Netflix Case Study

Topics: Renting, Netflix / Pages: 6 (1458 words) / Published: Oct 20th, 2012
Case #6 – Netflix’s Business Model & Strategy

1. How strong are the competitive forces in the movie rental marketplace? Do five-forces analysis to support your answer.

Firms in Other Industries Offering Substitute Products
There is a small amount of possibilities for substitutes. The only substitutes would be illegally obtaining the movies by downloading or streaming, purchasing ³bootleg´ DVD¶s, or waiting until the movie is aired on public or cable TV stations.
Suppliers of Raw Materials, Parts, Components, or other Resource Inputs
Consisting of only a small number or suppliers, buyers do not have the upper hand. If suppliers run out of stock or decide to cut supplies short, there are not many alternatives to obtain DVDs or right to a movie. The seller has the power to control distribution and prices.
Rivalry among Competing Sellers
There are very few competitors in the movie rental industry of which consist of Netflix, Blockbuster, and small businesses. These few control overall market share of the industry. The main competition is between Netflix and Blockbuster. Blockbuster is currently the leader in movie rentals until Netflix introduced their DVDs by mail program and subscription based business model.
Buyers
Buyers have limited powers and options. An avid movie renter is limited to the selection available in store or library on line. The movie rental companies are limited to the supply they can purchase and stock their stores with. They are unable to control prices, but larger companies do have the upper hand since they can order larger quantities to get a better deal.
Potential New Entry
There are little to no potential entrants into this industry. A recent entry into the movie rental industry is Red Box; they are a vending machine style movie rental. This market requires entrants to have large capitals to acquire movie rights along with fresh new ideas of movie delivery options.

2. What forces are driving changes in the movie

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