The global environment for business has changed over the years. It has become important for the organisations to make sure that they do the strategic analysis of their operations (Barney, 2014). This is necessary for making their position in the market. Strategic analysis of the firm will help them in understanding various aspects related to its strategies which is cable of giving competitive gains to the firms. Advancements in technology have made the most significant impact on the various industries. Netflix is an US based firm which offers movies and television series with the use of online mediums or by delivery of mails. This report does the strategic analysis of the Netflix and Blockbuster. It also provides the analysis regarding dominance of Netflix in the online video streaming. The way in which Netflix has been able to surpass its competitor Blockbuster with the use of technology and effective strategies have been highlighted. In the last it presents the idea regarding the Netflix’s future in online video streaming industry.
In the entertainment industry Blockbuster is considered to be one of the biggest organisations. It is a US based firm that offers entertainment related services like video games, media streaming, on-demand videos, cinema theatre and home movie rental services using DVD mail delivery. In 1990’s this firm it stretched its business in various parts of the world. Netflix in 2000 denied the offer of Blockbuster to acquire it and now it is the biggest competitor of Blockbuster.
Blockbuster was established by David Cook and now it is having employee strength of more than 84,300 people all around the world (Blockbuster, 2017). Alone in US it has more than 58,000 employees and rest are in other nations. Present it owns around 9094 stores all across the globe. Recently this company is facing many kinds of challenges and risk in business like Redbox automated kiosks, higher competition and on-demand video services. These challenges have led it to demand for bankruptcy prevention in the year 2000 which could be seen by the fact that there was consistent decrease in its revenue.
It is also an America based firm which was established in the year 1997 by Marc Randolph and Reed Hasting. It is also an Entertainment provider that was founded in Scot Valley, California. This firm offers different services that are associated with streaming videos on media. It offers its consumers various opportunities for streaming the TV episodes, movies or other things via internet (Chopra, et. al., 2017). In the beginning, Netflix model included DVD sales and rental. Its leaders restricted the sale and hence reducing the sales of DVD so that they could focus on giving it on rental basis through mail. Presently its services have surpassed all the businesses that are running in its parallel in the world market. Write now its online services are run in 190 nations and there are around 109.25 million subscribers. Alone in US it is having more than 52.77 million in United States. Rage of TV series or movies is available at its online services which can add more number of potential customers to its basis.
In the present global business scenario Netflix operates its business with aim to enhance its subscriber’s base related to its video streaming in both national and international markets. For achieving this, it is regularly increasing the experience of consumer by adding the services range. By focusing on its aim and by the help of its effective strategies, Netflix is planning to become best entertainment provider in the industry having a large base of subscribers on the global level. It has adopted several marketing and corporate strategies for creating more revenues and profits than its competitors.
From the beginning, Blockbuster has dominated the rental movie business for so long and hence in the year 2005, its organisational value was more than $8 billion. On the hand Netflix started to utilise postal services for the DVD’s delivery (Gomez-Uribe and Hunt, 2016). By the use of efficient marketing strategies, they have started to become the business leader and hence its result can be seen that Blockbuster which was its competitor asked for declaring itself to be bankrupt. The blockbuster made a loss of $518 billion and hence they locked most of its stores. Few years later Netflix crossed its subscriber list to 16 million by running its videos through online mediums. The leadership of Netflix played a very major role in beating the Blockbuster by the help of strategies. Some of the major factors that helped them in beating blockbuster are as follows:
DVD on demands was the initial business through which Netflix was targeting its consumers. As there were advancements in technology related to entertainment industry hence the customers also started to make certain different kinds of demands. Netflix adopted all the advanced technologies for conducting its activities. The major factor behind its development can be understood to be the approach that its leaders adopted towards adopting advanced technologies. Its manager adopted the best technologies for delivering the videos or DVD. Its technology strategy was implemented under several distinct stages. Further it has adopted the strategy of virtual films and media and internet streaming which was capable of giving its services to clients appropriately and at lower cost (Lees-Miller, et. al., 2008).
Checking the environment in the market, management of Netflix has understood that content is very essential and unique. When they understood the problem the firm has changed its catalogues. By making improvement in the technology, now Netflix is providing many types of episodes and videos that are most suitable for its consumers (Grant, 2016). The adoption of online technology has helped them in neglecting the accountability of its retail outlets. For this they started utilising internet services so that greater satisfaction of subscribers can be achieved. Their lists of viewers were shown by gathering the information base from the contents that have been watched the highest number of times. On the other hand, Blockbuster still relied on its retail store and here is where Netflix have beaten them by the use of technology.
