Netflix can it recover from strategy mistakes Harvard Case Solution & Analysis

Problem Statement

Netflix has decided to expand its business with a new pricing strategy however this strategy was not a common expansion as the investors perceived it. It is a particular kind of proposal in which the company has made a plan to revamp its business structure. The company has established a system through which the existing customers can rent out DVD on a specific price.

Netflix is splitting its existing business by a implementing a new strategy of price scheme on which the company received an extremely negative response from its current customers. As the subscribers perceive themselves on the darker side because new strategy of the company was increasing their entertainment cost. This announcement of this strategic plan has made a rapid change in the accumulated profitability of the company. The ratings of the company in the stock market were decreased suddenly on the arrival of this problem.


Netflix has started its business with the help of an online DVD by mail system that enabled the customer to rent DVDs. After then, Netflix has moved with the market trend and has introduced a unique technology named Online Streamline, which has enabled the user to watch movies online and to enjoy a complete facility of pause and play the program. Most importantly the spectators can avail the viewing of movies or programs without the disturbance of commercials or any other advertisements that use to bother the customer. The company has established itself in more than 40 countries with a growing market share which shows positive results day by day. The most enhancing feature of the company is its low priced services that consist of about one billion hours of movies and T.V programs monthly. The programs can be easily accessed anywhere and everywhere through the streaming technology provided by the company.

The case study has discussed Netflix business strategies from various perspectives which has shown the crest and trough in the main business company with the passage of time. As the market shifts towards the technological advances, DVD rentals trend has also shown its maturity in the online video entertainment services providers.

The case has enlightened the over industry environment in which Netflix is doing business. The industry analysis mainly shows the advantages of Netflix new streaming technology and disadvantages of its DVD by mail service. It also describes a number of another players existing in the market, urging the same by providing different technical tools to enhance their profitability. In addition, the case has revealed the downward trend of DVD mailing service business because of in hand online streaming facility. Market trend shows the strong competitors move in the industry that has contracted the life cycle of DVD mailing system. In the end, the case has elaborated the business model and strategies used by Netflix to increased its market share and profitability with the introduction of streaming technology. However, most of their strategies was not successful but despite of this failure Netflix is doing its best to place right strategy at the right time.

External Analysis

Porter Five Forces Framework

Threat of New Entrant (Low)

It highly depends upon the promptness of the technological advances in the video entertainment business. The new entrant cannot be a fresh company who is coming to cater the market with their sole experience of entrepreneurship. This online video streaming industry is not the same as investing one time in a television channel and enjoying the profits through various advertisement cost. Online video entertainment requires a continuous improvement in terms of business strategies and technological advances. Netflix has made its solid appearance through its long-time market presence and innovative streaming technology. Although, the company is currently not producing content on their own while they are planning to do this by themselves in the future. Netflix is facing some extreme susceptibilities to the price hikes at the time of licensing deals come up for renewal.

Hence, the threat of the newcomer become very low because the existing player are finding themselves in a difficult position to sustain their growth and profitability in the video entertainment industry so the new entrant will not survive under these circumstances. The presence of entertainment giant like Apple, Amazon........................

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