Netflix Case Analysis
Netflix
Philip J. Brooks
Business Policy & Strategic Planning – BA 4910
Professor Dr. Jeffrey Walls
November 25, 2006
GENERAL ENVIRONMENTAL ANALYSIS
Netflix was founded in 1997 by Reed Hastings, founder and CEO. Prior to this, Hastings founded Pure Software in 1991 and led several acquisitions that allowed Pure Software to become one of the top 50 largest software companies in the world. In 1999, Hastings launched the online subscription service and led Netflix to a subscriber base of over 1 million in just three and a half years, something that took AOL six years to accomplish. Netflix’s business strategy was quite simple, because they had pioneered the online DVD rental industry when DVDs were rare and had developed a strong lead of customers, revenue, and brand recognition. In response to its ever growing competition, in June of 2003, Netflix won a patent that covered much of its business model and could be used to help stifle future competition or at least demand licensing fees for the service. Additionally, according to Mike Schuh of Foundation Capital, one of Netflix’s earliest financial backers, the barriers to entry in the online DVD rental market were very low, but the barriers to profitability were very high. Lastly, Netflix faced a greater challenge, in that the likelihood that DVDs would soon no longer be the medium of choice.
VISION
Since the strategic vision is a road map showing the route that the company intends to take in developing and strengthening its business, the Netflix vision was nothing short of this with founder Reed Hastings exclaiming that, “Our vision is to change the way people access and view the movies they love” (Hastings, 2003). To accomplish this vision, Hastings purports that the company has set a long-term goal to acquire 5 million subscribers in the U.S. and by then, they expect to generate $1 billion in revenue.
BUSINESS MODEL
The business model of Netflix is one of simplicity on one
Philip J. Brooks
Business Policy & Strategic Planning – BA 4910
Professor Dr. Jeffrey Walls
November 25, 2006
GENERAL ENVIRONMENTAL ANALYSIS
Netflix was founded in 1997 by Reed Hastings, founder and CEO. Prior to this, Hastings founded Pure Software in 1991 and led several acquisitions that allowed Pure Software to become one of the top 50 largest software companies in the world. In 1999, Hastings launched the online subscription service and led Netflix to a subscriber base of over 1 million in just three and a half years, something that took AOL six years to accomplish. Netflix’s business strategy was quite simple, because they had pioneered the online DVD rental industry when DVDs were rare and had developed a strong lead of customers, revenue, and brand recognition. In response to its ever growing competition, in June of 2003, Netflix won a patent that covered much of its business model and could be used to help stifle future competition or at least demand licensing fees for the service. Additionally, according to Mike Schuh of Foundation Capital, one of Netflix’s earliest financial backers, the barriers to entry in the online DVD rental market were very low, but the barriers to profitability were very high. Lastly, Netflix faced a greater challenge, in that the likelihood that DVDs would soon no longer be the medium of choice.
VISION
Since the strategic vision is a road map showing the route that the company intends to take in developing and strengthening its business, the Netflix vision was nothing short of this with founder Reed Hastings exclaiming that, “Our vision is to change the way people access and view the movies they love” (Hastings, 2003). To accomplish this vision, Hastings purports that the company has set a long-term goal to acquire 5 million subscribers in the U.S. and by then, they expect to generate $1 billion in revenue.
BUSINESS MODEL
The business model of Netflix is one of simplicity on one