Posted: June 27th, 2015
Netflix Case Study
QUESTION ONE: Evolution of Net fix business strategy from a mail based model to a streaming model.
Netflix Company delivered DVDs to customers via emails, but in the recent times, the company has been experiencing evolutionally changes. The company has started delivering DVDs via streamline models (Ireland, Robert and Michael, P.85). During the time when Netflix Company was using emails to deliver DVDs to the customer, the company was facing competition from Amazon Company. The Amazon Company was willing to produce the same DVDs content at a loss (Kaplan, P.78). However, Netflix Company had been experiencing substantial success despite the fact that, the company was facing stiff competition from Amazon. This is because Netflix customers found that, email delivery was convenient because customers did not have to drive to Netflix stores to buy those DVDs. However, the model was in danger of being faced out of the market by other firms that had already started developing high speed streaming models (Kaplan, P.104). The models required customers to download movie or video at the comfort of their place. The chief executive officer of Netflix, Mr. Reed Hastings, was aware that, renting DVDs via email was to be faced out. Therefore, he started to adopt streaming model for streaming videos. This model encountered a lot of competition from larger companies such as us; Apple, Comcast, and Amazon among other competitors. This means that, unlike before, Netflix Company could not enjoy a competitive advantage because the companies could provide the streaming content to customers at a subsidized price. Additionally, the streamline content were scattered everywhere in the market, and it became difficult to differentiate those belonging to Netflix Company and other companies in the market (Ireland, Robert and Michael, P.115).
Netflix Company has been differentiating itself from competitors by creating a subscription content that could compete with cables. The company employed diversification strategy in the mail order model whereby, the company produced a variety of DVDs to consumers at the convenience of their residence (Ireland, Robert and Michael, P.110). Additionally, the company enjoyed a bigger market share than competitors. This is because; Netflix Company was a pioneer in DVD rental market. On the Contrary, Netflix Company and competitors employed pricing strategies in the streaming model to attract customers. However, despite the efforts used by Netflix Company to use streaming model, the company experienced stiff competition from rivals. This was as a result of poor decision making, whereby the manager of Netflix rushed to use streaming model without conducting adequate market analysis.
QUESTION TWO: Continuous and discontinuous change
The adoption of net mail order technology model by Netflix Company was a discontinuous change. This is because this model was faced out by new technology witnessed in the streaming model (Pride and Ferrell, 168). Additionally, nothing could have been added to this model for continuous performance improvement. Hence, this model remained static and was replaced by a continuous system improvement model. On the contrary, the emergence of streaming model was a continuous change. This is because technology is dynamic and requires that, the firms using this model to conduct a continuous innovation to remain competitive in the market. This can be observed from the way Netflix Company was faced out of the market by other companies because of failure to take a comprehensive analysis of the impeding market changes (Hurwitz, 102). Therefore, firms using video streaming operation models should be innovative and should take the initiative to adopt continuous system innovation for a continuous change.
QUESTION THREE: Strength and weakness of Netflix video streaming model the model using both value chain and 5 forces model
The Netflix video streaming model has strengths and weakness. The use of the value chain and Porters five forces model could have helped the company to determine the strengths and weakness of using video streaming model. When using Porters five forces model and value chain model, Netflix Company could have understood its strength, opportunities, supplier’s power and buyer’s power. Based on the two models, Netflix Company could have discovered that, the application of streaming model required large capital investment (Kaplan, P.117). The two models could have helped the company to identify the competitors and provide ways in which to deal with the competitors. Additionally, the application of the two models could have helped Netflix Company to differentiate its products. This could have provided the company with opportunities that could have boosted its strength. Additionally, the two models could have provided the company with model tools to identify whether the application of video streaming model would be successful (Ireland, Robert and Michael, P.110). This could have helped the company to avoid exposing some of the weakness, such as lack of adequate capital outlay. Porters five forces model and value chain model could have been helped the company to realize the strength of having a large market share that could have been used to neutralize some of its weakness (Pride and Ferrell, P.132).
Hurwitz, Judith. Service Management for Dummies. Hoboken, NJ: Wiley Pub, 2009. Internet resource
Ireland, R D, Robert E. Hoskisson, and Michael A. Hitt. Understanding Business Strategy: Concepts and Cases. Mason, OH: South-Western Cengage Learning, 2008. Print.
Kaplan, Saul. The Business Model Innovation Factory: How to Stay Relevant When the World Is Changing. Hoboken: John Wiley & Sons, 2012. Internet resource
Pride, William M, and O. C. Ferrell. Marketing. Australia: South Western Cengage Learning, 2010. Print.
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