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Netflix - World's Largest online Movie Rental Business

Autor:   •  March 29, 2011  •  Case Study  •  1,232 Words (5 Pages)  •  1,463 Views

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Issues and Problems:

Netflix has grown to become the world's largest online movie rental business. As the case states the company has more than 6 million members and over 100,000 titles for consumers to rent. Netflix revolutionized the way in which customers consume and enjoy movies at home or on the PC. The business model and competitive strategy of Netflix, however, has some points of strengths and weakness and most certainly opportunities and threats. It is imperative to consider the Porter's Five Forces model as well as key success factors for the industry while assessing the current business situation as well as provide educated professional recommendations for future actions.

The core issues or problems with Netflix seem to live within three categories; Netflix current business model, competition with rivals and the Video on Demand service. First, their current business model defines the industry which they compete in to narrowly. According to the case the "online entertainment subscription services" industry is how Netflix defines its core competencies. I do agree that currently their market is online movie rentals based on member subscriptions although that definition does not leave much growth opportunity for the future. The business model currently does not seem to have a growing international population and it may be worth discovering what that world could bring. Also, the company seems to be focusing on rentals of commodities and not streaming a movie which really is the direction o the future. In my opinion this is a large risk to Netflix.

Competitive rivals also pose a threat to Netflix. Netflix feels threats of competition from both online and in-store rentals. The number of competitors and the variety of them can often times be challenging for a company to successfully define and conquer competitors. For example some competitors include Blockbuster (online and in-store) Wal-Mart, Disney, Amazon and many others. Lastly, Video on Demand is something that Netflix needs to invest more research and development and resources into. Industry analysis suggests that this is the direction of the future and if Netflix does not start to migrate into that line of business they may be left behind its competitors.

Implications:

There are many implications of these issue and problems that Netflix is facing. For instance, because of the narrowly defined industry the company is not involved much in the video game segment which could be preventing some customers from using Netflix. Also, some threats of this company include its suppliers shifting toward competition. Netflix is weighing heavily the relationships it has with its suppliers and buyers and if something were to happen with those relationships the financial success of Netflix could be damaged. Also the company relies so much on technology and specifically the internet, if

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