Netflix Harvard Case Solution & Analysis

MAIN ISSUE ANALYSIS:

The company has placed its foot-steps strongly into the industry of online video rentals and has been performing efficiently and effectively in the entire industry. The introduction of Video on Demand has posed a serious threat on the business of the company as it is likely to steal the overall customer base of the company. Therefore, the top management of the company is seriously considered towards the issue as it would have a significant impact on the overall business of the company.

The top management of the company is unable to make effective strategies to tap into the industry of VOD efficiently and effectively. The top management of the company is unable to figure out that whether the company should outsource the new product/service line or the company should establish VDO by itself with the help of its core team.

In addition to this, the top management of the company is unable to identify the expected customer base that would be procured by diversifying its business from online rentals to Video on Demand. Furthermore, the connectivity between the user‘s computer and television and the current limitation in available content is beyond the core focus of the company.

The top management of the company is unable to identify the perfect time to tap into the market of VOD as there are few impediments, which should be resolved in order to tap successfully in the VOD market.

3C ANALYSIS:

Company:

Netflix was founded in 1997 by Marc Randolph and reed Hastings.It’s headquarter is located in Gatos, California. The company initiated its operations by facilitating its customers with Home delivery of DVDs ordered online by the customers through the website of Netflix.

The company has earned the confidence and satisfaction of its customers over the period of time by providing its customers with excellent quality products and exceptional customer care services.

Later, the company transformed its business model into video rental services. The company offers its customers to rent DVDs online rather than purchasing, which has considerably fuelled up the overall growth of the company. The company has performed exceptionally and has reported a net profit of $49 million and a total revenues amounting to $996 million in the financial year 2006.

Customers:

Netflix has a huge customer base consisting of approximately 6.6 million subscribers at the end of 2006. The target customer segment of the company includes existing customers of brick and mortar video rental stores, people wishing to watch movies on demand as well as people without cable TV. In addition to this, the customers of the company show a high degree of brand loyalty towards the company, which further enhances the overall competitiveness of the company.

Competitors:

The competitors in the VOD industry include Vongo launched by the Starz subscription channel and Cinema now, as well as, it is a joint venture formed by Lionsgate, Microsoft, and Cisco. The other major competitor of the company includes MovieLink, which was also formed by a joint venture of a number of movie studios including MGM, Paramount, Sony, Warner brothers, and Universal.

PORTER’S FIVE FORCES:

Threat of New Entrants:

There are various barriers for new entrants in the entire industry, which includes huge establishment cost, network setup costs, licensing fee, cost for adoption of latest technology as well as there are already well-established companies prevailing in the entire market that are dominating over the entire share of the online DVD market.Netflix Case Solution

Many large multi-national companies are tapping into the entire industry. These well established companies have a diversified product and service segments which has enabled them to earn economies of scale. Thus, they have a huge financial backing, which enables them to compete strongly in the entire market. Therefore, the threat of new entrants is assessed to be MODERATE.

Threat of Substitutes:

The substitutes of the products and services of the company include online games, online music, and cable TV. Thus, there are various substitutes available for the products and services of the company, which increases the overall threat of substitutes for the company. Therefore, the threat of substitutes is assessed to be HIGH.

Bargaining Power of Suppliers:

The suppliers of the company include content developers and web developers. Thus, there are very few high quality content developers as well as there are few quality internet service providers in the entire industry, whereas, there are large numbers of online video service providers in the entire industry. This increases the overall bargaining power of the suppliers in the entire industry............................

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