According to Reed Hastings, Netflix have been facing a lot of competition in the video renting market and thus the need to come up with most effective strategies that may help it in improving its productivity. Netflix is a new adventure brought into the market through the internet commerce and the advent of DVD that aided in securing movie rentals. He says that the new strategies that they have employed such as the recommendation system and also focusing on enhancing their clients’ experience concerning their website. It is clear that through such strategic focus Netflix has been able to grow into one of the largest online entertainment subscriptions service in the United States with a total of more than 6.3 million subscribers.
Netflix has been in one of the most competitive fields as a business venture. It has been competing with companies such as the Blockbuster. It is therefore vital for Netflix to employ a strategy that will ensure that it gets secondary markets. It is important to develop and implement a flexible and disciplined business strategy that will aim at driving revenue growth, minimizing operation costs and profitability, and maximizing store level productivity.
The profitability of the market is the determining factor of the attractiveness of this movie industry. Even though the industry has high burrier to profitability, it also contains various factors that validate its attractiveness. As a result of increased buyer demand, online movie renting is presently one of the fastest growing markets globally. An attractive feature in the market of movie renting is the possibility of having newcomers who develop strong competition, revenue, brand recognition, and strong lead of customers. The main vision of Netflix is to change the manner in which people access and view the movie of their zeal and love. For that reason implementation of present strategies will enable Netflix to reach their objective and guarantee the accomplishment of their vision (Willy, Stephen, & David, 2009).
After Netflix realized that the traditional merchandizing system was ineffective, its engineers came up with a proprietary recommendation system in order to balance the needs of their customers. Netflix also signed a new signing account which made customers to be capable of identifying new favorite movie genre, including rating specific movie titles from one to five. Netflix’s proprietary algorithm was a strategy that solely depended on the results of these surveys. The surveys help both the company and its clients in placing their orders or choosing the movies they prefer. This recommendation page also included information on why the movie was being recommended apart from just the title and rankings. This kind of strategy ensured that customer’s gotten what they preferred most. Moreover, Netflix’s software refined its understanding of the clients’ preference (Willy, Stephen, & David, 2009).
The company also did the screening of movies through its inventory management with the aim of avoiding frustrating its customers. The system increased utilization Netflix’s library of films in order to be in short supply. It was an important strategy since it satisfied the needs of the customers since it picked the needs of the customer.
Netflix has a number of strengths which include: a) a strong e-commerce expertise, b) knowledge about technology, c) defect free merchandise to the clients, and d) expertise that are capable of providing consistent customer services. It also has experienced and capable workforce, valuable physical assets, and proven managerial know-how (Willy, Stephen, & David, 2009).
Netflix also has a number of core deficiencies in comparison to other companies that puts it at a disadvantage in the marketplace which include: a) inventory control is one of the most difficult things in Netflix since DVDs are sent to the clients through the mail, and this means that the DVDs may arrive late or may be broken or even lost in the delivery process, b) it is also hard to determine the number of DVDs that reach customers since they have the right of keeping them as long as they wish, c) Netflix also does not distribute videotapes, but just DVDs, this can make the company loose customers, and finally, d) even though it is not expensive but convenient, it is less economical to those client who watch less than one movie every week (Willy Smith, 6).
Netflix also has some opportunities such as: a) Netflix will provide a service that will allow its customers to download movies online, b) it will also give lower variable costs which will be profitable in the long run, c) its feature (SamGoody.com) will be a service that will enable its clients to access discs if need be, and finally, d) it has a rapid growth potential that will enable it to gain popularity and development (Willy, Stephen, & David, 2009).
Netflix has threats that do not allow them to be more competitive in the online video market; it also has some features that do not satisfy the needs of the clients. It is also faced with competition from other companies offering online rental services.
In order for the company to gain a large base, it must begin to implement its long term goals and advertise to specific consumer needs which have been assured by the recommendation system. Since technology is ever changing, Netflix will have to devise it marketing strategies to march those that other companies use in online market. It is also vital to look at globalization which is another long term goal since it has various guiding principles to worry about when venturing into the global market. Finally the whole team at Netflix needs to target on the research development in order to improve on their strategies (Willy, Stephen, & David, 2009).
Willy Smith, Stephen Kaufman, and David Spinola. “Netflix Case from the Business Harvard School, Case # 9-607-138, (2009), pp 2-15.