Netflix Case Study

Strengths:

Netflix provides a subscription-style e-commerce service. Customers only need to sign up and pay $13.95-39.95 a month to borrow as many as 2-9 movies at a time with no monthly limit. If customers quickly watch the DVD and send them back, the monthly fee pays for quite a few movies. The relatively low monthly fee enables Netflix to compete with Blockbuster and other brick-and-mortar video rental business. Meanwhile, Netflix might keep the customers who try the service and happy with it continue paying the monthly fee. Therefore, Netflix has less problem in predicting revenue or level revenues.

Being an on-line DVD rental store, Netflix combines the growing Home Entertainment Market and the Internet. Unlike brick-and-mortar video rental business, Netflix incurs less overhead because no storefront is required and less employees are hired. Movies are sent to customers in prepaid envelope within 24 hours after the customer returns a movie. Located in San Francisco, Netflix still owns nation wide market through World Wide Web. In addition, customer can easily get the movies they like without leaving home.

Netflix provides customers unlimited access to the world’s largest DVD library consisting of 10,000 movies. This in more than 10 times the selection of the Blockbuster. Netflix’s terrific search engine and automatic movie recommendation engine helps customers find their favorite movies easily.

Netflix enables customer to enjoy their service without long line ups and late fees. Customers can select moves and put them into rental queue. Customers can easily edit queue time, too. At the same time, customers can keep the movie as long as they want without the hassle of due dates.

Netflix has very good customer service. Whenever the customer has a problem with a returned movie, a broken DVD or a missing DVD, Netflex will respond to it immediately. The customer does not need to pay for broken discs or movies lost in the delivery process. The Customer can feel free to give comments and recommendations about the service.

Netflix’s web site is impressive and easy to navigate. Customers can master it quickly and benefit greatly from its movie introduction and powerful search engines, recommendation engines and queuing mechanism. If customers return to Netflix after only partially complete registration, they don’t have to start over from the beginning.

As the world’s first online DVD rental store, Netflix attains first-move advantage. It is easier for Netflix to build both strong company image and reputations with customers, and build good relationship with DVD suppliers.

Customers can cancel their membership whenever they want.

Weaknesses:

Inventory control is very difficult in Netflix. Because DVDs are sent to customers through mail, some DVDs might arrive late and some might be broken or lost during delivery. In addition, it is difficult to get the actual numbers or DVDs that might be available due to customers’ right to keep the videos as long as they want. This might also cause Netflix to lose some customers if the customers wait too long for one favorite movie which is kept by other customers for a long time. To avoid losing customers, Netflix has to buy more copies although it costs them more.

Customer cannot get the movie immediately. They have to wait for the mail to arrive. It might only take 1 or 2 days to get the DVDs, however, delivery delay by the post office can result in longer waits.

Although Netflix allow unlimited DVD rentals, the customer has to return at least one movie to get another one. Any slowness at receiving and processing returned movies could be the bottleneck of the service.

Although Netflix is inexpensive and convenient, it is less economical to those customers who watch less than one movie