...Analysis 3 1.2 Industry Analysis 4 Porter’s Five Forces of Competition Analysis of Netflix 4 1.2 Opportunities and threats (Partial SWOT) 5 Part 2: Internal Analysis 6 2.1 Value Chain Model 6 2.2 Competencies Framework 7 2.3 VRIO Framework 8 2.4 Strengths and Weaknesses (partial SWOT) 9 Part 3: Netflix Issues and Challenges……………………………………………………………………………………………..10 Part 4: The selection of strategic options 11 4.1 Strategy Clock model and the Porter’s Generic Strategy Model 11 4.2 Strategic Options 12 Part 5 – Conclusions 14 References 15 Appendix 17 Introduction Netflix, set up in 2000, is a television show and movie rental Company. It slowly became a leader in this field by offering DVD-by-mail and online video streaming services. It provides a subscription based model. According to this model the customers utilize the products and services of Netflix through a monthly fee rather than a pay as you use rate. Netflix has been expanding its reach of providing services to other geographies with its two service lines to places like the UK, Ireland, Canada, Latin America and the Caribbean. Among the Porter’s generic strategies, Netflix has adapted the Differentiation/Cost Leadership strategy as their target customer base is broad and they also provided to renters a low cost alternative to the otherwise traditional video rental stores. The major stakeholders of Netflix are the content owners who provide video content to Netflix, the subscribers of this content...
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...influence their own televi-sion program. Most TVs have the ability to install applications, like Netflix. Older screens can be updated by a small hardware player to get this capability. Usually living room video entertainment is done by traditional companies like the RTL group. The customer can switch the channels, but is not able to choose his program by a remote click. Netflix is the pioneer and market leader in the US in streaming and offers shows and movies by video on demand. New streaming companies will mix up the tradi-tional market. A kind of quantum leap infects the television screen. The conver-gence of technologies combines an internet stream on the classic television. Traditional companies, like RTL, should consider following a different another strategic management course than for example Netflix. This assignment analyzes the streaming market, the forces, threats and opportu-nities as a Macro Environment Analysis. It’s a fast growing business and has a huge potential. The company Netflix is screened by a Micro Environment Analysis to show their portfolio and key figures. In the targeting and positioning part, a possible way of a strategic corporate management is developed, by references on the analysis of Porter’s three generic strategies, Ansoff and Mintzberg. For the final conclusion the current strategy will be investigated and opportunities are shown. Netflix has still some unexploited possibilities to maximize the profit and demonstrate also their market...
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...Netflix and Porter’s 5 forces I have been an active Netflix user for a couple of years now and have seen several different pricing strategies implemented. I was reading this article about the effects of the latest changes in the company’s pricing structure yesterday and I got to thinking about the “why’s” of this decision. Why would Netflix choose to change it’s pricing structure? From the framework of the five forces: Suppliers: as far as I can figure, suppliers don’t put a whole lot of pressure on Netflix. The company must keep enough DVDs in stock to handle customer demand (there are drops in the number of subscribers who will still be renting DVDs) but that hasn’t changed much. Substitution: again, I don’t think this has much to do with the changes. Customers could choose to go see a movie in the theater, but that isn’t a very comparable substitute as movie theaters offer new movies (for about $8 a pop) while Netflix offers old movies (for a flat $8/$16 a month depending on the service (DVD, streaming, or both). Threat of new entry: There aren’t too many threats of new entry here either, as the main players in this competition have already been well established (Netflix, Redbox, Hulu, Blockbuster). Rivalry: I believe this is the driving force behind Netflix’s decisions in this case. In order to stay competitive with services like Hulu Plus (which offers streaming content for a $8 a month) Netflix has separated the streaming service from the DVD service (this...
