Netflix Case Analysis

Netflix Case Analysis

Competition and Strategy

January 31, 2006

This case represents an analysis of the DVD rental business and specifically how Netflix positioned itself in the market and the direction of the industry as a whole. Several tools were utilized to help analyze Netflix. Case facts were considered in addition to possible future strategy in relation to market position.

Introduction

Netflix was founded in 1997 by Reed Hastings who is the current CEO of the company. Mr. Hastings has experience with the birthing of a startup company in his venture with Pure Software, which he founded in 1991. Mr. Hastings background in the software industry would prove to be an asset for his new venture, Netflix. Netflix was formed to address a niche market for delivering DVD’s directly to the customer via mail service.

The Vision

Reed Hastings had a clear vision; “Our Vision is to change the way people access and view the movies they love”.

This Vision was born out of the recognition of the perception that people that rent DVD’s wanted easier and more convenient access. One of the drawbacks of renting through storefront method was that you had to drive to the store and rent the movie. Another drawback was the movie had to be returned within a certain time period and if not, late fees would apply. Reed Hastings saw an opportunity to build a business model that would revolutionize the rental process.

Business Model

The business model was simple in concept but heavy in technology. The business model was that Netflix would offer to customers, convenient access to the movies they love. Customers who signup for a subscription are able to create their own wish list. For a set fee, customers could rent the DVD’s they wanted and keep them as long as they wanted. No due dates and no late fees. Depending on the level of subscription service, customers select the number of movies they are allowed under their level. They receive the movies via US mail service and return them when they want with a postage paid return envelope.

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