Netfilx Case Analysis

The history of Netflix

Netflix is one of the largest online movie rental companies in the world which was established in 1997 in Scotts Valley, California by Marc Randolph and Reed Hastings. In the past, when consumers wanted to rent DVD, they had to go to DVD store. Until April 1998, Reed Hastings and Marc Randolph created a new technology to rent DVDs. They created a website then rent DVDs by mail over the internet. In 2000, Netflix had signed the revenue sharing deals with Warner Brothers and Columbia film studios. According to compete.com survey, the domain Netflix.com attracted at least 194 million visitors which is about five times the number of visitors to blockbuster.com annually by 2008. At the end of 2009, Netflix had achieved revenues of $1.67 billion, generating free cash flow of $97million (Netflix financials, 2009). Therefore, we can say that Netflix is a successful company in the world.

Porter’s models

Porter’s model includes strategy, value chain, and five forces. They can be introduced into Netflix. I will discuss those three items in below.

The strategy of Netflix

The strategy of Netflix is focusing on convenient which is differentiation. Differentiation is providing a product or service which is different from other suppliers in the market. In this society, people become busier than before. Most of people have to go to work every day. Everything in our life is going to quickly more and more. Therefore, they will not have time to go to the DVD store for renting DVD. First reason is that they are busy in day time, after work they want to take a break. Second reason is most of DVD stores have opening hours, when the people finish their work, the store maybe closed. In order to meet the demand of customers, Netflix uses the information technology to create a new service---online ordering DVD. Through Netflix’s website, customers can choose from among 100,000 titles on DVD. Netflix is also the first company to provide rent-by mail service. More...