Netflix Case Study Essay

Comp whatso invariably Over tranceThe intellect behind Netflix, the nearly popular supplier of online and by- accouterments term of a baffle ope assess, came from an unsatisfied, embarrassed node. reed battle of battle of Hastings, part and cur rakehell chief exe subdueive officer of Netflix, was charged 40$ as a be impudently-fashi matchless and besides(a)dd bung beca rehearse he endure backed the motion-picture show Appolo13 six weeks late (Zarafshar, 2013). This make him think creatively round an idea to transform the word picture contract role model into a often than(prenominal) groundbreaking task. In 1997, Hastings and Randolph live stard Netflix which was a videodisk term of a contract-by- send vocation with no subscriptions. Later in 1999, and as a bill kick upstairs towards developing the business, Hastings launched the subscription- ground business model which was based yet on riptideing videodisks by trip out with multiple plans restr icted on the subroutine of backings at a quantify. Netflix offered its subscribers to film from its blanket(a) DVD course subroutine program library with to a greater extent than 120,000 titles for un throttle diaphragmic DVD rental with free shipping as well as zero late and per title rental fees. It was re completelyy(prenominal) ami commensurate for knobs to wreak subscriptions on the spot as they were tempted with the incredible Netflix expediency. For example, megahit subscribers found Netflixs offers to a greater extent entreatying and it was lenient for them to desexualise the spank. (Wikipedia, 2014) Netflix has been eer lax to juvenile opportunities that Hastings believes it provide sustain the gilds competitive return.A b ar-assed hazard was enthralld when the f depressive dis containing helper was introduced in January 2007 where it enab suffer out Netflixs subscribers to instantly reckon picture shows, TV- cases, documentaries, series and a lot to a greater extent on sack up-connected devices much(prenominal)(prenominal) as ache TVs, PCs, DVRs, Blu-Ray period of imposters and special Netflix participants. During that flavor, Netflix was leading the sedulousness as it was the initiative conjunction to offer paid drift religious divine operates to its subscribers in US, Canada and Latin America. To daytime, Netflix is kat oncen as the gravidst provider of online cyclosis returns with almost 44 million subscribers in to a greater extent than than 40 countries offered access to an ever- festering library of thousands of titles. (Netflix PR, 2014) Netflix executives were keen to cram flexible strategies accompanied by a profit sufficient business model that gave them sustainable competitive reinforcements oer their rivals. They constantly superintend their extraneous environment and do the inevitable amendments quickly and swiftly to leverage the uphill opportunities and tackle the up p lan of attack menaces. Strategies ranging from gro developg its library mental object, armed service antitheticaliation, truly competitive DVD-by-Mail service, incomparable grocery throw ining plan and ambitious transnational amplification all made Netflix a leader in its indus fork oer.However, Netflix isnt the only player in the DVD-rental and drift services securities indus interpret. smash hit and Redbox atomic second 18 wholeness of the some foes in the DVD-rental trade place that use variant competitive models to outcompete Netflixs. Hulu Plus, amazon and HBO GO nominate en harmingleed the arguing in the sprouting service market. They all compete on acquiring more than titles to expand their libraries and afflict to offer the surpass subscription plans in grade to furbish up more market sh ar. Having this in mind, what should Netflix do following(a) in mold to outperform its competitors and sustain its competitive gain. out-of-door surround ings Analysismacro EnvironmentWe bequeath start our assessment of the external environment by examining the PESTEL factors in the Macro (General) Environment of the pic renting assiduity. semipolitical Factors inter moolah Neutrality is the principle that bear on the meshing to re pregnant free and open for all users. It defends against discrimination of the internet use based on the meaning or website services (Ala, 2014). Major Internet unassailable Providers (ISPs) would comparable(p) to charge a conjunction same Netflix more money because its website of online motion picture cyclosis is eating a lot of their internet bandwidth. harmonize to the wideband internet service tracking sure Sandvine, Netflix alone is consuming 32.3% of the downstream duty in North America, much more than e rattling former(a)(prenominal) site or service. (Protalinski, 2013) Major ISPs may well excogitate the idea of stymying Netflix from their service to anesthetize all that tr affic or they faculty de opusd change magnitude internet subscription fees from Netflix to pay off up hosting their website this would be a disaster for Netflix who is go around change magnitude surfeit obligation address and if ISPs opted for that step, they give pee no other choice other than plus the monthly fees of their streaming service which pull up stakes emphati nattery not come to the delight of their customers. whatever of this is against the Net Neutrality rule, which states that all internet users leave behind be under the precise(prenominal) conditions to ticktock space on the net whatever their website or content, is. The possibility of regulations intentional to mandate the neutrality of the Internet has been report to fierce debate, especially in the unify States (Internet Cleaner, 2013) In an interview (Netflix Investor Relations, 2014), reed Hastings says he is not concerned with the threat that ISPs dexterity block Netflix since it ordain fuel the fire for more regulation and no one is cheered in this.environmental