Netflix Business Plan Proposal

Topics: Strategic management, Marketing, Price Pages: 7 (2286 words) Published: May 16, 2012
Strategic planning involves taking information from the environment and deciding upon an organizational mission, and upon objectives, strategies, and a strategic architecture. There are many different ways to go about deciding on your mission. Michael Porter, a researcher from Harvard, had a few ways for developing frameworks for developing an organization’s strategy. One of Porter’s main contributions was Porter’s value chain. The value chain is all the activities an organization undertakes to create value for a customer. According to Porter, there are two ways to gain an edge over competitors. A firm must provide comparable but value but perform the activities on the chain at a lower cost, or; Perform services in a unique way that would create higher value and dictates premium price. Another preliminary analysis for a company is the Business Portfolio Matrix. The first step in the business portfolio matrix is to identify any division that can be considered a business. Once all divisions (SBU’s) have been identified, the matrix can be used to measure their performance. The matrix depends on two business indicators: The vertical indicator, “market growth rate”, refers to the annual rate of growth of the market in which the division is located. The horizontal indicator, “relative market share”, illustrates the division’s market share. It ranges from low to high relative share of the market. Based on these 2 axes, there can be four distinct classifications: A star has a high share and a high-growth market. Stars need a lot of financial resources, and become cash cows after grow slows. They then become important cash generators for the company. A cash cow has a low-growth market, but a high share in the market. They produce a lot of cash for the organization while not requiring much additional resources, making them great financial assets. A Question Mark has a high-growth market, but a small share in the market. Companies soon have to decide whether they want to try and invest lots of financial resources in order to make them grow, or to eliminate it altogether. A cash trap has a low-growth market and a low share in the market. They could be either generating enough money to keep them afloat, or draining money from other divisions. Another huge part of assessing the environment is the SWOT analysis. The SWOT analysis is a thorough breakdown that pays attention to four things; internal strengths and weaknesses, and external opportunities and threats. The ability to lay out all of these components on paper helps asses the environment much easier for any company. Issue

Netflix appeals to many people because it is cheap and convenient. Netflix’s streaming service has even replaced cable in some homes. Their mail order service still appeals to customers who want more of a selection to choose from. Netflix was a popular and trusted company until they started making some fundamental mistakes in September of 2011. Netflix decided to raise the prices of its video mail order and streaming services, causing their stock to drop by 40 percent (Mourdoukoutas).

As if that was not a big enough mistake, two weeks later Netflix decided to split its services into two companies. The mail order service was now going to be run under the name Qwikster. Customers were outraged. By October, Netflix realized they had made a mistake and recombined its services. However, the damage to the company’s reputation had already been done. (Mourdoukoutas).

Both of the changes Netflix made were unsuccessful because they failed to notify their customers properly of the changes they were making. The CEO of Netflix admitted in a blog how unhappy its customers were; “It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes” (Hastings). Also in this blog, Hastings apologizes to customers and tries to...
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