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Questionable Decisions Can Be Costly

In: Business and Management

Submitted By DJondeck2012
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Questionable Decisions can be costly

Management Decision Models

In this assignment, we shall be looking at Netflix and the decisions made by CEO Reed Hastings back in 2011, price increases and an attempt to separate the company into two separate entities. Somewhere in the neighborhood of 800,000 members cancelled their subscriptions due to these decisions, perceived by many to be drastic and over the top. During this paper I will show that while the decisions were first received poorly they were the correct decisions, made with haste and without supportive, positive PR. With the use of PR (promotions), the price increase and division of the company would have been better received. Firstly, there was the price increase separating DVD service and streaming into different services with different monthly rates. This was seen as forcing customers to choose one service other the other, or pay an increase of 60%. While many subscribers at the time became upset with the idea, many people could see that the monthly cost was still reasonable when you consider the amount of content that was available on Netflix. Netflix was ahead of the game when it came to streaming media content across the internet. Having been an early contender in the streaming business, they were able to secure the streaming rights for a lower cost. Netflix then passed this savings onto their subscribers. Yet, with more companies showing interest in the rights to stream media, Hollywood started to raise prices for their content. This made acquiring the rights to stream media more costly than in the past, forcing prices to increase. In order to remain in business, Netflix was faced with the choice of raising subscription rates or fall into bankruptcy. So ask yourself, what choice would you have made? I truly believe Reed Hastings made the right choice. Which will be made clear later....

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