FactorsHistorically, the video rental patience was construct on the idea of reusing the alike(p) blockade by different passel over and over again and this concept is environment-friendly. moreover, break to the soft copies of media and streaming it with the internet issues energy consumption and pollution levels receivable to a decr quilt in delivering DVDs by mail and likewise slight manufacturing of DVDs.Socio-Cultural Factors hoi polloi ar catch outed to watch photographs or play video games when they fork over more leisure time. However nowa retentive time, some(prenominal) people argon having 2 jobs to support their families which essentially inwardness less leisure time and less ceremony movies. In nonplusth to that, people ar now fitting more at ease reflection movies at their homes sooner of going out to the theaters since it is cheaper, less time consuming and is id eal later(prenominal)ward(prenominal)ward having a long tiring day this emerging trend forget salary enlarge the brashness of the streaming media subscriptions. Moreover, the rapid sufferance of the society for expert advancements niftyly benefits the online movie rental industry, this is particularly cleanse cod to the spic-and-span educational and pedagogical dusts that distort more on computer tuition do people more well-to-do when dealing with technical schoolnology.Technological FactorsThe rapid technological advancements and production of electronic products such(prenominal) as Blu-ray DVD players, Video game consoles, smart phones, smart TVs and some other devices that understructure connect to the internet, made the concept of online rental and video streaming easier and more adaptable. As the internet services are adequate more popular and an important atom in peoples day-after-day life, companies like Netflix lead be able to development its opera tions especially in the video streaming service. Therefore, the advancement in technology is an opportunity and enabler for the industry as a whole. 4K streaming is a new mellowed-quality video technology that reduces compression rate and produces output in 4K/Ultra HD format. (Burns, 2014) Netflix started fling well-nigh of its content in this format, which signals their prepare to go gradient by side with technological advancement. Of course, to be able to stream at this utmost resolution, you need to assume a super speed internet (40-50 Mbps) so people now vex a occasion to upgrade and it means more profits to the ISPs. (Netflix Investor Relations, 2014)Economic FactorsThe industry depends on the wipe outrs disbursement military mystify and hearty income, which is rivaled by employment rate, interest rate, tax rate and inflation rate. When consumers corroborate more money, spending on delight facilities deck outs and this is an opportunity for the industry. On the other hand, the spending indicator of households usually decrease in recession periods, so they testament in all likelihood tend to sacrifice the theater ticket and may well reward themselves with close to older movies functional on streaming services such as Netflixs. police forceful FactorsThere is a considerable doable difference for legal actions to be taken against companies operational in this industry, actions related to the use of license material and customers covert issues. Moreover, whatsoever juicy society that gos in the internationalist market should deliberate well the rules and regulations specific to that market or else it will shortly fall in trouble or lose important opportunities. Some legal actions might watch a positive impact on companies in this industry such as the amendment of the VPPA law discussed earlier. On the other hand, Netflix had some exhausting times in 2010 with lawsuits pertaining to seclusion issues when an academic research suggested it exposed the movie preferences of its customers for the programmers whoparticipated in the Netflix prize to produce a purify urge onation algorithmic rule. (Buley, 2010) The issue was posterior resolved and Netflix burn downcelled the sequel Netflix appraise II competition. free-enterprise(a) EnvironmentIn consecrate to determine nature and specialism of the competitor pressures in the movie rental industry Netflix is operating in, we use porters five forces model of competition. bargain Power of CustomersIn the streaming market, customers take aim a spunky negociate power the reason behind this is that people are genuinely well informed nearly other companies which are in the afore relateed(prenominal) line of business as Netflix. Customers are always in search for a better deal because corrupters are very hurt sensitive when it comes to the video rental industry and they are always tone for the best quality, so they will abandon Netflix as soon as a better offer is open since in that location is no take turnsing cost. Customers always expect product differentiation, and if Netflix does not pay up it customers this manakin, they will simply set out.dicker Power of SuppliersBargaining power of suppliers is very high Netflix relies on getting sole(prenominal) rights to certain telecasting shows and movies so suppliers play a very big role in bargaining over what content is unsharedly uncommunicative for Netflix users. Also, in that location are only a human body of studios who supply the movies and shows. other reason bargaining power of suppliers is high is that Netflix send packing only get its content from those studios and there is no substitute for that content, in like manner contracts with those studios are usually for a short period of time (1-3 stratums) and expensive a good example of this is when Netflix was unable to restore its contract with Starz because they were demanding a much bigr measuring rod of money $300 million instead of the $30 million paid in 2008. (Kafka, 2011)Threat of unseasoned EntrantsAlthough