Netflix Case Analysis - Essay Example

Netflix case study The recent advancements in internet technologies have expanded the channels that customers can use to access and view movies. Customers can conveniently view latest movies while in hotels, airlines and at the comfort of their laptops and other mobile devices such as iPhones in their homes. The DVD rental revenues have been declining as customers can easily switch to other suppliers and other channels of viewing the movies. There are many cable, fiber-optic or satellite devices that allow household TVs to connect directly to the internet and stream movie content and thus purchase or rental of DVDs from retail outlets will continue to decline in the future. Netflix is facing stiff competition from other players such as You Tube, Video on Demand and iTunes that offer cheaper and reliable movie products (Thompson 138). A key success factor in the future movie industry is the ability to control and dominate the various movie distribution channels such as the Apple iPhone distribution channels, internet distribution channels and rental channels. The ease of access, pricing and size of content library are key success factors in the new movie rental industry since customers require convenience and wide-variety of entertainment content. Netflix should invest in proprietary software that will allow customer easy-of-use and recommend movies depending on prior customer streaming or search terms on the movie library (Thompson 142). The success of Netflix will require the company to manage its costs in order to reduce the rental business costs and continue focusing on technology to deliver the movies to the customers. According to 2012 survey, many consumers asserted that unlimited internet streaming offered better customer value than pay-per view option. Long-term partnerships with electronic manufacturers will improve the market reach and enable Netflix acquire new customers in its streaming option business (Thompson 144). Netflix is facing the threat of pirated streaming library and stiff competition from more innovative movie rental providers such as Apple’s iTunes, Blockbuster, Amazon Instant video and You Tube. Although Netflix was the market leader in internet streaming in 2012, Netflix failed to implement TV programming, entertainment content on internet connected devices, and rivals such as Hulu Plus and Amazon Prime Instant Video started offering better pricing mechanisms such as access to current TV shows and free shipping to premium members (Thompson 136). The current business strategy based on a subscription-based business model is good since it has enabled Netflix consistently increase its revenues over the past years and attain market leadership in online entertainment subscription service. Specific thinks that Netflix should do differently to compete successfully in the future Netflix should scale down the DVD-by-mail option and close down some of the numerous distribution centers and shipping points in order to cut down the operating costs. Netflix should provide due date on DVD rentals in order to avoid cross-rentals and ensure new customers can access the current DVDs. Netflix should keep growing its subscription option and partner with more internet-enabled device providers and software companies to enhance the streaming of video content on the customers devices. The company should offer single subscription plan for unlimited streaming together and DVD-by-mail since some customers may not have the devices needed for online streaming. Netflix should continue international streaming since the associated losses are attributed to free trial subscriptions and increased payments to the company partners. The domestic US market is saturated and focusing on emerging markets such as Canada and United Kingdom will enable the company to attain higher revenues. The company should use cost-effective promotion channels such as website banners, yahoo sites and You Tube advertisement. Early foreign market entry in the European market will enable the company to attain higher global market share before competitors can think of entering the international market. Netflix should collaborate with electronic device companies such as LG to increase the number of customers that can use Netflix-streamed content on their devices. Netflix should increase the number of movie titles in its content library. Action steps to implement recommended plans i. The first step is to scale down the mail delivery service and implement standard pricing both mail delivery and streaming subscription. The company should invest in streaming since it reduces the postage costs and piracy problem and enables easy access for the customers. ii. The second step is building and maintaining relationships with the entertainment content providers iii. The third step is collaborating with electronic device manufacturers in order to enhance the access channels of the streaming option. iv. The fourth step is to enter the European market that offers high growth opportunities Word message to Netflix top management Dear Netflix management, I have conducted a strategic evaluation and situational analysis of your company, I would like to meet with you in order to provide you with a summary of how my ideas can keep your company competitive in the future movie rental industry. Here is a summary of my recommendations that should be implemented: Netflix should implement an integrated pricing approach that caters for customers who need both Unlimited DVDs and unlimited streaming. Accordingly, it is prudent to control the operating costs through reducing the distribution channels and rental outlets and focus on growing the online access through collaborating with electronic device manufacturers. The company should focus its marketing expenditure in improving the ease of use of its website and promoting the streaming subscription option. Netflix has suffered negative criticism in the market and should try to build brand image through offering customers free period trials since some potential customers still have feared that their membership may be discontinued even without advance notice. Netflix should enter in to long-term partnerships with premium movie channels such as Starz-controlled movies TV shows and increase the library content that is available for streaming. The company should build beneficial relationships with entertainment content and video providers in order to ensure continuance of service to customers and ensure higher customer satisfaction. Netflix should increase the content library and monitor customers changing preferences in order to offer current movies. Works cited: Thompson, Arthur. ‘Netflix in 2012: can it recover from its strategy Missteps?’ Alabama: University of Alabama. 2012. Read More