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Transcript of Netflix
1999 – Launches the subscription service.
2000 – Launches the personalized movie recommendation system.
May 22, 2002 – Netflix makes its initial public offering (IPO).
2002 – End the year with 857,000 members.
2003 – End the year with 1,487,000 members.
2004 – End the year with 2,610,000 total members.
2005 – End the year with 4.2 million members.
2006 – End the year with 6.3 million members.
2007 – Netflix introduces streaming, which allows members to instantly watch TV shows and movies on their personal computers and they end the year with 7.5 million members.
2008 – Netflix partners with consumer electronics companies to stream on the Xbox 360, Blu-ray disc players, TV set-top boxes and the Apple Macintosh computer.
2008 – End the year with 9.4 million members. Netflix Timeline 2009 – Netflix partners with consumer electronics companies to stream on the PS3, Internet connected TVs and other Internet connected devices.
2009 – End the year with 12.3 million members.
2010 – Netflix is available on the Apple iPad, iPhone and iPod Touch, the Nintendo Wii, and other Internet connected devices.
2010 – Netflix launches in Canada.
2010 – Netflix ends year with 20 million members.
2011 – Netflix launches throughout Latin America and the Caribbean.
2012 – Netflix launches in the United Kingdom, Ireland and the Nordics.
2012 – Netflix surpasses 30 million members globally. What forces are driving changes in the movie rental industry? Are these driving forces likely to have a favorable or unfavorable impact on competitive intensity and future industry profitability? Common Drivers of the movie industry changes
1. Technological Change
2. Emerging new Internet capabilities and applications
3. Product and Market innovation
4. Improvements in cost and efficiency in closely adjoining markets
5. Reductions in uncertainty and business risks
6. Changing societal concerns, attitudes, and lifestyle.
7. Enter or exit of major firms
8. Increasing globalization
9. Changes in an industry’s long term growth rate Netalin Tassniyom
Denom Ojhanthanche Key Success Factors Technology
First Mover Advantage
Efficiency and Performance Five Generic Competitive Strategies SWOT Analysis First Mover Advantage
Watch instantly streaming service
Reasonable monthly plan and no delay fees
Recognized brand name and identity
Size of content Library
Constant innovative culture
Flexibility in content delivery
Fastest DVD delivery among competitors The Five Forces Strengths Weaknesses Opportunities Threats DVD Segment declining
Lack of updating movie content
Damaged reputation after attempting to increase fees and separate DVD & streaming video memberships
Shipping expenses International Expansion
Growing demand for online video streaming
Expansion into gaming market
Apple TV partnership Competitive Environment
Amazon breaking into movie rentals
Youtube to start offering movie rentals
New entrants into the rental market.
Redbox & Blockbuster (National) 2005-2009 Revenue Trend 3. What does your strategic group map of this industry look like? Is Netflix well-positioned? Why or why not? As of the strategic map, it showed that Netflix has more approach to the customers in term of the location, but the same amount of the movie products. Netflix is better positioned a t the moment due to the convenient of their products usage, the location of the distribution centers is not the factor on the physical DVDs as long as customer can easily order online and DVDs will send to their mails. Blockbuster is the weakest positioned at the moment because they have no direction to have specific strategy to employ (which they have Stores, Kiosks, and online).Netflix tends to be the most profitable in the movie industry for the period of time because Netflix tries to apply to the new technologies and combine to the physical one in order to capture all age’s customers to get the products. The most injured at the moment will be Blockbuster because they kept the same strategy for more than 5 years that made the company declined in revenues and loss on profitability while the new rivals came in. 4. What key factors will determine a company’s success in the movie rental industry in the next 3-5 years? The best key factors for the company’s success in the movie rental industry are to capture on the cost, efficiency and the technological changes. In order of Netflix to stay leader in the movie industry, they have to keep onto their lower price and more option of the movies to their customers. Technological changes such as on cloud or applications are also important for them to keep up-to-date in order to keep their existing customers and attract the new one. 5. What is Netflix’s strategy? Which of the five generic competitive strategies discussed in Chapter 5 most closely fit the competitive approach that Netflix is taking? What type of competitive advantage is Netflix trying to achieve? Netflix’s strategy is the best cost provider because Netflix offers both physical and online streaming from the original sources. Their strategy is trying to get the most value for the money of what customer is paying for. By offering each level of the selling price to get the right choices for customers, Netflix offers the combination of physical inventory and online streaming movies and TV episode for customer to touch on the differentiation and the low cost at the same time. By offering free trial for the new customers, Netflix gains more customers through the “free samples” like other products which other competitors never take risk to do so. Netflix spends on the marketing services very aggressive to attract the new subscribers and promote their brand and service. 8. How does Netflix’s competitive strength compare against that of Blockbuster? Do a weighted competitive strength assessment using the methodology presented in Table 4.4 of Chapter 4 to support your answer. Does Netflix have a sustainable competitive advantage over Blockbuster in the movie rental business? Why or why not? 9. What 2-3 top priority issues does Netflix management need to address? What 2-3 top priority issues does Blockbuster management need to address? 1. They should refinance the business by turn their creditors to investors. Blockbuster should get them involved in their business once they cannot afford to repay their loans.