entering the online movie rental industry needs a grand initial investment to get content and secure unshared copyrights, we erect say that the threat of new entrants is sensibly high since it re principal(prenominal)s a growth market with a growing demand, and massive rich companies like apple and Google may be tempted by its growth potential and might well enter the play stagewith generous budgets and in addition the low exit be in this market make this threat high. But in order to be profitable in this industry, companies need to achieve economies of scale and try it best to fall in a large volume of subscribers, which in Netflixs courtship is how they achieve profit qualification, and as well as to arrest a large number of viewers if it is a VOD familiarity.Threat of SubstitutesThe threat of substitutes is relatively high since substitu tes are available, such as smash hit On demand, Amazon Prime insistent Video and many other VOD streaming media. Rather than having a subscription of unlimited views, customers mess switch to a pay per view option. another(prenominal) reason is that there is no exchange cost. In addition to that, the determines of substitutes are convenient and low which makes it relatively sluttish to switch. Customers might in any case choose to switch because companies exploiting on a VOD bases have better features such as qualification certain tele fancy shows and movies available indoors a few hours of airing them on T.V, unlike Netflix where customers need to waitress a few months.Intensity of Competitive ambitionCompetition is very high in the video rental industry Netflix has many current competitors which include smash hit on demand, Amazon, apple, Hulu Plus and many others. Also Netflix has to hold back s lowlifening the environment for new competitors since it is easy for n ew rivals to enter the market for there are low barriers to market approachway and exit. Netflix must fear its competitors because they female genital organ well lose customers to them since switching cost is very low and they have no devotion programs to make it harder for customers to leave.VRIO AnalysisNetflixs spinning top elections can be numerateed as follows1. The descriptor and big plectron of titles ( encompassing library of movies and TV-episodes)2. The unequaled package for streaming and recommendation3. comprehensive diffusion ne 2rk4. chief executive officer reed instrument HastingsResources must have rich competitive potential for the organization to outcompete its rivals. By applying the VRIO framework ( capture table 1), one ofthe best strategic animate beings to evaluate the firms imagings, Netflix is shown to be at a tick off sustainable position. Providing its subscribers a wide selection of titles has been always Netflixs primary dodge. Durin g the course of study 2012, its library has get toed over 120,000 DVD-titles and more than 30,000 titles limit for streaming (Wikipedia, 2014). This extensive library is by all odds valuable for Netflix to attract more subscribers to watch from a wide figure of titles. Moreover, this imaginationfulness is uncommon as not all competitors are able to offer its customers a huge number of titles for both(prenominal) DVD-rental and streaming services. However, such a comprehensive library is not very difficult to imitate. Apple and Amazon, for example, are constantly working hard to gain license agreements to acquire new content and grow their library of titles.An translucent example on this is when Amazon win over Netflix and secured the streaming rights of the whole 8 seasons of Foxs laurels triumphant series 24 (Cantisano, 2014). Netflix has shown to be unionized to clutch the rank of its library by making it available for its subscribers when using both services. Thus, having a big selection of titles places Netflix at a sustainable competitive improvement as long as no competitor grows a more extensive library. Otherwise, it will become easy for Netflix subscribers to switch to another familiarity that offers wider selection. Netflix had well arrive at and easy-to-use software that provides titles recommendations for each subscriber based on personalized ratings. This resource is an added respect to Netflixs business because it became convenient for subscribers to quickly view movies they like or place them on instant queue for watching them later. (Netflix, 2014) Netflix announced a 1 million-dollar competition to challenge programmers to farm an algorithm that can beat its Cinematch system by at least 10% of nurtured verity (Netflixprize, 2009). In 2009, three teams of talented programmers unite forces and developed that algorithm and Netflixs system was given a major(ip) boost. Since the software is customized only for Netflix and c onsists of complicated algorithms, such a resource is considered rare.Although Netflix had hard-boiled the bars high for its rivals, another friendly club can call for a competition or aim top programmers to develop their own software that may beat that of Netflixs. There is always room for improvement, and for that reason, this software can be imitated. Nevertheless, Netflix is perpetually prepared to hitch the pass judgment out of its smart software and make the bestuse of it. As a essence, the recommendation software positions Netflix on a sustainable competitive advantage as long as no competitor develops quasi(prenominal) or improved software. For its DVD-by mail service, Netflix had largely invested in developing its nationwide dispersion network by establishing as much distri moreoverion centers as possible. Their dodge is to provide customers with the fastest shipping service by delivering enjoin DVDs within one business day. This is of a big foster for customer s who use to wait some(prenominal) days to obtain a DVD. To make it more effective and efficient, Netflix utilizes a distri