The Advantages of the E-Commerce - Netflix - Case Study Example

The Advantages of the E-Commerce Netflix Introduction The Internet has revolutionalized the conduct of business through management of supply chains and bringing products and services to the market place. Companies use Internet, not only to improve efficiency and effectiveness, but also to stay ahead of technological changes introduced in the business world. The unprecedented growth of the Internet has surprised both technology and enterprises in the year 2005. The volume of business done through the Internet was US $ 8.5 Trillion in 2005, and around 700 Million people worldwide, use the Internet. However there are two factors to be considered while entering business deals through the Internet. (1) Genuineness of the parties and (2). Trust among the parties. Another important aspect in today’s e-commerce is strategy. This is where we undertake the introspective work to explore what kind of business we really want to build. Whether we just getting started or looking to expand an existing business, it is important to define our vision and mission and the strategy we will follow to achieve our goals. We all know that the Internet is rapidly becoming an indispensable business tool, creating unprecedented opportunity for organizations of all sizes. Internet usage is growing dramatically around the world. Indeed the retail Internet commerce dominates electronic commerce to the extent that most other forms are forgotten, but the term covers much more. Currently the market for services in support of electronic commerce is very large and provides many significant opportunities even though there are already thousands of service providers. The opportunity comes from the variety of services that are not at all well covered in today’s marketplace. “It comprises complete rethinking of traditional modes of behavior, the need and importance involved in internal staff and external suppliers and customers.” 1 Some of the advantages of the e-commerce are as follows: Users need not be in the same physical location as an e-business and the exchange of information and transactions may take place at any given time, twenty-four hours a day, seven days a week and from any location in the world with Internet access. A physical location is restricted by size and limited to only those customers that can get there, while an online store has a global marketplace with customers and information seekers already waiting in line. “E-commerce is fundamentally changing the relationships between customers and suppliers.” 2 In e-business, there is often a reduction in costs required to complete traditional business procedures. Many of those same traditional business approaches can be eliminated and replaced with electronic means, which are often easier to carry out as well as easier on the pocketbook. For example, compare the cost of sending out 100 direct mailings (paper, postage, staff and all), to sending out a bulk e-mail. Also think about the cost of paying rent at a physical location opposed to the cost of maintaining an online site.With e-business customers receive highly customizable service, and communication is often more effective. There is far more flexibility, availability and faster response times with online support. For example, think about the speed of e-mail inquiries and live chat as opposed to getting on the phone, especially when that business is closed for the day. There is also a faster delivery cycle with online sales, helping strengthen the customer/business relationship. The internet is a powerful channel for reaching new markets and communicating information to customers and partners. Having a better understanding of your customers will help to improve customer satisfaction. The Internet opens up a brand new marketplace to businesses moving online. Competition via the internet is growing as the internet itself grows and waiting too long to move online may cause you to lose your place in line entirely.and also,” differentiating yourself from the competition” 3 Easy access to real time information is a primary benefit of the internet, enabling a company to give more efficient and valid information and helping to gain the competitive advantage over those that are not online.Although there are risks associating with e-business, as with most business decisions, there is also the risk associated with the inability to adapt to the changing times. Change is inevitable in today’s marketplace and should be embraced with open arms and open sites. Review of Literature The global supply chain have created the need for standard partnership over the internet for buying and selling over the Net.This includes Electronic stores, product catalogues and processing of various orders though the use of e-commerce. The whole gamut of purchasing, including payment to suppliers with the trading partner are routed through automated systems by the use of ecommerce. In large manufact ruing organisations, there are massive volumes of datas received from different sources and different systems stored in various locations. Therefore it is necessary to have a centralized and attainable information systems which is facilitated through e-commerce. In a manufacturing organization, there is need for a constant interaction between the partners and the provisions of integrated system between the shop floor application and manufaturing system which is called Plant To Enterprise (P2E). Further, in manufacturing