Netflix Pricing

INTRODUCTION

Netflix:• video rental store. • Founded by Reed Hasting and Marc Randolph in 1997 in Scotts Valley, California. • Business model centers on mailing DVDs to customers using 35 warehouses spread around country. • Rapid growing DVD rental service where they gained 3 million subscribers in early 2005.

EXTERNAL ENVIRONMENT ANALYSIS

• • • • Situational Analysis Industry Analysis Competitive Environment Analysis Environment Trends

SITUATIONAL ANALYSIS

• Politics/Legal

– Governmental regulation – little regulation – Supplier agreement – start rent DVD after 28 day DVD in market.

• Socio-cultural

– Changing in customers’ buying behavior – Changing in customers’ watching method – Customers’ perspective about price, time and quality of services.

SITUATIONAL ANALYSIS cont..

• Technological

– VHS to DVD - become one of the companies adapt this technology – Changing to stream online – digital age – Wide-spread in gadgets market – PSP, Blue Rays Player and others

• Demographic

– Increase world population – 6.1 billion in 2000 to 7.2 billion in 2015

SITUATIONAL ANALYSIS cont..

• Economic

– Customers can watch a movies without paying more.

• Socio-cultural

– Most of the people like to watching movies – Changing customers buying behavior

INDUSTRY ANALYSIS

• Threat of new entrants/ barriers to entry

– low entry barriers – Industry leader – Customer loyalty is weak

• Power of suppliers

– Suppliers own content that company needs. – Licensing deals – Legal issues

INDUSTRY ANALYSIS cont..

• Power of Buyer

– Customer loyalty is weak (price changes) – Majority of revenue is from customers

• Product Substitutes

– Alternative methods of receiving content – On demand, purchasing

INDUSTRY ANALYSIS cont..

• Intensity of rivalry among competitors

– Many competitor – Few emerging market leaders – Trying to maintain dominance

COMPETITIVE ENVIRONMENT ANALYSIS

• Competitors

– Divided to direct and indirect competitors....