Swot Analysis of Netflix.Docx Essay

“Netflix recognized that late fees were bringing in big bucks for Blockbuster – roughly $300 million annually – but the fees were alienating its customers.” (Smart advantage). They used this to create their signature business model, which is no limit on rental time and no late fees, for one low monthly fee. They also believed convenience was a top purchasing criteria of consumers, so they delivered DVDs right to your door, allowing customers to obtain any DVD with ease and without worry of being charged fees. “Netflix quickly developed a reputation for revolutionizing the movie rental market. As a result, Netflix dominated the market and enjoyed minimal direct competition,”(Smart Advantage 2012). They made their initial public offering in 2002 with just 600,000 members in the United States. Within 5 short years, Netflix grew to 4.2 million members. In order to continue to meet the needs of their customers, Netflix took its service to the next level in 2007 by introducing streaming. This allows members to watch movies and television shows instantly on their computers. “Netflix obtains content from various studios and other content providers through fixed-fee licenses, revenue sharing agreements and direct purchases”, which allows Netflix customers to stream any TV show or movie offered in the Netflix streaming library (Forbes). Within the next three years they took it one

Netflix provides a subscription-style e-commerce service. Customers only need to sign up and pay $13.95-39.95 a month to borrow as many as 2-9 movies at a time with no monthly limit. If customers quickly watch the DVD and send them back, the monthly fee pays for quite a few movies. The relatively low monthly fee enables Netflix to compete with Blockbuster and other brick-and-mortar video rental business. Meanwhile, Netflix might keep the customers who try the service and happy with it continue paying the monthly fee. Therefore, Netflix has less problem in predicting revenue or level revenues.

Netflix also initiated the streaming video and television shows through the internet to your television, computer, or gaming system. The selection wasn’t as big as the actual DVD mail-order system, but it was faster and more convenient for some customers who “wanted it now”. This was all offered to the customer in a low monthly fee. Some subscription services even allowed for unlimited rentals per month.

Netflix offers no late fees, no membership required, the ability to cancel services anytime, 24-hour online and telephone support, substantial movie reviews from customer (peer), and unlimited streaming and DVD rental services. Most important, Netflix major attraction was quality service without the long lines like most brick and motors, moreover instead, DVD rentals arrive directly to your front door. This model has launched Netflix into a highly innovative company.

Netflix has around 75 million subscribers today which suggests that it is a very popular organisation. Netflix at the moment serves many markets across the world whinch included the US and Europe. Netflix suffers from competition from companies such as Amazon prime. Both of these companies compete to gain customers in this compact market. Netflix's corporate strategy fits in with their business level strategy as they deal mainly with DVD rental via online streaming. The deal that is in place with Warner bros has a major impact on how Netflix conducts itself. If other online streaming companies don't face this deal of not being allowed to stream their contents untill 28 days after the public release date then other companies have a competitive advantage which would lower Netflix's revenue. This would cause customers to leave Netflix as they may be able to see films at an earlier date with rival

Netflix’s completed changed the movie renting industry. Netflix’s completely changed the movie renting industry. Netflix targeted Blockbuster customers who were inconvenienced by making two trips to blockbuster in a 24 hour period and also spent time to scan the stacks to find their movies of interest. Netflix online and mail distribution system was a way to scale Blockbuster’s barriers to entry, which is their network of stores. This is a great example of disruptive innovation as they targeted a market niche, one which has been neglected by the incumbent. Blockbuster was caught off guard by the innovation by Netflix

Netflix is one of the most popular ways to stream television shows and movies, without paying the high cost of cable. Netflix offers several subscriptions plans which allows customers to rent DVD’s and stream movies instantly, but this service has recently declined primarily because the increase price for this subscription. I personally know a few people who have canceled their cable subscription and started using streaming companies in order to save money. I believe that this idea will become increasingly popular within the next few years and cable companies will have to lower their prices in order to stay competitive. The popularity of Netflix is combined with its strengths and weakness.

stands in a weak position in terms of having power over suppliers because these ther are the owners of the content, which represents the key asset of Netflix Inc. and only a second source of revenues for the TV organizations. Therefore, they have a strong bargaining power and have a profound influence over the pricing of the licenses granted to Netflix Inc. Using backward integration Netflix Inc. produces its own content in the form of TV series, in order to reduce the supplier risk. Buyer Power (high): Although Netflix being the undisputed market leader, huge competition and the minimal switching costs put the consumer in a prime position. Threats of substitutes (high): the chances to get the same level of entertainment from another industry is really high (e.g. video game industry), although costs and product diversities are still the key leading factors that make customers choose Netflix Inc. rather than its substitutes or

The Video-on-Demand services through digital, cable and subscriptions also saw major increases. The purchase decisions of customers were mostly catapulted through convenient access, variety of services, ease of product return, price of rentals, return fees etc. (Kriete 2013).

Launched in1997, it originally offered DVD rental on a pay-per-use basis. In 1999, the company moved to a subscriptionbased model. In January 2008, Netflix began offering unlimited steaming content. Initial approach aimed to position the company as a low-cost video rental service competing with the brick and mortar stores and movie theaters. Since the product they were offering was not easy to differentiate, Netflix began focusing more on the services provided with the DVD rental rather than the price alone. Netflix introduced a No-Due-Dates-No-Late-Fees model and offered an

Netflix, the online subscription-based DVD rental service aimed to better satisfy customer in a way competitors didn’t, customized and personalized service with unlimited monthly rentals from a great variety of film offerings. Now they want to leverage their strengths to enter into the Video on Demand market

Netflix exhibits dominant economic characteristics in the online movie rental business. They enjoy strong market size and growth rate when compared to rivalry competition. The number of rivalries are increasing, and the market remains dominated by only a few sizeable rivalries like Blockbuster Video, Wal-Mart, Walt Disney Movies and Movielink’s Downloadable Movies. Netflix is determined to offer new and innovative technology to sustain their competitive advantage.

Netflix has specific factors that could enhance its growth or can hinder continuity of its impressive performance. Evidently, the company has strength in its branding as it is recognized in over

Competition leads Netflix to come up with a strategy that can help differentiate itself from its competitors. According to the case, “...expanding its streaming business did not require expanding its physical infrastructure, [which] has proven to be a major differentiator as it expands internationally in the Americas and Europe” (Netflix Case, Pg.5). Expanding broader into new markets gives the Netflix a huge advantage to outperform its competitors. Moreover, by choosing to expand, Netflix is able to stay consistent with the corporation’s mission, which is to grow the streaming service broader domestically and internally.

Video-on-demand or VOD, a service that allows users to select and watch videos over the internet, will be one of the greatest innovation as stated in the Netflix case study. It will be a great opportunity for Netflix, but it will also be a challenge to integrate or do away with its current business model. Its current business model is one that relies on the internet and the post service to deliver DVDs to its subscribers. Netflix should carefully enter the VOD market without doing away with its current model. This will allow it to maintain its growing position as a giant in this media industry. In order to better understand Netflix and the problems it faces, we must first identify its strengths. What does Netflix offer its customers that its competitors do not? What differentiates it from its competitors?