Market Disruption By Business Models

This paper endeavors to define a business model and product disruption, the paper identifies the film industry as an industry whereby the Pay-tv has been disrupted by Netflix and there is a comparison between the Pay-Tv model and Netflix disruptive model, the paper concludes by discussing the significance of the findings for future business models.

It is a framework that guides a business to the realization of profits, a business model comprises of the goals that have been set up and strategies well laid for an organization to have profits in the long run, it is a money making method description for businesses, a business model contains aspect like the product offering in the market and also its sustainability in the market (Muehlhausen, 2013).

A business disruption is basically the changes that happen in the market, which cause organizations, to change their business operation or functionality in the market, as a result of business disruption businesses are expected to change operational management of goods and services (Blythe and Zimmerman, 2005).

In the 20^th and 21^st Century the film industry has experienced a fundamental evolution. The film industry was characterized with people visiting theatre halls after a release of every new movie, people were expected to purchase tickets for the new movie, thereafter came television industry and channels that would provide films though their programming. With the current technological advancements there is a new wave in the film industry, which happens to be the cable Tv, filming is not interrupted with advertisements, all one needs, is a strong internet connection and make payments for internet service or bandwidth to access the content. One of the company that has caused market disruption in the film industry is Netflix. The company has driven video tapes and disc rental to a halt, this has led to reduction in number of jobs at the video tapes rental worldwide. The organization is challenging major cable TV providers as well as the Pay TV, through its invention, the organization has posted better profit returns after tax, more than the predominant organization in the industry like the Disney which owns ESPN and ABC. Netflix has caused war on the media industry and many clients in the world are throwing away their Pay-tv set boxes and are embracing the Netflix streaming videos services. It has been a smiling phase for Netflix after they have caused market disruption, price per share has rose to high as $123 per share. It was noted that 46% of households in the U.S. can access streaming services as at August 2015.Customer preference in   the video streamline by Netflix has disrupted the media programmers and the distributors of content globally. Traditionally, the Pay Tv model acted as an intermediary between, the customers and the filming companies and what was really irritating before, according to the consumers; the television stations kept or advertising products in between the programming, something that doesn’t exist in Netflix, video streaming. 

Sourced from: Perry (2015) The Netflix effect: an excellent example of creative destruction. Available at: https://www.aei.org/publication/the-netflix-effect-is-an-excellent-example-of-creative-destruction/24/08/2016 

The traditional media had a very different approach from the Netflix disruptive model, the traditional media and Pay Tv served it consumers at its convenience, waiting for the right movie to be released and dictating to the customers when they should watch the movies at their own   timings. On the other hand, the PAY- Tv interferes with programming or the movie that is being broadcasted at that particular time by advertising their products and services. Prices in the traditional video broadcast keeps going up with no explanations, to receive a good picture quality using the traditional video, one will need a signal receiver either a set box or an aerial which is connected to the television set.  Netflix disruptive form in offering services is the right thing, the organization offers services via internet and streamline of the video content. Competitive advantage of Netflix is that; the consumers don’t require set boxes or signal receivers to stream line the video content being aired by the Netflix company, all they require is a strong internet connection they can either watch on the laptops, at work during lunch time, in the bedroom before catching a nap or even while relaxing beside a swimming pool after the first swim .Netflix has disrupted the film industry by giving the customer a choice, a good  organization enables the consumers to decide when they want the product and how the given product should be packaged.( Evenson, 2007).

A close look at the packaging by the Netflix sums it all, why the company efforts and disruptive intentions hit the market. Packaging of the products go co-currently with current technological advancements, watching video content is moving from theatre and cinema halls as well big TV sets in the living room, to where the consumers are watching the content and movies even on their mobile phones (Paetz, 2014).

The disruptive model by the Netflix organization has succeeded over the Pay-tv or traditional model as it offers customers a chance to enjoy video streaming services with all available gadgets that can access internet, various consumers can watch content while in the same room through Netflix, all they need are different gadgets and plug in earphones unlike the Pay Tv model whereby for consumers to enjoy services, they will need a Tv set and they all need to concentrate on the aired content (Sinclair, 2012). 

