Netflix Case Study

Netflix

Some of the factors on which the success of companies in the video rental industry depends on are identified below:

1. The strength of the company lies in the fact that how wide and up-to-date is the collection of movies and episodes in its store.
2. An efficient method of distribution and delivery is necessary in order to gain new consumers and retain the old ones.
3. Consumer convenience is of utmost importance to build customer loyalty. Hassle-free and easy-to-use user interface provides convenience to customers. User-friendly and less time consuming software installations can go a long way in attracting new customers.
4. As the number of online video renting websites grows, it becomes imperative to invest in advertisements to distinguish oneself from its rivals. Building a brand that is sensitive to the needs of consumers is extremely important.
5. Upgrading to new and better technologies which have high potential of acceptability in the future is another factor essential for higher penetration into the consumers.

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1. Of the options available in front of Hastings, which one would you recommend and why?
2. Did Netflix do the same job for consumers as Blockbuster did? How did it evolve over time?
3. Compare Blockbuster’s & Netflix’s value networks and business models. How might the differences affect the respective company’s strategies?

Ans. Blockbuster specifically focuses on the ‘movie night’ segment who demand the newly released movie right away. The business model is based on the fact that customer buying behaviour is impulsive in nature i.e. the purchases are not pre-decided, but rather on the spot. This gives rise to a simple way of making business for Blockbuster, where customers visit the stores and rent a movie. Hence Blockbuster’s operations strategy emphasizes on having actual stores located nearby heavily populated areas throughout the United States and stocked with popular movie titles.

On the other hand, Netflix’s business strategy assumes that customers seek convenience rather than indulging in impulse buying. Netflix offered entertainment options that the consumers could not get from any other of Netflix’s competitors. With deep understanding of customers’ needs and weaknesses, Netflix could succeed in catering to their demands. The differentiation in value provided by Netflix and others lied in the former’s focus to address the inconveniences of returning movies and the hatred of late fees. Through a subscription-based rental service, customers could keep the movie DVDs until they wanted another one. This ease of functioning resulted in huge subscriptions in the first year itself.