‘Netflix’ 1. Describe the company's primary business model, revenue model, and industry? Answer: The Company delivers both DVD and Blue ray disc to its customers. The revenue model of the company is entirely dependent on rentals and DVD movie sales. Netflix acquires DVDs at wholesale prices to reduce their costs. Recently the company has expended its business model to online streaming. The company now offers thousands of different movies online through its portal for free streaming. The company is a totally based on its online channels and does not deal through brick and mortar stores.
The movies are delivered to customers through mail and they have to return them by mail as well. 2. Who are the competitors? What makes the company stand out from its "pure play" Internet as well as brick-and-mortar counterparts? [Specific USPs, strengths, and weaknesses] Answer: The biggest competitor of Netflix is blockbuster videos. Blockbuster is a pioneer in movie rental business and controls the majority market share. As we known the rental industry in the United States was always fragmented. Blockbuster was the first company to really consolidate this industry and establish a strong brand name.
The biggest strength of Blockbuster lies in their ability to operate from both brick and mortar and online stores. It has thousands of different stores located all around America. This business model is a key strength of blockbuster as it increases the accessibility of customers to blockbuster. Moreover blockbuster has the first movers’ advantage on Netflix. In the online arena however Netflix holds the advantage as it was the first company to provide such services online. Blockbuster enjoys the luxury of a superior brand name because of its accessibility.
3. What are the benefits and limitations to the user? What is the value proposition? Answers: The value propositions of Netflix model are limitless. The real value lies in the ease of use. All the customer has to do is easily browse from a collection of thousands of different options and order them all without leaving their house. This ease of use is the value proposition that Netflix capitalizes on. This model has many other benefits for Netflix. The cost of running Brick and mortar store is very high and includes many variable expenses such as wages, bills, property taxes etc.
Netflix saves all these costs and they go directly towards their profit. 4. Is it the industry's online bellwether? How has it changed the industry and the way business was transacted in the industry? Answer: The success of Netflix business model has brought a revolution in the industry. The increased emphasis of industry leader on being an online rental service provider is just a small example of the impact of Netflix on the industry.
Moreover many other smaller online movie rental businesses have sprung up inspired from the success of Netflix. 5. Had the company's model failed before? If so, why and how did it turn around? Answer: After the launch of Netflix in 1997, the company initially faced some problems in terms of marketing and sales. The model was new and did not appeal to the consumers right away. The primary reasons behind this lack of appeal were the costing. Initially Netflix operated on similar footings to other rental business and charged additional $2 for shipping.
Thus customer could rent DVDs from brick and mortar on lower prices. However the company changed its pricing, by introducing a flat rate system with no shipping charges etc. 6. What are the potential risks and challenges it faces now? Is it profitable? Answer: The business is still highly profitable and shows an annual profit of 151 million dollars. The potential threat to Netflix is from online piracy. There are hundreds of different illegal websites on the internet which allow free streaming of movies.
7. What’s in the future? Answer: The industry will slowly shift towards streaming services. Netflix has realized this potential and made some very wise investments in streaming services. 8. What are your recommendations for competitive advantage/corporate strategy? Answers: Netflix can develop a very large database on similar footings as Megavideo and get a first mover advantage on Blockbuster videos. 9. What can FYC apply to its company process to be a successful e-biz company? Answer: FYC can change itself in to a company which provides both online services and operates brick and mortars.
This would be a similar model as blockbuster videos. This model would ensure that FYC can advertise through their website, by allowing customers to easily browse their products etc. The customers can then order online or visit their stores to get a firsthand look at the furniture. This would first of all increase the target audience of FYC’s customers. The amount of customers a company has directly relationship to the amount of sales that can be made. Therefore a large number of customers would help them acquire more sales.
This would also act as a medium for complaint handling and customer feedback. In the designing business customer feedback can be crucial to a company. References Borrelli, C. (2009). How Netflix gets your movies to your mailbox so fast. Chicago Tribune Chiu, R. (2007). Entering video on demand industry through providing streaming movies. HSS