Strategy

There are basically six technology-driven threats to the traditional rental model: (1) Cable companies offering Video on Demand (VOD), (2) online movie downloads, (3) online movie rentals, (4) disposable DVDs, (5) illegal movie downloads and DVD copying, and (6) Digital (or Personal) video recorders (DVR). (Jackson) One could also consider traditional pay-per-view (PPV) as and additional substitute. Only one of these seven, online movie rentals has proven to be a major competitive substitute for traditional movie rentals. All other areas, except traditional pay-per-view are expanding rapidly, but some face significant challenges.

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.

Occasionally, people use to go out and rent DVD’s to watch a specific movie from rental stores. Advancement in technology has brought a sufficient change in customer’s behaviors, today DVD rental stores have almost gone. Moreover, by time we saw enormous increase in channels being provided by cable providers, but today even that has been replaced by streaming media devices, thus my time, role of cable providers might also disappear due to the introduction of devices such as Netflix, Apple TV etc. “DVD sales have also been hit. The Los Angeles-based Digital Entertainment Group estimates DVD sales in 2008 fell 8% to $21.6 billion from a year earlier, while DVD rentals were flat.” Charny, Ben. "Viewers Tap Free Web Content." Wall Street Journal, Eastern

The landscape of television has undergone major shifts over the last five years. In 2013, cable companies like Time Warner and Comcast, pulled over 100 million subscribers (Udland) total subscribers. By 2015, that number dipped below 100 million subscribers decreasing by one percent (Udland). In 2013, streaming services like Netflix, Hulu, and Amazon, totaled over 40 million subscribers (Udland). By 2015, they saw a 30 percent increase in subscribers (Udland). While cable still holds dominance in the market, the latest trends have shown that streaming services will overtake them in the near future. Streaming services’ surge in popularity is a result of having a product that provides a superior alternative to cable that accommodates the customer.

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.

This report analyzes the company Netflix to determine whether or not it makes a good investment at this time. Netflix was founded in 1997 in California. The company launched its website that same year, at the time the company was composed of only 30 employees and had close to 1000 DVD’S available to rent. Netflix was one of the first company’s to offer rental DVD’s on a monthly subscription basis rather than having to pay per DVD. The year 2007 was a big year for Netflix and its first step toward its new business model. Netflix moved away from renting DVD’s and instead shifted to video on demand via the Internet. Today, Netflix holds the spot as the world’s top Internet television network; with almost fifty million subscribers in close to fifty nations who enjoy hours of TV shows and movies every month. (Netflix)

Netflix has maintained the highest number of share in the online streaming industry market, but it cannot guarantee the consumers preferences nor has a control over them of which can grant its leading market position. In 2011, when Netflix decided to adjust its pricing structure, it led to major consequences and negatively impacted

The product/service I chose is in store movie rental and purchase. I.e. Blockbuster Videos. While DVD sales declined for a third straight year in 2009, consumer appetite for viewing movies at home remains very healthy as new physical and digital services for buying and renting movies gain in popularity. The proliferation of movie rental kiosk machines over the last year was probably the most visible sign of consumer interest in viewing movies at home.

Before the advent of movie rental stores, to watch a new movie, people had to go to theatres or cinemas spending a lot of money. Video rental was the answer to the new needs. Since the 90s, video rental industry has become a very big business; in those years, rental prices rose as more and more people began renting movies. At the same time, new players entered the market creating strong competition inside the industry. In the last years, the field of home entertainment has changed dramatically because of the presence of Internet and new technologies (Recorded DVD & Video in the United States, 2009).

Lefkofsky uses a very aggressive strategy. His priority is to reduce user reliance on email and to make Groupon available for use on the user’s mobile devices. Lefkofsky mentioned that "We were in the midst of this huge migration from being an email-oriented company to a primarily mobile company. We were still at a very entrepreneurial state, building out the very foundation of the business model.”

To expand on the topics mentioned in the previous paragraph, in this research paper, I will evaluate trends in demand and their impact on the business as well as analyze how the information on supply and demand will support the recommendations I make. In examining the cost of production, I will outline the cost Netflix faces over time and how that effects its success as well as evaluating the different kind of costs the company faces and how they affect the output level and how they information output decisions. To examine the price elasticity of demand of the services and products that Netflix sells, I will explain how I determined the price elasticity of demand, discuss what factors affect consumer responsiveness to price, and analyze how these factors influence the Netflix’s pricing decision and growth. To investigate the overall market that Netflix is a part of, I will examine the

Secondly, different delivery medium are changing the television industry in a fundamental ways. Digital video recorders (DVRs), Internet television, satellite video-on-demand(VOD)

In the book “Good Strategy and Bad Strategy”, Richard Rumelt illustrates examples of success and failure of business management to explain the true meaning of the strategy, and tells companies how to develop a correct strategy and adhere to core of management strategy. He also emphasizes the central role of strategic management as to remind the readers to understand the huge difference between a good strategy and bad strategy. This book has three sections: good and bad strategy, sources of power, and thinking like a strategist. I will be evaluating strengths and weaknesses under these topics. After finish reading the book, I had gained a better understanding of what a good strategy means to the success of a company. According to Rumelt, a good strategy is coherent, where companies pursue multiple objectives that are connected with each other. Rumelt points out that a good strategy consists of three elements: diagnosis, guiding policy, and coherent action. (71) First, diagnosis means to define the obstacles and challenges that the companies are facing, and guidelines help the people to overcome the obstacles. Lastly, coherent action is the activities or actions that company did to be consistent with its guiding policy. Today, many of us lost the focus of the strategy, which results in the downward of businesses and organizations. Rumelt has defined the strategy as acknowledging the main problems and take coherent action to overcome the problems. Moreover, he illustrates

This essay will provide insights and sufficient background to understand Netflix’s success and difficulties the company is facing.

Organizations successful at strategy implementation effectively manage six key supporting factors :     1.  Action Planning