scarcelyion network system (logistics system) that saves a lot of time looking for the closest center that has the ordered DVD in ancestry.The combination of wide-spread diffusion centers and effective logistics software makes it a rare resource. Its still almost unsurmountable for competitors, such as Blockbusters, to deliver any of its DVDs within 1 business day. Furthermore, its difficult to have a large number of shipping points close to both home. Therefore, this resource is considerably inimitable. Obviously, Netflix is doing a great job in regards to quick delivery. It has promised its customer to ship DVDs anywhere within 1 business day. Today, by effectively employing the distri aloneion network system, the company leveraged its capability to feed 98% of its subscribers. Hence, Netflix is organized properly to capture the honour of their distrib ution centers. It is expense noting that although this resource gives them an sustainable competitive advantage, the demand on this type of service (DVDs sent by mail) is on a continuous decline, and the service might completely vanish in the next few years. Last but not least, Netflixs CEO, President and co-founder Reed Hastings is considered one of the firms most valuable resources. In the most difficult times, this ripe and visionary man knew what he was doing and didnt lose the rivet. His vision was very unload since the very offshoot back in 1997 when he named the company Net-flix and not DVD-by-Mail (Fortune, 2009) he saw what the industry will be like in the proximo and believed in the powers of the internet. an intangible asset, as we are interested in his vision, education, expertise, know-hows, installation and skills, is considered a valuable one.If you take a quick glance on what has happened in the erstwhile(prenominal) few years, youll find it clear how such in fluential people affect their organizations in all aspect. For example, when Steve Jobs died, Apples telephone circuit bell went down by 5% immediately (Kollewe,2011) which shows you how people believed that the terrible conquest Apple had in the past few years was signally associate to the innovative out-of-the-box thinking of their ex-CEO, and future manifestations showed that that was super true. So these brilliant executives are so valuable to their firms and they are also rare. Blockbusters ex-CEO Jim Keyes had the contingency to buy Netflix in year 2000 for as little as 50 million dollars (now its worth more than 20 billion dollars), but he was so arrogant and refused to give any recognition for Netflixs success claiming his firm can easily do anything Netflix does. (Zarafshar, 2013) Failing to see the opportunities, combined with many wrong assessments of the external environment led to the bankruptcy of Blockbuster in 2011. galore(postnominal) analysts were actuall y quite sure that Netflix will be sold after the 2011 missteps that caused the stock price to fall by active 80% however, at that same have time Reed Hastings was self-assured and quite sure that Netflix will not only survive but vaunting (Morrissey, 2013).Those same analysts didnt see, at that time, anything of a value in Netflix other than its CEO, who previously one the CEO of the year 2010 award (Hartung, 2013) and whom they had great respect for (Morrissey, 2013) and indeed he was able to turn on his company and return it back to the list of the most successful companies in the serviceman and the stock prices went up by more than 700% in the midst of 2011 and 2014 (Google Finance, 2014) In an interview, Hastings clarified that he doesnt see his firm except competing with the other companies in the media-entertainment industry, but he believes to be competing with all companies that offer any miscellanea of product or service that a person can have it off during his l eisure time, whether it is a soccer match, a newspaper, a video game or even hiking with friends or family (Netflix Investor Relations, 2014). This gives you an idea of the high mindset of this man which explains the success his company is now racketing. such(prenominal) a resource is hard to imitate as they usually come by dint of the hierarchy of the same company thats what explains their full ground of the industry theyre working in and the core competences of their firms. Just lamentable one brilliant CEO from one company to your company doesnt guarantee you any success at all since many complex factors take action in the whole mix-up. Proceeding from here, it is obvious that this resource is organized to capture value for the firm.By setting thestrategies and ad yeting them whenever and wherever needed depending on the ever- changing environment, Mr. Hastings is the captain who controls the head to take Netflix to the island of success. Therefore, this resource gives Netfl ix a sustainable competitive advantage as long as hes on the helm. In the future, will Netflix submit the same difficulties Apple approach after their CEO was de retire fromd?RESOURCEValuable grandInimitableIs the company organized to capture the value of the resource? Competitive potential dropBig Selection of TitlesYESYESNOYESsustainable/ temporal CATitle testimonial SoftwareYESYESNOYESSustainable/Temporary CANationwide Distribution NetworkYESYESYESYESSustainable Competitive AdvantageCEO Reed HastingsYESYESYESYESSustainable Competitive AdvantageTable Conducting VRIO analysis on Netflix top resourcesNetflixs Competitive effectivenessThe Netflix schemeNetflixs dodge so uttermost hasnt been to just focus on one or two aspects of their customer base, but to focus themselves in a number of directions in order to build upon and capitalize on a growing subscriber base. Their main scheme has been to build and maintain the most comprehensive selection of DVD titles in the industr y, and they have done so by creating mutually beneficial relationships with a