Netflix in 2012 Case Analysis

In: Business and Management

Submitted By ss2145
Words 2087
Pages 9
Session 3 Case Analysis
Stephanie Shanks
Strategic Management
March 28, 2015
Professor Debra Hunter
Shorter University

Netflix in 2012: Can It Recover from Its Strategy Missteps?
Introduction
The following case analysis follows the strategic moves of Netflix over its existence, specifically from 2011 to 2012. The specific matters discussed refer to some poor strategic decisions made by the company. Netflix made many decisions that turned out to be toxic to the company’s future. Moving from price changes to global expansion, the firm’s financial status was back and forth. Further analysis will identify key issues with strategy and allow for realization for better alternatives.
Company Background
Netflix was founded in 1997 (Netflix, n.d., para. 1). The company started out with the idea of offering online movie rentals. Over time, the firm has grown to offer subscription services for online media streaming of movies and television shows, and DVD rental. The idea behind the services was to allow consumers more affordability and flexibility in renting videos. Consumers are able to pay a small monthly subscription fee to rent a specified amount of DVDs based on the plan for any desired length of time, without worrying about late fees (Thompson, Peteraf, Gamble, & Strickland, 2014, p. C-137).
Netflix also offers a streaming option for movie and TV shows. The service started out as metered but moved to a subscription for unlimited streaming (Thompson et al., 2014, p. C-137). The services also started out with rental and streaming as a combined subscription, but was separated in 2011. The options made available were DVD rental, or unlimited streaming, or both. Eventually, Netflix removed the subscription option for both plans and consumers had to sign up separately for both services if they so desired.
Situation
Netflix is a strong competitor…...

Similar Documents

Netflix Analysis

...Netflix Analysis Dayani Marrero DeVry University 07/25/2012 Netflix Analysis Netflix Inc. is the world's leading rent-by-mail company. The firm has more than 1.1 million subscribers who typically pay a monthly fee of $19.95 for unlimited rentals, provided they have no more than 3 discs out at one time. The company offers more than 15,000 titles and maintains an inventory of more than 5 million discs. To speed delivery, Netflix has opened more than 20 regional shipping centers around the United States, and most DVDs are received by customers a day or two after ordering them on the company's Web site. More than a third of the publicly traded company is owned by Jay Hoag's Technology Crossover Ventures. Some of the organizational strengths are low prices and fast delivery. With the low prices they have they attract more customers into signing up. The price is convenient for almost everyone because it is affordable. Netflix is the best way to watch movies for a low price each month you get to watch unlimited movies and shows. There are competitors like Hulu or Red box and now Blockbuster that offer movie streaming online and also by mail. Blockbuster is Netflix’s biggest competitor at this time but the only thing that Netflix has to win over customers is their low price. Blockbuster charges $14 a month just for online streaming and Netflix charges $14 a month with online streaming and DVD’s by mail. Two options for the same price when the other has one option. Netflix......

Words: 953 - Pages: 4

Netflix Case

...For this case analysis I will be answering the case assignment questions for case 6: Netflix’s Business Model and Strategy in Renting Movies and TV Episodes. Before going into the first question, an introduction into the company always seems fitting for these types of assignments. According to Netflix, Inc. 10-K Annual Report Form from Edgar Online, “Netflix, Inc. is the world’s leading Internet television network with more than 33 million members in over 40 countries enjoying more than one billion hours of TV shows and movies per month, including original series,” and the report also states that Netflix, Inc. core strategy is to grow their streaming subscription business domestically and internationally. They are continuously improving the customer experience – expanding their streaming content, with a focus on programming an overall mix of content that delights their customers, including exclusive and original content, enhancing their user interface and extending their streaming service to even more Internet-connected devices while staving within the parameters of their consolidated net income (loss) and operating segment contribution profit (loss) targets. Contribution profit (loss) is defined as revenues less cost of revenues and marketing expenses (Edgar Online Report).” From this report and a few others that I researched along with reading the facts presented within our text, I look at Netflix, Inc. as a innovator in the Internet delivery of TV shows and movies,......

