MGT872: Business Policy and Planning
Dr. Wissam Al Hussaini
Table of Contents
The idea behind Netflix, the most popular provider of online and by-mail rental services, came from an unsatisfied, embarrassed customer. Reed Hastings, founder and current CEO of Netflix, was charged 40$ as a late fee because he returned the movie Appolo13 six weeks late (Zarafshar, 2013). This made him think creatively about an idea to transform the movie rental model into a more innovative business. In 1997, Hastings and Randolph started Netflix which was a DVD rental-by-mail business with no subscriptions. Later in 1999, and as a step further towards developing the business, Hastings launched the subscription-based business model which was based only on renting DVDs by mail with multiple plans dependent on the number of titles at a time. Netflix offered its subscribers to choose from its extensive DVD library with more than 120,000 titles for unlimited monthly DVD rental with free shipping as well as zero late and per title rental fees. It was very attractive for customers to make subscriptions on the spot as they were tempted with the incredible Netflix service. For example, Blockbuster subscribers found Netflix's offers more appealing and it was easy for them to make the switch. (Wikipedia, 2014) Netflix has been always open to new opportunities that Hastings believes it will sustain the company's competitive advantage. A new opportunity was captured when the streaming service was introduced in January 2007 where it enabled Netflix's subscribers to instantly watch movies, TV-episodes, documentaries, series and much more on internet-connected devices such as smart TVs, PCs, DVRs, Blu-Ray players and special Netflix players. During that time, Netflix was leading the industry as it was the first company to offer paid streaming services to its subscribers in US, Canada and Latin America. Today, Netflix is known as the largest provider of online streaming service with almost 44 million subscribers in more than 40 countries offered access to an ever-growing library of thousands of titles. (Netflix PR, 2014) Netflix executives were keen to devise flexible strategies accompanied by a profitable business model that gave them sustainable competitive advantages over their rivals. They constantly monitor their external environment and do the required amendments quickly and swiftly to leverage the emerging opportunities and tackle the upcoming threats. Strategies ranging from growing its library content, service differentiation, very competitive DVD-by-Mail service, unique marketing plan and ambitious international expansion all made Netflix a leader in its industry. However, Netflix isn’t the only player in the DVD-rental and streaming services market. Blockbuster and Redbox are one of the many competitors in the DVD-rental market that use different competitive models to outcompete Netflix's. Hulu Plus, Amazon and HBO GO have fueled the competition in the streaming service market. They all compete on acquiring more titles to expand their libraries and try to offer the best subscription plans in order to get more market share. Having this in mind, what should Netflix do next in order to outperform its competitors and sustain its competitive advantage ? External Environment Analysis
We will start our assessment of the external environment by examining the PESTEL factors in the Macro (General) Environment of the movie renting industry. Political Factors
Network Neutrality is the principle that preserves the internet to remain free and open for all users. It defends against discrimination of the internet use based on the content or website services (Ala, 2014). Major Internet Service Providers (ISPs) would like to charge a company like Netflix more money because it’s...
References: Thompson (2012) - Netflix in 2012: Can It Recover from Its strategy Missteps? Thompson, A. A. (2012).
Welch (Jan, 2014) Netflix’s momentum continues with 2.33 million new US customers in Q4. Retrieved from: http://www.theverge.com/2014/1/22/5334934/netflix-q4-2013-earnings
Netflix (2014) In Wikipedia
Hartung (Jan, 2013) – Netflix – The turnaround story of 2012! – Retrieved from: http://www.forbes.com/sites/adamhartung/2013/01/29/netflix-the-turnaround-story-of-2012/
Honorof (Mar,2014) Netflix vs
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