Netflix Business Model and Strategy

1) How strong are the competitive forces in the movie rental marketplace? Do a five-force analysis to support your answer.

The competitive forces in the movie rental market might be described as moderate in so far, there were several players competing in the industry, yet only Netflix had the most promising business model mix to position itself strategically and gain market share over its rivals by increase sales exponentially, leveraging its bargaining power over movie studios, and becoming so unique in its value added capabilities as to force out its closest competitors out of business.

Initially there was easy access to the market as many venues were available in different formats to allow various participants to configure their business models and take advantage of an exploding demand in video rentals. Companies as diverse as Hulu, Netflix, Google, Apple’s I tunes division, Blockbuster, and premium channels such as HBO and Showtime explored streaming video, brick and mortar retail outlets, kiosks, and pay per view/VOD venues to capture sales.

However, it was Netflix differentiation strategy and pioneering into the emerging advances in streaming video capabilities which effectively marked the difference between itself and the rest of the pack. Its unique value proposition of offering a superior viewing experience was characterized by an effective pricing point strategy based on a subscription based model consisting in streaming video and/ or next day delivery of DVD’s. It gradually displaced the number of market participants and converted its product offering extremely attractive to buyers.

The company increased its market share by leveraging its brand and reducing the power that movie studios exercised over the market by engaging in partnerships with rivals to take advantage of synergies. Such was the case as its alliance with premium channel Starz entertainment to increase its library of titles and content as well as licensing agreements with the major...