflix with tremendous leadership gained control of their industry and swiftly transformed the delivery of movie rentals ("How Netflix Beat Blockbuster: An Exemplar of Emerging Technologies”). Faced with impossible odds, we will discover how Netflix was able to survive, conquer and prosper as the emerging technology in their industry.
The presence of Netflix and Blockbuster in the movie rental industry has assisted me in developing this analysis of each corporation’s strength, weaknesses, opportunities, and threats as followed:
Netflix exhibits dominant economic characteristics in the online movie rental business. They enjoy strong market size and growth rate when compared to rivalry competition. The number of rivalries are increasing, and the market remains dominated by only a few sizeable rivalries like Blockbuster Video, Wal-Mart, Walt Disney Movies and Movielink’s Downloadable Movies. Netflix is determined to offer new and innovative technology to sustain their competitive advantage.
Even though Netflix is successful in revenue and expanded globally, it is vital for the organization to create a SWOT analysis “which stands for a company 's strengths, weaknesses, opportunities, and threats (Abraham, 2012). Netflix does have a competitive market such as Amazon.com and Hulu that are becoming more popular with their lower monthly pricing. They also have a more simplified catalogue of consumer favorite new titled movies and TV shows. In order for Netflix to stay competitive with a strong strategic plan, let’s take a look at the SWOT to identify what the best course of actions would be to increase and/or sustain the current procedure for the benefit of the company, its employees and the satisfaction of it consumers.
Video-on-demand or VOD, a service that allows users to select and watch videos over the internet, will be one of the greatest innovation as stated in the Netflix case study. It will be a great opportunity for Netflix, but it will also be a challenge to integrate or do away with its current business model. Its current business model is one that relies on the internet and the post service to deliver DVDs to its subscribers. Netflix should carefully enter the VOD market without doing away with its current model. This will allow it to maintain its growing position as a giant in this media industry. In order to better understand Netflix and the problems it faces, we must first identify its strengths. What does Netflix offer its customers that its competitors do not? What differentiates it from its competitors?