Netflix Analysis

Topics: Porter five forces analysis, Renting, Blu-ray Disc Pages: 12 (2401 words) Published: February 13, 2015
 Table of Contents

Summary3
Implementation of Porter’s five forces in U.S video rental industry3 Implementation of Porter’s Value Chains in Netflix5
IT techniques and applications applied in Netflix9
Netflix's Strengths and Problems10
Recommendation and Conclusion12

Summary
According to Boogren (2013), the video rental industry has changed in the past decade due to the development of IT technology. Customers have more opportunities to choose different ways to catch the TV programs, movies or shows if they want, it could be from a traditional way like brick-and-mortar stores such as Blockbuster, an online service provider such as Netflix, or a modern channel like TV cable companies. Consider of all, this paper will be separate to the following parts: Implementation of Porter’s five forces in U.S video rental industry; Implementation of Porter’s Value Chains in Netflix; IT techniques and applications applied in Netflix; Netflix's Strengths and Problems; Recommendation and conclusion. Implementation of Porter’s Five Forces in U.S Video Rental Industry Buyer Power

Buyer power in the video rental industry is high. First, consumers are well informed and demands high quality. They can get and compare all the information from Internet when they are trying to rent a video. Second, due to the multiple choices, buyers acquire the low switching costs. Third, buyers could expect more product differentiation. Since buyer power is high, the industry becomes more competitive. (Boogren, 2013). Supplier Power

Supplier power in the video rental industry is regard as high because the video rental companies have to buy the copyrights of new movies or TV programs directly from the makers, and also there are few studios and content providers are available. This means the supplier are highly differentiated and unique to the companies and there is no substitution. In the meantime, signing contracts with studios will cost the rental companies a lot. High supplier power makes this particular industry unattractive. (Boogren, 2013). Threats of Substitutes

The threats of substitute products or services are the highest in the video rental industry. This is because there are so many different formats in entertainment and each of them could be interchangeable. Such as pay-per-view, online streaming, and VOD among others. Consumers also can purchase a combination of these services at the same time. Because they only need to pay very low price that even could be ignored to switch the services, small changes in price or quality may cause people to drop the current service and switch to choosing the products or services from competitors. (Boogren, 2013). Threats of New Entrants

The threat of new entrants in the video rental industry is low at this time. This is because there are several barriers the companies should face whenever they want to enter in or exit. The biggest barrier entering the industry could be the costs of acquiring products rights from studios. In today’s market, there are too many big companies and they monopolize the new films. In the other hand, the costs of exit from the industry could be high. For example, Blockbuster might have extremely higher costs of exits since it has extensive investments in real products like DVDs. (Boogren, 2013). Competition In the Industry

Rivalry among competitors in the industry could be high, which simply means the businesses in this industry are competitive. First of all, many companies are sharing the market from a limited number of buyers, and buyer demand is growing steeply. Second reason is online streaming has become commodity product. The third one is with the development of IT technology. Many companies from other industry are entering into the industry such as Amazon, YouTube and even Microsoft. Their participation makes the market completely in a mass. (Boogren, 2013).

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