Executive Summary: Netflix Business Model and Strategy
The following is an executive summary outlining the key issues facing Netflix in its current business position and making strategic recommendations for the business’s future. These recommendations are based primarily on a Five Forces Analysis, SWOT Analysis and the financial positions of both Netflix and Blockbuster.
Netflix exists in a highly competitive external environment. There is a high degree of rivalry among competitors and little product differentiation, meaning that the ability for buyers to substitute easily to other DVD and movie providers is high. As well as other VOD and DVD subscription providers such as Amazon, iTunes and Video-on-Demand, competitors exist in the form of pay TV movie channels. Thus, the degree of rivalry and threat of substitution products in the movie and TV rentals is quite high. As a result, the buyers wield a significant amount of power as they are easily able to utilize the services of competitors. Similarly, suppliers (in particular mainstream providers such as Universal, Time Warner and Sony) hold a large amount of power in the marketplace as they supply the bulk of Netflix’s profit making products. Netflix also exists in an environment where key success factors such as utilizing technological advances, customer service and marketing, and organizational capability are paramount to the business’s sustainable success. Thus, the key issue for Netflix is how to not simply consolidate its solid market position, but to improve it by becoming a market leader in the KSF’s for the rental TV and movie industry, improving its profitability, and continuing to build a sustainable competitive advantage.
Netflix’s current strategy focuses on rapid expansion of its customer base through affordable membership fees and rapid delivery of its products. It is also focused on shifting further from mail delivery to online streaming to increase its...