The Success of Netflix on Revolutionizing the Video Rental Business

Topics: Strategic management, Renting, Rental shop Pages: 5 (1546 words) Published: September 18, 2011
Executive Summary
The case discusses the success of Netflix on revolutionizing the video rental business. It clearly shows the company’s ability on utilizing superior customer service, emerging technologies, strategic partnerships, empowerment of employees and creating an ever growing subscriber base to transform the traditional video rental in to a 21st century on-demand concept. Video-on-Demand is the recent video streaming technology where pay-per-view programming merges with Internet downloading. Netflix, an online subscription-based DVD rental company, entered the video industry with disruptive technology of offering online video rental while the incumbent competitors like Blockbuster were offering retail rentals. The incumbent competitors eventually followed Netflix’s direction when their core competencies were sabotaged by Netflix’s strategy.

In this case study, we would be trying to figure out the possible problems faced by Netflix, the solutions generated by the company, as well as the various ways through which the problems can be handled.

The introduction part of the case presents short history of the company and some theoretical aspects. The second part i.e. analysis will build up on the problems identified from the case, the possible solutions created by the company and how the solution affected the company. The last part will conclude the case by discussing the lessons gained from the case and recommending ways through which the case can be handled.

Netflix was founded in 1997 and has truly revolutionized the way people rent movies. It launched its online subscription service in 1999 and has now become the world’s largest online movie rental service. The company has more than 55 million discs and, on average, ships 1.9 million DVD’s to customers each day. On February 25, 2007 Netflix announced its billionth DVD delivery. Two years later, on April 2, 2009 the company announced that it had mailed its two billionth DVD delivery.

The company recently announced the availability of a free Netflix app for the iphone and ipad allowing users to instantly watch TV episodes and movies. The company is experiencing amazing growth in subscribers and revenues. For fiscal year 2009, revenues exceeded $1.6 billion with net income rising above $123.5 million. (Netflix, 2010)

Strategic management is what managers do to develop an organization’s strategies. It is an important task that involves all the basic management functions-planning, organizing, leading, and controlling. Organization’s strategies are plans for how the organization will do whatever it’s in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals. (Robbins and etal, 2010)

Why strategic management is so important? There are three reasons * It can make a difference in how well an organization performs. That is why some organizations succeed while others fail facing the same environment. That is what makes Netflix different in its industry, a strong strategy. Research found a generally positive relationship between strategic planning and performance. * The second reason is the fact that managers in organizations of all types and sizes face continually changing situations. They cope with this uncertainty by using the strategic management process to examine relevant factors and decide what actions to take. Here the strategy used by Netflix using an online subscription-based DVD rental can be taken as an example * Finally, strategic management is important because organizations are complex and diverse. Each part needs to work toward achieving organization’s goals; strategic management helps do this.

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