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Netflix Case Presentation

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livia gao

on 12 December 2016

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Transcript of Netflix Case Presentation

Add servers to distribution centers
Company Background
Business Model
Vision and Mission
Subscription Based Business Model
Stream Service
Get DVD in mail
Company Performance
Strategical Performance
Best internet movie service
A growing subscriber base
World's largest online entertainment subscription service
We would recommend the Netflix service to a friend
Financial Performance
A growing earning per share every year
Netflix compares with Blockbuster
Core Competencies
Ability to develop unique proprietary systems of databases using algorithmic techniques.
Ability to create close relationship with the movie industry while delivering content to consumers in the best efficient way.
Alternative 1
Problem 1
Free limited streaming service with ads
Alternative 2
Attract more people

Ads will create revenue

Defer people from pirating
Alternative 3
Get rid of some distribution centers, relocate sources to streaming services
1. Company Background
2. Vision & Mission
3. Goals & Objectives & Strategies
4. Business Model
5. Company Performance
6. Management Characteristics
7. SWOT Analysis
8. Analysis of Core and Distinctive Competencies/Capabilities
9. Industry & Competitor Analysis
10. Major Issues/Problems
11. SARS Analysis
12. Recommendation & Implementation Plan

Problem 2
Industry Key Success Factors
Broad selection
Extensive information provided about each movie
Friendly UI (User Interface)
Convenience of returning rented DVDs
Ease of ordering and instantly watching movies streamed to their devices
Alternative 3
Focus on expanding VOD
Alternative 4
Alternative 4
Create our own kiosk to be placed in high foot traffic areas
Management Characteristics
Embrace Changes
CEO of Netflix, Reed Hastings, personally designed the business model
Flexible business model

Reliance on suppliers and USPS

Rapid change of technology

Upstart competition
Driving Forces
Changing the way customers rent movies
5 Forces
Rivalry (4) High
Buyer's cost to switch brands are low
Business model is easy to copy
Company faces an intensely competitive
New Entrants (2)
Netflix has over 97% of its customers living around their distribution centers;
New entrants have to outperform Netflix's DVD rental services and their superior "one day business delivery".
5 Forces Cont.
Substitute Products (4)
Competing viewing formats includes:
VOD, Pay-per-view, and online streaming etc.
Elastic price changes easily may defer consumers to alternatives
Supplier Power (4)
Studios, networks, and distributors
control prices that Netflix must pay for its videos content
Studios have complete control over time between theatrical releases and in-home videos release
Environment changing from
Costly to create the new system

Customers prefer the free service

Difficult to find the companies to pay for ads
VOD online with less loading time

Increase customer satisfaction
Costly to implement
Lose of jobs, can damage image

Damage ability of 1-day-delivery
More capital to use on VOD

Less centers to manage
Allow users to view a larger amount of VOD with different priced plans
More titles available

Increase revenue

Increase advantages for customer

Decrease costs on postage and inventory
Expensive to get VOD

Hard to build relationship with supplier

Customers don't want to pay more
Competition growing rapidly from kiosk services and VOD services
Buyer Power (3)
Be conscious of competitors' prices and make every effort to keep subscription low
Technological developments in video consumption are continually changing
Economic Features
Average size of market 32 billion from 2006 to 2009
Main competitors
Redbox, Blockbluster, Hulu, Apple TV
Buyer needs and requirements
Large selection of contents
Affordable pricing
Pace of technological change
Playstation, Xbox, etc.
Recommendation: Alternative 4
Allow users to view a larger amount of VOD with different priced plans
Recommendation: Alternative2
Offer video games
Advancing technology
Ability to be more convenient

