Netflix Case Analysis free essay sample

Netflix, Inc. â€Å"Netflix, Inc. is the worlds largest online movie rental service, with more than 10 million subscribers (Netflix Media Center, 2009). † Netflix exhibits dominant economic characteristics in the online movie rental business. They enjoy strong market size and growth rate when compared to rivalry competition. The number of rivalries are increasing, and the market remains dominated by only a few sizeable rivalries like Blockbuster Video, Wal-Mart, Walt Disney Movies and Movielink’s Downloadable Movies. Netflix is determined to offer new and innovative technology to sustain their competitive advantage. â€Å"Netflix growth strategy entails making the best product and the best consumer experience even better. Lead the expansion of internet delivery content by offering subscribers both mail delivery and a continuously improving internet delivery option (Netflix Overview, 2009). † Netflix’s vision is â€Å"to change the way people access and view the movies they love. To accomplish that, on a large scale, we have to set a long term goal to acquire 5 million subscribers in the U. We will write a custom essay sample on Netflix Case Analysis or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page S. or 5 percent of the U. S. TV households over the next four to seven years (Thompson C-41). † This vision is well devised and crafted setting short term and long term performance targets. Current analysis shows less than 4 million subscribers in 2004, and in less than six years their subscriber base has more than doubled to more than 10 million subscribers. Their intent is to leverage their online DVD rental leadership to grow both subscribers and net income, thereby using a balanced scorecard approach relating to financial performance and those related to strategic performance. My analysis of Netflix’s strategy and vision is focused and on target. Netflix is achieving its competitive advantage by crafting a well-conceived strategy and the necessary vision to compete, survive and gain a competitive advantage over competing rivals. My case analysis is based upon the information gained from the textbook and reviewing the company’s website. Unfortunately, the information in the text book is quite a bit older than the current information on Netflix’s website. Viewing the company’s profile and financial growth over the last few years indicates that Netflix strategy and vision has been implemented successfully, achieving strong strategic growth and a sustainable competitive advantage. Netflix‘s business model and strategy compare closely to its key rivals. Although, Netflix won a patent that covered much of its business model and could be used to help stifle competition in the future (Thompson C-33) . Netflix has a team of executives that manage only the on-line DVD rental enterprise. They are well established and use a very sophisticated software program thereby making movie selection easy and fun. In my analysis, Blockbuster has many retail stores to contend with and many other facets of a business enterprise, thereby not having a unique team of individuals solely dedicated to the on-line DVD rental business. Wal-Mart would be Netflix’s greatest fear due to the enormous capital available and expertise that could be employed, yet Wal-Mart continues to lag behind Netflix. Wal-Mart’s online software needs a lot of debugging, whereas Netflix had already spent several years debugging its software (Thompson C-37). The online movie rental business is changing. As technology changes, DVD’s will not be the medium of choice. The shift will be downloadable movies. Most people enjoy the ability to watch a movie immediately, thus another of Netflix’s rivals, Movielink’s. Netflix was able to see this change and react to it quickly as seen in their company vision statement. I personally enjoy the option of pay-per-view that is available with local cable TV and satellite providers. Also available is the â€Å"on-demand† or â€Å"on-command† movie experience that allows a person to view older movies free of charge. Another threat is Redbox and other automated DVD retail machines. These are showing up almost everywhere. Redbox charges $1 for all movies, with no late fees or hidden charges. These are just a few external threats that Netflix needs to be concerned with. The key factors that will determine Netflix’s continued success clearly relates to getting their product to consumers as quickly as possible. Their innovative software and warehousing has proved to be very effective and efficient. But, they must continue to improve on the technology that will bring movies to consumers even faster! If they do not, the competition will. Netflix’s ability to rapidly change and provide customers with the products they desire, in a timely fashion, combined with their powerful software makes searching for movies more interesting and enjoyable. As a past customer of Netflix, I enjoyed many of these features. I do not like browsing through a video rental store. I find it difficult and time consuming trying to find an interesting movie. Netflix’s online software is structured to make recommendations on my previously viewed movies, thereby making the decisions for me. This is one strong feature that has strengthened Netflix’s competitive advantage. In order for Netflix to survive in this competing market, they must capitalize and dominate the downloadable DVD business. Netflix has the ability and â€Å"know-how† to do this. Netflix has the software already in place for promoting their products online, now they need to implement a user friendly application for downloading movies to the consumer. The biggest obstacle I see, is getting them to a medium that consumers can use and watch on their current television. Another hurdle is the advances in high definition televisions. I enjoy watching high definition movies. Recommendation Netflix must design and implement downloadable high definition movies in a format that anyone can use on their current television. If Netflix can achieve this technological hurdle they will no doubt see continued growth and strengthen their competitive advantage. Blockbuster and Wal-Mart will try to imitate Netflix. If Netflix can develop the technology to achieve my recommendation above, it is possible for Netflix to obtain exclusive rights and patents that would stifle the competition. Would I buy Netflix stock? No. There is no doubt that Netflix’s financials are strong, and their growth remains steady. I can list the highlights of their financial statements and ratios, but my analysis is already too long. In short, Netflix is not turning a profit on their Web streaming, downloadable movies.