Case 4 - Netflix’s Business Model and Strategy in Renting Movies and Tv Episodes

Bustamante, Alfredo 11027320

Cigaral, Romelia Ann 10829954

Sabala , KImberly 10933506

Case 4 - Netflix’s Business Model and Strategy in Renting Movies and TV Episodes

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

Competitive Rivalry within the Movie Rental Industry- Strong to Fierce Competitive Force

-Rivals are actively launching promotional activities ( Netflix’s free trial and unlimited streaming) and engaged in marketing tactics (more red kiosks for Redbox, Blockbuster reinventing themselves) to increase movie rental revenues and attract more customers.

-Low switching cost on the part of buyers

-Some rivals have utilized very low subscription and rental fee as means of attracting new customers which intensifies the rivalry.

-All movie rental firms are actively seeking to improve/grow their business.

Rivalry among Netflix, Redbox, Blockbuster and other movie rental competitors (especially those that stream the video via the internet directly to the PC or TV) is strong. The said competitors are clamouring to attract support of individuals/household who rent movies and battling it out to gain a larger part of the market share and sales revenue.

Threat of New Entry in the Movie Renting Industry- weak to moderate competitive force

-Cost of developing a website

-Cost and time needed to develop a fast delivery system offered by Netflix and Blockbuster

-Investment in Movie/ DVD Inventory

- Advertising and Promotion expense to draw in customers (Netflix spends over $200 million annually)

There is a weak to moderate threat of new entry due to the huge capital needed and also due to the already established competitors in the industry.

Bargaining Power of Movie Renters- weak competitive force

Consumers have no bargaining power over firms for them to lower their prices. They can choose to rent or not to rent a movie or switch to...