Words: 1576 - Pages: 7

Netflix Case

...NETFLIX SWOT ANALYSIS | Strengths * User Experience – Unlimited movies/TV and DVDs delivered quickly to home * Streaming Capability and Device Compatibility – can be accessed by any of the new technologies and this makes it easier to be spread all across the globe and provides possibilities of expansion * First Mover advantage – Secured leading position in the Internet TV market. * Large Subscriber base – around 33M global Subscriber base * Brand Value- Netflix received a pretty strong media attention after the launch of House of Cards and customers have only good things to say about the company * Low Fixed price Value proposition – Unlike Amazon (you pay for the new series), Netflix provides free access to all the content for the low monthly fee of $9.99 in US. * No commercial interruption like Hulu or other competitors * Netflix claims to have the largest online content library among all of its competitors. It also has exclusive deals with content providers like Disney which makes it easier to get new subscribers. | Weakness  * Customers tend to be very price conscious with so many options available in the market like Hulu and Amazon prime. This will prevent Netflix from increasing the price point for its customers. * Netflix has not been very up to date with the movie selection and this can hamper its subscription base in the long run * DVD segment of the business has been declining and Netflix lost almost 3M subscribers last year. The......

Words: 569 - Pages: 3

Netflix Case

...NSU H. Wayne Huizenga School of Business & Entrepreneurship  Assignment for Course: | MGT 5090 | Submitted to: | | Submitted by: | | | | | | Date of Submission: Title of Assignment: Case 2 - Netflix CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and disclosed in the paper. I have also cited any sources from which I used data, ideas or words, either quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course. | | Executive Summary Once the top leader of the online streaming and mail-in DVD market, Netflix has lost significant market share due to strategic missteps and increasing competition from new entrants. The company’s decision to rectify its failed strategy and expansion towards international markets will favor its prospects but other measures will be necessary in order to secure its leadership and expand its market share faster than its competitors. The proposed strategies that the company may implement in order to expand faster than its competitors and increased profit share are the following: * Cross-industry partnerships * Video game media integration * Greater title selections From these three alternatives it is concluded that the optimal strategy, which is better aligned with the company’s goals of rapid expansion and profit share is to strategize an aggressive......

Words: 1904 - Pages: 8

Netflix Case Analysis

...Netflix Case Analysis Netflix is an American provider and the world's leading internet subscription service of on-demand streaming media in the United States, Canada, Latin America, the Caribbean, United Kingdom and Ireland and flat rate DVD-by-mail in the United States. Netflix members can instantly watch unlimited films and TV episodes streamed over the internet to more than 700 devices for about $7.99 a month. With regards to increasing the influence of the Netflix brand, expansion into the video game industry could be an option, however various factors such as competitors, viability and sustainability of the company as a whole need to be further analyzed in order to assess whether this proposal is feasible. Competitor Analysis AREA| NETFLIX| HULU| BlOCKBUSTER| REDBOX| market share| 55%| 35%| 5%| 5%| Subscribers| 23.6 mil| 24 mil| low| 12 mil| Brand Popularity| HIGH| LOW| MED-HIGH| MEDIUM| start date| 1998| 2007| 1985| 2003| Revenue in 2011| 705.7 mil| 420 mil| bankrupt| 363.9 mil| Revenue increase from 2010| 29.00%| 48%| | | Growth in customers| 30%| 50%| | 30%| (in 2011)| | | | | Netflix's success has inspired a number of other DVD rental companies both in the United States and abroad, but none of the purely online companies appear to approach Netflix in terms of market share or revenues as can be seen above. Hulu is a close second in terms of Market share and it can be seen that its entry into the market was nearly...

Words: 3411 - Pages: 14

Netflix 2012

...Prior to 2008, Netflix had successfully dominated the DVDs-by-mail industry by developing an effective network of distribution centers that made delivery of over 120,000 titles across the United States in one business day possible. In recent years, technology has advanced to the extent that household are rapidly shifting from renting physical DVDs to watching movies and TV shows streamed over the Internet to over 700 different devices. While the company has benefited from a phenomenal increase in the stock price, revenue and the amount of subscribers, a series of strategy changes and new initiatives in July of 2011 led to a downward spiral for Netflix. The major strategic issue facing Netflix is how to recover from its strategic mistakes that resulted in a significant plummet in stock value and revenues, disgruntle consumers and reduced customer loyalty in addition to a whopping amount of canceled subscriptions and deterred potential customers. Not to mention the deterioration of brand image and reduced operating profits. If Netflix does nothing to address the strategic issue at hand, it can be detrimental to the future of the company. In the worst case, in light of the intensely competitive nature of the industry and the oversaturation of movie rental and instant streaming rivals, Netflix may in fact become a thing of the past. Unsatisfied consumers can be very unfavorable to a company when there are numerous substitute services. It is likely that Netflix will continue......

