Netflix Strategy

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Netflix: Strategic Analysis
Strategy I – Winter 2012

Basic Information & Assessment of Strategy
Netflix is a U.S provider of on-demand Internet streaming media. Launched in1997, it originally offered DVD rental on a pay-per-use basis. In 1999, the company moved to a subscriptionbased model. In January 2008, Netflix began offering unlimited steaming content. Initial approach aimed to position the company as a low-cost video rental service competing with the brick and mortar stores and movie theaters. Since the product they were offering was not easy to differentiate, Netflix began focusing more on the services provided with the DVD rental rather than the price alone. Netflix introduced a No-Due-Dates-No-Late-Fees model and offered an excellent customer service. It provided a quality customer experience with their user-friendly website, recommendation software, queue function, vast content library and free overnight straight-to-home delivery.

A differentiated strategy has enabled Netflix to provide distinct value to their customers.

Netflix’s first mover advantage allowed them to garner a large subscriber base and helped them transform the video rental business model. Netflix in entering into multi-year licenses with studios and distributors to continually provide newer content, attracting more subscribers and allowing for organic growth.

Due to the technological advances as well as changing trends in movie viewing and consumer preferences, Netflix’s focus has shifted towards wireless video-on-demand services. The rise of complementary products, such as smart mobile devices and TV’s as well as the proliferation of broadband internet access allowed a fundamental shift in content distribution.

Overall, Netflix’s strategy is to retain and attract new subscribers by continually providing a larger selection of content and incorporating new technology to enhance the user experience. The company started its expansion into international markets to leverage their gains from the US market. It launched its services in Canada, Latin America, the Caribbean, UK and Ireland.


Netflix - Strategic Analysis

2011 – Strategic Group Map
Netflix Subscriber Value Paid TV
(content catalog)

Amazon/Hulu Kiosk OO Theater Access to Content
(online, stores, etc)



Netflix - Strategic Analysis

Strategically Important Activities/Resources
Largest subscriber base and social communication data
~ 24M subscribers as of Q3 2011 Obtained through first-mover advantage, low-cost offering, as well as providing customers with distinct value for the service On-line community connected through recommendations, sharing movie lists and reviews

Unrivaled portfolio of digital content rights

Early established relationships and licenses with studios and content providers offer largest movie library Recent deals done with DreamWorks Animation, Open Road Films, Epix, Relativity Media, Nu Image/Millennium Films, BBC Patented method of web-based DVD selection Cloud computing services improve business agility and increase movie streaming capacity Continuously gaining new distribution channels (mobile devices, gaming devices, Internet T V’s, etc.) increases product penetration

High investment in technology architecture and innovation

Access to most distribution channels

Netflix - Strategic Analysis

Sustainable Competitive Advantage
Netflix’s Large Subscriber Base Is Their Most Sustainable Competitive Advantage Valuable because it allows Netflix to funnel more money into their acquisitions, increasing people’s willingness to pay. In addition, more customers create a more comprehensive experience on their website with their expansive movie reviews and recommendations no competitor can match. Rare because no other competitor has been able to come close to its 24+ million subscriber base. One of its main competitors Hulu just celebrated reaching 1.2 million subscribers.1 Imperfectly Imitable because Netflix...
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