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Netflix Swot Analysis

By:   •  Case Study  •  1,455 Words  •  December 31, 2009  •  739 Views

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S.W.O.T. Analysis

Strengths:

• Netflix provides a subscription-style e-commerce service. Over 95% of customers pay at least $17.99 a month which includes unlimited rentals with up to three titles at a time. A comparably low monthly fee, allows Netflix to lead market share of online DVD rentals while competing with traditional brick and mortar rental stores. Meanwhile, Netflix might keep the customers who try the service and happy with it continue paying the monthly fee. Therefore, Netflix has fewer problems in predicting revenue's.

• Netflix enjoys lower fixed costs due to the fact that it is an online DVD rental company. As an internet business, Netflix incurs less overhead costs than competitors such as Blockbuster, as well as having much less employees to operate the physical locations, thus labor costs are greatly reduced.

• Netflix gives customers unlimited access to the largest selection of DVD’s. Netflix’s video library consists of over 45,000 titles, making their selection the worlds largest, beating out Blockbuster, Movie Gallery, and Hollywood Video.

• With over 35 distribution centers across the United States, Netflix has the fastest delivery time of any online DVD rental company. Through the use of the United States Postal Service over 90% of DVD’s are received by customers within one day of ordering.

• Netflix’s easy to use website allows customers to browse the video library by category such as action, romance, drama (sixteen total categories) or by using a comprehensive internal search of the library.

• Netflix uses the technology of Cinematch to give customers even better service. Cinematch studies past selections made by members, and begins to recommend titles that would likely be enjoyed by the customer based on previous selections.

• Charging a monthly fee for unlimited rentals, Netflix eliminates due dates and late fees, as well as eliminating the long lines of a brick and mortar store.

• Netflix uses their great customer service to keep customers happy which intern keeps customers from canceling there subscription to the service. If there is a problem that arises during the rental process such as a damaged DVD, or lost DVD during the shipping process, Netflix addresses the problem immediately, and never charges the customer for the problem.

• Netflix was the first company to offer DVD rentals through the internet. By leading the industry in innovation, selection and delivery time, Netflix enjoys the benefits of a strong brand image, and strong relationships with DVD suppliers and manufacturers.

• Movie Recommendations. Netflix offers over 700 million customer ratings and recommendations on DVD titles that customers can read before choosing a title.

• Currently, Netflix offers a Two-Week free trial period. A free trial will allow users to sample the service free of charge, while most likely gaining a new customer in the process.

Weaknesses:

§ Netflix is an online DVD rental company that operates exclusively on the internet. Netflix looses the market share of people who are unfamiliar with the internet or those who are not comfortable with making purchases online. This group generally consists of older men and woman.

§ Customers are unable to rent the movie immediately, and must plan ahead to obtain the DVD. This eliminates sales generated from spontaneous decisions to rent a DVD. Customers must go online to order the DVD, and then wait for the DVD to arrive which may take over a day due to variation in the postal system.

§ Low Visibility of Brand Image. With no brick and mortar locations to rely on to advertise the company brand image. Netflix must rely on advertising to increase awareness of the company and ultimately generate revenue.

§ Currently, Netflix only offers selections in DVD format. Though DVD’s are obviously the emerging leader in movie formats, there are still customers who prefer to use VHS for watching movies. By not offering VHS, Netflix will loose out on possible market share to those who continue to offer VHS tapes.

§ Depending on what type of subscription a customer has purchased, customers must first return a DVD through the mail, and wait for the returned DVD to be processed before a new DVD can be shipped to them. Delays in DVD returns and the processing of the returns could possibly result in a bottlenecking.

§ Difficulty of inventory control. With so many different factors involved with the inventory system, it is hard to keep track of all titles accurately and reliably. With over 35 distribution centers involved, and the postal system as the primary means of delivery, accurate inventory methods are difficult and costly. In addition, with no controls

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