Netflix Case Analysis

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Netflix, Inc.

“Netflix, Inc. is the world's largest online movie rental service, with more than 10 million subscribers (Netflix Media Center, 2009).”

Netflix exhibits dominant economic characteristics in the online movie rental business. They enjoy strong market size and growth rate when compared to rivalry competition. The number of rivalries are increasing, and the market remains dominated by only a few sizeable rivalries like Blockbuster Video, Wal-Mart, Walt Disney Movies and Movielink’s Downloadable Movies. Netflix is determined to offer new and innovative technology to sustain their competitive advantage.

“Netflix growth strategy entails making the best product and the best consumer experience even better. Lead the expansion of internet delivery content by offering subscribers both mail delivery and a continuously improving internet delivery option (Netflix Overview, 2009).”

Netflix’s vision is “to change the way people access and view the movies they love. To accomplish that, on a large scale, we have to set a long term goal to acquire 5 million subscribers in the U.S., or 5 percent of the U.S. TV households over the next four to seven years (Thompson C-41).”

This vision is well devised and crafted setting short term and long term performance targets. Current analysis shows less than 4 million subscribers in 2004, and in less than six years their subscriber base has more than doubled to more than 10 million subscribers.

Their intent is to leverage their online DVD rental leadership to grow both subscribers and net income, thereby using a balanced scorecard approach relating to financial performance and those related to strategic performance.

My analysis of Netflix’s strategy and vision is focused and on target. Netflix is achieving its competitive advantage by crafting a well-conceived strategy and the necessary vision to compete, survive and gain a competitive advantage over competing rivals. My case analysis is based upon the information gained from the textbook and reviewing the company’s website. Unfortunately, the information in the text book is quite a bit older than the current information on Netflix’s website. Viewing the company’s profile and financial growth over the last few years indicates that Netflix strategy and vision has been implemented successfully, achieving strong strategic growth and a sustainable competitive advantage.

Netflix‘s business model and strategy compare closely to its key rivals. Although, Netflix won a patent that covered much of its business model and could be used to help stifle competition in the future (Thompson C-33) . Netflix has a team of executives that manage only the on-line DVD rental enterprise. They are well established and use a very sophisticated software program thereby making movie selection easy and fun. In my analysis, Blockbuster has many retail stores to contend with and many other facets of a business enterprise, thereby not having a unique team of individuals solely dedicated to the on-line DVD rental business. Wal-Mart would be Netflix’s greatest fear due to the enormous capital available and expertise that could be employed, yet Wal-Mart continues to lag behind Netflix. Wal-Mart’s online software needs a lot of debugging, whereas Netflix had already spent several years debugging its software (Thompson C-37).

The online movie rental business is changing. As technology changes, DVD’s will not be the medium of choice. The shift will be downloadable movies. Most people enjoy the ability to watch a movie immediately, thus another of Netflix’s rivals, Movielink’s. Netflix was able to see this change and react to it quickly as seen in their company vision statement. I personally enjoy the option of pay-per-view that is available with local cable TV and satellite providers. Also available is the “on-demand” or “on-command” movie experience that allows a person to view older movies free of charge. Another threat is Redbox and other...
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