Strength of competitive forces in the movie rental marketplace
The competitive forces in the industry are tough and affect the ability of the movie rental marketplace to serve their customers and maximize profits. Numerous companies have emerged and captured the market with no indication of losing out. All this, is as a result of the pricing models employed and the alternative modes through which the movies can be watched, rented or sold out. A five force analysis is done to examine the competitiveness of the industry. Threats of rivalry to Netflix include Red Box and other vendors that rent movies since they have been around for a longer time; hence, gaining an advantage. Threats of substitutes include pay per view and video on demand products offered by cable and satellites that are enjoyed from home comfort. Threats to new entrants include internet movie that would continue being around. Lastly, other internal forces that would affect operations include the bargaining power of supplier and clients.
Forces driving change in the movie rental industry
Some of the forces which are driving change in the sector include increased globalization that has led to entry and exit of firms, technological advancements, innovation of better products, changing consumer patterns, attitudes and concerns, better management of cost concerns, and internet penetration. All those forces have empowered the clients and provided a range of services and options to choose from. Consumers have benefited from this new turn of events since it has given them the ability to make decisions based on their suitability. The impact of the forces in the industry would prove favorable in that more competition would be witnessed by companies in a bid to obtain a larger segment of the market. New products and services would come by to sway clients, and this could prove profitable. Companies that would be versatile and adapt to the ever-changing market needs would yield more from the current situation and proceed into the future.
Strategic group map of the industry
The strategic group map of the industry has revealed that Netflixs location has a better approach to the clients. The better positioning of Netflix is as a result of convenience in the usage of their products and distribution channels that quickly deliver products to customers upon placing online orders. Blockbuster is weakly positioned. This is caused by lack of appropriate strategies. Therefore, Netflix is currently profitable in the movie industry, due to its ability to adapt new technology in its operations and subsequently combining the classical ones. This is in a bid to capture clients from diverse demographics into offering their services. Blockbuster is at the receiving end since it maintained the same strategy for an extended period while new players came in, thereby impacting the revenues and leading to losses.
Factors that would determine a companys success in the industry
Some of the principal factors which may determine a business's success in the industry in the next three to five years would include managing costs to cover up for the declining rental costs, and provision of the most convenient services to clients, so as to set them apart from competitors and enhance efficiency. The last would be the need for constant innovation to keep up with the latest technological advancements. Netflix has to lower prices and provide a variety of options for their customers to maintain the superior status in the industry. In addition, technological advancements such as cloud and application would prove inevitable so as to keep their current clients and attract new ones.
Netflixs strategy is to ensure a constant increase in the number of customers subscribing to their services. It is to come by through the provision of more DVD selection options for the subscribers to choose from, acquiring more content and ensuring maintenance of sound business partnerships. Incorporation of technology through the use of software that allows clients to identify the movies they like, providing the option to watch content through streaming, vigorous marketing to facilitate the creation of awareness of their services and the brand itself, and finally getting rid of mail delivery. Netflix is on the path of being a leader in the rental segment through the instant watch capability that they are employing. The strategy that fits the company is that of best cost provider. There are numerous plans they have provided for to give subscribers value for their money. The advertisement of their products, to uphold the loyalty of clients, clearly points to the employing of best cost strategy.
SWOT analysis of Netflix
SWOT analysis obtains insights into factors such as strengths, weaknesses, opportunities, and threats that would impact on an organizations chances of success and survival in the industry they operate. The SWOT analysis for Netflix shows some vital combinations in terms of strengths such as brand awareness, partnerships with manufacturers to have their application integrated, and first mover advantage. However, the company is threatened by rivals and is weak in terms of content variety. To mitigate and handle the threat and weakness, the company needs to divert resources from the current way of delivering services. Ensuring ever-growing streaming content will enable them to attract more clients in addition to maintaining the current ones. All this will give the company an upper hand to favorably compete with other rivals and content providers. Nevertheless, more needs to be done so as to augment content and save on costs related to shipping. This will in turn capture a wider market and help the company gain a higher competitive edge in the industry.
Appraisal of Netflixs operating and financial performance
The stocks of Netflix were earlier on the rise and this could be attributed to the attractive pricing model and service bundle that Netflix used on top of the growing market for streaming through the internet. A new pricing model was adapted and this subsequently affected the organization. Stocks declined resulting from termination of services by clients brought about by displeasure of the directive. Netflix has developed more on investments. This is proved by increase in the ability of the company to spread its wings all over the world. The rapid increase in the working capital also indicates an improvement in performance.Net cash has kept on growing. The overall picture is that Netflix is in a sound position and has more ability to improve. The strength of Netflix is the maximization of profits and improvement of technology while, on the other hand, the use of huge resources to build the brand is rather costly.
Netflixs competitive strength compared to Blockbuster and Amazon
Netflix competitive advantage over the other content providers is mainly based on first mover and cost advantage. First mover and cost advantage include: instant watching streaming services, constant innovation, reasonable monthly plan, recognized brand and flexible content delivery. This gives the company an advantage over the competitors who have been trying very hard trying to imitate it. Blockbuster and Amazon, for instance, have relatively high subscription packages. On top of that, they dont offer free streaming services that is incorporated into Netflixs plan thereby giving it an upper hand. Numerous selection options, convenience and quality of services offered and technological advancement ensure Netflix is a step forward; thus, enabling the company maintain a competitive advantage over other content providers. This can be capitalized to gain a larger market segment
Priority issues Netflix management needs to fix
One of the key issues that the management needs to fix is to ensure that the customer base is increased on top of maintaining the current subscribers. This would lead to improvement and growth of revenues that would make the company bounce to profitability again. Another issue would be the focus on maintaining the brand. Since the separation of the services by the company that led to the decline of the enterprise, more has to be done to revive it to where it was so as to build the image of the company and persuade more subscribers to uptake their services. Last but not least, would be to minimize costs of the enterprise to enable the realization of profits in the movie rental industry. Efficient ways of managing costs need to be developed. In addition, expansion to new territories needs to be encouraged.
Q10. Recommendation to Netflix CEO, Reed Hastings
One of the recommendations that Netflix CEO, Reed Hastings, needs to put into consideration concerning the growth of customer base would be to partner with multichannel TV providers to increase on its streaming services. This would lead to growth in the client base and mitigate the exit rate. Besides, the brand would be improved and increase the communication capabilities with the clients. In maintaining the brand of the company, the primary cause of the decline in subscribers, resulting from wrong decisions, needs to be addressed. Splitting of the streaming and mail delivery services need to be coordinated well to facilitate incorporation of the two entities into one functional service. Above that, charges need to be brought down to enable fair competition with other players in the rental movie industry. Finally, decisions regarding expansion to new territories or maintaining the domestic market demand require more consideration. If international operations are rising maintenance costs, they need to be discontinued; subsequently, leveraging on technology more in its operations.
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