orgainzations there is a need to utilize the services of suppliers from different countries in order supplying of raw materials and parts and also for procurement from outside for the various stages of the manufacturing process. E- Commerce provides opportunities to manufacturers for streamlining the supply chain and also for ensuring complete efficiency in the manufacturing process itself. This is necessary in order to keep and enchance the supply chain moving and its transparency. For manufacturers so that they could effectively manage availability of materials on time.E-commerce is very similar to commercial dtransactions taking place on the net and it is basically concerned with purchasing,selling,marketing, delivering ands servicing of products by electronic technology through computer network. The ever increasing support rendered by the electronic commerce to manufacturing industries give necessary initiative for the use of supply chain management software, stores controls systems ands financial management software. With the emergence of ecommerce, the trade barriers between countries have broken down and small manufacturers are able to utilize ecommerce for business development Internet commerce has expanded the frontiers of global business and has allowed the use of electronic commerce independent of time .language, and geographical locations of the customer. It shifts the power balance between buyers and sellers, enables price comparisons and distribution of knowledge, widening of market and sustenance of growth. Global marketing today means the companies would have to shift to the on line medium to remain competitive in future. The development of internet will determine the economies of nations. Netflix is a American DVD rental Company based at California, using e-commerce medium of business. During the end of 2006, the total subscribers was to the tune of around “6.3 million subscribers.” 4 And it is the world’s biggest home online entertainment service with choice of more than 75,000 DVD titles at the most compeititive prices, and they have a strong distribution network across the USA. Neflix’s strategy is to continue to create and increase consumer experiences. They are mainly targetting on rapid subscriber growth. They expands their markets through mail delivery and continaully improving online video option and to continue their market leadership by providing good customer service and achieving economies of scale. They are a very ethical in their dealings, and believe that, should a “conflict of interests” arise with customers, Netflix employees should not use their influence in the company for “improper personal benefits.” 5 They offer schemes in which home delivery is made within 1 business dayafter the cusomer listed requirements are shipped to their warehouses throughout the USA. (a) Assessment of need and problems : Through the survey it has been found out that the delivery schedules to customers may be delayed in the case of bulk subscribers of DVD’s. Netflix’s allocation policy gives priority shipping to customers who rent the least DVD’s per month. High quanity renters may have shipment delays. The claim that Netflix’s deliveries are effected in one business day following the shipment from the local distribution centers has been proved incorrect.Shipments are often delayed and often, the receipt of items get inordinately delayed. The following problems may also occur from time to time: Failure to understand the customer’s real needs and demands and be able to satisfy the customer. This may arise due to heavy order bookings as a result of which individualized customer servicing may not be possible. Again due to bulk bookings, some of the items may not be readily available, thus there may be delay in supplies. Failure to consider the competitive situation, due to better customer service by competing companies, and larger market share by competitors. In certain locations the compeititors may be more active and having a better hold on the market. In these locations, the company would have to review its strategy for better positioning of its product marketing and should try to improve its market standing by offering attractive terms so the customers may now opt for these products instead of the earlier ones, Inability to forecast business reactions is another aspect which needs to be reviewed.It often happens that due to changes in business climates and local commercial factors, certain products and services gain supremacy over orthers.In t his case, since electronic entertainment has become very popular in USA, and nearly 70% of American homes have DVD players, therefore the market for DVD rentals is very good and there is a bright future for this industry. Moreover, since the company has a good marketing and warhousing network throughout the USA, the potential for future growth is also available.Since the electronic industry technoclogy is fast changing, it is imperative that the company keeps abreast for the changing technology and reacts quickly to market changes. Inadequate resource competence. The company’s growth is phenomenonal and its sustenance also poses a major challenge for the management team. Therefore, it is necessary that the manaagement team equipps itself well to tackle the problems associated with high growth rate and technological changes associated with e-commerce. coordination problems within the organization may arise due to numerous warehouses and servicing outlets spread throughout the USA. The