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...Summary Netflix is the worlds largest subscription service company, selling streaming movies and television episodes. Also Netflix has a large mail order DVD rental service with more than 20 million subscribers. Netflix provides streaming and DVD rental in the US. Internationally Netflix provides unlimited streaming capabilities but limited existing DVD rental services. Netflix streams movies directly to televisions, consumer smart phones, home computers, and tablets. Netflix uses multiple marketing services to attract customers, online advertising via banner ads, text ads on popular consumer sites, as well as traditional television and radio advertisements. To increase marketing opportunity Netflix created strategic partnerships to attach advertisements to emails that went to potential customers. Competitive Forces Netflix founder and CEO Reed Hastings has instituted a strategy that has Netflix outcompeting competitors. Reed’s strategy is to build the best internet movie rental service. Netflix is currently the largest online entertainment subscription service and continues to revolutionize the industry and how consumers rent movies. The keys to Netflix’s strategy are to offer higher quality and wider selection then their competitors. Netflix focuses on the performance of their delivery to ensure they are an industry leader and ensures they have the latest technology. With Netflix technology movies and TV episodes can be streamed directly to most devices...
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...Netflix Netflix Inc. had its start in 1997 when it was incorporated by its current CEO and founder, Reed Hastings. It was not until 1999 that Netflix finally began to rent movies to its customers. At its origin, Netflix was a DVD rental service that only rented through the mail. With this type of service, customers would pay a membership fee that determines the number of DVD movies that they were allowed to rent at a given time. Once the customers would choose their desired movies, the DVD’s were mailed to them and then returned whenever the customer finished watching them. In 2007, Netflix introduced the concept of streaming on-line videos to its customers which allowed for instant access to their inventory that was formatted for such viewing. With the on-line streaming, they were still offering their original DVD service through the mail. Netflix introduced this new service in the attempt lower their overall costs that was brought on by paying for the shipping and handling of the mailed DVD’s. In 2010, Netflix introduced only their on-line streaming service internationally to over 43 countries. In 2011, it was announced that Netflix would stop the combined services of streaming and DVD rental and instead offer these services in separate subscriptions. Their customer base was displeased and the company’s stock prices had experienced a major drop in a short period of time. During the same year, Netflix sold a portion of their stocks to mutual finds causing their stock...
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.../ changing business and influence of emerging high tech to business will be discussed. The purpose of this homework assignment is to provide you with an opportunity to investigate how business can be improved / affected by the modern IT technologies. As discussed in class, Porte identified 5 forces, 3 business strategies, and a framework for business management / development. 1. Review the companies in movie rental industry, e.g., Blockbuster, Netflix, HBO, Amazon in terms of Porter’s models for business. 2. Using Porter’s models for business development / management to analyze / review the potential influence of modern IT technologies on Cable TV industries. 3. Using Porter’s models for business development / management to analyze / review the factors that led to the success of the following companies: Amazon, Walmart, Target, Costco, and Disney, and Google. 4. Using Porter’s model to analyze / review / identify factors that led to the downfall of the following high tech companies: Lucent, Motorola, RCA, AT&T (note: AT&T was merged by Southwestern Bell and changed the name to at&t). 5. The once mighty retail company, Sears, is not doing well in recent years. Using Porter’s model to explain why and how it can be improved in the future? Any strategy you would recommend? Notices on Homework Assignments: 1. Use either MS Wordpad or MS Word to write your answer. You can copy, i.e., cut and paste, the...
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...CIS610-Foundations of Management Information Systems Case: Netflix Leading with Data: The Emergence of Data-Driven Video Question: What advice would you give to the CEO of Netflix? Ruohua Cui, Yang Cheng, Tien-Ni Kuo, Yitian Ren Digital distribution market is undoubtedly the future of the video rental industry. Netflix has already taken a good lead in it but must have fresh ideas to keep its advantage in the industry. Beating its competitors in the domestic market is important, however, Netflix should jump out of its own circle into a new market to gain the first mover advantage. Looking at the global market, China is a good choice for Netflix’s next station. Using the Porter’s Five Forces model, Netflix can examine its advantages and disadvantages see whether entering China is good choice: * Bargaining power of customers China has a growing economy with a large group of new middle-class, who are able and willing to consume on entertainment. Nowadays, Chinese usually watch films on free websites with a low picture quality and slow Internet speed. While the number of people watching films are increasing, the picture quality is becoming more important for the viewing experience. Providing a fast, flexible and high-quality service, Netflix can persuade many customers into its subscription model. * Bargaining power of suppliers: China’s film and TV show makers have been facing a major problem: plagiarizing (including unpaid online watching), which substantially...
