Netflix Case

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BUSI 4400

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Case: Netflix’s Business Model and Strategy in Renting Movies and TV Epsiodes

Tammy Cohoon

May 12, 2013

Table Of Contents

Netflix’s Strategy 3

Business Model 4

Strategy Tests 5

The Fit Test 5

The Competitive Advantage Test 5

The Performance Test 5

Porters Five Forces 7

Rivals 7

New Entrants 7

Substitutes 7

Suppliers 8

Buyers 8

Overall Assessment 8

Recommendations 9

Netflix’s Strategy

Based on the information that I have read regarding Netflix and their operations, I feel very confident in saying that Netflix is following a lost-cost advantage strategy. Over the previous number of years that Netflix has been in operation they have continuously tried to offer their customers the largest variety of television shows and movies at the lowest price. They have proved to be very successful following this type of strategy, as they have had revenues of $1.2 billion, $1.3 billion and $1.7 billion for the years 2007, 2008, and 2009 respectively. Netflix is able to receive these revenues by offering their customers the options to receive DVD’s by mail, stream movies and television shows over the Internet, or they could choose a combination of the two. Any of these options offered by Netflix are very efficient and give the customer full range to a vast library of movies and television shows, and they only have to pay a low, monthly subscription fee.

I feel that Netflix is opting to go for the low-cost advantage strategy because they are striving to be the industry leader in providing at-home movies and television shows. In the movie and television show market in order to be the industry leader you must be able to effectively offer your customers the most efficient low cost options because there are many competitors....