Netflix’s Business Model and Strategy Essay

Netflix is the largest subscription proceeds for sending videodiscs by position and streaming movies and TV episodes over the internet. Netflixs revenues grew from $500 million in 2004 to $519.8 million in 2010. troupes net income increased from $21.6 million in 2004 to $141-156 million in 2010. It attracted 1.6 million subscribers in 2004 and had to 15 million subscribers by 2010. Reed Hastings founder and CEO of Netflix have pushed the company to outcompete its movie letting competitors by building the worlds best internet movie service. Netflix is the world largest online frolic subscription service and revolutionized the way that people contain movies.Netflix has outcompete its rivals on the basis of differentiation features, with their higher quality, wider product selection, added performance and services, and has tops(predicate) engineering science. Netflix has a large selection of DVDs to choose from. It maintains relationships with entertainment providers to expand th e title selection. Movies are prescreened for customers based on peer reviews. This takes Netflix to increase their inventory with movies chosen by viewers. at that place are no late fees. Netflix technology is superior because movies and TV episodes locoweed be streamed directly onto nearly any device in a matter of seconds.Netflix business model and strategy can be analyzed with the 5 competitive forces in the movie rental marketplace 1-substitute, 2- buyers, 3- suppliers, 4- potential for new entrants, 5- rivalry Substitute-It does not matter who sells the movie or the TV episode at the end the end user is getting the same product whether he got it from Walmart or Blockbuster. Substitute for Netflix and a potential threat is pirating movie files from the internet and illegal. This is a substitute that is cut-rate or free copy of the file.Buyers- Have the power to select where they are going to get movies or TV episode. They are going to look provides the best price and best quality. Buyers are not sure and can get this product from other vendors. Competitors compare industry prices and quality. They will reduce cost in effectuate to attract the buyer.Suppliers-Such are Hollywood are likely to increase cost if the industry remuneration increase. Suppliers have the capability to make movies and TV episodes harder to get by limiting license agreements. In order for suppliers to maximize their revenues they sell large number of movies and TV episodes the outcome results in competition and does not allow supplier to have much power on the product. Potential for new entrants- Blockbuster, and Netflix are the dominant retailers in the market it is really difficult for new entrants to succeed.Rivalry- Consumers have multiple sellers they can buy or rent movies and/or TV episodes. Main competitors are online subscription services internet movies and TV episode provider, kiosk services, and DVD rental outlets.From SWOT analysis we found theStrengths as follo wed, by operation on line is very flexible and very low cost, it has high customer satisfaction levels, and strong knowledge base and stain identity. Weakness are the industry, it is constantly changing at a fast speed, it is supplier dependent, postage is a variable cost (increases), customers need to have internet access and or DVD players. Opportunities are It can expand globally to international markets because its internet access, new technology.Threats If its not able to adapt or confine up with technology, rivals such as Walmart.com or Blockbuster have capital to compete against Netflix.There are some issues Netflix is facingNetflix needs to watch out for growing competitors with deep pockets and need to keep up with the fast growing changes with technology. It is recommended that Netflix increases its customer base (subscribers). This income will offset the ongoing costs. Netflix should move away(predicate) from DVD rental, it creates a large percentage of its operating cost. Netflix should find out why people are still ordering DVDs Netflix should educate customers with their streaming and downloading and focus on encouraging customers to stay with the service.Blockbuster advantage over Netflix is that they are able to release new released titles. Netflix needs to negotiate with entertainment providers to get new releases earlier than the competitors. Finally it is suggested that if Netflix is able to get new releases earlier they should pass a cost for the newest release (separately from subscription download monthly fee).