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Davit Sioridze
Prof. Gardner
International Strategic Management
Case 1, Netflix
External Environment:
Opportunities – According to market demand Netflix faces the development of video streaming
and downloads on PCs as well as mobile devices. Netflix is in its infancy stage of introducing
streaming videos and TV shows. This new addition of streaming video was built on Microsoft
infrastructure and company hopes to make service available on other software combinations,
portable devices and TV screens.
Threats - At the same time biggest online retailers such as Amazon Apple and Youtobe have
been looking for ventures in movie rental business. So Netflix must decide how to adjust its
current business model in order to grow and adapt to the market dynamic environment. Apple
TV, Downloadable Amazon Unbox allows customer to access DVD quality movies. Besides,
Walmart also decided to enter lucrative movie download market in 2007. As obvious such
intense competition is challenge for Netflix which tries to maintain leadership position.
Industry analyses - Netflix was the first mover in online rental industry. In 1998 business model
has revolutionized the movie rental business and the way US viewers rent and watch movies.
There are few major and several firms which compete for market shares. Blockbuster which
nowadays faces financial problems was major competitor for Netflix in 2004 when it launched
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Blockbuster Online. Another major player is Movie Gallery which tries to maintain its market
share and fight back market penetration attempts of Netflix.
Internal Organization:
Strength – Netflix is the most recognizable movie rental in the USA. Since 1998 its service has
captured approximately 6.7 million subscribers and offers video library for more than 90K
movies, television and other entertainment videos. Netfllix changed traditional brick & mortar
video rental chain which appeared to be the best choice for the customers who were annoyed
with Blockbusters late fees. As case describes one of the biggest strength of Netflix is marketing
and its relationship with different stakeholders. Company constantly tries to maintain friendly
image and seeks for more and more partners around the USA.
Weakness – The major weakness of the company is that it still can not provide highest quality of
movie streaming. Even though this weakness is determined by relatively slow internet speed in
certain regions, Netflix still needs to solve this problem.
Value chain- online service of Netflix costs 7.99 $ ([Link]) which is affordable way to
stream any of 90 thousand movies. Since 1999 Netflix eliminated due dates and late fees which
increased brand acceptance and helped company to become popular. Recently Netflix offered
new features to it subscribers (Watch Now) proving that company innovation is core value.
Company launched Red Envelope Entertainment which offers subscribers unique and original
contest.
Sustainability – Even though Netflix has impressive results, long term sustainability is not
guaranteed. This lucrative niche is not yet mature and still offers wide opportunities for growth.
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It means that profitability and growth potential attract new movers as lure. So it is essential to
maintain long term innovation and competitive advantage to keep the status of market leader.
Strategic Management Team –Company leadership team and structure makes it clear that Netflix
has bright team and members of this team are professionals. Having such titles as Talent Officer,
Content Officer and Product Officer show strategic philosophy of company. Mentioned titles
should make it sure, that customers get what they expect. At the same time company employs 13
hundred full time people.
Business Strategy- Company legal status also supported its development. Netflix became
corporate enterprise after it went public (IPO) in 2002. Part of business strategy was to expand
according the growth of the sales. Consequently company built distribution and shipping centers
every year to meet increased customer demand. To maintain high level of customer satisfaction
and contribute value chain, Netflix continually invests money into marketing.
Relationship and Alliance- Major success of Netflix could be attributed to strategic relationship
with major home theatre manufacturers such as Sony, Toshiba, Pioner, RCA. Netflex maintains
strategic relationship with content providers. Those companies which produce and provide
movies are major suppliers of Netflix input. So maintaining mutually beneficial relationship is
very important for Netflix.
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