Netflixs Business Model and Strategy - Case Study Example

1. Marketing tie-ups- Netflix had entered into a deal with a company named Startz Entertainment and made tie-ups with entertainment content providers such as Universal Studios, Twentieth Century Fox, Indie films, etc that gave the subscribers access to several new movies at the same amount they paid (Thompson 284). This move was taken to increase the popularity of the company.
2. Quick delivery to subscribers- Netflix made it a point to deliver the ordered DVDs to the subscribers within one business day after the order is placed (Thompson 286). For this, the company formed several regional centers that helped to deliver the DVDs in a very short time. This was a strategy to increase its popularity amongst customers.

Netflix is trying to achieve a competitive advantage in three areas:

1. The company has a fast-mover delivery system on its online subscriptions. This has been done by setting regional bases in several areas. Also, by placing orders online the company made watching movies cheaper (Thompson 286).
2. The company had a patented way for its web-based selection of DVDs.
3. The company was more customer oriented and relied on monthly subscriptions of the movies streamed which was much cheaper than any other form of movie watching.

Answer 2

The number of competitors who control the rental market is very few. Thus, the movie rental marketplace has a strong competitive force.

(a) Threat of Substitutes

There is little scope for the threat of substitutes as the only available threats would be in the form of websites that would allow people to watch movies online illegally (Thompson 278).

(b) Barriers to Entry

There are fewer threats from new entrants into the market place and Netflix enjoyed a market leader position there. Making movie steaming and renting cheaper involves huge money and this would not be easy for any new company in a short time.

(c) Buyer Power

The buyer power is strong as they can cancel any subscription at their will.

(d)       Supplier power

The supplier power is strong as there are few companies in the movie rental market place and it would be costlier as well as nonprofitable to switch suppliers.

(e)        Degree of rivalry- the degree of rivalry can be strong as there are fewer companies operating in the market. Rivalry can also arise from other sources such as cable and satellite companies (Thompson  281). 

Answer 3.      

SWOT analysis of Netflix

Strengths – the strengths of the company lie in its fast delivery and huge collection of movies. The company also got huge customer satisfaction as it had around 16.3 million subscribers (Thompson  287) and strong brand recognition.

Weakness – the company relies on fast delivery of DVDs. This can cause some of the products to arrive in a broken or scratched form which can reduce satisfaction. Also, the monthly subscription can discourage people who watch fewer movies.

 Opportunities –the company has expanded its product line to video games and has lowered its shipping cost (Thompson 286). It also developed a third-party content delivery network so as to enable fast streaming of movies online. It also practiced online advertising on Yahoo, AOL, etc to attract subscribers (Thompson 287).

Threats – the company faces threats from Blockbusters. The contractual restrictions on its streaming content can retard its popularity.

Answer 4

Netflix had a strong competitive strength against that Blockbuster. Blockbuster was closing down its distribution centers in 2010 (Thompson  290) where as Netflix was expanding its business. The average movie rental fees were slower for Netflix than for Blockbuster. Netflix had the system of a fast delivery system that was absent in Blockbuster.

Netflix does enjoy a stronger sustainable advantage over blockbuster. This was shown by the revenue share of Netflix which increased from $500 million in 2004 to $2.1 billion in 2010 (Thompson 277) but blockbuster was reducing at a very fast rate and had a debt of $569 million on it (Thompson 277).

Answer 5

A few recommendations for Netflix CEO Reed Hastings:

1. The company should market its products more diligently.
2. They could offer separate rental plans so as to make their streaming services more comfortable.
3. It should try to capture the people who do not watch movies online often
4. It should increase its stock of movies for the streaming video library.

Answer 6

A few recommendations for Blockbuster CEO James Keyes:

1. The company can shut down multiple stores in the same area to reduce the cost of overlapping.
2. They should concentrate less on putting up stirs and focus more on putting revenues for rentals online.
3. They can enter into business tie-ups with bigger giants like popular search engines and entertainment providers.
4. They should focus more on their promotion strategies.