What is Netflix’s strategy in the on-line movie rental market? What are Netflix’s sources of competitive advantage? Identify the competences key to the success of Netflix’s strategy and explain why. Netflix was a late entrant to the movie rental market and it was a first mover in the on – line movie rental market. Netflix’s strategy in the movie rental market is differentiation from traditional movie rental stores. Instead of attracting customers to a retail location, Netflix offered home delivery of DVDs through the mail. Why only DVDs? In 1998, most available movies were in VHS cassette format but Netflix concentrated on using only DVDs because its marketing strategy was to develop cross promotional programs with the manufacturers and sellers of DVD players, providing a source of content for the customers. Also, there was no competition in that niche market and DVDs were small and light which made them perfect for mail delivery.
Netflix had several sources of competitive advantage. For starters, Netflix’s website included a search engine that allowed customers to easily sort through its selection by title, actor, etc. Using these search engine customers could easily and quickly find a movie that they would like instead of looking on shelves of a retail store. Netflix was using the US Postal Service to deliver DVDs directly to a customer’s home. It was more convenient for customers.
They used similar pricing to that offered by traditional video stores in the beginning but what gave them the competitive advantage was moving to a subscription prepaid service. And, soon afterwards they offered unlimited rentals to customers because they were targeting another group of customers – ones that wanted the convenience of watching a movie at any time and change them unlimited during a month.
Netflix’s engineers developed a proprietary recommendation system. They have done so... [continues]
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