NETFLIX OPERATIONS MANAGEMENT REPORT
TABLE OF CONTENTS
Netflix Process Strategy
Exhibit 1 Process Flow Diagram
.A-1 Exhibit 2 Video Market Chart
..A-2 Exhibit 3 House of Quality
A-3 Exhibit 4 Graph of the Pareto Principle
..A-3 Exhibit 5 Inventory Flow Plan
A-4 Executive Summary
For a company who emerged in the Dot Com Era and adapted to the virtual world through technology, the CFO Reed Hastings definitely found his niche in the competitive market for DVD rentals. 5.7 million customers receive the luxury of convenience of a subscription service with a personalized recommendation system, an extensive collection of titles, usual one day shipping, an interactive internet interface, detailed movie plot descriptions, and pre-paid envelopes to return the movies. Though being the innovator of this home delivery for entertainment, Blockbuster and Amazon.com compete for Netflix's market share. Netflix is one step ahead of the game by implementing a unique differentiating marketing tool, "No Late Fees." Vital to their success, Nelflix uses a sophisticated software system made specifically to efficiently deliver to subscribers individual title requests within 1-business day. With keeping its costs down, Netflix does not anticipate downsizing, instead it is out to reach higher demands of consumers by having a future innovation of having consumers the ability to download movies. Continuing with low costs, Netflix creates mutually beneficial relationships with other entertainment industries which minimize inventory risks and providing them subscribers for niche titles and programs. These will help their market share grow to the anticipated 20 million by 2020.
Many companies introduced during the growth period of the Dot-com Era have long gone without a second thought. However, Netflix is one success story of an ecommerce company that effectively utilized technology to become the world's largest online DVD rental service. Netflix is known is the innovator for the mail-based delivery service for renting DVDs. Founded by Reed Hastings in 1997, the original concept was based as an online version of a more traditional pay per rental model. But the CEO Hastings had personally experienced frustration with late fees. Once when returning a single movie, he was forced to pay a $40 late fee and realized that he was not only one who had displeasure with such large charges. He launched the monthly subscription service in 1999 and began Netflix #1 differentiating marketing tool, "No Late Fees." Today, over five million families now have Netflix accounts, and they can access to over 65,000 titles. Netflix Process Strategy
Netflix offers an online subscription DVD rental service to customers for a monthly fee. Through the website, netflix.com, subscribers may log into their account and browse all of the 65,000 available titles as well titles that have not yet been released to DVD. The website provides detailed information about all movies including plot description, ratings, and actor/director information. The customer chooses which movies they want to see by adding it to their "queue" of which they are allowed up to 500 ranked choices. There are 8 subscription choices which vary the amount of DVDs the subscriber may keep at one time. The top choices are mailed to the subscriber through the US postal service and usually arrive within 1 business day. Every time a movie is mailed...
Bibliography: "Interview with Reed Hastings" n Post 2002 http://www.npost.com/interview.jsp?intID=INT00032
"Throttling Angers Netflix Heavy Renters" ABCNews Feb 10, 2006 http://abcnews.go.com/Business/wireStory?id=1603927&business=true
MICHAEL LIEDTKE, "Netflix offers $1M for better picks" AP Business Writer Mon Oct 2, 2006
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