Netflix Case Study Solution

Answer 1

Year 2007 (time of the case) marked the beginning of the end for the traditional home video rental market. The "next big thing" (VOD) was already starting to cannibalize a descent market share and attract multiple competitors. Although we're analyzing the case post factum and aware to future circumstances (Blockbuster bankruptcy in 2010), we can determine that our money at the time would have gone on traditional companies that penetrated or were on the verge of penetrating the VOD market (long on Netflix and short on Blockbuster).

Netflix and Blockbuster, two veteran competitors, were the leaders and forces of the traditional market. The two were positioned differently based on their core competencies. Netflix, known for its recommendation technology, delivery effectiveness and wide titles collection, has based her strategy on innovation. By keeping its finger on the pulse of the home video market and the competition in the market, Netflix was successful in finding future trends and adjusting itself to them very quickly. Netflix dynamism, throughout its history, enabled it to change business models frequently to suit its clients' needs.

Blockbuster, on the other hand, was known mainly for its geographical coverage and based its strategy around opening new locations. During the years, the corporate management developed a culture of short term profits preference on long term investments in developing markets. Blockbuster immobility, over the years, made it a late entrant and enabled competitors such as Netflix to penetrate the market and gain market leadership. The lack of vision prevented Blockbuster from utilizing its size advantage against the small competitors, first in the rental market and later on in the VOD market.

As mentioned above, in late 2006 VOD became a hot trend. Netflix that witnessed a first customers' drip towards the new market, felt the urgency of becoming a player in the VOD market. Its culture and competencies enabled it to shift...