co-ordination between all these outlets become necessary for smooth functioning of the company. Wherever bottlenecks occur in the head office-warehouse-service outlets chain, it needs to be ironed out immediately so that the smooth flow of business is not hampered, and customer servicing is highest priority. Since it is a service industry, improvement of services provided is paramount to develop in the competitive market. Complaint rates should be minimized and professional ways of handling responses should be inculcated. If complaints are not set right, it is needless to say that the reputation of the company is affected and this may cause longterm problems. Obtain senior management commitment. In the corporate hierarchy, high level decisions regarding policy and pricing matters need to be taken at the senior management levels. If the decision making is decentralized, there no problem, otherwise the commitment and consent of the senior management team is required for corporate decision making and execution. The commitment of the senior management is also necessary for ratification of decisions at top levels. Effective employee loyalties. It is one of the key factors for achieving corporate Goals, since emplyees are the stabilizing and profit earning persons of any organization and their active support and co-operation are very necessary for future profitability. It is also necessary to provide proper training to cope with new e-commerce technology. Setting up an e-commerce venture involves time and money and often profits are realized after market share is culled out. During the first few years of operation, a service industry may not make profits, and it would take some time for profits to accrue. Therefore, more than the profit motive, the market share and scope for future business profitability should assume priority, since they are the key factors for future profits. In the early years, the company should concentrate its efforts on earning market share and rendering excellent service to customers. The other matters would come automatically. Failure for developing and implementing plans . Once plans are formulated, they should be developed and implemented as soon as possible, since, in this type of service industry, the volume of business plays an important part, and the company is also trying to increase substantially the net volume of business and turnover for increasing profits. The volume of businesss can only be increased if more subscribers join the company and existing shareholders increase their volume of business. Poor followup after initial plans – In a service oriented industry like Netflix, it is important that orders are generated and executed as per customers requests. It is important that proper and regular follow-ups are made to increase the new subsribers’ base, and also service existing customers regularly. Therefore a proper follow up mechanism involving the marketing team is set into place, in order to increase sales turnover and profitablity. Insufficient tracking of progress against plans. The progress against planned targests should be regularly reviewed and bottlenecks, if any, should be removed. The plans should be feasible, attainable and comparable with achievements. There should be regular assessment of the progress made against plans and the reasons, if any, for the variances should be analyzed and addressed to. If progress against plans are not periodically monitored and reviewed, the very purpose of the plans become questionable and plans only achieve their desired results when compared against actual performance and reviewed. (b) Data and Information Requirement: In this survey it is necessary to know the performance of this service company vis-à-vis the customer needs and their level of satisfaction this is required for improving the existing condition and also for effecting sustain growth in the future it is also necessary to know the areas of weaknesses in the plans and policies present or propose of the company in order to eliminate the weaknesses and reinforce the strengths. It is also equally important to know about the activities of competitors, their marketing strategies their pricing policies and how it impinges on the market share of Netflix. Moreover the strength and weaknesses of the deferent strategies adopted by the company, taking in to account the present market conditions needs to reviewed. Since E-commerce is an area which is subject to constant changes and innovations it is very much necessary that certain policy decisions regarding innovative styles of marketing advertisement and publicity and other relevant areas need to be done to enhance Corporate image of the company in the world market. In order to increase its market share it is necessary to strike a close rapport with the customers. Since E-commerce does not deal with the customers at a personal level it is essential that electronic communications be utilized for striking rapport with the customers and they should be treated as individuals rather than mere numbers. This would have a considerable impact on the long term business of the company. Bu taking a keen interest in the needs of the customers and by giving them the necessary attentions and service promptly, it is envisaged that a better growth rate for the company would occur. The datas that would be required for this survey would be with regard to the total market share of Netflix and also how the competitors view Netflix as a opponent. The datas that would