Netflix Analysis

Topics: Renting, Rental shop, Video rental services Pages: 4 (1284 words) Published: July 15, 2013
The following analysis is about Netflix and Blockbuster. Two successful companies with similar target market but at the same time with very different strategies which can make the difference of success in the future or contrary go down. First of all we need to clarify what is the specific situation of each one. Blockbuster is a rental home video company that has been leading the market during many years, since the VHS cassette till the appearance of the DVD and the expansion of the internet. They have had a well-designed strategy which let them growth significantly being the leaders in the market, having in 2006 more than 5000 locations within the US. They basically offered a huge number of in-store movie rental. As it is said in the text their financial success is based on the maximization of the days that a movie is rented. Also it is important to mention that a big part of their revenues came from the ‘’late fees’’ (10% of the total revenues in 2004). But as the times were changing, the customer’s needs were changing too and Blockbuster was in the need to adapt his business to the market. Netflix, being so visionary ten years ago, was launched as a personalized DVD movie rental using USPS to deliver DVDs to its subscribers and using a pricing model similar to the one used by video stores. The following analysis focuses on how those two companies that cover the same needs, they have totally different strategies and by analyzing both strategies we will see how a good strategy and a good knowledge of the market can make the difference and take a company to the success. Basing on the data and information in the case, Blockbuster would be ‘’short’’ and Netflix would be ‘’long’’. Blockbuster has an old-fashioned strategy, they focused all their efforts in differentiate from Netflix by integrating online and traditional in-shop services and by copying Netflix’s strategy of no late fees. Despite their attempts they had significant operation losses...
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