Words: 4562 - Pages: 19

Netflix Analysis

...Forces Analysis………………………....……………………3 Entry………………………………………………………………3-4 Rivalry…………………………………………………………….4-5 Substitutes…………………………………………....…………….5 Supplier Power……………………………………………………5-6 Buyer power………………………………………………………..6 Competitive advantage………………………………………………..6-10 Identifying challenges…………………………………………...…..10-13 Reference…………………………………………..………………….14 5 Forces Analysis of the Video on Demand Industry By offering streaming movies through its website, Netflix is entering the Video on Demand (VOD) industry. This industry, along with DVD rentals (both from online providers such as Netflix, and cable services such as On Demand and Pay-Per-View), is part of the larger industry of “watching movies in the home.” However, since Netflix is already positioned in this market, with its online DVD rentals, we will examine the smaller 5 portion of the market that is streaming online movies. This business is too closely related to the movie downloading service to be considered as a separate market. Threat of Potential Entrants Today, internet video rental industry is very profitable and still has a very good develop prospect. After Netflix’s success, the whole video industry starts to change gradually, and more and more people start to consider entering this field. However, for most of those potential entrants, this industry has some big barriers to entry. First of all, the service in this industry is already very complete. With its seven-year-development, Netflix has......

Words: 4257 - Pages: 18

Netflix Case

...Duane Lefevre Netflix Case Analysis Summary To “Netflix” is fast becoming a common word in today’s society. Everyone knows it, because it is very famous for its service of online movie. It has replaced the traditional DVD rental store and all the rental process can be done through internet with a higher image quality. Reed Hastings incorporated in 1997 and starting movie rental service in 1999. In 2012, there was already over 23 million subscribers and more then 120,000 titles available for online streaming, majorly competing with Hulu Plus and Amazon prime instant video. Analysis Porter five forces analysis The Porter’s five forces model is often used to analyze companies’ level of competition within an industry and business strategy. The rivalry among existing competitors is intense. There are a large number of firms in the movie rental industry and the competition is very high. Several methods for consumers to choose from in-store rental, online rental and mail delivery or video on demand and low level of product differentiation also increase rivalry. There are low switching cost which also lead to aggressive competition and comparable product can be found at many different places. In brief, Netflix major competitors have large levels of capital and also achieved economies of scale. The threat of new potential entrants of Netflix is......

Words: 1365 - Pages: 6

Netflix Case Study

...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......

Words: 2627 - Pages: 11

Analysis of Netflix

...The Netflix case covers the period since the inception of Netflix (1997) until sometime in 2007. I will admit, it is difficult to put myself in the shoes of “2007 Jonathan”, while not allowing my knowledge of Netflix’s future stunning success and Blockbuster’s ultimate bankruptcy to influence my decision making process. Let’s try anyways. By 2007, Blockbuster had made it abundantly clear, whether via actions or words, about their perceived vision of the future of the video rental industry. In 2002 they claimed that there was no “financially viable long-term” online rental business. They also claimed there was “not enough demand” for a mail order business model as well. Finally in 2004, they started to take things seriously with the introduction of Blockbuster Online. That was essentially the beginning of the end for Blockbuster, with many analysts noting in hindsight that it was too little too late. During the early 2000s, Netflix was driving forward by using the power of the internet (the usage of which is a great example of disruptive innovation), innovating an entirely new industry right under the nose of Blockbuster. While they started out as a “mail order” video rental company, they ultimately thrived due to the use of innovative algorithms, a website, a search engine, and a novel pricing structure; one that Blockbuster couldn’t even imagine working. During this this time, Blockbuster’s absorptive capacity was so low that they were unable to harness the power of......

Words: 378 - Pages: 2

Netflix Analysis

...Netflix Analysis Netflix, Inc. is an internet television network. The company derives revenues from monthly subscription dues. Its members can watch as much as they want, anytime, anywhere, on nearly any internet connected screen. Members can play pause and resume watching, all without commercials or commitment (Netflix, 2014). Netflix does not have an actual mission statement, however, according to Reed Hastings, founder and CEO, their mission and vision is “to grow our streaming subscription business domestically and globally, continuously improving the customer experience, with a focus on expanding our streaming content, enhancing our user interface and extending our streaming service to even more internet-connected devices, while staying within the parameters of our consolidated net income and operating segment contribution profit targets” (Hastings, 2014). Nine company published values provide further clarification about the principles which guide its employees in their daily decisions and activities. Those company values as published are: judgment; productivity; creativity; intelligence; honesty; communication; selflessness; reliability; and passion. Hastings has expressed a clear vision for the future of Netflix, which is to become the best global entertainment distribution service, licensing entertainment content around the world and creating markets that are accessible to filmmakers, thereby helping content creators around the world to find a global audience.......