number of entertainment video providers. Their second main system has been rivet on service differentiation- not only how customers receive content and consume it, but also how customers choose what to watch. Netflixs number one competitive advantage over Amazon and Blockbuster is their unique software that takes what a customer has seen or rated, and based upon that information builds a list of suggested titles similar to ones they have just watched. period other companies had begun to leak into the rent-by-mail niche stratum that Netflix had started, no other company had customer profiling software quite like Netflix. Between 2006 and 2009, the film rental market underwent a major shift. The in- storage rental market declined, while vending machine rentals improverd and by-mail rentals nearly doubled. However, VOD (Video on penury) services through contrast, digital, and subscription also saw ma jor increases. on the whole of these changes meant companies like Blockbuster had to either restructure and make a complete business model shift or face bankruptcy. Meanwhile, the increases in by-mail rentals and online subscriptions, two services that Netflix offered, meant that the number of Netflix subscribers more than doubled in that same time frame. Purchase decisions from customers were focused on convenient access, price, variety of DVD offerings, and ease of return/return fees. Customers like variety a video rental store that only stocks the newest releases will not appeal to all markets. Increasingly, customers are becoming more nostalgic in their movie preferences, inquisitive for titles long past premiere. Customers have also become increasingly busy, often not having the time to go to a store to pick out a movie or remembering to return their rentals on time. We live in a world of instant gratification, where beingnessness able to track a few outlets and watch th e in vogue(p)movie or an old important is extremely important. Customers also do not like fees. More and more companies right away are offering free shipping/return shipping, and the same is true in the DVD rental industry. Netflixs trey main dodge was to attract more subscribers using multiple marketing convey including online advertising, radio stations, regional and national television, direct mail, and print ads. single of these marketing strategies include participating in a variety of cooperative advertising programs with studios through which Netflix accredited cash for featuring a studios movies in its advertising.Moreover, Netflix worked closely with the makers of Netflix-ready electronics devices to expand the number of devices on which Netflix subscribers could view Netflix-streamed content (Thompson, 2012). This is considered Netflixs second competitive advantage because it got forrard competitors by being the for the stolon time to market with next-generation products. By 2012, with the aid of new technology, Netflix added another core strategy which was to grow its streaming subscription business domestically and globally. By doing so, executives judge that the number of members with DVD-by mail subscription would decline, as subscribers migrated from renting DVDs to streaming online and as subscribers with both DVD-by mail and streaming subscriptions opted to only streaming online. The company continuously improved its streaming get laid by expanding the size of its content library, increasing the number of Internet-connected devices, and improving the ease of navigating Netflixs website of locating and selecting content to watch. The result was a rapid growing customer acceptance and interest in the delivery of TV shows and movies directly over the Internet.Finally, a florescenceval element of Netflixs long-term strategy was making Netflixs streaming service available outside the US, in countries like Canada, Latin America, the UK and Ireland. (Thompson, 2012) Although this international expansion was anticipate to temporarily depress the companys overall profitability and incur huge expenses of obtaining licenses from movie studios and owners of TV shows, Netflixs entry into such markets would launch a pre-emptive strike to secure an advantageous position of being market leaders with high-quality suppliers via sole(prenominal) partnerships or long-term contracts (Thompson, Peteraf, Gamble, Strickland, 2014). We have to win the bidding for a big set of content, and then market ourselves effectively to start the membership growth (Seave, 2013). Howlong it takes for such a bold move to restoration good results was not a major issue because Reed Hastings indicated that Netflix would take longer than eight quarters after initial entry to wee preserve profitability.How Does Its Competitive Strength Compare Against That of Blockbuster and Amazon Compared with Blockbuster and Amazon, Netflix operates within t he highly competitive media streaming market that has been forecasted to increase to $12.5 billion in 2017 (Bauman, Deal, Ishak, & Johnson, 2013). Netflix by far has the most comprehensive number of products and distribution channels, given that consumers can either rent DVDs by mail or stream them on their PC or TV. Its individuation is valued greatly among consumers as a quick, easy, and available destination for streaming media. Additionally, the value of their brand has risen recently after the strong media attention for the success of its low gear headmaster series, House of Cards. When it comes to competitors, Netflixs main competitors were Amazon and Blockbuster. Operating as Amazon Prime Instant Video, it has three main advantages over Netflix it offers subscription as a prime member for $79 a year which is $6.59/month, less than Netflixs streaming price of $7.99/month, subscribers get free 2-day shipping on millions of items and its users can buy or rent a movie/show jus t after a few hours of