Netflix - Is Enterprise’s Competitive Advantage Sustainable? Why or Why Not?

ENTERPRISE

Is Enterprise’s competitive advantage sustainable? Why or why not?

Yes, Enterprise has positioned itself in the market in a way that it has created competitive advantages that are sustainable. Some of these advantages are:

• Different Target Market from Competitors: By targeting the Home City Rental Business instead of the fray of the Airport Traveler, Enterprise has created a first-mover advantage in the space while keeping costs down. It now as nearly 70% market share in its target market. With this advantage it’s difficult for competitors to become a serious threat any time soon.
• Strategic Placement: With one of the strongest distribution network, thousands of locations (no customer should be more than 15 minutes from an Enterprise) and its proximity to garages, Enterprise has built an empire a competitor would struggle to match because of sheer time, location and capital expenses.
• Cost Savings: Building off the target market, Enterprise is able save costs. 10% savings on travel agent commission, 3% for its reservation system (they have a highly sophisticated computer network) not to mention savings because they didn’t invest in prime real estate that competitors need to pay. While competitors continue to target Airport travelers, they will continue to pay these costs.
• Relationships: By creating relationships with dealers and garage owners, Enterprise has made sure it is able to have strong word of mouth advertising. These are relationships that can be replicated by are difficult to do so quickly.

What strategic moves should Enterprise make in order to strengthen its position?

• Maintain Market Share of Target Consumers: Through loyalty programs and perhaps, even through expansion to serve airports, you can maintain market share. However, both those activities will shave margins down by increasing cost.
• Build More Relationships: Expand on relationships by creating locations on auto body shops and building relationships with other players like insurance agents, continue the word of mouth.
• Expand into Corporate Relationships: An interesting demographic of consumer was the consumer who hires for short time periods to impress clients or visiting colleagues. By building relationships with corporates, you can tap into more business through exclusivity contracts. Also, you can look at hourly rentals as well to fulfill the short term rental needs of this market.
• Continue investment in Tech: By capitalizing on online rentals, they can save on onsite car parking costs and instead encourage more “delivery to home” from cheaper lots outside the city. Rental costs will go down even though labor (they already offer home delivery service) and tech costs (might not cost much to improve good tech) might increase marginally.

NETFLIX

Whitney Tilson argues that Netflix’s competitive advantages are not sustainable. Reed Hastings disagrees. Whom do you agree with and why?

Reading Whitney Tilson and Reed Hasting’s competing Seeking Alpha articles on Netflix’s future, I find myself agreeing with Tilson in that Netflix’s competitive advantages are not sustainable. 

While Tilson recognizes that Netflix has an established brand as a media distributor (although it was the diminishing consumer base of DVD users that helped establish it) and a captive audience of 16.9 million customers, Netflix by changing its business model has changed its market losing its competitive advantage.

• DVD: it is no longer competing with Blockbuster & Movie Gallery but instead is competing with Redbox which through its kiosks has eliminated the need for shipping costs though has more overheads than Netflix.
• Streaming: it has competitors with deep pockets although their models are different (movie competitors almost all have a la carte offerings and in the TV space, Hulu is the only one who charges a flat rate).
• TV: There is also an argument to be made that like all streaming services, it has emerged a competitor to TV (cord-cutting argument).

Besides the fact that Netflix has diluted its competitive advantage in the DVD space with the evolution in core product, and the fact that it’s going up against stronger competitors, market changes further endanger the company’s success.