Netflix

Assignment Question and Answers

Netflix’s Business Model and strategy in renting movies and TV episodes

1) How strong are the competitive forces in the movie rental market place? Do a Five forces analysis to support your answer.

Ans 1: Netflix’s strategy so far has been to focus on not just 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 strategy has been to build and maintain the most comprehensive selection of DVD titles in the industry, and they have done so by creating mutually beneficial relationships with a number of entertainment video providers. Their second main strategy has been focused on product differentiation- not only how customers receive content and consume it, but also how customers choose what to watch. Netflix’s number one competitive advantage 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. It became very popular because of the entry of Coinstar's Redbox Instant which not only has the same price point as Netflix, but also offers 4 DVDs that are redeemable at various Redbox Kiosks across the country However, Netflix's streaming product offering is still the market leader on a larger scale.

Five Forces analysis evaluates the five factors that determine industry competition

Intensity of Existing Rivalry

Low storage costs | |

Fast industry growth rate | |

Relatively few competitors |

Bargaining Power of Suppliers

Supplier costs likely to increase as industry profits increase. | |

There are a few substitutes available. | |

Switching cost among suppliers is low. Threat of Substitutes |

Netflix has a very easy to access online system, which limits substitutes. | |

Limited number of substitutes Bargaining Power of Customers |

Customers cannot produce the...