Netflix Financial Analysis

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  • Topic: Netflix, Million, Subscription business model
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  • Published : October 26, 2012
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Netflix: Planning

Netflix Current Strategy
Netflix Inc. is the largest video subscription service in the United States. Currently having over 25 million global subscribers (Netflix.com, Q2 11 Letter to shareholders), the company’s clientele is up by 70% from 15 million just last year. By examining Netflix’s management, three important questions can be raised in the effectiveness of company’s business strategy. First, what is their mission and vision and how do they affect the company’s planning (strategic and tactical)? Second, what are the company’s objectives and how is the current strategy accomplishing their objective? Third, what is the company’s strategic advantage and how productive is it? Netflix Strategy

Netflix overall strategy is to provide their customers with a convenient alternative to renting and watching movies. Reed Hastings, CEO of Netflix states the company’s mission statement as, “our appeal and success are built on the most expansive selection of DVDs; an easy way to choose movies; and fast, free delivery “(Brill, 2003), this statement is truly the foundation for what this company has become today. With an ever-growing gradient of subscribers, Netflix has definitely made an impressive mark by not only selling online movie rentals, but also by strategically providing streaming content (watching movies or shows online) on their website. Additionally, Hastings asserts, “our vision is to change the way people access and view the movies they love” (Thompson, A.A., Strickland, A.J. & Gamble, J.E., 2005, pg.C-41), this statement especially applies to the relatively new plan that the company offer to their customers who choose to view movies by online streaming. Essentially, Netflix customer base who view movies by online streaming alone shows consistent growth “with nearly 75% of our new subscribers signing up for it” (Netflix, Q2 11 Letter to shareholders). However, Netflix has not only increased their customer base, but it has also expanded their customer base by “1.8 million domestic subscribers in Q2, 75% more than Q2 of last year” (Netflix, Q2 11 Letter to shareholders) launching the Wii console platform. Indeed, Netflix provides a range of alternatives that is cost effective as well as time saving which has thus caused growth, and has truly supported and heightened Netflix business strategy. Netflix Strengths

According to an article, Redbox's golden opportunity: higher Netflix prices, Netflix has “the largest U.S. video subscription service.” Netflix’s ability to offer low prices, high customer satisfaction rate, free shipping, no late fees, and large selection of movies, video game, and streaming content gives the company a competitive advantage. In part, online movie rentals, streaming, and Wii game platform all are alternative that provides convenience of cost and time to their customers. Cost and time effectiveness are the two main reasons why Netflix customer base is continually growing. However, marketing is also an important strength that helps Netflix dominate the market of online movie rentals. Essentially, Redbox's golden opportunity: higher Netflix prices states, “Redbox's marketing expenses during the first half of this year totaled $10 million compared with $199 million at Netflix,” with competitors like Hulu Plus, HBO GO, Dish Online, Apple’s iTunes, Amazon Prime, and YouTube placing television advertisements and online sites is a very ingenious way to continually experience success. Currently, Netflix has now secured a variety of new content from movie studios, broadcast, and cable networks. For the most part “Netflix subscribers now have access to a wide range of programming from all for major U.S. broadcast networks and from nearly every major cable channel, as well as thousands of films” (Netflix.com, Q2 11 Letter to shareholders). Hence, customer satisfaction stands at 86% (according to Amazon And Netflix Tops In Customer Satisfaction) which is another strength that...
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