Netflix: Video Subscription Service Businesses - Term Paper Example

NETFLIX d c- Use relevant theory to explain how the Internet has impacted the competitive strategies available to a firm, and analyze how successful (or not) your particular firm has been in meeting the challenges posed by its e-Business activities. Competitive strategies are one of the many factors that signify a healthy market environment. With a number of brands competing with each other in the same category to win over the highest share of a consumer’s pocket, competitive strategies are designed to enable a brand to stand out amongst the clutter by generating and maintaining a consumer base. The internet has played a major role in shaping the businesses of today. Whether it is related to managing inventory, past data, customer data or complex functions like smart reimbursement of inventory levels, identifying consumer patterns or trends etc., the internet plays a significant role in the operations and management of almost every business of today. It has become so entrenched in today’s world that is imperative for businesses to maintain an online presence as well to interact with customers, spread product awareness and showcase their offerings. According to Michael E. Porter, the internet is not a new technology for today’s world. It has been there for more than a decade now and organizations should be smart enough to learn from the risks that can be associated with integrating business with the internet. Now is the age of accepting the internet as an ‘enabling technology’ that can help businesses cut down on their costs significantly, position their brand better and create a more competitive marketplace (Porter, 2001). This too is only possible if a strategically drafted competitive strategy is in place to attract the target market. Netflix is targeted towards dominating the Internet TV category. However, the internet does not bind the competitors as such and with the shift of its DVD business towards live streaming, the challenge does not remain in maintaining the best logistics system rather, it has shifted to maintaining relationships with the video providers. Netflix’s main competitor, Blockbuster, closed down recently but this is due to restructuring and not bankruptcy (Indiviglio, 2010). They are expected to come back into the market with bigger and better services that Netflix cannot ascertain completely at this point. Netflix accepts that the DVD rental is not feasible in the long run and has to be let go of at some point in time. However, it managed to aggravate a significant portion of its target market when it tried to drop the DVD rental service (Wolverton, 2012). Thus, it faces a challenge of letting go of a previous service for the one that is bound to be the future, Video streaming. Secondly it needs to maintain its relationships with the suppliers so that they can keep their prices at the minimal and deliver the superior quality they are known for. Many movie studios have also decided to offer streaming services themselves so they are unlikely to keep up their collaboration with Netflix. Netflix has taken many steps to overcome the challenges. It has introduced mobile apps for video streaming to allow the customers to avail the services even on the go. The current business model of Netflix does well for the company by satisfying the anticipated demand for online streaming of movies along with catering to the customers who are comfortable with DVD rental. However, in the long run, there is bound to be more competition and hostile approach from the suppliers so Netflix needs to restructure itself accordingly. d- Discuss Carr’s writings with respect to whether or not information technology and the Internet have given, and can continue to give, competitive advantage in the case of your particular firm. Gone are the days when IT consisted of just computers and was viewed as a mere data entry, calculation and recording tool. With the advent of technology and the introduction of smart systems, It investment has become a hefty one in the biggest businesses if the world and its consideration is taken at the strategic decision making level (G. Carr, 2003). It has been accepted that the use of the latest technology can help business to be more efficient, communicate better, anticipate trends, and fasten their operations and many more. Many organizations manage to earn their competitive advantage through an efficient use of technologically advanced systems. One such business is that of Netflix. Netflix offers an online service that allows video streaming as well as DVD rental system. However, their operations too are all managed by systems that help them manage inventory, logistics and customer relationships. Netflix is able to generate more order due to its smart recommendation system that suggests movies according to the likes of the subscriber on the basis of their trends and comparing them with those who have previously watched such movies. The operations at Netflix are so automated that the employees seldom interact with any subscribers directly. The whole process of viewing the catalog to ordering and delivering is maintained by their smart in-house propriety system. Their supply chain management system identifies the closest route to the subscriber’s location making the delivery faster and more efficient. That being said, Netflix does anticipate the future competition that may emerge as a result of the endless opportunities that the internet offers. It works towards continuously developing it technology and a recent example is that of their 1 million prize contest for the in-house team to develop a system that shows a 10% improvement for 5 years. Incentivizing innovation for their technology teams has played a major role in their business development. With faster and more efficient system, Netflix aims at making it recommendation system even stronger and allowing multiple buying options. Netflix also aims at partnering with electronic companies to come up with devices that instantly stream videos onto the subscriber’s TVs. For example blu ray disc players by Samsung, TiVo digital video recorders, Microsoft Xbox 360 gaming console etc. e- Comment on what your research shows you might be the firm’s future competitive environment. With more than 10 million subscribers today, Netflix has managed to