Netflix currently offers more services in quantitative and qualitative terms than its competitors do. Based only on case study data, it is obvious that Netflix tries to exploit positive DVD market conditions through offering superb services and focusing on customers needs. On the contrary, the other firms just seem to view online rental as another attractive channel without focusing on how to better serve customer than competitors do.
Summarizing, Netflix seems to be a customer-oriented company applying a strategy to enlarge it’s subscribe base by offering several benefits.In order to compete effectively, it offers unique services like the dates absence of due dates, the recommendation system and the faster distribution. Finally, it scans the environment in order to detect competition that comes from different distribution channels of DVDs rented and competition from other companies entering online movie rental business. Through the strategy, Netflix tries to achieve a competitive advantage in terms of better services provided via recommendation system and absence of date due, in terms of faster distribution provided by the sophisticated distribution system.
A company’s internal environment consists of its resource capabilities, relative cost position and competitive strength versus competitors. Internal environment is considered as a controlled variable (Johnson & Scholes, 1999), as its elements depend fully on the company’s activities. Therefore, given the external environment, which consists of macro-environment (Papadakis, 1999) and industry environment (Johnson ; Scholes, 1999; Tompson et al, 2005), a company should exploit its strengths and improve its weaknesses in order to grow or even to survive.It is obvious that strengths and weaknesses characterized company’s internal environment.
Netflix is a pioneer in online DVD movies rental business. Therefore, it possesses the first mover’s advantage in a sense that it has the highest accumulated experience and, thus, it has the chance to offer first innovative products and services, and retain being the leader in this niche market without extra effort that other companies possibly need.Its business model can be considered as strong enough.
It gives the company the opportunity to compete with other distribution channels of rental movies at far lower costs. Concerning the direct competition inside the niche market, company’s business model offers the fastest services, the broadest series of movies and the familiar recommendation system loved and used by it’s customers. Actually, this system is generating around half of company’s sales, according to Netflix’s top executives.Moreover, the absence of dates due and late fees is another strong point of Netflix’s business model. Netflix has focused business. Actually, online DVD rental system is its sole passion. Therefore, the company has the opportunity to be specialized in this kind of job and works for further improvements and new developments compared to both direct and indirect competitors. Concerning its core operations, due to distribution system construction, Netflix has managed to maintain inventory availability for more of the movies to be requested.
Moreoever, it has created a wish list in order for customers to be served immediately at a future point as soon as a requested movie is being available (that current is not). Concerning Netflix’s operational current weakness is the absence of instant delivery. Customer ordering online must wait for one day for the DVD delivery compared to other channels’ instant delivery. This is a market structural inefficiency that Netflix tries to solve by launching in the future of Internet delivery.
Another weakness is possible inventory lacks in demand peak points of time. As company delivers hardcopy DVD’s it may lack several movies sometimes and, thus the customer may prefer another channel. Financial statements often reveal some useful things concerning the performance of a company related with the strategy application. Concerning Netflix’s financial statements, they are presented in the following exhibit and figures.