Netflix Case Study

Business Strategy

Focus/ niche- Providing subscribers with a comprehensive selection of DVD titles.  Netflix’s DVD library far outdistanced the selection available in local brick and mortar movie rental stores and that of Redbox vending machines, but it was on a par with the number of titles available through Amazon.  Netflix’s streaming library contained more titles than any other streaming service.  

Differentiation- Giving subscribers a choice of watching streaming content or receiving quickly delivered DVDs by mail.  Netflix concentrated its efforts on speeding the time it took to deliver subscriber orders via mail delivery.  The strategy was to establish a nationwide network of distribution centers and shipping points to deliver DVDs orders within one business day.  Netflix moved quickly to better compete with the growing number of video on demand providers by adding the feature of unlimited to its regular monthly subscription plan.

Corporate strategy

Concentration- Acquiring new content by building and maintaining mutually beneficial relationships with entertainment video providers.  New content was acquired from movie studios and distributors through direct purchases, revenue sharing agreements, and licensing agreements to stream content.  

Global Multi-country/ Multi-domestic- Expanding internationally (Canada, Latin America, UK, and Ireland).  Some of the challenges were the costs of obtaining licenses from movie studios and the owners of TV shows to stream their content.  Netflix also had to deal with costs that were trelated to the incremental advertising and marketing expenses needed to attract new subscribers and grow subscription revenues fast enough to achieve profitability.  

Functional strategy

Operation- Making it easy for subscribers to identify movies and TV shows they were likely to enjoy and to put them in a queue for either instant streaming or delivery by mail.  Netflix developed proprietary software technology that allowed members to easily scan a movie’s length, appropriateness for various types of audiences, primary cast members, genre, and an average of the ratings submitted by other subscribers.

Operations- Promoting rapid transition of U.S. subscribers to streaming delivery rather than mail delivery.  Netflix did this by expanding the size of its streaming content library, working with consumer electronics partners to increase the number of Internet connected devices that could use Netflix, and improving the ease with which subscribers could navigate Netflix’s website to locate and select content they wanted to watch.

Marketing- Spending aggressively on marketing to attract subscribers and build widespread awareness of Netflix brand and services.  Netflix used multiple marketing channels to attract subscribers, including online advertising, radio stations, television, direct mail, and print ads.  It also participated in a variety of cooperative advertising programs with studios through which Netflix received cash consideration in return for featuring studio’s movies in its advertising.