successfully drive out the DVD rental services that existed in the market at that time like Wal-Mart and Amazon. However, with time it is not unlikely that competition will emerge and offer better services than Netflix or the same one at lower prices by replicating the business model. Companies like Hulu and VuDu poses the biggest threats. Hulu is a free service that is supported by advertising and it offers a greater variety of options as compared to Netflix. Vudu offers high definition streaming through their specific broadband connection that enables them to be fast and more efficient. Their positive relationships with supplier and studios enable them to cut costs and have a wider span of operations internationally (Review, 2009). Time warner, Verizon, Amazon and HBO are also serious threats to Netflix’s business due to their long term relationships with suppliers and better geographic spread. These competitors also have a history of business strength and can afford to invest in large scale promotion activities and advertising. These competitors also strive to offer the greatest variety of content and are willing to bid aggressively for that. Thus, Netflix faces severe competition currently and in the future. Its initial disruptive technology managed to challenge DVD rentals, television viewership and theaters to name a few. With many already established businesses also venturing into identical businesses, Netflix aims at keeping up its proprietary system strategy and develop in-house systems that can be made as efficient as possible. App streaming is also seen as a step towards tackling competition and keeping afloat in the long run. Netflix constantly aims at providing superior customer value and subscriber experience by developing efficient technology. It also works towards maintain sustainable business relationships with television and movie studies that can prove mutually beneficial for both the parties. Limited geographical penetration could be seen as an opportunity to focus on huge profitable markets in the best way possible. Netflix’s own website gives an insight into the organizational goals for the future. The website states that linear TV viewership is declining at a rapid speed; this is an age of tablets and smart TV and internet. Thus, the focus is shifting towards development for faster internet data transmission. However, it expresses its focus on catering to all demands, whether it is for linear television subscriber or a mobile app one. Since it differentiates itself on the basis of ease, convenience and quality content, the aim for 2014 is an investment of $3 billion of content. This mirrors the business’s aggressive stance to stay in the market and maintain its leadership position. Their simple approach which highlights humbleness and acceptance of limited resources but a strong focus on meeting the demand of the consumers in the best way possible is wrapped up in an ending note that says it all, that they are willing to embrace the challenge of emerging strong competition Executive summary Netflix is one of the world’s largest Video subscription service businesses that allow its subscribers to rent DVDs by order mail or by internet streaming. Its disruptive technology drove out the store based model of DVD rental and made it automated, digitalized and more efficient. It offers a variety of options through it on-demand catalogues and prides itself in its propriety smart systems that recommend similar genre movies to people upon opting for one, generating more sales. It offers a variety of packages for different people based upon their needs, frequency of viewership and volume of orders. Its target market includes all genders ranging from 15-65 years of age with a household income of more than $30,000 dollars annually. It caters to a variety of people differing in their ethnic backgrounds by offering several foreign and international films as well. Due to the technological nature of its business, Netflix invests heavily into its research and development, almost 6-7% of the total revenues. It faces competition from movie studios and other similar video streaming services like Vudu, Hulu, Verizon, HBO etc. and aggressively aims at maintaining its competitive position by gaining first rights over videos through sustainable relationship swath the suppliers. It also aims at elevating the whole customer experience through quick and efficient service and developing a stronger recommendation system that is a driver of continuous sales. Netflix’s propriety system is developed in-house and is a trade secret that enables it to safeguard its competitive advantage. Use of technology to maintain logistics and customer/ supplier relationships have helped Netflix become the huge brand it is today. With the increasing threat of technology and more market competition, Netflix focuses of making its business more efficient through development of newer in-house systems, maintaining relationships with studios, Initiating collaborations with electronic companies for devices and plans to grow internationally. It incentivizes creativity for its teams making it an exemplary HR policy for market success. In the future, Netflix can maintain and grow its market share by investing in web marketing through social media content, contests and trial period options and consider feedback to cater to the customer needs better. References: Wolverton, T. 2012. Netflix has challenges on path to ‘Internet TV’ dominance. [online] Available at: http://www.sltrib.com/sltrib/money/55228653-79/netflix-company-business-dvd.html.csp [Accessed: 28 Mar 2014]. Porter, M. 2001. Strategy and the Internet. [online] Available at: http://hbr.org/2001/03/strategy-and-the-internet/ar/1 [Accessed: 28 Mar 2014]. Indiviglio, D. 2010. 3 Big Challenges Facing Netflix. [online] Available at: http://www.theatlantic.com/business/archive/2010/09/3-big-challenges-facing-netflix/63637/ [Accessed: 28 Mar 2014]. G. Carr, N. 2003. IT Doesn’t Matter. [online] Available at: http://hbr.org/2003/05/it-doesnt-matter/ar/1 [Accessed: 28 Mar 2014]. Review, T. 2009. Netflix | MIT Technology Review. [online] Available at: http://www.technologyreview.com/article/416843/netflix/ [Accessed: 28 Mar 2014]. Netflix. 2014. Netflix : Netflix Long Term View. [online] Available at: http://ir.netflix.com/long-term-view.cfm [Accessed: 28 Mar 2014]. Read More