be necessary would also relate to how customers view Netflix as a major player in this business. Also the future plan of action proposed by Neflix, with regard to DVD business, also needs to be known through survey and how the customers perceives Neflix as a sound service oriented company. The datas are also needed regarding the delivery aspects relating to DVD rental business, quality aspects of this business and adherence to contract agreement by the Company. Also how far the service aspects of this business are carried out efficiently by the company needs to be a subject matter of this survey. Methodology and analysis : We would recommend using of the Survey method through Internet for collection of customer taste, preferences and their reactions regarding the standards of service of Netflix since the customers of Netflix are situated across the United States of America. The questionnaire would be hoisted in the website, and the answers from the respondents collected accordingly. We could also mail copies of the questionnaires along with the requested DVD’s into the mailboxes of the various customers for quicker and speedier responses from them and solicit answers within a specified timeframe Conducting of survey Analysis from samples: We propose to utilize questionnaire method hoisted on the internet. Collection of primary datas from responses given the customers. The method adopted for collection of data- total sampling method through Internet. This is based on the basis of non-probability sampling. Classification of primary Data: The number of respondents should be classified on the basis of their responses and this would be collated for further analysis Analysis & interpretation of primary sources: Based on the responses to the questionnaires, preliminary analysis and Interpretation can be done with regard to the proposed area of research. Drafting of final reports: After the completion of the entire process and integration of relevant datas, the final report would be summarized for presentation. Analysis: Findings of the survey. 51% of the sample survey agreed that the delivery system was very good with regard to rentals of DVD. 46% of them agreed that the quality complaints where promptly attended to, and 38% of the respondents where satisfied with regard to availability of DVD’s as per their request list. 46% of the respondents said they rtecieved swift responces for their complaints and an equal persentage of them agreed that the company’s technology was attuned to their needs. However only 36% of the respondent agreed to the fact that the customer service personel showed interest and understanding to attend to their needs. However 53% of the respondents agreed that the present cost structure was excellent and 51% agreed that the overall service performance of the company was very good. Limitations: There appears to be a lacunae in the area of customer service personel showing interest, care and understanding for the needs of the customers and its fullfilment.Therefore, this critical performance area needs to be reviewed and proper mechanism for further improvement in this aspect needs to be set in to place.This is of particular significance because Rentals of DVD’s belong to the service genre, and the success of any service company depends upon in its ability to provide the highest degree of consumer satisfaction and demands realization. CONCLUSION : The Internet and other wireless devices have change the way people interact in business. Such technological advances not only brings better and newer concepts into the workplace, but also increases the speed and connectivity of business enterprises. As a result of technological advancement and globalization, the underdeveloped and developing countries are benefitted by sophisticated and updated technologies which they could never have developed on their own. Moreover, the technological advancement has made work load easier, quicker and reliable in all areas of corporate accountability. And more and more people can work away from the offices through laptops and mobile phones, thus enhancing effectiveness, efficiency and effortlessness in global business. Through advanced technology displays, communication and writing skills gives more options as a medium of communication. The main areas in which e-commerce has contributed to the development of modern business could be summarized as follows: It facilitates the smooth and easy operations of business without major communication hurdles. Messages could be transmitted via e-mails and fax machines very rapidly, and business decisions are greatly facilitated. The barriers to modern communications like geographical distance, languages, governmental controls and commercial considerations have been eliminated and all business have been joined together in global bonding. Along with international reach, the internet and intranet offers secrecy and confidentiality in business through encyrption and secret passwords. Thus, only authorized persons having access codes could have entry to business information.This privacy is required because” information must be kept from unauthorized parties”. 