Blockbuster is known for using retail outlet stores for its operations while Netflix focuses on giving services through online DVD rental firms. This strategy of the Netflix has reduced the liability in terms of retail stores and hence by making use of online store they reduced their operational cost (Indiviglio, 2011). They just have a few offices and warehouses where they make virtual films while there are no sales people or physical stores. Netflix’s strategic planners understood that the way in which Blockbuster is operation through Physical stores may limit the chances of company to reach to larger consumer base. With the use of internet they could possibly reach to larger targeted consumers and hence expanding its area of business (Martin, et. al., 2013). Netflix adopted Open source approach that helped Netflix to supply the movies on mobile phones, DVD players, TV’s and Computers. Presently, the firm is offering online streaming contents and DVD through the help of mails which differentiate it from its competitors. Furthermore, the cost of DVD delivery is relatively higher in the market place and online contents are available at cheaper cost hence people enjoy online videos. The online video offering has helped the firm to attain larger gains from consumers as compared to Blockbuster (Netflix, 2017). This made them the leaders in the market.
Since Netflix is offering its products and services by two different modes like DVD with the use of mails or via internet mediums. Netflix is known for using its strategies for attracting consumers and hence they were able to resolve their issues by offering exclusive and modern type of services (Peteraf, Gamble and Thompson Jr, 2014). With the use of internet mediums they have been able to sale its products at lower prices. This offer products at affordable prices as they do have to maintain the cost of inventory like retail stores hence they are still able to earn huge profits. It offers its services at monthly subscription basis and the charges are also not too high. Their plan for pricing is illustrated below:
These plans offer unlimited DVD and video streaming each month. In the case of movies that are given on rent, it does not change any additional cost for late returns and due dates (Adhikari, et. al., 2015). This strategy was distinct than that which was offered by local movie rentals. On the other hand Blockbuster adopted the pricing structure where they charged $5 per movie. The most important reason behind failure of Blockbuster is that its subscribers disliked the late fees charged by the firm. The firm is continuously improving its strategy for pricing.
Innovation has been the major area of focus for the Netflix. Innovation has the part of their business operations and marketing strategy of Netflix (Sicoli, 2018). They are utilising innovative techniques and processes for improving their business. By utilising it they have been able to attract larger numbers of customers towards their business. Netflix stands as one of the major companies that have adopted innovation. For such innovative processes, the cited firm has stressed upon four elements namely think big, fail quickly, scale fast and start small. Online streaming video is one of the prime examples of its innovative services. For facing the competition, it has distributed a user interface guide and has placed the poster images with video preview (Walker, 2016). The sample video automatically gets played when any client scrolls over the DVD title card. Apart from disruptive innovation, the firm has also implemented open innovation as well.
In the field of innovation, Netflix has made a huge amount of investment for enhancing the business processes and technology. All the information regarding various kinds of contents, new releases, critics, synopses as well as information regarding movie rating is also been provided by Netflix. Such innovations have made them better than Blockbuster.
Netflix’s business was started in the year 1997 and it now it is the major player in the entertainment market and video streaming. For improving Netflix’s processes and operations, the firm is implementing effective and innovative strategies (West, Ford and Ibrahim, 2015). It has made them capable of capturing the entertainment industry. At the same time Blockbuster the major competitor of the cited firm. Blockbuster is charging extra fee from viewers on late return of rental movies which is not done by Netflix. For competing with Blockbuster, Netflix reduced the plan rates. At the time when the Blockbuster is at the verge of bankruptcy, Netflix have crossed borders and have become the major player in the industry especially in terms of online entertainment video streaming. There are several other competitors of Netflix like Kiosk Machine services, cable service providers, television stations etc. By checking at this intense rivalry, Netflix have been effectively used policies, their strategies and advanced technologies. It has assisted the firm to achieve the dominant position in the online video streaming market. Netflix have focused on its present business rather than having their stretch in various new services (Matrix, 2014). It has helped the firm to become leader in entertainment service industry and online video streamlining.