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...digital age from birth. Today people can go online to Netflix, Blockbuster, or VUDU and rent a movie to stream immediately to their flatscreen HDTV or computer monitor. This is a far contrast from mom and pop VHS video rental stores that emerged in the late seventies and early eighties. The immediate download of videos without having to drive to a brick and mortar building to return the video without incurring late fees is a thing of the past. In 1977 George Atkinson opened the first video rental store in Los Angeles offering videos for rent at $10 a day with a $50 or $100 membership to raise capital[1]. Since that first home theater store George opened, there have been a plethora of mom and pop video rental stores that sprouted up. As video renting became more popular due to the availability of the VHS recorder and the DVD player, larger movie rental chains entered the market with better buying power and lower prices. These larger chains were able to offer rental movies at lower prices with a larger selection[2]. The technology revolution has changed the landscape of video renting. Using Porter’s Five Forces model, entrance into the video rental business will be examined. Technologies used to stream movies, download full length movies, renting movies from store front, and renting from kiosks are the available avenues for the budding entrepreneur. With new TV commercials glamorizing owning movie rental kiosks, Porter’s model will be used to examine the attractiveness...
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...Netflix: Identify and evaluate the impact of the forces that drive change in the movie rental industry on competitive intensity. How are these forces likely to affect the future industry profitability? All industries are affected by new developments and on going trends that alter industry conditions. It is important managers remain alert to such changes most likely to affect the strengths of Porter’s Five Forces (Crafting & Executing Strategy; The Quest for Competitive Advantage, p.77). By pinpointing and understanding the intensity of change driving forces, managers will be able to react in a timely manner, lowering costs and/or influence this change, which allows them to gain competitive advantage. We have identified and focused on the most powerful agents of change altering competitive conditions in the movie rental industry. 1) Increasing Globalization Due to the rising availability of high-speed Internet in many developing countries such as Latin America, streaming movies has increased over the last few years, expanding the consumer market and intensifying competition 2) Changes in an industry’s long-term growth rate The traditional movie rental method (physical DVDs) is on a steep downward trend. There is also an anticipated expansion of content distributors via the Internet increasing demand and rivalry for the Internet based movie-renting industry. Changes include the possibility of content providers digitally distributing their own content. Potential...
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...// TABLE OF CONTENTS BACKGROUND……………………………………………. 03 STRATEGY…………………………………………..…...... 05 FIVE FORCES…………………………………...…........... 08 DRIVING FORCES…………………………….…….......... 11 KEY SUCCESS FACTORS…………….……………....... 14 SWOT ANALYSIS……………………….……………....... 16 FINANCIAL PERFORMANCE………………………........ 22 KEY MANAGERIAL ISSUES…………..……………....... 24 RECOMEMENDATIONS……………….……………........ 26 APPENDIX……………………………….……………........ 28 BIBLIOGRAPHY………..……………….……………........ 35 // BACKGROUND The founder and CEO of Netflix, Inc. Reed Hastings, incorporated in 1997 and starting movie rental services in 1999. Netflix employed then and continues to employ a subscription-‐based business model. The company was originally only a DVD-‐by-‐mail service in which the customer paid for a certain level of membership that determined how many DVD’s could be rented at one time. DVD’s were mailed to the customer and then returned by the customer when they had completed viewing. After a couple years in business, the company began including ...
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...organizational resources within it – people, information, and information technology. 2. Describe how to use break-even analysis to assess the financial impact of information technology. 3. Describe how to use Porter’s Five Forces Model to evaluate the relative attractiveness of and competitive pressures in an industry. 4. Compare and contrast Porter’s three generic strategies and the run-grow-transform framework as approaches to the development of business strategy. CHAPTER SUMMARY This chapter serves two primary purposes. First the chapter introduces your students to the broad notion of management information systems within an organization and the three key resources on which MIS focuses – people, information, and information technology. Second, the chapter jumps right into the process of appropriately selecting which technologies to use based on the industry in which your organization operates, the identified business strategies for competing in that industry, and how to assess the impact of technology. The primary sections of this chapter include: 1. MIS Resource #1: Information 2. MIS Resource #2: People 3. MIS Resource #3: Information Technology 4. Financial Impact of IT: Break-Even Analysis 5. Industry Impact of IT: Porter’s Five Forces Model 6. Strategy Impact of IT: Porter (Again)...