6 Nowadays, the complexity of business has necessitated advanced coding systems to avoid hacking and virus entry into the systems. By far, the most important aspect of e-commerce is its speed with cost effectiveness which is unmatched by any other traditional forms of business responses. The cost of sending business communication from one part of the globe to another has reduced significantly and this sends out strong posistive signals to the bottom line of any business, manufacturing, service or hybrid. However, the important disadvantage of e-commerce lies in the fact that commercial transactions have become impersonal and technological obsolescence is not at unknown word in the e-commerce world. In the context of Netflex, it is seen that today, it is one of the top e-commerce service company in the US since DVD’s are an extremely popular form of electronic entertainment in US. “Neflix has become the world’s largest online DVD rental service.” 7 Its popularity can be judged from the fact that, monthly, more than 7 Million people utilize the Netflix rentals systems. However, what needs to be kept in mind is that the company needs to sustain its pace of growth and ensure that controlled growth takes place which could enhance stakeholder value. Since the ultimate objective of business enterprise is to increase Net Value for stakeholders and Increase Returns to them. Another aspect with regard to the Netflix model would be to delayed deliveries which has been a constant complaint from the customers. Netflix needs to concentrate on these areas and work out a suitable business plans which could effectively deal with this problem. The online tracking of DVD’s needs to be geared up and also follow ups with customers regarding their specific complaints. The reasons for the delays needs to be analyzed and sorted out since this could affect the reputation of the company. Another aspect in this regard is the quality of the DVDs. It may happen that the DVD’s may not be of the desired quality which may affect its performance. Therefore it is necessary to ensure that the DVD sent to the customers is of standard quality. Another factor is regarding sending latest movie releases. There is a common complaint regarding Netflix that although library editions of films are available, the new movies released are not available. These matters need to be addressed to, in order to preserve the reputation of the Company and also to gain more customers who may be more interested in latest movie releases. Recommendations For a company having the reputation and customer satisfaction level as Netflix, it is necessary that the delivery aspect have to be streamlined and made prompt and efficient. By using the 42 locations situated all over the US, Netflix should be able to make the best use of its network and cater to a sizable section of this market. Today, 2/3 of the American homes have DVD players. The Company should capitalize on this fact and expand its markets as much as possible. In this connection, it should also take into account, the strategies used by its competitors. Some of their competitors give free DVD’s during initial enrollment of the subscriber and may be offering schemes that Netflix may not be offering. Thus, there is every likelihood that present and future subscribers may migrate to other competitors who offer a better deal to them, and also offer other attractive schemes. It is a policy decision which the top management of Netflix has to take regarding the positioning of Netflix vis-a –vis its competitors, and how the competitions can be successfully tackled and surmounted. The market share of the Company has to be constantly reviewed, and areas where improvements are to made have to be done. Through innovative techniques, designed and executed by marketing and sales development professionals, taking into account the specific requirements of the cases, inroads have also have to be made into new areas and new projects have to be undertaken that could consolidate and underpin the existing market and business opportunities. “A select number of Netflix’s 6 million subscribers will have access to a new Watch Now product that will stream television shows and movies to a Windows PC.” 8 The Company need not confine itself to DVD rentals, and could also diversify into other areas like film production, acquiring DVD rights of major production houses and also introducing new concepts like instant viewing for particular length of time of newly made films, ands also arranging rushes or previews of films under production. Should the top management feel it feasible, the company could also associate itself with Film Awards as major sponsors, or contract prominent actors as their Brand Ambassadors throughout the United States. In a major expansionist move, the Company could also make forays into other countries where their line of business would be beneficial for furthering their business interest after appropriate market studies and gaining of key information regarding the strategies of the existing players in DVD rental markets. Works Cited Shah, Nilpa. and Dawson, Ray. Formulating an E-commerce Strategy.18 Apr. 2007 . BASF and E- Commerce. BASF Aktiengesellschaft. 2005. 18 Apr. 2007. . Brain, Marshall. How E-commerce Works. HowStuffWorks. 1998. 18 Apr. 2007. . Helft, Miguel. The shifting business of Renting Movies by the Disc or the click. The New York Times. 16 Jan. 2007. 18 Apr. 2007. . Code of Ethics. Netflix. 18 Apr. 2007 . Ecommerce Security Issues. ecd. 2002.18 Apr. 2007. . How it Works. Netflix. 1997. 18 Apr. 2007 . Arrington, Michael. Netflix, I Was Just Kidding About Breaking Up With You. Tech Crunch. 16 Jan. 2007. 18 Apr. 2007. . Code of Ethics. Netflix. 18 Apr. 2007. http://files.shareholder.com/downloads/NFLX/118527061x0x17642/ccfbe9a7-f0a5-4c16-a3a4-9471252b4144/73.pdf Read More