2. They should make strategy alliances or selling franchisees in order to gain more stores and just get the franchise fee and provide them the inventory and delivery of the new products and services. 11. What recommendations would you make to Blockbuster CEO James Keyes? At a minimum, your recommendations should cover what to do about each of the top priority issues identified in question 9. They should get the creditors to be their investors once the company cannot afford to repay the debts and find the way to expand and exist some stores that make profits to the company. As they get the creditors involved in the business, they will drive the company more furious to gain the money back to their pocket.
Also, franchisee in the international market is the idea that they can gain more business by alluring the small business owner to invest in the company and Blockbuster can provide them products and services. 1. How strong are the competitive forces in the movie rental marketplace? Do a five-forces analysis to support your answer. Profit margins changes for Netflix 2005-2009 Profits Trend Free trial subscribers for Netflix The forces of the driver changes in this case are vary. The strength is Technological change because the newer choices of the technology it means to the approach to the customers. The quickest way to serve their customers and the lowest price option for customers will attract them to buy the best option in the market. The new internet and applications also affect the industry because the company must perform quickly in order to capture their customers and set the barriers to the new entrants. The next strength is the improvement in cost and efficiency in closely adjoining markets, the movie industry, and the competitors can get advantage from the first mover by changing in price and their performance in order to gain more customers at this point. The profitability is showed by gaining more customer of each company cost and efficiency to gain more customers in each period of time. The weaken is regulatory influences and government policy change because the movie industry like Netflix get their products from the producers which means that every competitors in the market have the same level of forces into this area. 2. What forces are driving changes in the movie rental industry? Are these driving forces likely to have a favorable or unfavorable impact on competitive intensity and future industry profitability? Assorted expense ratios for Netflix Netflix should continue with its investigation into advancing the accuracy of it's Cinematch system. If Netflix is successful, they will be more likely to experience continued growth in their market because their customers will continue to rent DVDs that have been recommended and maintain their subscription online.
As subscribers shifts from getting DVDs through the mail to the instant online streaming, Netflix needs to make those suggestions for customers even better.
Come out with more content in the online streaming market. Rivalry-
We believe that the rival is strong because the demand growing steady in the past years. If the new rival can come up with the lower cost possible may attract the customers to switch the brands. The DVDs or the streaming movies are easy to find in the online website, so there are choices of customers to choose the lowest possible price to consume. Strategy of Netflix using is the best cost provider because they offer the certain price per month in order to get the fit option that customers can use and afford. They offer the unlimited of streaming movies and choice of DVDs combination.
Threat of entry-
We believe that the barriers to entry is weak because time and cost of entry will be so high in order to get newer and better choices to attract customers at this point. High economies of scale make the new entrants face off the significant experience to achieve the cost advantage in order to attract their customers.
Substitutes— In the movies industry we believe that the substitutes is moderate because the movies itself has similar option of 2choices are Physical and online at this point. The different option for customer is only the technical of each company to offer the easy-to-use and the lowest price possible.There are currently three principal substitutes for renting movies, which one are these?
The bargaining power of suppliers—
At this point, we believe is strong. Because of the movie producers has the power of the price control through their licenses and in order of Netflix to use the products, they have to get the contracts and pay for the price that suppliers requested.
The bargaining power and leverage of people renting DVDs—
We believe is also strong. Because most of the products in the market are standardized this means that customers can choose the products of their choice considering by time and price of what they pay for. At the same quality of the products, customers tend to be price sensitive onto the products because they think that it may be one time consume so they consider on what they pay and what they get.
Overall, we believe that the forces are so strong to the company in the industry to survive and get the successful place to be. In order to be strong in the market place, Netflix has to come up with the best provider possible in the market to be the leader of the industry. 7. What is your appraisal of Netflix’s operating and financial performance based on the data in case Exhibits 2, 3, and 4? What positives and negatives do you see in Netflix’s performance? In the very first year of Netflix up to 2000, we can indicate as of the exploration time. Netflix had spent a lot of money in order to grow their brand and service. Netflix has loss up to year 2000 to promote and develop their differentiation through the market. Netflix has grown rapidly during 2000-2009 and keep stable for the past 5 years. From the Exhibit 4, it showed that Netflix has developed more on the investment. From the current ratio it showed the progress of the ability of Netflix from 28% in 2000 to 61% in 2009. In working capital part, Netflix has increasing in the working capital rapidly; it shows their efficiency in their performance. Net cash provided by the operating activities also keep increasing in the past ten years.Overall condition of Netflix is still in a good shape and also has ability to produce more value and expand throughout the companyThe strength of Netflix is gaining huge profit through the company while the weakest point is spending on huge cost to establish the brand and develop their technology which they may control on this. 6.What does a SWOT analysis of Netflix reveal about the overall attractiveness of its situation? Netflix has a critical combination of membership, brand awareness, and accessibility that allows them to be competitive with similar streaming content providers. To cope with the threats they face, Netflix must redirect resources from its delivery services to enhance strengths. Providing ever-expanding streaming content will enable Netflix to serve and attract an even wider base of customers. Blockbuster Netflix 1. Need to update more contents
2. Try to save on shipping cost 10. What recommendations would you make to Netflix CEO Reed Hastings? In order to be number one market leader, Netflix should get their contents up to date and cover more title than any other. They should also control the cost of the operation in order to sustain and keep profit in this market.