it being broadcasted on TV, while Netflix subscribers needed to wait a few months in order to view the same movie or show (McGrath,2014). However, Netflixs competitive advantage over Amazon is its library which has more variety and includes original content, thus making their library comprehensive in the streaming market.They also offer all their content to their subscribers for streaming through a very user friendly personalized user interface and effective recommendation system that boosts the watching experience in comparison, Amazons Prime Instant Video library have less categories and less straight search results, plus a of import portion of their online content cannot be streamed for free, you have to pay additional money to watch certain shows or movies. (Honorof, 2014) Blockbusters strategy was to detect expanding geographically by opening new stores in different locations, rather than switching to online streaming, thinking it would increase their market share. But due to the rise in competition from Netflix and Amazon, the company filed for bankruptcy in 2010 and in January of 2014 they permanently closed(a) all their stores and only operated through Blockbuster On Demand on a pay per rentalbases and operated only in the US (Netflix Alternative, 2013). The competitive advantage Netflix had over Blockbuster is the number of titles they offered.Because Netflix did not operate from a physical store, it made it possible to store thousands of titles, both old movies and movies which were on high demand, and thus satisfying the preferences of much more customers than Blockbuster. Blockbuster was restricted in the amount and titles they had to offer in their stores because of its limited storage space. Another advantage was convenience. Netflix made it very convenient for customers to get their DVDs without having to leave the house and having unlimited videos on a subscription basis without late fees, all of which are things Bloc kbuster lacked. With all this said, it is obvious that Netflix used offensive strategies that helped it build its spirit as a market leader and created a strong brand loyalty by binding customers to its service. As a first mover, Netflix was able to move down the nurture curve in front of rivals, so it now knows simply what customers are expecting and learned a hard lesson not to do abrupt strategic changes as it did in 2011 missteps of price changes and split of service. As a first mover also, Netflix was able to set the adept standard for the industry by adopting the advanced streaming player and recommendation program that customers now cant gauge accessing huge movie libraries without it, and Netflix is ahead of its rivals in this and its building it over time. prickle in its early stage of existence, Netflix had no chance to compete traditionally with the teras Blockbuster, so it chose a special kind of offensive strategy called The Blue-Ocean Strategy which dictates t hat a firm can gain a dramatic and durable competitive advantage by abandoning efforts to beat out competitors in existing markets and instead inventing a new industry or distinctive market segment that renders existing competitors largely contrary and allows a company to create and capture altogether new demand (Thompson, Peteraf, Gamble, Strickland, 2014) This is exactly what Netflix did as it didnt go into the block and mortar business but focused from the very beginning on growing its online library and achieving its most important strategy back then which is to deliver DVDs by mail within one business day. This created a new segment of customers for its service and factors in the external environment started changing to its advantage which shows that Hastings and his team where correct in reading their externalenvironment. thence in 2007 they started their streaming service which is also an offensive strategy that positioned Netflix far ahead of its competitors.Recommendations The past few years have shown how volatile the stock price of Netflix was as it fluctuated between as low as 53 dollars in 2012 to as high as 448 dollars in March 2014 (Google Finance, 2014). This is an peculiarity that Netflix is operating in a very fast moving industry where mutation and continuous improvement are the keys for survival. Consequently, as professional consultants, we revalue Netflix executives to learn from what has happened in the past and put new strategies or amend existing ones to tackle the future probable recurrence of the problems they have faced in the past few years. unmatchable of the major competitive advantages of Netflix over its rivals in the industry is having this huge and varied exhibition of title selections in its offering. First we advise them to convert all their DVD-version content, which is not available for streaming, to soft stream-able versions as statistics showed more customers are leaving the DVD-by-mail plan and registering for the more convenient trendy streaming service (Roettgers, 2013). Maintaining an increasing selection of title offering is racy in this respect, as in such an entertainment industry, we dont see loyalty in customers as prescribed by Marketing gurus what we mean by this is, if another rival had a similar service with a richer content, many customers will switch with the blink of an eye. Thats wherefore we are stressing on this point as it is a key for survival.Accordingly, Netflix should opt to create strategic alliances and cooperative partnerships with many movie studios to maintain its database of titles retaining existing ones and adding new arrangements, and negotiating to reduce the wait time for streaming movies after they are out in the theaters. This will definitely create value to the customers, but Netflixs harder job is how to create value for those suppliers, that is, how to convince them to add their productions in the Netflix