Case Study 4
What forces are driving changes in the movie rental industry and 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 forces driving the changes in the movie rental industry can be boiled down to the booms we have seen in technology. The cost of HDTV’s has been dropping and has now become more practical for each person to obtain. This leads to the desire to view movies and shows on the big nice screen as opposed to the smaller devices we used to. The movie rental fee as well as the late charges always gave people pause but were not unsurpassable boundaries for consumers who wanted the movie viewing experience without making a purchase. The growth of the movie rental industry via an online presence I feel will continue to grow as more and more people become accustomed to the idea of owning or viewing things through a purely digital means. With a growth in any industry comes the inevitable competitiveness that we see between Netflix and Blockbuster. I would not be surprised to see Redbox throw their hat into the ring with online offerings in the future. 5)
What is Netflix’s strategy? Which of the five generic competitive strategies discussed in Chapter 5 most closely fit the competitive approaches that Netflix is taking? What type of competitive advantage is Netflix trying to achieve?
Netflix’s strategy was a “six-pronged” one:
1. Providing comprehensive selection of movie DVDs
2. Providing an easy way to choose movies
3. Providing a fast delivery of selections
4. Having no due dates for return
5. A convenient drop-it-in-the-mail return procedure
6. Aggressive marketing to attract subscribers and build widespread awareness of the Netflix brand and service.
Of the five generic comparative strategies Netflix is taking the best-cost provider strategy approach. Each week they are trying to make deals...
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