Among the various services that Netflix have launched over the years, they have also experienced significant growth in its operations and business activities. They have launched its new subsidiary named Qwikster in the year 2011 after setting up the market base in other services. By using this subsidiary, the firm has shown its intentions to redesign and rebrand its DVD Home Media rental services. Qwikster was a subsidiary that was highly unique and offered a slight different kind of video streaming and DVD rental services (Amatriain, 2013). It comprised of DVD that was delivered through mail facility which also included video games with it. Netflix created certain distinct kind of websites for its new service Qwikster. Their leaders had a view point that it will enable them to give equal focus towards improving both the services. Even when Netflix made many efforts to manage this business, negative effect of it can be seen on the overall business of firm (Bennett and Lanning, 2007). Several reasons were found for after analysis that why this business failed for example the enhanced price of service, split of website, name change etc. Qwikster which was the subsidiary of Netfllix has impacted their viewers as it forced clients to take use of DVD and hence empowers them to make new accounts.
The demise of Qwiskster was unable to produce significant impact on their business because the clients were unable to find that Qwikster was also the part of Netflix. But still there was a significant impact of it as they lose millions of viewers. It had also affected the business profit of Netflix.
The setback of Qwikster was not good for Netflix hence after this they have taken several efforts for regaining its client’s base and its strategic positioning in the market. For regaining this problem they launched their first TV service named “House of Cards” which proved to be major image builder for the firm (Bell and Koren, 2007). After this they also started producing television series and films. It also provided the “Netflix Original” content with the help of internet library of television series and films. Till the year 2016, Netflix launched an around 126 series and films which are better than cable channel and other network. Unlike other competitors they have now totally focused on developing original content. It was the influence of its real content as per the study of 2015-17 that their client’s base increased sharply. It has provided as one of the other reasons why Netflix attracted customers. Netflix works for making a balance among the services so that clients may get TV packages where the subscribers might get the content that is ads free. It has made $7 billion of investment for services related to content which was better than fund that was allocated in previous years (Bell, Koren and Volinsky, 2008). The shifted their focus towards content development and marketing efforts. It also has emphasized on their catalogue. By evaluating the Netflix’s condition, it is obvious that in term of sports, music and other things there was no scope but still better content in DVD and pay-per-view. All this helped company to rebuild image and regaining revenue after the setback of Qwikster.
The cited firm has been highly successful in their business in their industry and the type of strategies it has implemented shows that its future will be brighter. Various factors related to the industry success like alterations in status and lifestyle, convenience, consumer behaviour, change in the interest of people and affordability has to be clearly monitored (Gomez-Uribe and Hunt, 2016). If Netflix emphasised on all these factors them there is a sure that it can achieve success and growth. Its past success shows that their future successes will also depend upon the strategies they have made for themselves. The important elements of their strategies are:
There are several reasons why Netflix will ensure higher growth over its rivals. The type of unique content and strategies that Netflix is making they will be able to attract more number of customers to become their subscribers. With the advancements in the mobile technology along with the improved internet technology users will be able to access their contents from anyplace, anytime. The cost of internet facilities is reducing hence Netflix will be able to generate more profits from their operations. Various researches have predicted that in the coming years they could attain 80 million foreign consumers and is capable of generating 7 billion in terms of revenue by the end of year 2020 (McCord, 2014). Its present growth attributes the fact that their growth is in appropriate path and will add new potential consumers from different age groups. It reasonable pricing strategy will again gave push to its growth and hence their financial strength will enhance in future. In the time to come, the firm must be able to provide advanced facilities with the help of technology development so that piracy can be stopped and more consumers can be added to its base. Some kind of promotional offers must also be launched so as to improve their sales performance (Singel, 2009). They will also have to look towards the type of strategies their new competitors are adopting so as to make changes in the firm to stay ahead of them. Innovation that they are making will help the firm to stay ahead of most of their competitors in the future. The only thing for which the firm needs to worry about is the increasing competition.
Conclusion
From the above based report it can be said that Netflix is the market leader in online video streaming and entertainment industry. They have outlasted all their major competitors like Blockbuster which was once the giants of the industry by the help of various strategies. In this the technology and pricing strategy have played a much greater role in this regards. With their strategies they are able to face all the challenges confronting their business like increasing market cost, competition etc. With the help of their strategies they were also successful in attracting huge number of potential consumers towards their subscriber base. This company faced the setback in business in the name of Qwikster but with the help of original contents, they regained their market position and captured even further bigger market share.
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