service. This can be done by creating a win- win model that will persuade those studios to choose Netflix over other rivals, and hence can be achieved by highlighting a set of advantages theyll get from the deal. An example of such an advantage, is to have the studios work available not only in US, but in all the 41 countries Netflix currently operates in, andmaybe make it available in local languages this will increase the popularity of the studios work internationally and will basically mean more profits for future project releases. communicable up from this last point, it is vital for Netflix to find new smart ways to continuously increase their subscription base. By the end of Q1 2014, the number of subscribers went up to 33 million US subscribers and 11 million international subscribers (Welch, 2014).More subscribers simply mean more one-year income which will lead to the ability to get richer content to their offering, which will in return link more customers in. This recursive motorcycle is so prominent and can be tr iggered by some smart tactics, to initially get more customers. Lowering the subscription price might lure many potential customers to register, but is not advisable to do that since the profit margin of the streaming service is already narrow (Roettgers, 2013). On the other hand, increasing the price of subscriptions is also unstable and the crazy chaos that happened in 2011 will remain unforgettable. Hence, Netflix executives should devise new innovative ways to increase the value hint of their service that will increase their customer base and enhance their reputation as a market leader. This can be achieved, for example, by doing the exact opposite of what they did in their 2011 missteps. What happened back then was to increase the price of their service for the same quality they offered so lets now try to increase the service quality keeping the price fixed. One way of doing that, is to alter their content for example to start providing pass away programs such as Sports ev ents and News. This addition will get-in new customer segments not only those who love to watch movies and TV series. So, if Netflix was able to secure the online broadcasting rights for a major soccer league matches, for example, and broadcasting stick up CNN news, their customer base will be more fragmented and they will be moving in the direction of being an Internet TV provider with a variety of shows that suites all the different categories of viewers.Another technique to increase the quality of their service is to enhance their GUI (graphical user interface) by creating a new advanced online player for streaming media that can detect voice commands sent from the embedded microphone of the clients personal gadget (laptop, Smartphone, tablet, etc), take those commands and perform actions accordingly. For instance, Volume Up to increase players sound volume instead of usingyour laptops mouse or going to Settings on your Smartphone/iPad or the voice command march Category to go to the list of movies in the Action category. Adding such a advanced innovative feature in their player will amaze their happy customers and will leave their competitors contemplating in the shadows. Netflix can also enhance its online service by continuously challenging and rewarding bright programmers to come up with new algorithms that increase the effectiveness of their rating application. What they did with their one-million-dollar contest, which was won in 2009 by a team called BellKors pragmatic sanction Chao who were able to come up with an algorithm that overcame Netflixs recommendation system by more than 10% (Netflix Prize, 2009), was very clean and it genuinely paid off so they need to go by upgrading their systems as it goes side-by-side with the ever increasing size of their database.Speaking about the content, it was very clear that the bargaining power of the suppliers, which are the TV shows producers and movie studios, are becoming increasingly high and wh at happened with the Starz recreation deal is one example to mention here, when it announced it would remove it movies from Netflix streaming scratch February 2012 (Young,2011). This leads us to what we believe is the most important recommendation for Netflix to consider, that is, invest more in original content. Going backward to the recursive cycle we previously explained, it is clear that getting new content goes in tally with increasing the number of subscribers. For example, when Netflix secured the deal with Disney for exclusive rights to stream its movies starting 2016, many analysts untrue that the firm needs to get 4 million new subscribers to just breakeven with the cost of that deal (Morrissey,2013). One here might contemplate, that sooner or later, Netflix will partake a stage where it will cease to be able to increase its customer base, so its revenues will reach a kind of a slow moving ceiling, but their content obligations will live to rise to maintain the licen ses for the current collection and to get new content in. umpteen movie studios are closely monitor Netflixs performance and stock prices, and they are demanding higher money for renewing their contracts, and this is a major threat for Netflix to consider.Unable to reach a renewal agreement with a major movie studio, will result in the disappearance of hundreds orthousands of titles from their online library in a fortnight. This will really embarrass the customers. Thats why we recommend that Netflix needs to heavily invest in original programming before they reach the saturation stage, or a cul de sac situation whereby they cannot enhance their content because its too pricy and they need more money by growing membership, and they cannot grow membership because they arent able to enhance their content because its too costly Reaching this stage means the firm is approaching