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Porter's Five Forces
Transcript of Porter's Five Forces
Threat of Rivalry
Threat of Substitutes
Threat of New Entrants
By Maureen Bullis, MaryClare Condon and Tina Mazzeo
"Our appeal and success are built on providing the most expansive selection of DVDs; an easy way to choose movies; and fast, free delivery."
Threat of substitutes for Netflix is low
They have minor threats
Any industry that does not including streaming can be considered a substitute
Although Netflix industry consist of few suppliers, the supplier power is high
An example of this would be the deal Netflix made with Warner Brothers
Netflix must delay the streaming of newly released movies for 28 days, causing impatient customers to purchase from stores rather than waiting to stream the movie.
Since supplier content is a huge part of suppliers revenue, they are reluctant to allow other company's immediate streaming rights to any provider.
Buyer Power is also high
Buyers have multiple options of places to go and can easily switch
This is because viewers are loyal to content verses being to loyal to the provider
Threat of new entrants is high
This is because there are numerous websites that offer online streaming
There are also no legal barriers stopping competitors from setting up website
Consumers are switching to companies like Netflix because they offer a cheaper way to view content
An example would Netflix costs $8.99 per month for unlimited viewings while a newly released video from stories can cost up to 25 dollars
Impatient attitude is forcing companies to come up with new ways to give consumers easier access to the content they offer.
The ability to download any where is one example of a new way.A
Warner Brothers deal with Netflix is one example of a Legal-Political Segment
There are also high licensing fees being put in place
Marc Randolph, Mitch Lowe and current CEO Reed Hastings founded Netflix in 1997
Founded in Scotts Valley, California
Headquarters is located in Los Gatos, California
Hastings initial idea was to have a rent-by-mail video business, he never imagined where the company would be today
The company launched its website on April 14th, 1998
The company originally only offered DVD rentals for a small fee but now offers member subscriptions
In February 2003 the company reached a million subscribers and now has more than forty million streaming members.
The online portion of the business has launched not only in the U.S but also other countries such as Canada, United Kingdom, and Ireland.
As of 2002, Netflix has signed with fifty distributors including DreamWorks, Columbia Tri-State and Artisan.
Netflix stresses that they value
1. Their products and services
2. Their consumers
Netflix has expanded their collection of entertainment throughout the years so that they keep up with the new releases and appeal to people of all ages.
Netflix has also be able to diversify their products in thanks to an extensive catalog, recommendation system and tremendous customer service while still consistently innovating.
Netflix looks to serve a wide target market through delivery and online streaming.
Through Netflix's wide collection of movies and TV Shows, the company is able to target kids, teens, young adults, and adults.
Netflix does have competitive advantages against a majority of its competitors. They...
ensure high quality streaming
are jointed with other companies to allow for easier streaming for customers.
are available on multiple types of devices
offer two different delivery options for one flat rate
have their own specific shows that you can only watch on Netflix.
Technology is one of the biggest segments impacting this industry. Netflix has adapted their website and allows subscribers the option to either mail DVD's or download them online for one low rate.
Netflix could create a competitive advantage if they could tap into the 384 million users in China or the 81 million internet users in India. They also have to determine if the cost of expanding into an international company is worth the cost of expanding.