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...Strategy Exam Framework Executive Summary (5%) I would recommend that (the company)… The company faces (the main issue), which has caused (major symptoms)… However, the following constraints must be addressed… - Timing - - In addressing this issue, the following alternatives were considered: - - - The alternatives were evaluated based on the following set of decision criteria: - - - The first alternative was selected because it satisfies (decision criteria). The second alternative was not chosen because it does not satisfy (decision criteria). Similarly, the third alternative was not preferred because it does not address (decision criteria). To implement the recommendations, the company should first (action plan). In the short term… In the long term… Issue Identification (10%) * Quantitative calculations Rule of 7272/# of years=Time it takes to double growth Rule of 114Number of years to triple growth Rule of 144Number of years to quadruple growth CAGR calculations CAGR=(1+Percentage growth)^n years Market share now versus market share in the future? (Current sales/Current market size) (Projected sales/Projected organic market size growth) Quantitative calculations Rule of 7272/# of years=Time it takes to double growth Rule of 114Number of years to triple growth Rule of 144Number of years to quadruple growth CAGR calculations CAGR=(1+Percentage growth)^n years Market share now versus market share in the future? (Current...
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...Kindle Fire facilitates delivery of Amazon’s services and content to customers, and provides them the mobile-device experience. It has established itself as the leading Android tablet with a 54.4 percent market share (comScore, 2012). ii) Amazon’s main focus on customer satisfaction has ensured their position in the on-line retail market. Amazon is highly invested in providing customers convenience, selection, prices and personalized services (Mirow, 2005). Amazon’s e-commerce platforms with highly granular array of choices and mobile shopping apps, have vastly improved the shopping experience for the customers. According to a recent online retail customer satisfaction survey, Amazon topped the list, outdoing competitors like Apple, eBay, Netflix, Best Buy, Walmart (techcrunch, 2012). iii) Amazon has been experiencing marked increase in its revenue with $24,509 million in 2009 to $48,077 million in 2011. The margin (net income), however has been fluctuating, with an increase from $902 million in 2009 to $1152 million in 2010, finally decreasing to $631million in 2011. Amazon although is on the right path with its long established policy of “Leaping revenue, little profit”. BARGAINING POWER OF BUYERS: The...
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...2. How can Porter’s five-forces model aid in strategic decision making? - Porter argues that stronger each of these 5 forces makes harder for a company to raise prices and earn more profits. Also the weaker each of these 5 forces may raise new opportunities for the company. So, a company can evaluate each of these forces to calculate the risk and profit when making strategic decisions in the industry. 3. Describe how “Risk of Entry”, “Bargaining Power of Buyers”, “Bargaining Power of Suppliers”, and industry competition (“Threat of Substitutes”) affect the external threats a company faces. Provide examples of each. - Risk of entry of a potential new competitor is calculated by number of factors that makes it costly for a new competitor to enter the industry. Higher the risk makes the industry more reliable for existing competitors by making it easier for existing companies to keep their market...
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...INDUSTRY SUCCESS FACTORS PORTER‟S FIVE FORCES Page 3 Page 3 Page 3 NETFLIX, THE COMPANY PROBLEMS FACEBOOK BLOCKBUSTER Page 6 Page 8 Page 9 Page 10 CONCLUSION Page 11 RECOMMENDATIONS Page 12 EXHIBITS Page 14 APPENDIXES Page 18 1 INTRODUCTION Netflix entered the video rental industry in 1998, being pioneer on the online delivery channel. They were the first conceiving the digital format that was able to faster the delivery process at the same time it abolished several costs related to the physical points of sales. Being pioneers and developing technologies on which they had patents over could initially be seen as a competitive advantage. The fact of being the first ones operating under this format permitted them to come up with several services before competitors, as the streaming video, the disc rental, the original programming and the household profiles. Not only for being pioneers, but also for the valuable services offered, at accessible prices and with high variety of content, the image among consumers about Netflix was constructive. The share of mind among users was on a general perspective positive and of satisfaction relating to the services they were paying for. Netflix had a great brand awareness and in a positive sense. However, more recent happenings are changing this position. With the years competitors of the industry developed their services, competing more and more directly with Netflix. As so, over the years, in order to survive...
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