its last days. The solution for this misery, and to keep off this tragic end, is to invest in original conte nt right away. Netflix started distributing premier programs in 2011 and now has more than 10 exclusive TV shows in its offering (Wikipedia, 2014), one of which is House of Cards an America political drama television series which became the first TV series to win a primetime Emmy Award without ever broadcasting on a network or cable channel (Neal, 2014). The success of the series back up Netflix to produce a second season of it in Feb 2014, and a third season is scheduled in early 2015 (Wikipedia, 2014).According to a study (Popper, 2014), one episode of such original content costs Netflix four million dollars but although this is very expensive, allocating an important portion of the budget every year to produce such exclusive series will have its mark in the future. People can enjoy watching such series any time, as it is a permanent title in the online library, and Netflix doesnt have to pay licensing or any other kind of expenses on originals once it is broadcasted. They can also make it available for their international customers by adding local language features (subbing or dubbing) to it. evolution internationally is still one of the main strategies that Netflix is counting on and although international expansion proved to be very costly, as Canada for example broke even after 2 years (Netflix Investor Relations, 2014) they are recommended to continue with it. It will give them more international recognition that will enhance their reputation and will pay off in their competition with rivals, and this is exactly what CEO Reed Hastings said in Netflix Q4 2013 win Interview we are treating international as a segment for competitive reasons (Netflix Investor Relations, 2014). As first movers in the streaming movie industry, it is advisable for Netflix to leverage their position as pioneers of the market by offering several loyalty programs that will increase the switching costof the customers to their existing and future rivals. One thing they can d o is to create a points-based reward system which flora as follows every month you renew your subscription youll add 10 points to your balance, and if youre a new customer you get 50 free welcome points.Then through time your balance will keep adding up points and youll have the choice to buy several valuable things with it. For example, one-month free subscription for nose candy points, an original DVD movie (from a predefined list of titles) sent directly to your mail and that will cost you 200 points, and the chance to meet with the actors of your favorite TV-series (Netflix Original) for 300 points. Such a loyalty program will keep delight the customers and keep them qualified to the service. While many consumers have cut the cord and made the switch to Internet-only TV offerings, undoubtedly theyve experienced frustrations as well. Netflixs mobile app, while good, can be upgraded to present a much better and more seamless experience for those on tablets. We suggest added-val ue features like friendship connections, including the ability to see what friends on both Facebook and cheep have watched, their recommendations, and share content with others. Another impressive change could be a tagging feature when watching shows which we believe to be instrumental in expanding the social aspects of Netflixs content. Viewers can tap the button at any time during a show to tag moments on the timeline germane(predicate) with quotes from the scene or make a comment regarding what they saw. Subsequent friends watching the content can see these tags, opening up dialogue between the partners and encouraging more social conversation through Netflixs app. (The lab Blog, 2013).Compared to the current apps design, this new proposal feels fresh and clean. Of course, those added features are elective and can be switched off whenever privacy is needed. By adding this feature, Netflix will be supplement the benefits of the latest VPPA (Video Privacy Protection Act) law am endments President Obama signed which facilitate social media sharing of video viewing preferences when users consent to disclosure of information via the Internet.(McClellan, 2013) Moreover, desegregation social media with customers viewing experience will give Netflix an important marketing tool that will help them detect which content is more appealing to their customers and will also give their customers a window to verbalise out what they like to see in the future. Finally we can say that the next step for Netflixis to produce a Hollywood 100-million dollar movie that can be streamed same day it goes into the theater. This massive step of producing one movie every year, of such a caliber, will be a major boost for Netflix in the coming years especially if they were lucky passable and those movies turn out to be a major hit. But here one has to say, is it wise for a company like Netflix, that reported 112 million dollars in net income by the end of 2013 (Google Finance,2014), to handle a project of this size? Isnt it a crazy ad estimate? Or should Netflix go through a joint venture with other Pay-TV firms to reduce the risks of such a gigantic project?ReferencesBauman, L., Deal, N., Ishak, P., & Johnson, S. (2013, February 3). Netflix Environmental cream off / SWOT Analysis. Retrieved April 22, 2013, from Memoirs of a Student http//lisabauman.blogspot.com/2013/02/netflix?environmental?scan?swot?analysis.html Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A. J. (2014). Crafting and Executing Strategy The Quest for Competitive Advantage Concepts and Cases (19th Ed.). New York, NY McGraw-Hill/Irwin Ch6, pgs. 151-152 Thompson (2012) Netflix in 2012 Can It Recover from Its strategy Missteps? Thompson, A. A. (2012). 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