The Pay Tv model used before seemed to be working in the media industry, especially where the programmers would wait for new release of movies, and air the content through the television set at their own timing, Pay Tv Model provides consumers with content though it limits when the consumers should be watching certain content, during the broadcast they introduce products and advertise in between the broadcast. This portray that Pay-Tv model caters more for the big consumers who normally pay to advertise and they care less about the home consumers. All the companies involved in the Pay-Tv need to reinvent the products being offered or even rebrand their business and product offering to remain relevant in the market. Business need to reinvent their models to consumers, in order to remain relevant in the market.

Netflix is at the top of the game with its disruptive model unlike the pay-tv model, Today Netflix is shaking the film industry, there was a time that Pay-Tv was the most admirable form of broadcasting film in the market. If the current disruptive model by Netflix is not redesigned and offer a competitive edge in the market, Netflix will become a company of survey in the future, consumers will quote how the new organization X is offering better services than Netflix (Montgomery, 1991).

The end product of doing business is to make profits, most of the business models have a profit mindset at the end, businesses should tap on other aspects of making profits like a good well laid out competitive strategy even when the competitors disrupt the market. For example

To be a leader in the beverage industry, Coca-Cola has developed a number of strategies such as market segmentation, communication advertising, segmentation of the lifestyle in the market and also product differentiation this is aimed to attain an upper hand over its competitors (Michman & Mazze1998).  Coca-Cola introduction of the diet soda called Tab, made its main competitor Pepsi, to introduce Diet Pepsi. The Tab brand was originally a product developed or designed for the female market but with introduction of Diet Pepsi, Coca-Cola, diversified its market, for the Tab to be consumed by men and families too. While Pepsi produced a Diet Pepsi, to counter Coca-Cola markets for Tab, Coca-Cola couldn’t throw away its product with a new rival in the market but diversify the market through the competitive strategy of segmenting more customers that can be on the reach out by the Tab diet brand.

(Michman & Mazze1998). Another competitive strategy of the Coca-Cola company, is product differentiation. Coca-Cola has reinvented or made its products different with time and again in the market for relevance.to manage change Coca-Cola has always introduced new brands in the market, for instance in 1989, the organization introduced Power Ade which happens to be a sports drink. In 1990’s Coca-Cola came up with products such as bottled water, fruit juices like minute maid and tea. The Coca-Cola is not resilient introducing new products, as well as differentiating it products to meet the market gap and thus it employs use of competitive strategy product differentiation

Coca-Cola has highly invested heavily, in promotional or advertising strategy across the globe, what makes its advertising to be a great strategy is advertising on uniform information and Coca- Cola, creative team behind advertising always comes up with appealing information to the markets, for instance in 2013 Coca –Cola invested $3.3 billion geared towards marketing and advertising, in the “Share a coke campaign” the campaign was aimed at allowing the Coca-Cola fans ,to share bottles or cans personalized with their names. The campaign saw Coca-Cola company volume of sales rise at 5% in Germany, Nordics and North west Europe regions.

Sourced from: Sharon. B (2014, Nov20). Investor insights on the non-alcoholic beverage industry. Retrieved from https://marketrealist.com/2014/11/guide-non-alcoholic-beverage-industry/

The paper begins by defining business models, which are strategies set out by companies or organization for profit maximization on the other hand is a definition of a business disruption, which  is basically the changes that happen in the market, which cause organizations, to change their business operation, business disruption may be caused by an organization for the realization of its new market , other businesses might cause disruption in the market to shut the existing business and enjoy profits by themselves. The paper has identified the film industry as one which has been disrupted by entry of Netflix which offers film content via the internet, Netflix has employed a disruptive model while the traditional media uses the Pay Tv Model. Two of the models have been compared and reasons why the disruptive model by the Netflix has ended up succeeding and causing ripples to the main competitors. There is a conclusion on the models by examining the significance, of the finding and recommendation to the models for them to be a reality they should have a competitive advantage and product differentiation, to support differentiation the paper has analyzed the wars between Pepsi and Coca-Cola during the market disruption period.

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Sourced from: Sharon. B (2014, Nov20). Investor insights on the non-alcoholic beverage industry. Retrieved from https://marketrealist.com/2014/11/guide-non-alcoholic-beverage-industry/