Market share
Order movies online
Core Competence
Get DVD with one-day delivery
No due dates, no shipping fee
no late fee, no pay-per-view fee
Return envelope provided.
Ability to combine streaming and DVDs-by-mail all for one low monthly price.
Alternative 1
Add incentives & benefits to subscribers
creates loyal customers
costly to implement
Alternative 2
Offer a video game rental program
increase revenues

good reputation with "gamers"

use same distribution centers
not experienced in video game distribution

costly to build new inventory
become more convenient

easily manageable inventory
lose some customers

costly to acquire VOD
Expand reach

More competitive

Easiest returns
Costly to create

No prior experience

Other kiosks have a head start
Unlimited access to over 20,000 movies
Run on a variety of Netflix-ready devices
Directly through Web browser
Industry & Competitor Analysis
Step 1: (1 month)
Study industry and which games are most desirable
Step 2: (2 months)
Create budgetary plan for obtaining most desired games
Step 3: (4 months)
Introduction of new technologies and electronics products
Acquire rights to rent the video games
Increasing households that have DVD players at home
Step 4: (1 month)
Wave of future in viewing movies at home
Send games to largest distribution centers and begin the new offer
Step 5: (4 months)
Advertise heavily, and advertise on Netflix users who are using a video game system
Step 1: (1 month)
Study environment to find which titles are most desirable to our customers
Step 2: (2 weeks)
Select studios and networks according to our findings, and contact them
Step 3: (4-6 month)
Create deals with studios and networks to carry their content and build appropriate systems
Step 4: (4 months)
Advertise that Netflix now offers an improved service
trend of consumers of wanting convenience
under served market
market share to be gained

reduce market share
reduce revenues
cause us to become unsuccessful
1. For everyone in the world to be able to conveniently watch movies and TV shows wherever they please.

2. To be the leading provider of the largest video database and most convenient video rental service in the world.
1. Build the world's best Internet movie service

2. Continue growing the subscriber base

3. Continue growing earnings per share
Distribution Network

Online distribution of media
Netflix in the movie, TV episode rental market
Ability to combine streaming and DVDs-by-mail all for one monthly low price.
Trailer, critical reviews, user reviews
Zango Consulting
1.Further develop favorable relationships with production studios to expand their video library
2.Continue making Netflix available on all internet accessible devices
1. Provide subscribers with a comprehensive selection of DVD titles
2. Make it easy for subscribers to identify movies they were likely to enjoy
3.Give subscribers the maximum amount of options for watching content
4. Spend aggressively on marketing to attract subscribers and build widespread brand awareness
5. Gradually transition subscribers to streaming delivery rather than mail delivery
Strategic Group Analysis
Videos Rental Industry
8 unlimited plans: start from $8.99/month
Limited plan: $4.99/month
Netflix is founded in Scotts Valley, California by Marc Randolph and Reed Hastings
Netflix introduces the monthly subscription concept
Netflix launches website in April as an online provider of the traditional pay-per-rental business model
On May 29, Netflix initiated an initial public offering (IPO) selling 5,500,000 shares of common stock at the price of US $15.00 per share.
After incurring substantial losses during its first few years, Netflix posted its first profit earning US $6.5 million profit on revenues of US $272 million.
Netflix posts revenues of 1.2 billion with 4.2 million subscribers
Today, Netflix has emerged worlds largest subscription service for sending DVDs by mail, and streaming movies and TV episodes over the Internet.
Generic Strategy Analysis
Apple TV
Industry Trends
Weighted Competitive Strength Assessment
Streaming (not easily pirated)
VOD (Video on Demand)
Analog to digital distribution (2009)
Price drops for HDTVs
Decreased DVD sales
Resource: Blockbuster Annual Report for fiscal year2009 and 2007
Freddy Castillo
Erik Enson
Livia Gao
Hyeri Pang
Max Tseng
Zango Vu
Enabled by Netflix -controlled software
Scale 1-5
Scale 1-5
Resource: Blockbuster Annual Report for fiscal year2009 and 2007
$100 million
$100 million
$300 million
April 2007
$150 million
$300 million
$175 million
Jan. 2008
VOD will be “the dominant movie rental channel by 2015”
March 2008
Jan. 2009
August 2009
June 2010
Full transcript