Words: 2699 - Pages: 11

Netflix Case

...Submission: September 25, 2015 Title of Assignment: Netflix Case CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and disclosed in the paper. I have also cited any sources from which I used data, ideas or words, either quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course. Student's Signature: Gabriel Behar ***************************************************************** Instructor's Grade on Assignment: Instructor's Comments: Executive Summary Problem Statement Competitors for Netflix are on the rise ad market share position can be on risk Analysis Although Netflix is the world leader on internet television, recent issues have being worrying its investors. The fall of stock prices and intensification of competitors is becoming an issue that have to be address before it becomes harder to deal. With a maturing industry, innovation becomes tougher and more difficult to achieve. For Netflix, innovation is the key to success and to continue being number one in the industry. Alternatives Solutions that can assist Netflix to maintain its advantage over competitors * Focus on the areas where current success is greater and expansion can be possible * Make good usage of marketing ideas and resources Recommendation Production and marketing of Netflix original content would be the best approach.......

Words: 1822 - Pages: 8

Netflix Case

...9-607-138 REV: APRIL 27, 2009 WILLY SHIH STEPHEN KAUFMAN DAVID SPINOLA Netflix Late one afternoon in January 2007, Reed Hastings had just concluded a meeting with his senior management team in the King Kong board room at Netflix’s corporate headquarters in Los Gatos, California. Hastings, the founder and CEO of the company, which pioneered online DVD rentals, was preparing to unveil Netflix’s highly anticipated entrance into the online video market. Many industry observers believed that the ability of customers to order movies through their computers for instant viewing, commonly referred to as video-on-demand (VOD), would quickly impact the large user base for Netflix’s core business. Hastings looked across the third floor of the office building and the conference rooms named for some of his staff’s favorite films. A love of movies clearly ran deep among Netflix employees, and he was confident that one way or another, his team would maintain the company’s position as a leader in the home video market. But, as he reflected upon the years of investment and discussions surrounding the new feature that Netflix would be offering its customers, he could not help but think of the merits of the paths not chosen. As the management team filed out of the board room around him, Hastings returned his thoughts to the present. While he believed that the DVD rental market would remain healthy for years into the future, he knew that this announcement would impact not...

Words: 8871 - Pages: 36

Cima Case Analysis 2012

...[pic] FVYP (x) = ethics3 + strategy2 +operation1 | Content | 1. Introduction··········································································3 2. Prioritization of key issues ····················································· 3 3. Comprehensive analysis ·························································4 3.1 Ethical Emergency: Duty of Care········································ 4 3.2 Important Strategic Move: Entering Corporate Advertising·····4 3.3 Decision on Documentary: Cost vs. Quality··························· 6 3.4 Financial Pressure: Decreased Re-commission Revenue·········· 7 3.5 Liquidity and Risk Control: Merchandising Right···················8 4. Recommendations ··································································10 4.1 Ethical Emergency: Duty of Care·········································10 4.2 Important Strategic Move: Enter Corporate Advertising··········11 4.3 Decision on Documentary: Cost vs. Quality····························11 4.4 Financial Pressure: Decreased Re-commission Revenue···········12 4.5 Liquidity and Risk Control: Merchandising Right···················13 5. Conclusion ············································································13 6.......

Words: 3539 - Pages: 15

Netflix Analysis

...Netflix Domestic Strategy Prepared for: Netflix Senior Management Reed Hastings, Co-Founder and CEO Kelly Bennett, Chief Marketing Officer Jonathan Friedland, Chief Communications Officer Bill Holmes, Chief Business Development Officer Neil Hunt, Chief Product Officer David Hyman, General Counsel Patty McCord, Chief Talent Officer Ted Sarandos, Chief Content Officer David Wells, Chief Financial Officer August 4, 2012   Through this report, our consulting team has taken the opportunity to analyze and provide recommendations for future domestic business strategy of Netflix. As expressed in the company’s founder’s conference last October, we would like to help you build upon your stated vision for the future including: • Becoming the best global entertainment distribution service • Licensing entertainment content around the world • Creating markets that are accessible to film makers • Helping content creators around the world to find a global audience We would also like to follow the nine values you use to guide your company: • Judgment • Productivity • Creativity • Intelligence • Honesty • Communication • Selflessness • Reliability • Passion In this report, we will address the following issues to provide a foundation for overcoming Netflix’s domestic challenges: I. Competitive Dynamics A. Key Competitors B. Competitive Response II. Strategic Management/Competitive Issues A. Key Strategic......

Words: 3734 - Pages: 15